How to Organise Finance Department Structure

Finance organisation structure incorporates organising principles (i.e., whether the finance function is structured by subfunctions, customer segments, processes or another method), as well as reporting lines and spans of control. Progressive finance functions recognise the importance of organising finance around its opportunities for unique value creation. Recognising rising profit and loss (P&L) expertise among decision-makers, these organisations are applying a balance sheet, not P&L, lens to operational decision support and elevating individuals with balance sheet expertise (accounting and treasury experts) into more formalised business partnership roles. These organisations are also expanding their use of shared delivery models to capitalise on finance’s unique view throughout the enterprise, including transitioning more activities shared across business units to shared service centres (SSCs) and centres of excellence (COEs).

Finance function leaders have long focussed on standardising workflows and roles to increase efficiency, but standardised models proved brittle during the volatility of COVID-19. The impact of rising organisational complexity on finance’s closeness to decision-makers cannot be overlooked. Today, decisions are made more quickly and at lower levels within the organisation, which increasingly limits finance’s ability to remain updated on the business priorities and challenges of decision-makers throughout the organisation. Leading organisations are continuing to migrate ownership of common activities to SSCs and COEs. However, they are no longer looking to strengthen finance’s support of business-unit-specific decisions and instead are shifting from a business generalist decision support model to an expert decision support model for business-unit-specific decision-making.

CFOs and finance executives are continuously assessing and revamping their finance strategy in response to the changing needs of internal and external customers. Organisational structure redesign is one of the ways finance can effectively adapt to these evolving needs. To select a structure that best supports these goals, CFOs should understand a broad scope of structures that have been tried and tested by their peers. Centralised structures help finance achieve economies of scale, information and expertise, and enable strong corporate oversight. These benefits come at the expense of business customisation and speed of response to ad hoc requests and changing business conditions. Decentralised structures help finance customise its activities according to local business needs and achieve local compliance expertise. These benefits come at the expense of a limited corporate oversight on finance activities and high operational costs. Hybrid structures help finance find the balance between customising and scaling its activities. This balance comes at the cost of having complicated reporting relationships in some cases.

Many finance leaders are seeing their current measures for assessing the effectiveness of finance organisation design, such as finance functional cost and customer satisfaction, fall short because they do not work well as indicators; they are slow and are overly broad (i.e., they do not only reflect the effectiveness of finance organisation design). For a more accurate measure, finance leaders should use organisation design friction, which we define as obstacles in the work environment that make it hard for employees to get work done. Design friction is a better measure because it allows finance leaders to isolate more specific, individual aspects of organisation design that negatively impact employees, allowing more informed organisation design choices. Efforts to reduce organisation design friction target all three elements of finance organisation design: organisation structures; workflows and role design; and networks.