Hackett Research

Inflation, Geopolitical Unrest, Other Factors Drive Up Operational Costs of Finance for the First Time in Decades

For the first time in decades, most finance organizations experienced a significant increase in operating costs in 2023, driven by inflationary pressures, geopolitical unrest and other uncertainty factors, according to new research from The Hackett Group, Inc. (NASDAQ: HCKT). During this same period, Digital World Class finance organizations were highly resilient and managed to reduce costs to nearly half that of their peers while delivering dramatic improvements in value, including efficiency, effectiveness and customer experience.

A public version of the research, “Resilience: The Digital World Class Finance Advantage,” is available free, with registration, at https://go.poweredbyhackett.com/rdwcafin2305sm. It contains more than 50 metrics detailing the performance gap between Digital World Class finance organizations and their peers – plus six key areas where Digital World Class companies excel and a proposed action plan to close the gap.

While most finance organizations experienced an operational cost increase of 7.5% in 2023, Digital World Class organizations managed to reduce costs by 1.3%, demonstrating greater agility and resiliency. Also, most finance organizations employed more staff in 2023, while Digital World Class finance organizations reduced staff by 7% and operated with only 50% of the finance staff of peers. Digital World Class finance organizations improve continuously and now have accumulated a $48 million annual cost advantage over their peers (for a typical $10 billion enterprise).

The research answered the question as to why companies aspire to Digital World Class by highlighting an undeniable correlation between Digital World Class and improved overall enterprise performance. The data concluded that companies with at least one business services function operating at Digital World Class levels see a five-year average performance premium over their industry medians, including an 80% improvement in net margin, 24% higher earnings before interest, taxes, depreciation and amortization margin, 89% greater return on equity, and 44% higher total shareholder return.

The Hackett Group defines Digital World Class organizations as those that achieve top-quartile performance in business value (a composite of stakeholder experience, digital enablement and traditional effectiveness metrics) and operational excellence (a composite of efficiency and business process automation metrics) in The Hackett Group’s comprehensive finance benchmark. The Hackett Group’s Digital World Class finance research is based on an analysis of results from recent benchmarks, performance studies, and advisory and transformation engagements at hundreds of global companies.