Finance Transformation in Pharmaceuticals: When the Party's OverDOWNLOAD |
Abstract
After years of record growth, declining profitability forced this large pharmaceutical company to increase its focus on efficiency and costs. Yet issues within its existing finance operations made it hard to gain control and drive performance improvements.
The Challenge
During the 1990s, the pharmaceutical industry enjoyed record profits and didn’t pay much attention to efficiency. But, in recent years, slackening growth and profits – and a rise in costly lawsuits – have triggered big changes in how drug companies manage their operations.
In this case, the chief executive officer led the drive for improvement. He set out to shift the company from its single-minded focus on customer service to a more balanced perspective that included cost management and productivity. Unfortunately, the company’s financial accounting and reporting operations weren’t quite up to the task. Specific problems included:
- Ineffective financial processes. Overall transaction efficiency was unimpressive, and finance spent a lot of time on low-value activities. Regulatory compliance was expensive and time-consuming.
- Misalignment between jobs and skills. Many employees didn’t have the skills and training to do their jobs. Senior staff often spent much of their time on junior-level tasks.
- Poor data quality. Financial close data had repeated errors that distorted internal and external reporting. Executives and managers did not have access to the information and analysis they needed to make good decisions.
- Lack of clear roles. The company did not have clear career tracks for different types of specialists. This made it hard for people to develop their skills and limited the company’s ability to adjust to organizational changes.
How We Helped
The company’s finance transformation comprised 32 projects across five major areas: organization design, accounting simplification, global close process and calendar, consolidation and external reporting.
The first step was to develop a future vision for finance. With Deloitte’s assistance, the team delved deeply into finance’s organization and processes to understand the problems and develop a vision for how things should be. The second step was to develop a road map and business case for finance efficiency and improvement.
Solution
- Improved processes for the monthly, quarterly and annual close
- Clear separation between external reporting and management reporting
- Better alignment between staff skills and jobs
- Clearly defined career tracks
- Reliable information that gives decision-makers the insight to run the business better
It’s important to note that these changes all focus on processes and people, not technology. In fact, senior executives expect that the significant operational improvements currently being made in finance will serve as a strong foundation for the company’s subsequent Enterprise Resource Planning implementation.
The finance transformation effort is expected to generate $21 million in benefits over the next six years, while significantly enhancing the company’s ability to manage costs and improve productivity.
As used in this document, the term “Deloitte” means Deloitte & Touche LLP, Deloitte Consulting LLP, Deloitte Tax LLP and Deloitte Financial Advisory Services LLP, all subsidiaries of Deloitte LLP. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries.
Financial Transformation in Pharmaceuticals
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