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Turning automation into a business strategy

By Contributor
Tue 28 Jan 2020
FYI, this story is more than a year old

Article by BlackLine chief technology officer Pete Hirsch.

The “contribution” that software robots will make to the internal execution of work is expected to increase by 50 percent over the next two years, if new research by IDC plays out.

This points to the increased sophistication of workloads that automation is being pushed to handle, as well as to the customer satisfaction and employee productivity gains that companies are pinning on automation to produce for them.

But these gains won’t materialise without a strong internal vision for automation and a cohesive plan to deploy it. 

Additionally, what has worked to date to get automation projects off the ground is no guarantor of future success.

What is certain is that as automation grows in its strategic importance to organisations, it demands greater strategic oversight and focus - and that as you compile a vision and strategy for automation, there are several aspects to consider.

Gated by humans

One thing to be mindful of is that automation efforts may be derailed by prevailing attitudes towards it in parts of the finance sector.

Recent research by Gartner shows some finance departments are still hesitant to automate even the most repetitive tasks in their financial reporting processes. 

According to Gartner, up to 30 percent of a full-time finance employee’s time may be wasted on “avoidable work”. For a finance department of 40 full-time staff, that’s 25,000 hours a year and a cost north of $1.2 million. Even at a smaller scale, those numbers are significant.

One of the things holding finance departments back is an attitude that financial reporting processes need to be gated with points of human intervention. 

Gartner is unconvinced, noting these gates may just create more points for the injection of human error or rework. “Maintaining unnecessary human interaction points indefinitely creates a ceiling on the benefits of [automation],” says Dennis Gannon, research vice president in Gartner’s finance practice. 

I’m equally unconvinced this level of human intervention is required. BlackLine’s own research shows the people preparing financial statements and reports are often not confident about the accuracy of their source data, leading to trust and risk issues, especially around data-driven decision making.

Human error is the biggest single contributing factor to that lack of trust; the third-highest contributor is a lack of automated controls in use. That supports the theory that a strategy built on constant injection of human overseers is unlikely to create the right assurance.

Turning to automation

Gartner says companies that lean too heavily on humans can overcome a reticence to embrace automation by creating “tandem systems set for a limited period of time.” 

“This allows accounting leaders to test the performance of a fully automated process against the traditional manual approach and provides proof of the efficiency and accuracy of [automation], without the need for human intervention points.”

That could work, but I’d also argue that before setting up systems for comparative purposes, a strong vision for the role of automation - and a strategy for how it is to be embraced - should be determined.

Automation projects often begin with a broad vision such as removing points of friction (thereby improving customer satisfaction), or cutting costs by rebalancing the distribution of work handled by employees and software bots in a specific area of the business. 

An automation strategy, meanwhile, should define how you think about automation at a business-wide level, the types of automation you want to introduce, and how to make it scale.

As Gartner notes, automation is progressing outside traditional strongholds. The analyst firm expects “almost all new [automation] customers will be business buyers that are outside the IT organisation. Major growth will come from expansion across silos, often coordinated by or with IT.” 

Automation is often achievable in small packages of experimental work, but can be difficult to scale without an appropriate strategy in place. Finding a path to scale isn’t a challenge unique to automation; it is also experienced by users of artificial intelligence and cloud, in that what works on a deliberately small scale has a habit of breaking when exposed to real-world environmental factors and conditions.

The money shot

The strategy should also demonstrate an understanding of the investment required to get to business-wide adoption and use of automation.

While it may be tempting to broach automation as a cost-cutting exercise (from reductions in headcount), this is no longer a lens used by large-scale, successful projects.

The efficacy of headcount reductions, in financial terms, may largely depend on the cost of labour. And while you may not need as many human ‘gates’ in the financial reporting process, the value and utility of the human workforce does not diminish when it is no longer performing automatable work.

As Gartner notes in a recent Magic Quadrant report, “Customers should not confuse in their minds the cost of an employee and the cost of a set of integration scripts. The claimed headcount reduction rarely happens, because employees are normally refocused toward more value-adding work.”

One of the most valuable uses of automation is providing organisation-wide consistency and integrity for numbers you produce or collate. Establishing internal confidence in your numbers enables you to raise the bar with your decision-making. The potential for bottom-line impact here is far greater than is possible under a short-term cost-cutting mindset.

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