The Leader Magazine

JUN 2019

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th E l E ad E r JUNE 2019 15 Reporting structure CRE&F represents the second or third highest expense for many organizations, typically just behind labor and payroll, and in close competition with technology costs. CRE&F decisions also affect many other parts of an organization and often come with significant financial implications (e.g., capital planning) for a defined period of time in the face of business uncertainty and demand. For these reasons, the most common reporting structure for CRE&F departments is to the chief financial officer (CFO), as reported by 49 percent of survey respondents. This reporting relationship gives heightened focus to strategies involving cost optimization and savings generation within the CRE&F department. An organization might decide to align its CRE&F organization to report to a CFO if it is managing a low-margin business, focusing on shareholder returns, or is otherwise operating in a challenging economic or industry cycle. It may also do so for regulatory or compliance purposes, such as adhering to the newly implemented FASB/IASB accounting standards, which have reinforced the rationale of reporting alignment with the CFO. Similarly, reporting structures may highlight other areas of emphasis for the organization. For instance, 15 percent of respondents indicated that their CRE&F department reports to the chief operating officer. This reporting relationship might point to heightened emphasis on efficiencies in supply chain, staffing performance, technology or other operational areas. Twelve percent of respondents indicated that their CRE&F department reports to the chief human resources officer (CHRO). Given the people-centric role of a CHRO, this reporting structure might emphasize workplace strategies, employee wellbeing, location strategies, and employee recruitment and retention in its organization. Interestingly, survey respondents also cited reporting relationships to chief executive officers, chief administrative officers, shared-services council and chief information officers, each of which would influence the CRE&F department's decision-making based on their specific priorities and focus. Organizational model Just as organizations exhibit varied approaches to the reporting structures of CRE&F departments, so, too, do CRE&F departments exhibit varied strategies in the way they are organized within their broader companies. Said differently, as the enterprise goes, so goes CRE&F. Two organizational models stood out in the survey results: 36 percent of respondents indicated their CRE&F departments are primarily organized by function or service line (e.g., facilities management, transactions, project management, client relationship management (CRM)/business engagement), while 30 percent indicated their CRE&F department is organized by geography (e.g., Americas, Europe, Middle East and Africa, and Asia-Pacific regions). Departments reporting in this manner tend to feature matrix attributes with one model as the dominant "axis" and the other models supporting it. For example, CRE&F Department A might be organized by function and service line, with matrixed reporting into geographic leaders and teams; CRE&F Department B might be organized by geography, with matrixed reporting by function or service line. The resulting organizational hierarchy (i.e., one model as the dominant axis with others supporting it) therefore affects the subsequent alignment of the profit/loss structures, governance protocols, decision authorities, etc., of the supporting business units. While the two organization models noted above were the two most cited organizational models in our survey, 16 percent of respondents reported that their CRE&F departments are organized by line of business (the specifics of which depend on the industry and nature of the business). This model increases organizational focus on structures, roles and processes that enable business unit alignment, and might be more appropriate in cases where the relative representation of either geographic or functional business units is dispersed or unevenly represented. Organizations that have recently undergone enterprise-level reorganizations and transformations might also find an advantage in organizing by line of business. One way CRE&F departments, regardless of organizational model, have had success in strategically engaging senior business stakeholders is by introducing dedicated CRM roles or CRM-centric processes and deliverables to provide proactive and strategic insights, support and recommendations. As an indication of the promise that this approach has shown, 65 percent of survey respondents expect CRM activities to become more formalized in the next three to five years. Data management CRE&F departments within large organizations manage portfolios that might include multiple service providers, multiple service lines, several asset types, several countries, time zones, languages, currencies, regulations and customs, and hundreds, if not thousands, of people. The level of complexity increases further when we consider the data produced across all these structures and source systems – and the variances in how it is generated, verified, governed,

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