The Disruptive Finance Function: An Interview with Rasika Padmaperuma of FHI 360
The Disruptive Finance Function: An Interview with Rasika Padmaperuma of FHI 360
In November 2017, FHI 360 Chief Financial Officer Rasika Padmaperuma (at right) presented at Humentum’s CFO Forum on The Disruptive Finance Function, addressing how innovative technologies are changing the way his finance team is doing business. We found his presentation so thought-provoking that we asked him to share more on this topic.
Q: Can you tell our readers who missed your presentation what the main message was that you gave our CFO forum a couple of months ago?
The main message was about how the exponential growth in technology is going to impact us as a society and the accounting profession, in particular. There’s a lot we need to do to retrain our staff to be employable in this new economy.
In the past, organizations outsourced the work to low-wage countries such as India and the Philippines. But now, wage inflation has crept in, and it is no longer cost effective to outsource functions to countries like these. I think a long-term cost efficiency solution is to adapt to technologies to augment existing human resources capabilities within organizations.
At FHI 360, we have reduced headcount in the HQ finance support functions significantly over time, and there’s still pressure to decrease it even further. When we merged with AED, we had to transition from two different accounting systems to a single accounting system that worked across the new organization. For this to work, we had to build a better interface between field operations and the HQ accounting systems. The new ERP system we implemented helped automate a majority of the labor-intensive processes that were heavily reliant on manual interventions. It wasn’t just one single thing that helped us reduce HQ headcount and introduce efficiency to our operations—it was a combination of introducing the right technology solution that suited our industry, evaluating and developing better operating processes, and hiring people with the right skills to manage technology and processes.
Q: So, at FHI 360, these are not positions that you’ve moved out to the field. These are positions that have been replaced by technology, right?
Q: Which functions have you automated and how will you continue to move forward?
Robotic Process Automation (RPA) is a new framework that has been developed in recent years by technology firms to study business processes and introduce technology to automate manual processes when possible. This framework is widely used in the software industry, and now other industries are embracing this platform to digitize their business processes. Outside of implementing Costpoint, at FHI 360, we are using the principles of RPA to study manual processes and digitize such processes when we can. We introduced RPA into our accounts payable function, which involved breaking a manual process into micro tasks and using technology to monitor and automate these with digital business processes. The focus is to get manual touches out of a business process. So, for example, in the future we hope to use technology to read invoices and automatically fill in data fields in our system. This is already done in the healthcare industry, and we’re trying to see if we can incorporate this technology into the work we do.
Q: How are you doing this without a background in computer science or specialized skills in this area?
I have always taken a keen interest in computer science even though my degree and background is not in that field. Throughout my career, I have implemented ERP systems and have seen the importance of these technology functions to improve efficiency and bringing businesses forward into the future. In addition, we are working with outside consultants who will help implement this framework at FHI 360.
Q: Is this something that you think about doing with your ERP system, or is it totally different? When you thought about introducing Costpoint, did you already have this in mind? How do the two worlds come together?
The way it will work—hopefully—Costpoint will be Costpoint. No one is going to touch that. But this framework will be used to understand and record human touches with our ERP and digitize some of touches to eliminate human intervention as much as possible. For example, some of the tools that are used in the framework will keep track of the keyboard touches, document flows to understand the unique data entry requirements, and business processes. For now, we are taking small steps, and we are looking at the accounts payable function. And then, depending upon how it goes, we’ll move on to accounts receivable.
Q: When did you start? And what’s your anticipated timeline?
We started thinking about it four months ago, and initiated this project about a month ago. We are hoping that we will have something that we will be able to deploy by June 2018.
Q: And will you be automating travel expenses as well?
No, not yet. The solution we purchased does not help the complicated travel that we do.
Q: What has the reaction been from your team to the automation process?
It has been hard on a lot of people. When an organization tries to introduce a new technology, there’s a significant change management component that organizations needs to understand. We underestimated the significance of “change management” especially when introducing an organization-wide ERP; hence, there was resistance to change. Also, there was gap in technology skill sets among the staff that was required to interact with the new ERP. Two years ago, we went through a reorganization exercise to re-skill our staff so that they could successfully interact with the new technology. During this phase, we learned that it is important to have a workforce with the right mindset that is willing to learn these new skills.
Q: As a leader, what would you say organizations need to do to help reskill people or to think about reskilling that goes beyond traditional reorganizations? Is there any progressive thinking in our sector?
We must face the reality: We need people with new skills who can interact with these technologies. People must be comfortable with them. Ten or fifteen years ago, people in the accounting profession had to know basic Microsoft tools, such as Excel and Word. Forty years ago, when the only technology tool for accountants was the adding machine, accounting processes were paper based and people actually did those things [that Microsoft tools do]. Then when digital spreadsheets became the driving technology, people had to be trained to get comfortable with these new tools, and then they became so widespread that everyone could use them.
Now, these tools have become obsolete. There are new tools, such as Python—what I consider excel on steroids. What we are doing is actively thinking about how we can introduce these tools to our current finance team. There are other tools such as Hadoop that are used as big data analysis tools.
In my opinion, evolution of technology is a continuous process. Take Zoom, a communications tool. Five years ago, we had colleagues from the information technology (IT) departments coming to meetings and helping us use these tools. But now, we don’t have the resources for IT to come and teach staff how to use them, and staff must be self-taught.
So, getting back to your question: We are trying to make people understand the need to learn new things. And I must say, a lot of people are embracing these new tools and trying to learn them. But unfortunately, there will always be a group of people who refuse, and those people will have to be helped in some other way.
There are no clear solutions. Leadership within our industry needs to be a frontrunner in introducing new concepts and encouraging employees to embrace new knowledge. I always tell our employees: learning does not only have to happen at work—it must happen all the time. There are many tools and platforms available to learn new skills. For example, there is the Google YouTube platform; in addition, the Massive Open Online Courses (MOOC) platforms have become mainstream. Learning is the responsibility of individuals, with the support from organizations. I think we should get used to this new phenomenon.
Q: Are you working closely with your learning and development (L&D) team?
Absolutely. The L&D team has helped us understand what learning is. It is not just looking at a PowerPoint presentation and spending eight hours in a classroom. The L&D team has helped us to understand that learning depends on individuals, and it must be customized to meet their needs. It may be that someone wants to learn something in just two minutes. So, we need to ask, “How can we provide a tool for accelerated learning?” We are working very closely with the L&D team to build tools such as micro-videos where people can watch and listen to something for a few minutes and then go try it out. For example, when we do work with our field teams, we often use this approach. It’s especially cost effective to train our staff based overseas.
One specific area in which we have made progress is with our sub recipient monitoring activities—we have developed fairly structured techniques to carry such due-diligence activities, and the work is mostly done by program officers who have little exposure to finance related topics. In the past, we have held four- or five-hour training sessions on how to do this work. Sometimes the sessions have worked, sometimes not. Many times, someone would come to us and say, “I only need to learn how to do this one thing, and I don’t want to spend four hours in a classroom to learn one concept.” So, with the collaboration with L&D team, we developed micro videos on various topics. For example, if there are 20 questions for vetting a subrecipient, and the person doing the work already knows how to handle 19 of them, they can just go to the one video and learn in a few minutes what they need to know.
Q: Wow. What will be the impact of these new technologies on indirect cost pooling?
In the future, we will have the technology to tag and track costs based on activities (projects) in a much more comprehensive manner than what we do now. Moreover, these tagging techniques will allow organizations to allocate direct and indirect costs to a project in a much more structured and effective manner than the way it is done now. These techniques will assist organizations to move from a few indirect pools to many activity-specific indirect pools. Strategic pricing will be a direct benefit of such a change, where organizations will be able to more accurately price their offerings based on actual costs (direct and indirect). I see companies that embrace these technologies and techniques as having a competitive edge over the others. Lastly, automating some of these processes will once again take out the very tedious human intervention that is often required to accomplish them and make us more relevant in the current market, where we are all trying to compete in a very restrictive funding environment.
Q: Do you have a number in mind of what your support staff will be? Or will you just keep going?
It depends since it is based on the volume we have. The ideal state for me is having a very agile model. So, where the volume increases, we increase (staff), when the volume goes down, we go down. The only way we can do that is with technology. Once we invest in technology, the marginal cost of increasing and reducing is very little. So, I don’t have numbers in mind, but our ideal objective is to be agile. Every organization should try to reduce their fixed costs as much as possible.
For example, we opened an office in Sri Lanka recently, and we went to a We Work model because we did not want to invest in real estate.
Q: How is your technological innovation being paid for? What advice would you give to others on how to pay for it?
That’s a tough one. One way to think about it is, if you sacrifice now, you’ll save in the future. There’s always a demand between operations with enterprise services / business development. The approach that we take is that if we invest in technology now, it will free up funds to do more in the future. Technology helps reduce costs, compels organizations to be more efficient, and then provides a better product to clients. But it is a very hard sell unless you get support and buy-in from your Board, CEO, and executive leadership team.