This study investigates the relationship between outsourcing a part of the finance function, and the involvement of finance in strategic decision-making. The main objective of this research was to find empirical evidence to support the direct positive effect of outsourcing finance activities on the involvement of finance in strategic decision-making. Survey data has been gathered via an online questionnaire, and different forms of hypothesis testing have been done to find significant correlations between the main variables.
The outcomes of the hypotheses tests following different methods such as the Pearson correlations test, Spearman’s Rank-order correlations test, and Regression analysis do no provide empirical evidence of a significant positive relationship between outsourcing finance activities and finance involvement in strategic decision-making. Moreover, outsourcing finance activities do not significantly increase the level of finance involvement in strategic decision-making. Therefore it can be concluded that outsourcing finance activities are not a suitable option to enable finance organizations to be more heavily involved in strategic decision-making. As shown in previous research, outsourcing finance activities can deliver positive results in case of cost savings, a more effective finance organization, increasing knowledge, and mitigating risks (Averaerts et al., 2010; Asatiani et al., 2018; Mishina et al.,2020), enabling finance to be more heavily involved in strategic decision-making cannot be added as a motivation to outsource finance activities. This finding contributes to the existing management accounting literature.
Nevertheless, some evidence has been found to support the second hypothesis showing a direct positive effect of an organization's size on the level of involvement of finance in strategic decision-making. This contributes to prior research of Chenhall (2003) and Zhang and Lee (2012). Besides, evidence has been found supporting a positive direct relationship between company size and the level of outsourced finance activities. In other words, larger organizations have outsourced finance activities to external suppliers more often. This supports the findings of Everaert et al. (2010) in previous research.
The conclusions drawn in this research paper are subject to several limitations. First, a larger sample size could have helped to find more empirical evidence for the first hypothesis.
Second, the moderator variable Company size by the number of employees could have been defined by another measure such as total sales or total balance value. This might have led to
different outcomes. Third, the research question and hypotheses are focused on one effect of outsourcing finance activities, while the topic of outsourcing finance activities has not received much attention yet. To fill in the gaps of this study, further research can be done to provide more insights into the effects of outsourcing finance activities in a broader way. Despite the limitations of the study, I believe that this study generates new insights into the effects of the decision to outsource finance activities and can be the reason for further research on this topic.
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Appendix A: Survey Finance Pulse Check
This questionnaire is used to gather information about the role of the finance function in organizations. You, as a finance professional (CFO, controller, finance manager) of your entity (organization, division or business unit), are requested to answer this survey.
The term ‘your entity’ refers to a relatively autonomous and independent organization which employs at least 20 people.
The survey is also electronically available:
https://uvafeb.eu.qualtrics.com/jfe/form/SV_0MuTHFsoDwhPTI9
Completing the questionnaire should take about 15-20 minutes. Please answer all questions. Most questions require you to circle a number between 1 and 5 that best indicates your opinion or to put the appropriate number in a box. If you have no opinion, or do not know, circle ‘NA’. When necessary, other instructions are given with the questions.
All of your responses to the questionnaire will be treated confidentially; no individual or organizational unit will ever be identified.
We would be very happy to receive additional comments, which you may add in the margins or on the back cover. These help us to interpret your answers.
For further information or if you should have difficulties with any part of the questionnaire and need assistance, do not hesitate to contact me – the details are below.
We can provide you with a summary of the final results of this study. Please provide your name and e-mailadress if you are interested in the results of the study:
Name: ...
E-mail: ...
Finance Pulse Check
©University of Amsterdam Business School Prof. dr. F.H.M. Verbeeten MBA
Plantage Muidergracht 12, Room M1.27 1018 TV Amsterdam
E f.h.m.verbeeten@uva.nl
1. Introduction
You may work at the organization level (corporate level headquarters), or in an entity (business unit, division) within a larger organization. Where in the organization are you located?
□ Organization level (headquarters)
□ Entity level (business unit, division of larger organization)
The term organization refers to the corporate level. The term entity refers to the part of the organization where you are located. This may be the entire organization (e.g., if you are the corporate CFO), or a local entity (e.g., business unit if you are the business unit controller, or division if you are the divisional finance manager).
2. Strategy and leadership
We are interested in the purpose and mission of your organization Strongly disagree
Strongly agree
1. This organization has long-term purpose and direction 1 2 3 4 5
2. Leaders of this organization have a long-term orientation 1 2 3 4 5
3. We have a shared vision of what this organization will be like in the future 1 2 3 4 5 We are also interested in the CFO leadership style: Strongly
disagree
Strongly agree
4. The CFO clearly articulates his/her vision of the future 1 2 3 4 5
5. The CFO challenges finance function employees to think about old problems in new
ways 1 2 3 4 5
6. The CFO has a clear sense of where our financial department should be in five years 1 2 3 4 5
The finance function may report to a general manager (e.g. CEO, division manager) as well as to a functional superior (e.g. audit committee, group controller), which may affect the impact of different leaders on the finance function.
Please indicate the relative influence of these superiors for the performance evaluation of employees in the finance function with regard to the next five aspects:
General manager has all influence
General manager and functional superior have about
the same influence
Functional superior (CFO, group controller) has all influence
7. Decision on salary increases 1 2 3 4 5
8. Recruitment and placement 1 2 3 4 5
9. Dismissal 1 2 3 4 5
10. Promotion and transfer 1 2 3 4 5
11. Work priorities 1 2 3 4 5
3. Operations and reporting
We are interested in the organization of operations and reporting in your finance function.
To what extent have the following activities been outsourced, or structured in shared service centers?
No plans
to adopt
Started (<25%)
Partially achieved (25- 50%)
Mostly achieved
(25- 75%)
Organization- wide (>75%)
12. Transaction processing (bookkeeping, accounts payables/receivables,
payroll) 1 2 3 4 5
13. Reporting (annual/management reports, (non)financial perrformance
measures) 1 2 3 4 5
14. Financial planning and analysis (budgeting, forecasting, target setting) 1 2 3 4 5 15. Valuations (asset valuations, M&A valuations, purchase price allocations) 1 2 3 4 5
To what extent have the following process and technology- improvements been undertaken in order to deal with the structural complexity in the finance function?
No plans
to adopt
Started (<25%)
Partially achieved (25- 50%)
Mostly achieved
(25- 75%)
Organization- wide (>75%)
16. Strict adherence to common data definitions 1 2 3 4 5
17. Use of standardized common processes in the finance function 1 2 3 4 5
18. Implemented standard chart of accounts/information architecture 1 2 3 4 5
19. Strict adherence to global process ownership 1 2 3 4 5
To what extent are the following activities robotized or automated? No
plans to adopt
Started (<25%)
Partially achieved (25- 50%)
Mostly achieved
(25- 75%)
Organization- wide (>75%)
20. Transaction processing (bookkeeping, accounts payables/receivables, payroll) 1 2 3 4 5
21. Reporting (provision of management and financial reports) 1 2 3 4 5
22. Planning, budgeting and forecasting 1 2 3 4 5
4. Business skills and transformation
Please indicate whether you agree with the following statements: Strongly disagree
Strongly agree 23. The finance function is very responsive to transformations and changes easily 1 2 3 4 5 24. The finance function responds well to changes in the business environment 1 2 3 4 5 25. The finance function continually adopts new and improved ways to do work 1 2 3 4 5
We are interested in the extent to which the finance function is involved in the decision making support of management:
What is the importance of the following five tasks for the finance function?
Strongly disagree
Strongly agree
26. Analyzing product and customer profitability 1 2 3 4 5
27. Development and evaluation of investment opportunities 1 2 3 4 5
28. Developing new entity strategy 1 2 3 4 5
29. Finding new ways to meet entity targets 1 2 3 4 5
30. Developing cost saving and revenue increasing plans for the entity 1 2 3 4 5
Please indicate whether you agree with the following statements: Strongly Disagree
Strongly agree 31. Obtaining valid and reliable data for decision making is very difficult 1 2 3 4 5 32. Obtaining data in time so that it is useful for decision making is very difficult 1 2 3 4 5 33. Existing information technology is not capable of providing the required data for
decision making 1 2 3 4 5
5. People skills and technological competences
Please indicate whether you use data analytics in the finance function for: Not at All
To a very large extent
34. Business performance analysis 1 2 3 4 5
35. Planning, budgeting and forecasting 1 2 3 4 5
36. Risk management & compliance (including identification of irregular transactions and fraud
identification) 1 2 3 4 5
37. Process optimization and cost reduction 1 2 3 4 5
Please indicate whether you agree with the following statements: Strongly Disagree
Strongly agree 38. The finance function is constantly improving skills for the digital era 1 2 3 4 5 39. The finance function continuously invests in the data analytics and technological skills of
employees 1 2 3 4 5
40. The digital capabilities of people in the finance function are viewed as an important
source of competitive advantage 1 2 3 4 5
Please indicate whether your department is acquiring/has acquired the competences to work with the following technologies:
Not considered
Implemented and abandoned
Considering Implementing now
Used somewhat
Used extensively
41. Blockchain 0 1 2 3 4 5
42. Visualization software 0 1 2 3 4 5
43. Processs mining 0 1 2 3 4 5
44. Machine learning 0 1 2 3 4 5
45. Artificial intelligence 0 1 2 3 4 5
6. Ethics, values and culture
Please indicate whether you agree with the following statements about your organization:
Strongly Disagree
Strongly agree 46. It is expected that employees will always do what is right for the customer and the
public. 1 2 3 4 5
47. People in the company have a strong sense of responsibility to the outside community. 1 2 3 4 5 48. The effect of decisions on the customer and the public are a primary concern in this
organization. 1 2 3 4 5
7. Finance function outcomes
What are the total costs of the finance function as a percentage of sales (budget in non profit industry) in your entity?
<0.5% 0.5%-<1% 1%<=2% 3%<=5% 5%<=10% 10%<=15% >15%
Please indicate how frequently you, or someone in your entity, took the following actions in order to comply with financial controls within what is permitted by GAAP (NA= option is not available to you, you cannot perform such an action):
NA Never Some-
times
Very Frequently
49. Decrease discretionary spending (e.g. R&D, advertising, maintenance,
etc.) 0 1 2 3 4 5
50. Delay starting a new project, even if this entails a small sacrifice in value
0 1 2 3 4 5
51. Booking transactions early (revenues) or late (costs) 0 1 2 3 4 5
52. Provide incentives (e.g. price discounts) to customers to buy more this
quarter 0 1 2 3 4 5
53. Draw on reserves previously set aside 0 1 2 3 4 5
54. Arranging for slack in performance targets 0 1 2 3 4 5
Please indicate the effectiveness of the finance function in: Extremely effective
Not effective at all
55. Continuous improvement of business processes 1 2 3 4 5
56. Driving cost reduction 1 2 3 4 5
57. Providing inputs to identify and execute growth opportunities 1 2 3 4 5
Please indicate the attainability of budget
targets Easy to
attain
Attainable with normal
effort
Attainable with high
effort
Attainable with very high effort
Practically unattainable
58. Generally, the budget targets in my entity are…
Strongly Disagree
Stronglee Agree 59. The finance function provides a performance-management system with continuous
feedback conversations, measuring business performance against team goals and cross-functional business targets
1 2 3 4 5
8. Organizational design
We are interested in the extent to which operational decision rights are delegated to managers at lower level entities. How is authority divided between lower level entities (e.g. your entity, business unit or division) and higher managerial levels in the organization (e.g. headquarters) for each of the following decisions? (If there are no separate entities in your firm, please answer
‘NR’, not relevant).
NR Decision is taken at our entity without consulting higher levels
The higher level and my entity jointly take the
decision
Decision is taken at higher level without consulting our entity 60. Strategic decisions (e.g. development of new
products and services; enter new markets)
0
1 2 3 4 5
61. Investment decisions (e.g., acquiring new assets and financing investment projects)
0 1 2 3 4 5
62. Decisions regarding internal processes (e.g., setting production and sales priorities, contracting with suppliers)
0
1 2 3 4 5
63. HR decisions (hiring and firing of personnel, promotion decisions)
0 1 2 3 4 5
We are also interested in how accounting decision rights are allocated in your organization. How is authority divided between lower level entities (e.g. your entity, business unit or division) and higher managerial levels in the organization (e.g. headquarters) for each of the following classes of decisions? (If there are no separate entities in your firm, please answer ‘NR’, not relevant).
NR Decision is taken at our The higher level Decision is taken at entity without consulting and my entity higher level without higher levels jointly take the consulting our entity
decision 64. Allocation of manufacturing
overhead
0 1 2 3 4 5
65. Allocation of marketing costs 0 1 2 3 4 5
66. Transfer prices for transactions within your entity
0 1 2 3 4 5
67. Expensing versus capitalizing costs (e.g., provisions, writing-off receivables)
0 1 2 3 4 5
68. Inventory valuation 0 1 2 3 4 5
69. Budgeting process within your entity
0
70. Short-range financial planning 0 1 2 3 4 5
Please indicate whether agile work practices (i.e., using sprint-based teams processes with fast and iterative deliveries) are used in your organization?
Not considered
Implemented and abandoned
Considering Implementing now
Used somewhat
Used extensively
71. Agile work practices 0 1 2 3 4 5
9. Demographics
Important to complete!
We have some questions on you and your current position in your organization.
72. Name of the organization (firm, corporation)
73. In which country is the head office of the organization located?
1 2-3 4-5 5-10 >10
74. How many distinct business segments (i.e., distinct operating divisions) does your organization have?
75. Name of your position (e.g. CFO, financial manager, concern controller, business controller, financial controller, etc)
76. How many years do you work in this organization?
Year 77. How many years do you work in this position?
Year 78. What is your age?
Year 79. What is your nationality?
80. What is your gender?
□ Male
□ Female
Ownership of your organization?
□ Privately/Family owned
□ Public government or municipality
□ Private-equity owned
□ Anonymous shareholders (stocklisted firm with publicly traded shares)
□ Other (please specify)…..
NA Not
important at all
Somewhat important
Very important 81. How important is meeting or beating quarterly benchmarks (e.g.
earnings targets, debt covenants) to your organization? (NA= not applicable)
0 1 2 3 4 5
82. Please indicate the debt to total assets ratio of the organization that you work for at the end of 2020:
<20% 20%<40% 40%<60% 60%<80% >80%
□ □ □ □ □
You are almost there!
Next, we have some questions on your entity.
83. Name of your entity (only if different from the name of the organization; please go to question 16 if you work at the organization level)
84. In which country is your entity operating?
85.
Please indicate total sales of the entity in 2020 (in millions €)
0-10
10-50
50- 100
100-
250
250- 500
500- 1.000
1.000- 5.000
5.000- 15.000
> 15.000
Measured by annual sales (or total budget), what is your entity’s main industry? (A list of industries is provided in Appendix 1).
Code
Please indicate the number of employees in your entity in 2020
<50
50-99
100-499
500-999
1.000- 2.499
2.500- 4.999
5.000- 9.999
> 10.000
Over the last year, your entity earned an after-tax profit
□ True
□ False
Over the last 3 years, what is your entity’s average annual growth in revenues (e.g. 8%)?
% average annual growth
Your company is approximately years old
Please indicate the predictability of the following factors in the environment of your entity (1= very unpredictable, 3 = neutral, 5= very predictable)
Very unpredictable
Very predictable
86. Competitors’ actions 1 2 3 4 5
87. Market demands 1 2 3 4 5
88. Production technology 1 2 3 4 5
89. Product attributes/design 1 2 3 4 5
90. Purchasing of supplies 1 2 3 4 5
Please indicate the relation between your entity and other organizational entities within the firm (NR=not relevant if your organization is a single entity).
i
How easily and quickly can your firm perform the following actions? (1=
strongly disagree, 3 = neither agree nor disagree, 5= strongly agree)
Strongly disagree
Strongl y agree 93. Respond to changes in aggregate customer demand (i.e., scale operations up or down) 1 2 3 4 5
94. Customize a product/service to suit an individual customer 1 2 3 4 5
95. React to new product/service launches in the market by competitors 1 2 3 4 5 96. Introduce new pricing schedules in response to changes in competitor’s prices 1 2 3 4 5
97. Expand into new regional and/or international markets 1 2 3 4 5
98. Expand or reduce the variety of products/services available for sale 1 2 3 4 5 99. Adopt new technologies to produce better, faster and/or cheaper products/services 1 2 3 4 5 100. Switch suppliers to avail of lower costs, better quality or improved delivery times 1 2 3 4 5
NR No
impact at all
Some mpact
A very significant impact 91. To what extent do your entity’s actions impact on work carried out in
other entities of your organization?
0 1 2 3 4 5
92. To what extent do actions of managers of other entities of your organization impact work carried out in your entity?
0 1 2 3 4 5