Your New Operating Model: Drivers And Trends Of Integrative Intelligence

Bryan Lapidus

Part 2 of the multi-part “Integrative Intelligence” series exploring the skills necessary for the new operating model of finance.

In the first article of this series, we introduced the concept of integrative intelligence: the act of defining work, disseminating it among a collaborative and fluid team, then re-aggregating it to drive decisions. The trends that drive this shift are also what is defining it, so in this article, we will look at three ways this changes how you deliver finance services.

Management theory is getting rewritten. Again. As Tom Friedman writes, “Innovation that happens from the top down tends to be orderly but dumb. Innovation that happens from the bottom up tends to be chaotic but smart.”[i] That requires getting the best return on your people by providing a supportive, nurturing environment where creativity can flourish.

  • Decentralization: Organizations are prioritizing decentralization over command-and-control systems to make decisions faster based on the input of more people. The drive for innovation and disruption is pushing companies to look for the “next big thing” before rivals push them out. The average tenure of a company in the S&P 500 has dropped from 33 years to less than 20, and about half the index’s companies are forecasted to be replaced in the next decade.
    • Agile management was born from software developers who rebelled against the rigor and restrictions of the “waterfall” methodology’s heavy up-front decision-making that guides the remainder of the project or the fiscal spending.
    • Research by the Association for Financial Professionals shows that fixed, rigid budgets are giving way to reforecasts and dynamic planning. The trend of integrated business planning also allows for inputs to the central plan to originate from individuals and departments that may be closer to the customer, supply chain, or other key input.
    • Organizations are “buying” their research and development through investments and mergers and acquisition activity, essentially letting the market dictate the direction of research rather than internal, planned capital allocations. Corporations provide about one-third of start-up capital and participate in one-fifth of all financings. Since 1986, companies with the highest CapEx-to-sales ratios have underperformed the S&P 500 by more than 2 percentage points on average each year, according to Bank of America Merrill Lynch.
  • Empathy: The ability to understand and share the feelings of another person is ascending as a management philosophy. People are looking for meaning in their work and work/life balance, control over their careers, intellectual freedom over rote jobs, and communities with a personal connection.
    • In Deloitte Global’s 2018 Millennial Survey, young workers indicate that the top four skills employers need to ensure long-term success are interpersonal skills, confidence/motivation, ethics/integrity, and critical thinking.
    • In a knowledge economy with data at our fingertips and automation on the rise, the human skills that separate you from your competitors are critical thinking and creativity. This happens where people can think freely, experiment with ideas, take risks, and feel psychological safety (more on that later), rather than the force-rank methodology of two decades ago where a certain percentage were known to attrite every year.

Businesses find themselves moving from a position of talent acquisition where they hire individuals, to one of talent access, where they hire the skills they want. Revenue per employee becomes a less meaningful metric as it becomes hard to know who an employee is. This trend is driven by:

  • Gig economy: Deloitte’s CFO survey estimated the “outsource, contingent, contract or gig workers providing finance work to our company will increase to nearly 16% of the workforce in three years, nearly double today’s count.” Outside of finance, more than 1 in 3 American workers freelanced in 2018, or 56 million individuals; 40% of freelancers are 18-35 years old.
  • Talent shortage: In the United States, 10,000 Baby Boomers are expected to retire every day for two decades, according to; in the United Kingdom, 60% of employers expect a skills shortage in finance and accounting, according to Jobsite.
  • Skills gap: CFOs estimate that 11.5% of the current finance workforce, and 15.4% of the future force, lack the requisite skills to perform their roles, with the biggest gaps in analytical skills, digital technologies, and business partnerships.

Technology is an enabler of integrated intelligence, through its ability to facilitate remote work, improve automation, and integrate data through the value chain:

  • Automation and bots: The McKinsey Global Institute’s automation research found that currently demonstrated technologies can fully automate 42% of finance activities and mostly automate a further 19%. This includes 83% of cash disbursement, 56% of FP&A, 39% of treasury.
  • Distributed work capabilities: Cloud and mobile have led to pervasive computing from anywhere in the world, enabling work to happen from anywhere.
  • Implications and actions: It sounds obvious, but finance needs to be very intentional in how it manages its own business. Subject matter expertise is necessary but not sufficient for success; we need to connect with people personally and think about how they connect to our organizational goals. Your team consists of anyone who can contribute, including co-workers, customers, and suppliers who have integrated data, vendors, consultants, gig/freelancers, and even automated bots.

The next article in this series will cover “creating the work” — why having the answer is less important than knowing what questions to ask in this new operating model. If doing work is less important than creating the work to be done, how should we organize our efforts?

Read Part 1 of this series.

Interested in learning more about integrative intelligence? Download AFP’s FP&A Guide, underwritten by Microsoft.

[i] Stephen Denning, in his book, The Age of Agile, page 56, cites Tom Friedman in his book, That Used To Be Us.

Bryan Lapidus

About Bryan Lapidus

Bryan Lapidus is the director of the FP&A Practice at the Association for Financial Professionals. He has more than 20 years of experience in the corporate FP&A and treasury space at organizations like American Express, Fannie Mae, and private equity-owned companies. At AFP, he is the staff subject-matter expert on FP&A, which includes designing content to meet the needs of the profession and helping keep members current on developing topics. Bryan also manages the FP&A Advisory Council that acts as a voice to align AFP with the needs of the profession.