291. Technology Doesn't Transform Organisations. People Do with Ilana Esterrich

0:00Welcome to CFO 4.0, the future of finance. The CFO role is changing rapidly, moving from cost controller to strategic visionary, and with every change comes opportunity. We are here to help you take advantage of this transition to win at work, drive your career forwards, and lead with confidence. Join Hannah Munro, Managing Director of ITAS, a financial transformation consultancy, as she interviews key experts to give you real-world advice and guidance on how to transform your processes, people, and data. Welcome to CFO 4.0, the future of finance.

0:48So hello everybody and welcome to this episode of CFO 4.0. I am your host Hannah Munro and with me today is Alana Estrich, who is the author of The ROI Lie. Now, before you get too excited about the title and the contents, I'm going to ask Alana to do a quick intro to her background. But what an interesting topic, Alana. So tell us a little bit about how you ended up writing a book on the ROI or the lie that ROI gives us. So I've spent my career helping organizations navigate change, including over the past 15 years as CFO of three progressively larger and more complex nonprofits, and most recently at Planned Parenthood Federation of America, the largest sexual reproductive health provider in the United States.

1:35Before working in the nonprofit sector as a CFO, I worked in consulting and corporate finance with organizations such as PwC, General Mel's and Thomson Reuters. And across all of these experiences, one question kept following me, like why do investments that look so compelling, so interesting on paper become really difficult to translate into really lasting improvements? And, you know, I've led those initiatives and I've learned some pretty hard lessons along the way. So that question brought me together with my co-author Vin Messina, and we decided to co-author The ROI Lie, Why Transformation Fails and What to Measure Instead.

2:17And we also co-founded AttentionShift OS. So through AttentionShift, we're examining what it actually takes to turn an investment into finance software or systems, and how do you turn that into meaningful change. And then I'm now officially an ex-CFO. Today, I'm a fellow at Harvard's Advanced Leadership Initiative here in Boston. And I'm part of the initiative. I have a personal project and I'm exploring how mission-driven organizations build capacity to pivot, scale, and sustain their impact. And I'm also focused on finding ways to prepare the next generation of finance leaders to help shape the decisions that determine an organization's future.

3:04So I'm building my next chapter of my career. In terms of why we decided to write this book and how it all came about, it's been a question that's been increasingly interesting to me over the last few years is how do you turn an organization's ambitions into something that people can actually deliver? And as a CFO, you see the distance between those two things really clearly. You're in the room when the strategy is approved and the investment is authorized. And then you're also there when the team is exhausted and the implementation gets really complicated. And everybody wants to know, where are all these promised benefits?

3:42I've lived through that multiple times. I've also contributed to it. And some of the most useful things I know came from initiatives where we underestimated what we were asking people to change. And so that is the experience that helped bring me together with Ben, my co-author. He has spent years examining those problems from the vendor side, and I was living with them from the CFO side. And we really wanted more of a Venn diagram where the vendor and buyer overlap, and we sit on the same side of the table. So in addition to selling us a solution, working with us to really understand the problem and ensure that the solution is the right fit, and then from the buyer side expecting our vendor to actually collaborate with us and not just push us to get a wet signature on a contract so that is where our logo comes from it's an overlapping venn diagram where we believe there needs to be a partnership between the vendor and the buyer and those organizations that are able to do that are going to ultimately be more successful with transformation absolutely and i have to say like as somebody that um obviously worked alongside And our team's favorite projects are those where we get involved nice at that early stage and have that conversation.

4:58So there's a really interesting piece in your book about why the traditional ROI model doesn't always, it doesn't work. And it's crazy, isn't it? Some of the statistics around the volume of projects that failed to deliver the initial perceived value. So let's just talk about that for a second. Let's talk about why does that traditional sort of time saved approach not really translate into reality? Where does it fall over? So I think business cases can be mathematically sound, but still give leadership a really incomplete picture of what it's committing to, right? So the projected return rests on a series of assumptions that don't always carry through.

5:41People will adopt the system. We assume that the old work will stop and that decisions are going to happen faster. and that any free time from this new solution will go towards the more valuable activities. We always talk about we want to go from doing the things to actually being strategic business partners and doing the strategic work. And those assumptions are often doing an enormous amount of work underneath this confident ROI number. So our title of our book calls attention to the certainty that can develop around that number while the organizational commitments just aren't resolved. So I will use an example.

6:21A few years ago in an organization that I was in, we tried to implement a procurement system. We were going from a COVID-based, almost fully manual procure-to-pay system, which in COVID, when we were all remote, So it was just people sending files back and forth and using PDFs. We thought we understood the problem. You know, there was a lot of manual work. There were too many handoffs and an opportunity to make the process more efficient. So we did the training. We communicated. We put effort into change management. And we expected a difficult transition, but we believed that we were preparing people for it.

7:03And then after go live, the procurement function just seemed to unravel and then just landed with a thud. And what we'd underestimated was how much the existing process meant to the people involved. Being part of the individual transaction gave people visibility, gave them a sense of control, and it gave them a role in how the organization worked. And when automation removed a step, we realized that someone would experience that as being removed from the conversation. And there was also a human fear of missing something. So if I used to see every transaction and now I don't, how do I know everything is working and how do I know I'm still contributing?

7:42And people started trying to recreate the manual process inside the automated environment. And work that we expected to disappear found crazy ways to survive. And the time that we thought we were releasing into more strategic work didn't turn into that more valuable work There was always kind of a strong pull towards what felt familiar and dependable And the really uncomfortable lesson was that we had made assumptions about people Just as consequential as the assumptions in our financial case We understood the steps we wanted to eliminate much better than we understood what those steps represented to the people performing them That experience stays with me because I can see our responsibility in it we needed a much more explicit conversation about how roles would change, what visibility people still needed, and what valuable work would take place in place of the work that was being removed.

8:36So using that as an example, what we wanted the central premise of the ROI lie to be is that transformation depends on changing how people direct their attention, how they make decisions and how they carry out their work. So the financial case that builds the ROI can justify the investment, but the organization still has to create the conditions that allow that return to materialize. And that's where we were seeing a recurring gap. ROI is very explicit about the money because we know the purchase price, we know the implementation costs, we know the projected savings. And yet we are always surprised about what people will stop doing, what they'll do instead, and who has the authority to make those changes stick.

9:24So the procurement experience I gave is a good example. We expected automation to remove manual effort. We hadn't adequately accounted for the attachment to the work that they had been doing or established how the released capacity would be used moving forward. So technology changed the process available to people, but their behavior determined what process the organization actually experienced. I find that we rely on the ROI. It's great if you're implementing a new machine or a new mechanical process, and you can easily measure inputs and outputs and then do the math to get to the ROI. When you add people doing human work, it becomes a little bit difficult to create the ROI.

10:12And yet, it's a metric that as finance people, it's our textbook metric. It's the one we feel comfortable. It's almost like our comfort blanket or our pacifier, you know, the ROI. But we're finding it is increasingly difficult to calculate the ROI in this era of people and technology. Think about how many times you may have heard people say, I don't understand how to get the ROI of AI implementation, right? It's very amorphous and it doesn't suit the nature of financial folks who love the concreteness of numbers. So our book treats attention as an organizational resource that leadership has to govern and manage.

10:57And if everyone is already occupied and we're at 110 % and we hear this from our teams all the time, adding a new priority on top of that requires a decision about the existing work. So if a system saves time, leadership needs to decide where that time should go. And if a change crosses functions, people need clarity about who can decide and whose decisions will hold. So that's where we introduce the concept of in addition to ROI, because as finance people, we're never going to let go of ROI, we feel that it's incomplete and that you need to add on top of that a metric of return on change because return on change gives structure to the questions that are not financially mathematically calculatable.

11:42So the ambition is to apply the same seriousness to the operating conditions behind a return that we apply to calculating the return itself. And I think that gives leaders a better basis for deciding whether to proceed, how to proceed, and whether the investment is delivering what the organization needs. And is one of the things that you're looking at as part of that sort of that initial early stage is that kind of stop, continue, start. So what are we going to stop? What are we going to continue doing? And what are we going to start doing with that alternate resource? Is that the stage that you would start to have that conversation at that initial ROI base?

12:19For sure. In our book, we include the three questions. Before you, the third, the last question is, what system are we going to buy or what should we be looking for in an application? You really have to understand, especially with our teams saying that they're at capacity, that they have no more time. And we don't want to be asking people to be doing the existing work and then layer out a new process until we get to a cutoff. So, the important question is, what exactly is our problem? What exactly we're trying to fix? How we want to fix it? And if our teams are at capacity, what are we willing to give up or to stop doing in order to create capacity to layer on the new system?

13:07and then you layer on the new system and you keep finding ways to eliminate the work that can be automated, that can be stopped, or that can be changed to create the additional capacity to do the strategic work that we all want our teams to be doing. There's a movie called Office Space, and they're all kind of just, they sit on their computers and they do work all day, and they're being required, they have a deadline to submit what they call the TPS report. It's a made-up report And that report has to be delivered by a certain day at a certain time But what happens if you don't deliver that report And nobody squawks and nobody says anything Does that report add any value?

13:50So is that something you can stop? Is that something that someone does use But they're very limited and they can use something else? Is there a way to automate? So really thinking about the work that's being done because, and we saw this during COVID, we have inherited band-aids and paperclips and staples and gum and tape holding process together that are 5, 10, 15, 20 years. And people come into an organization and they're told, here's what your job is. And they're wondering like, well, why do I do this? Well, because I was told to do it. But if you really get to the root of all the work that your team does and you do an attention audit, and that's something that we cover in the book, and really understand what is consuming your team's time, you will find, and we use the value diamond, which is also in our book, you will find that 60 to 80 % of your team's time are in activities that operate or that are control.

14:51and that leaves very little time to do things like compete and grow and thrive, which are the strategic things we want our teams to be doing. And so going through that audit in advance and really understanding what work should stop, what work should be changed, and what work should be started is going to give you the right foundation for then engaging in the conversation to what software solution or automation is correct. And that is more valuable and more cost effective than going out and being razzle dazzled by an amazing demo from a vendor and having your team come back and say, I love this.

15:32This was amazing. This is perfect. And then you try to paper that solution on top and you haven't fixed the foundation. And that's where transformations die. That's where you're not getting the return on investment that you expected. And yeah, absolutely. I always say avoid shiny toy syndrome when shopping for new solutions. So I just want to kind of roll back to one of the pieces you mentioned there, which is the value triangle. Now, I thought this is a really great way to, in the book, to talk about, I guess, the value that finance brings. So talk to us a little bit about what is the value triangle and what are the different elements that sit underneath?

16:15So there are four, actually five elements of the value diamond. And if you just think... I say diamond, not triangle. Yeah, let me get my terminology right. So, you know, there are activities that operate. This is keeping the lights on, keeping the trains running, all of the things that take people's time on a daily basis. There's activities that are control. So regulatory things that we have to do because we have to do them. And then you've got compete, which allows us to grow our organizations and to really go out and build the business. And then there's grow, sorry, that's compete. And then there's grow and thrive, which is to grow.

16:56And if you decide not to grow, to basically thrive and exist in a really positive ecosystem. And at the center of that value diamond is attention. And where your team's attention goes is important. And by doing the things that we put in the book, like doing an attention audit, looking at decision rights, really understanding the three questions, you're going to be able to see how much attention you really want to shift. So by doing, let's say, an attention audit and over a course of one or two weeks, just really having each team member keep a list of how much time they're spending, you'll find that you're spending an awful lot of time in operate and control.

17:41And so what you want to do is focus on how do we change the attention from operate and control activities to the really value-added activities, which are compete and grow, thrive. So that is the value diamond. So how do we know or what should be the sort of balance that a successful organization has across that value diamond? So I think as finance and accounting professionals, we get really wrapped on, but we have to do this. But this is a requirement. And one of the other tools that we have in the toolkit is the five whys. Like, go back. Why are we doing this? There are definitely things that we have to do for compliance that are part of control.

18:27You know, audit requirements, tax. Those are things that are requirements that we have to do. But we don't necessarily need to invest the amount of time that we currently do. So maybe there's an opportunity to take some of our control activities and automate them or eliminate them or reduce them or simplify them so that we can shift attention to other value-added aspects of the diamond. Same thing with operate. We get really, as humans, we get really excited about, I'm very busy. I'm just really very, very busy. and we get bogged down in how much we're actually spending at our laptops actually doing things because it makes us feel good that we're being productive.

19:11However, we know because we sit in the lunchrooms, we talk at retreats and at team meetings about this is crazy, I'm exhausted, I'm tired, I don't understand why we do this, this is silly. So look at those things that people are saying, what value does this add? Who's reading these reports? Why are we spending hours in an Excel workbook and the formulas break? Is there a way that we can do this simpler? Are we actually doing the right kinds of analysis? And then what can be automated or what can be shared with AI? And then we want to shift some of that operate time to the really important things.

19:53I'll give the example also with AI and how people are finding it very difficult to calculate the return on investment. And that's because the time saved, because we're allowing AI to do some of the functions, we have now shifted that attention to checking AI. So instead of doing, we're now checking. And if you've worked in a manufacturing environment, you know that rework and inspection is a non-value added activity. If you do it right the first time and there are strict controls on quality, you won't have to spend as much time on inspection and rework. And so really focusing on, you know, yes, we are doing things, but are we doing the right things and are we doing the right things the right way?

20:43And again, it's all about attention shift and shifting attention to where there is most value. Absolutely. And I think that's a really important part is that people underestimate the amount of time they spend checking, particularly in finance, right? Because no, you know, you don't want to miss that penny being out on that report that you're sent to somebody because you know you might get questioned. You know, there's a lot of people who really enjoy ticking and tying. Like, I found a three penny difference, you know, or I figured out that why that formula isn't working. We get a lot of enjoyment out of that.

21:19But in terms of long term satisfaction, that's a short term buzz of adrenaline for no long term return. absolutely and i think understanding you know the material value and i think that's i genuinely believe that a lot of finance individuals don't put enough value on their time they don't understand actually the power that they have to like you say to if they could invest that value in more of the compete or the grow and thrive what that would bring to the business and and i guess that's a mindset shift as much as it is a to task and to do shift. So, you know, what advice would you give, I guess, other CFOs that are going through that change about how do they help drive that want and that willingness to shift into those different roles and that more value-added piece versus the operate and the control where everyone's very comfortable sitting?

22:16So if you're you know if you're anticipating going through a transformation or you're in one right now Um, I would I would choose that investment or transformation Transformation initiative and then follow Um a promise benefit into the actual work, right? So if the promise is time saved Ask where that time is going to go If the promise is faster decisions ask which decisions and then who has the authority to make those decisions If the promise of your transformation is a more strategic finance team, you have to ask what work is going to stop and how people will develop the skills for the new responsibilities.

22:58And then establish what you're going to look at for, let's say, the next month. My procurement, procure-to-pay experience taught me how easy familiar work can survive in a new system. We had to understand why people were holding on to it and what they needed in order to work differently. And I think that's a useful place for any leader to begin. You want to examine what the return depends on, make the necessary choices explicit, and then pay attention to what people actually do.

23:30We talked a bit about the three questions, and I just want to roll back on that because that was one of the most interesting things for me in the book. And I think it's really great questions that you should be asking at that sort of initial solutionizing stage. So do you want to talk us through those questions and why those questions are so important for, you know, that initial piece? Yeah, the three questions are essentially, if you think, you know, just a kind of a question funnel, you know, the very top is what are we going to do differently? You know, what are we trying to actually solve for?

24:05What is the problem that we are engaging, that we're interested in going after a solution? And let me preface this by saying I go to a lot or I have gone to a lot of CFO events and they always have these demo rooms where the vendors all have their booths and they've got great swag and they've got their monitors up there and they bring you in and like, let's tell you about the solution. What's your problem? Accounts payable, accounts receivable, procurement, whatever it is. And they will show you these demos like we can do this and that and the other. And people come back and they are fascinated by the shiny and the new, the new toy.

24:45Before anyone goes down the path of falling in love with any particular solution, stop, erase, erase, and go back to the root question. What is the problem that we are trying to solve? And then the next question is, what are we going to do differently? How is the process? How is the team? How is the organization going to be different if we address this particular problem? And unless you have that understanding, you are more prone to be attracted by the shiny, bright object. Because the last question, the very base of the funnel is why this particular solution or software or application or process?

25:27Why this vendor? And that saves you. It's a lot of time at the front end. And this is what Vin, my co-author, you know, he acknowledges the vendors get really impatient because their performance metrics are on getting to wet signature. And you'll hear, like, if you sign by the end of the month, we'll give you a 10 % discount. And we'll lower the year-over-year escalation to 3%. And they're enticing you to sign because that's how they are compensated to sell. But vendors who slow down at the front end, yes, it's a little bit more time. but if they work with you to figure out if they're the right solution and they work with you to understand what you're solving for, what will be different, how will we operate differently before they get to the solution, vendors who follow this process will actually shorten the back end.

26:17And there will be a more collaborative, that overlapping Venn diagram between the vendor and the buyer. So by the time you get to the solution, you know exactly what the work is going to be do, work is going to be done. The team has aligned. The team understands what the impact on their work is. And they're not going to experience this FOMO of like, oh my gosh, I've lost all of these activities that I was doing. No, you are now getting capacity to do the activities that actually makes your career exciting, that people really want to be doing, right? The really exciting part of being in finance and accounting.

26:52And that is going to allow people to not feel like they're operating at 120%, that they have bandwidth to bring in new innovation and new ideas. So that's the three questions. So really understand. And this is before you sign a contract, before you go to the board requesting investment, or before you go to management asking for funds. Really being able to substantiate why we're doing this, what will change, how we will be different how the organization is going to win and then the investment and I again it's a little bit more time at the front end and people really want to just do things quickly and get to a win but I think that the organization I believe that the organizations that take that time will be more successful at their life.

27:46I think it's such an important point that people don't spend enough time at that beginning stage so like process and I like obviously we work in tech so people are always amazed when I say that you know successful transformation starts with process is not tech um and before that comes people right having those conversations up front about what genuinely you know what life is going to look like and and and that kind of comes around this is the value piece that you are going to bring in this new world so i i love that um and then so we talked about slowing down that process let's actually flip it because you said something really interesting i think it's really important and i i talk about this a lot but almost those small incremental changes so let's you know you talk about getting those wins in the early days and the 30 days so let's just talk about that piece around you know you know you know the certain things we need to slow down, but how do we, I guess, get that buy-in in those early stages of a project around those incremental wins?

28:49Well, I think that helps facilitate the change management. And to be clear, I'm not advocating that we not do the usual transparency, communication, change management, all of the normal things that are in all of the transformation guidelines. I believe that the attention audit really helping people understand what we're doing, why we're doing it, why we should stop doing it, why we could be different and creating that anticipation of, oh my gosh, this would actually allow me to do really important things. Or I don't know what the important things are going to be. If you take this work away from me, who am I?

29:32What am I doing? When you engage in those conversations up front and have people really understand the work that they're doing and ask them, how would your job satisfaction increase if we did things differently? How much capacity would you actually have? And let's say someone says, well, it's going to save me 100 hours a month. it's not necessarily about taking away 100 hours a month of a person. It's about redeploying them into much more valuable work. And so that's where the traditional change management exercises comes in because now we have a chance to decide what is that value-added work?

30:18What is that? Where is the goal? And when you bring, when you have that quantitative information, because at the end, we're quantitative people, the change management feels a lot less fluffy. Like, yeah, they're telling me I'll be happier, more productive. Okay, what does that really mean? And so when you get to go live and you've had all of those conversations ahead of time, you're less likely to have people going, this system is horrible. I don't like it. My particular report doesn't exist. I don't trust it. And after go live, you'll see a dip in performance. And that dip in performance is people, you know, they jumped off the diving board and they're like, I'm really scared.

30:59And you're by doing all of that pre-work, you're minimizing that fear and that possibility that people revert to, I'll just whip out my spreadsheet because I trust my spreadsheet. And now you're actually doing two things at once. You're doing the old and the new. So I think people going through transformation need to be aware of that dip, that kind of crisis of faith that happens after go live and really hone in on those 30 to 90 days after a go live to make sure people don't revert to behavior because that's what we're human at the end of the day and really deliver on the promise. We said we were going to change the work.

31:39We said we were going to keep things automated. We are not going back to spreadsheets. We're not going back to someone's particular favorite little cheat sheet and really help the team sustain to get back up to the productivity that was promised in the business case. And this is where the ROI is inefficient or insufficient because immediately people want to see my life was supposed to be easier. I was supposed to be able to do all of these things. And again, it's that dip after go live. And that's where people say, well, we didn't get the return on investment. You did. You just need to be able to get back up to the productivity that was promised by ensuring that people don't go backwards into the comfort of the original process.

32:29Absolutely. And I'm very aware that obviously there's a huge amount of information in your book. And I think that's a really great shout out to the team to spend some time going through because there is so much great content in this. So if people want to learn more about yourself, Ilana, or the book itself, where is the best place to find it and you? You can find the ROI lie on anywhere online that sells books. We have a Kindle as well as a print version. We're still working on the audio version. And then Vin and I actually started a firm called Attention Shift Operating Strategies, and we built it to help leaders put our thinking into practice.

33:13So the name Attention Shift Operating Strategies reflects the central belief in our book that organizational priorities become real through the attention that people give them. So Vin and I help leaders make more deliberate choices about that attention and establish whether those choices are producing value. So we work on the operating questions, such as where attention is being consumed, what the organization wants to achieve, what needs to stop, and then how decisions are going to be made. So we provide diagnostic. We work with leadership teams. And we look at activities across the organization.

33:50And we support that through our advisory work. And we facilitate working sessions, implementation support, and teaching. so they can also go to www.attensionshiftos.com to learn a little bit more about us. And we'd love anybody who has questions or wants to follow up, or even if they want to argue about the value of ROI, we're open to that. And then of course, Vin and I are also available on LinkedIn and we'd love connecting with everybody who reads our book and those who don't. Well, thank you so much, Alana. and really appreciate you taking the time to come on and talk about the book and also your experience as a CFO driving these change projects as well.

34:37So thank you very much. And to our listeners, thank you for listening. If you have enjoyed this episode, then please do not forget to leave us a review, share it on your favorite social media platform and give us a tag if you do. So that's it for this episode of CFO 4.0 and I'll see you next time. Thank you so much, Alana. My pleasure. Hey Google, what's the best accounting software for my business? Give it a couple of years and I'll bet you she'll be able to answer you pretty accurately. But for now, it's still one of the few questions Google can't give you an answer for. But we can! Take our free quiz and find out which Sage product is the right fit for your business.

35:19Just head to itassolutions.co.uk