The performance of general and administrative (G&A) functions varies dramatically among companies, and the differential is poised to widen. As new forms of automation—fueled by advances in areas such as robotics and artificial intelligence—transform the world of work, G&A functions will be transformed, too.
Some of the impact will show up in costs. We’ve shown before that top-quartile companies operate at nearly half the cost of their bottom-quartile counterparts in the same sector. Those cost differentials will grow with the increasing use of automation.
Just as important, automation brings with it the potential to improve the quality, speed, and flexibility of work dramatically—and this is where some of the most exciting opportunities in G&A reside. Successful G&A-improvement programs, which in our experience can generate twice as much impact from gains in effectiveness as from increased efficiency, not only improve decision making and the allocation of resources but also help employees to work more effectively. As the pace of automation accelerates, the opportunities for improving performance will only increase.
Technical possibilities
McKinsey Global Institute (MGI) research suggests that companies can automate at least 30 percent of the activities in about 60 percent of all occupations by using technologies available today. These findings are consistent with what we’ve seen in the G&A functions of many companies. For example, about 20 percent of the tasks of a typical finance unit’s record-to-report (R2R) process are fully automatable (requiring no human intervention) and nearly 50 percent are mostly so (with technology undertaking most of the work). Similarly, in the HR hire-to-retire (H2R) process, about 30 percent of all tasks can be fully automated and another 30 percent mostly automated.
As the cost of technology falls and its capabilities grow in areas such as robotic process automation, machine learning, and natural-language generation, the economic case for automation is improving rapidly. A major financial institution recently found that it made economic sense to automate nearly 35 percent of finance-function tasks right now. The technology to automate another 35 percent of tasks—though not in a remunerative way—was technically feasible.
Strategic potential
What those automation figures fail to reflect are the possibilities created by reimagining business processes. Assigning machines to handle discrete tasks and plugging new technologies into existing processes may generate savings, but they won’t take advantage of automation’s potential to elevate your G&A function into a more strategic asset. That requires redesigning processes and organizational structures around both current and anticipated automation technologies.
Of course, sustaining G&A improvements has always forced companies to get things done in new ways, to reconfigure roles, and to adapt the workplace culture. But the changes are likely to be bigger for large-scale automation efforts. Consider the experience of a global insurance firm that used a set of automation technologies to redesign an overwhelmingly manual and error-prone process. At any given time, tens of thousands of policies were held up as a result of exceptions, and management faced mounting pressure from regulators to meet mandated deadlines. More than 30 employees were tasked with working the backlog, and it took about five to seven minutes to bring each policy out of limbo.
Robotic process automation provided a way out of this logjam, as high-performing employees were redeployed to more valuable work. The automated process virtually eliminated errors, cut processing time by 50 percent, and reduced costs by even more. The new, automated process also proved highly scalable.
