The most important decision for top management is where the money goes. Capital allocation not only defines the money flow but also who will be spending it. Since many companies are threatened by disruption, intrapreneurship is now more important than ever. FP&A specialists can hold a key-position when it comes to facilitating the process of capital allocation. 

FP&A thrives on measuring performance and is constantly forecasting the ‘future’ in accordance with strategic and operational change. Acting as a partner for management, they can transform Business Performance Management into a platform for internal funding. 

Business Performance Management

There are various definitions of Business Performance Management. In general, it means setting goals and a range of targets, measuring progress and intervene when there are deviations from the planned targets. What often is missing from the definition, is the delegation of authority or collaboration. When targets are jointly agreed upon, management gets an active voice and is willing to suggest improvements. This is where intrapreneurship starts.

Finance Business Partnering

Performance is never stable and regularly top management must decide on business improvement proposals. Although this can be time-consuming, reading through all the proposals, zooming in on the performance measurements could simplify the capital allocation process. The first condition is that management has a Business Performance Management system in place, hence knowing its ‘language’. Second, there is a standard for presenting the proposals and a standard for comparing each proposal.

Presentation

The following 5 slides should be enough for a proposal to be in line with any Business Performance Management systems management is using.

Slide 1. Introduction (What)

• Scope of the problem (description)
• Reason for the project (e.g. strategy, incident, technology)
• Objective (fully quantified, being: intention/aim, target results, time, material)

Slide 2. Facts & Analysis (Why)

• Relevant data and factors (e.g. root cause, trends, facts)
• Key indicators and key objectives (reflecting the urgency)
• Norms and standards (what would be ‘normal’ or ‘compliant)

Slide 3. Objective & Action plan (How)

• Goal (intention/aim)
• Plan (general steps)
• Lead time (duration)

Slide 4. Financials (Funding)

• Team responsible (individual commitment)
• Estimate time usage (resource planning)
• Funding needs

Slide 5. Summary (Decision)

• Upsides & downsides (where, the impact, remediation)
• Benefits, costs, risks management (value creation)
• Advice and the request for funding

Decision making

Business improvement comes in two categories: changing a (part of the business) process yet maintain the target or change (part of the business) process to improve the target. Normally, most proposals relate to improvements to achieve the target. However, opportunities tend to improve the target, yet also impact the strategy of the business. It is important to judge each proposal on its own merits before any capital is assigned. 

The following 4 variables have been used to review proposalsequalising the selection process and improving the discussion at the top:

• Strategic need: Is there a need to strengthen the business strategy?
• Economically effective: Is there an efficiency improvement?
• Technically viable: Can it be done?
• Cultural fit: Will it be acceptable?

For sure, each proposal will have a different result for each variable and, yes, there are bound to be discussions. These discussions will be at least based on metrics known and used by (top)management. It avoids micro-management, e.g. looking only at a proposal detail, and it minimises favouritism, due to transparency. If finance is also to facilitate this process, development in soft-skills and group dynamics might be recommended. 

Future Roles

The FP&A specialist is already at the centre stage, due to the financial reporting and its connections throughout the business. Business Performance Management can be used to present viable plans in 5 slides and, as such, facilitate top management in the process of prioritising these opportunities. After all, it is about information and finance business partnering.

To move from planning & analysis towards preparing investment proposals is a natural step, where the financial will quickly gain more insight into the operations of the company. Being often the right hand of the CFO, working in FP&A is a career opportunity. Therefore, possible future roles include local Finance Director, Corporate Business Development, Investor Relations, or even the next CFO. 

The article was first published in Unit 4 Prevero Blog