There was once a day when FP&A was not even a job classification in the workplace. Back in time, we simply had Analysts. Life was straightforward, and if the business needed data dug up or some math calculated, they would tap an analyst on the shoulder to do it, and life would move on. It was simple, both for the business and for the Analyst. Everyone seemed to be happy… Or so they thought.

But there were so many other unrealised needs in most businesses, which fostered a shift in a traditional approach to FP&A. In this article, I am going to cover the evolution that FP&A has undergone and why it’s crucial to build an FP&A team consisting not only of Analysts.

 

The Art of Diagnosing the Business: Why We Need Storytellers

Often, when a business is running smoothly, or to be more general, with upward progression, so many insights are being missed. The true diagnosis and root cause of many poor outcomes may not be realised, and a business moves on without acknowledging any underlying issues until further down the road. In short, it often results in moving too far down the wrong path to prevent adverse outcomes from happening.

To address such insights, the business needed more than just a ‘number cruncher’: they needed more than an Analyst. They needed someone who could tell the story of what was really happening beyond just a calculation, a Storyteller. It is someone who looks beyond just the very narrow business request to understand what may be driving the need for this request in the first place and tries to see the whole picture.

The Titanic Effect: Why Modern Businesses Need Influential FP&A Teams

Sometimes, businesses may not even see the need or understand the point of telling a story. They think that the company only needs this narrow request or may have superficially come to a misaligned conclusion. This is where this Analyst must take on another personality as an Influencer. These people understand the minute details of something and can communicate their view for the next steps in a very compelling and consumable manner. Also, they understand what may motivate the business to properly move toward the desired goal.

Earlier in my career, I worked for a department store organisation whose business model was becoming less and less relevant in today’s business environment. The overall volume began to decline, and financial performance along with it. Most people from the outside would perceive this as a business with a lack of sufficient insight and not enough analysis; or not the right analysis.

What I can tell you as someone inside that situation is that the perception of poor analysis would only be right applied to about 10-15 years earlier. Our business was like the Titanic, headed for a giant iceberg. The business could have steered away from that iceberg. However, 10 years before, the business was booming. There was no point in considering anything other than the narrow analysis, which interested the people in charge of running the business. They simply had Analysts who would run numbers on what the company did the prior week or month without spending much time on any underlying issues or considering any macro forces that might have affected or could affect the business.

Fast forward 10-15 years, and they had missed their chance at steering clear of hazards. This paved the way for a need to do more than just the regular analysis. The business needed someone to dig into data, look around, tell a story about what was happening, and then understand how to influence the business owners with the right course of action, given the new information uncovered through the expanded analysis.

Some of the best work I have seen and done in my over 20-year career was in this ‘failing’ business. Because it was really needed. I have been in and heard of several firms since. They simply have Analysts. That is why they are underserved and end up missing many bigger-picture insights until it is too late to rectify or capitalise on. Someone I have recently worked with rightly termed the Finance function as the ‘navigators’ of the enterprise. I think it is a very fitting term, especially given my ‘Titanic’ analogy earlier.

Understanding the need for more than just analysis leads to an even more diversified skill set required from top FP&A professionals. In pursuit of building the story, the professional needs to wade through heaps and heaps of data, organise it, and transform it into meaningful information. They may ask Data Scientists for help or need to bridge any gaps of understanding between Data Science and the everyday comprehension of the business.

In this respect, some of the best FP&A professionals understand how the running of the everyday business links back to the account structure or structure of any other relevant data. They work with the IT and Tech teams as an Architect, ensuring the data is being adequately captured and structured. In addition, Architects also ensure that data is easily consumed, interpreted, reported and converted into meaningful information.

That means that the Analyst’s life can no longer be so simple. The Finance teams, which were once split between Accounting/Corporate Finance and business analysts, matured over the years to FP&A. Those Analysts cannot only have that narrow scope of performing straightforward number crunching. The reality is that they must have multiple personalities and understand they both serve the business by doing exactly the analysis and calculations asked for while taking on these other ‘personalities’ to explore a more holistic attempt at satisfying business optimisation.

From Numbers to Action: Connecting the Dots

What we have covered thus far only addresses the ‘A’ in FP&A. A much more significant component that becomes increasingly important in healthy business is the ‘P’, Planning.

In the example of the first company I worked for, another huge gap led to much of the trouble the company faced since targets and “plans” were not actually connected to business actions.

Most companies do not do this well. But similarly, when we talk about the analysis itself, many companies with natural or macro upward progression don’t notice that they don’t do this well because they misattribute decent financial outcomes with ‘hitting or achieving plan’.

We had to look at our planning processes and assess what was going wrong because our company was not performing well. The reality is that Planning becomes a very superficial ‘spreadsheet exercise’ in many other failing and successful businesses. It doesn’t connect with the actual business actions in place: the so-called ‘dots’ are not connected.

For example, just planning net sales and creating net sales targets without connecting the tactics that will be employed to drive those sales means the likelihood of hitting those sales will be less and less and just boil down to dumb luck if they are achieved. Indeed, we’re leaving alone the downstream difficulties put on the Analyst’s side trying to diagnose a sales miss to target. In other words, we neglect or don’t really understand which driving tactics to implement to get to that target in the first place.

We realised that Planning and Budgeting were less about the targets themselves, but more about connecting the business actions to the desired target. Anything less than that seems to be wasting more time than the budgeting or planning exercise is worth. Again, from the outsider’s look, it probably looked like our company did not excel in Planning. In fact, it was true for the years leading up to our difficulties. However, in the worst years, we had many planning victories and targets hit. On the flip side, they were just masked by the larger decline in traffic and customers due to the declining relevance of our business model.

This need for better Planning brought the emergence of another personality within the FP&A team – the Connector. Connecting business tactics to targets and connecting different departments to different planned inputs and initiatives may affect how those other branches will support the business. The expected sales demand in a week or month will affect how much work a logistics department will need to do. The FP&A professional is best positioned and much needed to be the Connector. Connectors are working with the business to develop the strategies and tactics to hit the targets and goals of the company.

As we can see, the various FP&A roles that a top FP&A professional must possess today put them in a very influential position in an organisation. To be effective in connecting, storytelling, influencing, and analysing, communication becomes a key trait. The business needs to trust the professional and to be able to understand the professional.

Let us get back one more time to the troubled company I started with. In any company that has trouble, it is natural for mistrust to begin to seep into the culture and everyday interactions of that enterprise. The blame game becomes almost as a high priority to some as actually getting to the root cause diagnostic of an issue. Functions stop effectively communicating with each other, and many processes and interactions fall through the cracks. At my company, this brought about the need for someone who could effectively communicate between functions. One of my bosses once referred to me as ‘The Business Whisperer’. I was able to understand what was important to the function I supported in FP&A, and they trusted me. I was also trusted by the C-suite and other functions. This was because I understood and knew what was important to each area, both from an everyday operational and financial perspective. I was able to draw on the commonalities between each function and communicate with each on that basis, bringing those commonalities in expectation and priority to the forefront. It allowed for understanding between functions that might not have seen eye to eye. This is the very valuable personality of the Interpreter. They are both able to interpret numbers into meaningful insights for the business and interpret priorities and plans from one function to another.

Being a good interpreter will only enhance a professional’s effectiveness in storytelling, influencing, analysing and connecting.

Conclusions

So there you have it. Today’s FP&A professionals must develop these several personalities. Businesses that still simply rely on their Finance department as someone to do straightforward analysis are likely to miss out on many opportunities and insights and may be headed for peril months or years down the road if they don’t start considering business needs more broadly.

Looking for these highly skilled FP&A professionals may seem counterintuitive for businesses. I bet you may find some of the highest calibre professionals who have spent some time at a company that has run into rocky times. Even if the company has not survived, there is a good chance that professionals will have broader skill sets and developed FP&A personalities.

It is said that enough pressure will turn coal into diamonds. From my experience, I know the pressure I endured at my first company helped turn my career into a gem.