In the world of Financial Planning and Analysis (FP&A), where reporting numbers and creating budgets are often the focus, a transformative skillset that can elevate finance professionals to a more strategic position also exists. It is storytelling. The ability to craft a compelling narrative around financial and operational metrics is not just nice to have anymore; it’s a powerful tool that can drive decision-making and ultimately redefine the role of FP&A professionals.

We’ll discuss the key aspects of storytelling in the context of FP&A, highlighting the importance of defining the most relevant metrics, maintaining consistency, and understanding the importance of data visualisation.

Defining the Best Metrics

Before even thinking about telling a story, the FP&A team must collaborate with other business units to align on the most relevant financial and operational metrics that will be tracked.

There should only be a limited number of relevant metrics for any business. Their number is not likely to be less than 5 for a given line of business (profit centre) or a department (cost centres), and it can be up to 20 for a corporation. These key metrics should be the only ones that are indispensable to drive the business and track progress against the long-term or the annual plan.

Remember, it’s not just about collecting data. It’s about selecting the relevant metrics that align with the organisational goals and reflect its unique journey.

For instance, such metrics as revenue growth, profitability ratios, and operational efficiency are fundamental, but their relevance can vary across industries. A tech startup might prioritise user acquisition costs and customer lifetime value, whereas a manufacturing company may focus on production yield and supply chain efficiency. So, the first step in effective FP&A Storytelling is to choose metrics that resonate with the organisation’s specific strategy and objectives.

Consistency in Tracking and Reporting

Once the right metrics are identified, the next step is to make sure that these metrics are:

1. Available on a real-time or very regular basis. If the right metrics have been selected, the business and FP&A teams need to constantly monitor them. Using the right system, like a data lake, storing all the operational and financial metrics in one place with a reporting tool layered on top will be crucial.
2. Referenced in every document: reporting pack, sales update, post-mortems.
3. Used for the investment or deal greenlight/approval process. Any dollar invested in the business should serve to improve one of these key metrics.
4. Leveraged for business and team members’ performance reviews. We have to aim most of the organisation’s efforts, such as investment, resource allocations, and the team’s focus at improving these metrics and overall business performance. That is why it is important to tie the performance assessment to these measures.

Consistent reporting not only fosters transparency but also builds trust among stakeholders. Whether it’s monthly reports, quarterly reviews, or annual presentations, maintaining a consistent approach enhances the predictability of the narrative. It allows decision-makers to focus on the nuances of performance rather than grappling with changing reporting methodologies.

How To Leverage These Metrics and Tell a Story

The next step is to leverage these metrics to develop a narrative. Storytelling is the vehicle through which FP&A professionals communicate the significance and implications of financial and operational metrics. It involves weaving a compelling narrative beyond your data, providing context and meaning to the numbers.

• Understand Your Audience

To craft an impactful story, FP&A professionals must understand their audience. Different stakeholders have various interests and levels of financial acumen. Executives might be more interested in strategic insights, while operational teams may seek actionable takeaways. Tailoring the narrative to resonate with the audience ensures that the story is not only heard but also understood and appreciated. The worst approach is to show just numbers and metrics without crafting a narrative around “the why”.

• Emphasising the “Why” Behind the Numbers

Storytelling is not just about presenting facts; it’s about explaining the ‘why’ behind the numbers. Why did a particular metric change? What are the driving forces behind the financial performance? FP&A professionals can transform into data interpreters, guiding stakeholders through the intricacies of financial and operational landscapes if they address these questions.

• The Importance of Format and Visualisation

Format and data visualisation play a pivotal role in your story. No matter how accurate, numbers can be overwhelming without the right presentation. FP&A professionals must adopt a visually engaging approach that can help simplify complex data and highlight key insights.

Different stakeholders prefer different formats. While executives might appreciate concise executive summaries, operational teams may benefit more from detailed dashboards. FP&A professionals need to tailor the format to the preferences and needs of their audience. Whether it’s a visual presentation, interactive dashboard, or a written report, the chosen format should enhance comprehension and engagement.

A mentor introduced me to the concept of the 6X6 rule. Try to stick with the boundaries of a maximum of 6 rows down and 6 words across for each slide. It eliminates the volume of words on a slide and allows you to focus on key ideas instead of complete sentences. If you have so much on the slide, the audience can read and understand the entire point. In summary, less is more.

Visualisation goes beyond charts and graphs; it’s about telling a story visually. Heatmaps, trendlines, and comparative analyses can bring data to life, making it more relatable and memorable. The strategic use of colour, size, and positioning can emphasise critical points, guiding the audience’s attention to key insights. Again – stay concise and focus on the key metrics.

Case Study: Lyft

At Lyft, our mission is to improve people’s lives with the world’s best transportation. We gather and use a phenomenal amount of data in many different systems to operate in a very complex marketplace. We are matching tens of millions of riders with millions of drivers to deliver hundreds of millions of rides every year in a safe, timely and cost-efficient manner. At first, access to information was difficult. We had many reconciliation issues, and most of the effort was spent on just being able to produce data.

The team was overly focused on lagging indicators such as P&L, margin per unit, etc., instead of leading indicators: our key operational metrics tracking supply/demand/conversion, etc.

In 2023, our IT, Rev Ops, and FP&A team underwent a significant effort to:

1. curate/select the 18 key metrics we will use consistently as a business,
2. design (in-house) a unique reporting platform that gives real-time access to these metrics to everyone across the business, and
3. consistently report against these metrics at each organisational level.

Conclusion

In the dynamic landscape of FP&A, the ability to tell a compelling story around financial and operational metrics is a game-changer. It goes beyond presenting numbers; it involves selecting the right metrics, maintaining consistency, understanding the audience, and adopting effective formats and visualisations. FP&A professionals who master the art of storytelling can become not only data analysts but strategic communicators, guiding organisations and supporting business leaders.