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SWTCH by Pigment
Three days of predictions, insights, and advice from leaders in finance, sales, HR, supply chain and more
Register now here
By Manasi Ramanna, CFO at Cerulean Scientific
In a previously published article, I proposed that integrating a strategic and financial planning process that is facilitated by the FP&A Head would set the stage for the successful execution of a business strategy while meeting financial goals. In this follow-up article, I will introduce a model for such an integrated strategic and financial process and highlight key practical considerations for its use by an FP&A team.
There are several good models for strategic planning. Having used many of these, I find models that are simple and easy to follow work best. This is mainly because the simplicity reduces debate about the merits and mechanics of the model itself and enables teams to focus on its implementation. Based on this principle, I find that the Plan, Prioritize and Execute (PPE) model is an effective tool for an integrated strategic and financial planning exercise.
This model is flexible because it can be used by both large and small businesses and accommodate different budgeting methodologies. The model has three phases that are summarized below:
The purpose of this phase is to align and motivate the leadership team and set a direction for the company. This phase is conducted during a CEO-led offsite with heavy involvement of the FP&A lead. There are three main deliverables from this phase:
The purpose of this phase is for the leadership team to decide on the top five priorities for execution in the next year. The session is kicked-off with the FP&A lead presenting the long-range financial plan with the first year of the financial plan serving as a “budget guideline”.
There is only one key deliverable for this phase, which is a list of five priorities for execution that will get funded in the budget for the following year. Each of these priorities should be measurable and have an accountable leadership team member assigned to drive execution. The FP&A lead will track the progress on these priorities throughout the year and build a budget to support their execution.
This step differentiates the PPE model from other planning models. The purpose of this phase is to ensure focus on the priorities for execution throughout the year. There are three main elements of the Execute phase:
Using the PPE model for an integrated strategic and financial planning process requires an FP&A team to not only draw upon its financial acumen and analytical skills but also hone its communication skills. Below are a few tips on communication that can aid a successful implementation:
Just as any strategy is as good as its execution, any model is as good as its implementation. The PPE model provides a simple and flexible framework for an integrated strategic and financial planning process that is heavily focused on execution. Hopefully, the details and nuances on the model provided in this article will help FP&A teams successfully run its own PPE process.
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