Criticism is defined as “the expression of disapproval of something based on perceived mistakes.”  FP&A is a learning process that creates insight into what organizations are doing and where they are going. Processes are not perfect; mistakes are likely to occur.  As a result, FP&A practitioners need to recognize that their work is subject to criticism.  It is important therefore to acknowledge criticism and respond to it.

A criticism of FP&A is its role during the 2008 financial crisis.

People believe a number of reasons caused the 2008 financial crisis.  One reason people believe is the role of FP&A.  People believe FP&A practitioners created financial models that failed to identify problems within financial systems.  People also believe FP&A practitioners created flawed financial models because the models were unable to determine how the world works.  In addition, people believe financial planning, an integral part of FP&A, is unnecessary because events that take place in the world are too difficult to predict.

An FP&A practitioner can respond to criticism of FP&A’s role during the 2008 financial crisis in a number of ways.  One way is to defend the entire FP&A function.  Another way is to neglect the entire FP&A function.

I prefer to evaluate the activities and defend the purpose of FP&A.

The criticism of the FP&A role during the 2008 financial crisis put me on a journey.  The journey focuses on how to use the criticism to become a better FP&A practitioner.  I use the criticism to evaluate the tools necessary to do my work.  What I discovered was I needed better tools.  The better tools were in the fields of mathematics and psychology.

Mathematics is more than concepts like the mean and standard deviation.  Mathematics has concepts like power laws that help FP&A practitioners understand the effects that certain customers have on revenues and certain vendors have on expenses.  Mathematics also has concepts like Bayesian Statistics that help FP&A practitioners develop a probabilistic mindset toward financial plans like budgets and forecasts.

Psychology establishes a mental framework for FP&A practitioners.  A fundamental element within this framework is biases, i.e. errors in judgment.  Biases affect the preparation of budgets and forecasts.  Biases also affect the interpretation of actions from stakeholders like customers.  Biases cannot be eliminated but can be managed.  It is the management of biases that help the FP&A practitioner improve one’s work.

The journey to become a better FP&A practitioner continues.

As human beings, we react to what we perceive through our emotions.  Criticism is an element that affects our emotions.  As FP&A practitioners we can react to criticism as an insult to our work.  That should not be the case.  As FP&A practitioners we help people within organizations think about what they’re doing in order to help them improve their situations and this is a noble purpose.  As FP&A practitioners our method to fulfill this purpose can be done in a number of ways.  Looking for ways to improve our ability to fulfill our purpose is how we should respond to criticism.

Remember… criticism is a fuel for improvement.