The essence of the FP&A role is about helping to enhance the decision quality of the organisation. It measures this by reporting on, analysing and planning for the financial performance of the organisation. And it does this by partnering effectively with the business. This article focuses on the HOW FP&A practitioners could approach their work.
The essence of the FP&A role is about helping to enhance the decision quality of the organisation. It measures this by reporting on, analysing and planning for the financial performance of the organisation. And it does this by partnering effectively with the business.
FP&A does tend to revolve around the following:
- Performance Management and Measurement
- Business and Financial Planning
- Decision Support
- Investment Analysis.
Increasingly technology solutions can be used to provide faster, deeper insights from these tasks. An example would be workflow solutions that support more timely posting of invoices thus allowing for an easier accruals process which in turn allows FP&A more confidence in the results and more time to analyse variances and consequences. Another example is the use of dynamic and powerful predictive models that can much easier spit out a baseline financial plan based on a larger quantity of business drivers.
This article focuses on HOW FP&A practitioners could approach their work.
I define 5 main phases that FP&A practitioners can use to approach their work.
- The Planning phase
- The Information phase
- The Analysis phase
- The Business Partnering phase
- The Controlling phase
Let’s look at each one in turn.
The Planning Phase
Within this one, we can define 3 more concrete steps
- Scoping – the initial scoping of the request including deliverables.
- Clarifying – an underestimated element. By forcing oneself to think about what may not be clear or is uncertain, it forces critical thinking which often leads to a clearer brief.
- Committing – establishing a more detailed plan of action with detailed steps, milestones and timelines.
The Information Phase
In this phase, the work begins.
- Gathering – identifying and collecting the relevant data. This may be quantitative data of either a financial or non-financial nature and it can be structured or unstructured.
- Validating / Cleaning – again an underestimated area. Given the average organisation and their approach to data management even structured data may have inconsistencies or be incomplete. Therefore allowing enough time to check the “raw” information / data is critical.
- Formatting – this step now gets it in the shape required to allow the necessary analysis to be performed.
The Analysis Phase
This is where the real magic starts to happen and where critical thinking is required.
- Conducting – critical here is to keep in mind the deliverables (the questions to be answered). The analysis here can be of a quantitative and statistical nature, but it can also be of a more qualitative nature.
- Making a report – turning the analysis into something digestible for the evaluators. Again, this step is often underestimated, and the insightful analysis conducted is, in the worst case, just copied and pasted into PowerPoint. Important here is to really think about the audience and think about the structure of the report what tool might best serve the purpose.
- Reviewing the report – this is by far and away from the step most often overlooked. It feels like a luxury and when time is of the essence, the easiest one to put aside. Use someone who knows something about the topic but not too much and, critically, is not involved in the discussion. Look for critical and objective feedback on the impact of the report.
The Business Partnering Phase
The report is now ready and has been stress tested. The real test is now to come with it being presented to the relevant audience who have the responsibility to do something with it. In general, the three things that are important from an FP&A perspective are:
- Communicate the recommendations – avoid a lot of time explaining the process and the context and the details. Check expectations are still the same regarding the brief and the deliverable and, if yes, go straight to any recommended plan of action / decision.
- Discuss insights – this stage of the interaction should be about presenting the insights that have led to the recommendation. Allow this to be a real interaction, as the audience must have the freedom to critically challenge and, therefore, be convinced.
- Supporting decision making – probably the most challenging part, where all the influencing and persuasive skills of FP&A will be called for. In the vast majority of cases, FP&A is not the decision-maker. It is important that if after the necessary time has been spent no decision is taken, that FP&A is clear on what the next steps are. It can be that the level of confidence is not yet high enough in the analysis. Or that further alternatives need to be explored.
The Control Phase
Finally, from an end to end perspective there is the control phase where FP&A has an important role to monitor outcomes and help capture learning.
- Verify implementation – this is also easy to overlook. If the activities are not implemented, then benefits delivery is at risk. Therefore, a commitment to follow up on implementation status is key.
- Measure outcomes – if clearly highlighted in the briefing document it needs to be followed up. It is therefore smart to think deeply early in the planning phase about how things and, in fact, whether outcomes can be measured. If not, a proxy should be explored.
- Evaluate learning – where the task is of an important nature (materiality and / or newness), retroactive learning is important for both the Business and FP&A in their search to make this entire process more seamless and effective for future activities.
A key focus of FP&A Transformation is to move from a current situation where too much time is spent downstream to more time spent on upstream activities. For example, a typical journey could look as follows:
Adopting an end to end process and drastically reducing time on collecting phase to invest elsewhere.
I hope this 5-stage approach gives some ideas for FP&A on how to approach not every single operational task but definitely those tasks that are of high impact for the business they are supporting. Technology is a great facilitator in most phases – for example, Artificial Intelligence in Information Phase, Data Analytics in Analysis Phase, Data Visualisation in Partnering Phase and Dashboards in Control phase.
Yes, exactly. What does it take to become a good or even great FP&A professional? Beyond the more technical elements required, for example, an affinity with numbers (not unimportant!), with information systems and so forth.
What I want to list is in my experience those QUALITIES that I have found in people who I have worked with, worked for and who have worked for me in an FP&A domain that I found to be particularly effective in driving the FP&A agenda forward within their responsibility domain. I deliberately do not want to use either the word skills nor competencies, as these two words are fraught with misunderstanding and tend to create more confusion than clarity.
Before I get to the list, there is also the point of what exactly is FP&A anyway. Apart from standing for Financial Planning and Analysis. There is no easy answer and certainly not a commonly accepted view around the business world. What strikes me as sensible is the focus of an FP&A function (which is normally a part of a broader Finance function) that “through an analytic approach actively supports business decision-making to help an organisation achieve its strategic objectives and in such a manner demonstrate a tangible and positive impact on value creation”.
This can then be applied to FP&A operating at a corporate / holding/group level as much (Corporate FP&A) as well as that operating at an operating level (Business/Commercial FP&A). One gets the picture.
So to what would characterise and is necessary to be successful to work in this space? We all love lists, so here is mine regarding what a great FP&A professional IS. And (s)he is:
- Curious: The FP&A professional has to be curious. This is one of the foundations. It seems to intuitive and yet it amazes me how this quality gets overlooked when hiring for FP&A positions. Without a natural inclination to be curious it will be extremely difficult to get a deep understanding of the business in order to add any value through any modelling and analysis.
- Critical: This goes to the heart of what FP&A delivers as its “products” and “services”. A critical thinking capacity is essential as, at heart, like many things FP&A is all about solving problems. Therefore the ability and perseverance to dig deeper, to peel just that one layer more of the onion are extremely valuable. This also applies to a critical view of one’s own motivations and (potential) biases when presenting analysis.
- Challenging: A natural inclination to challenge helps build credibility with your stakeholders. If done in a sensitive i.e. non-judgemental way. Why is this important? To truly bring new insight, existing assumptions and preconceptions are likely to have to be scrutinised and therefore laid open to challenge. Without this capacity and a level of comfort with this, it is likely that FP&A is only taken seriously to a limited level. It is about not being afraid to ask questions and voice opinions. Especially in an environment where perception often informs reality.
- Compassionate: This might seem like a strange one. By this I mean the acknowledgement that on it’s own an FP&A function has no value. It is like shouting alone in a forest. No one will hear. But in order to persuade and influence and cajole the relevant customers and stakeholders, there needs to be humility which is best served by being compassionate and caring. This means caring enough about someone’s issues and agenda to want to help solve it. And caring enough to get to understand the emotions that play with decision makers and collaborators when it comes to making decisions and taking action. This is about moving from the mind (more relevant for the first three) to the heart.
- Candid: Being honest is a virtue. Being brutally honest all the time may not be, especially in an environment which is fraught with emotions, politics and with differing degrees of trust levels between the various players. Being a “yes” function and totally pliant and downright lying is never to be tolerated. So the ability to use one’s judgment to sense when to be candid due to the particular context of the issue being addressed is a key capability to have. It requires sufficient reservoir of trust between parties.
- Creative: As mentioned before, FP&A is about solving problems. So it should come as no surprise that a healthy dose of creativity goes a long way to ensure success. This can also be likened to being resourceful although I believe being resourceful is only a part of a broader creative picture. For FP&A this is important in two ways. One is about being creative in the problem-solving domain. And the second is about being creative in building the relevant narrative, the story, behind the analysis and communicating that in a creative (i.e. engaging) way.
- Courageous: Given some of the organisation dynamics already alluded to previously, it should come as no surprise that there will be tension and conflict when it comes to dealing with FP&A deliverables. Someone not comfortable or able to deal with such conflict will struggle to get the traction required. Dealing with conflict would require not just personal stress management abilities but also the ability to arbitrate and help resolve the conflict between other parties. And this requires above all the courage to enter into the fray and help move it forward to a positive conclusion.
- Committed: In the end, FP&A is a support function, albeit a critical one in my view. It is there to serve, not to lead in and of itself. It is also not a judge and jury. It is definitely “on the pitch” and not on the sidelines. Therefore the ability to be committed builds critical credibility within the team that the FP&A professional operates in. Again, this quality can be split into two. One is being committed to delivering. Whilst by no means guaranteed to succeed all the time, people appreciate someone who they can trust will do their best to deliver on their commitments. And, secondly, being committed to the agreed course of action whether it is in line with their own opinions or analysis or not.
Of course, like with most organisational values, it is hard to not “want” someone with these qualities. No organisation or individual is likely to voluntarily say that they seek someone who is NOT curious or not committed or not compassionate. And yet, I think this combination of qualities is a decent start when looking for someone who is likely to have the aptitude and fortitude to drive the FP&A agenda forward in a positive way.
The key question is as always, whether these qualities are probed for, tested, inquired about when making hiring and talent management decisions. I would be very interested in hearing from others as to what in their view also exemplifies great FP&A people from their experience.
What does it take to become a good or even great FP&A professional?
The article describes those QUALITIES that I have found in people who I have worked with, worked for and who have worked for me in an FP&A domain that I found to be particularly effective in driving the FP&A agenda forward within their responsibility domain.