SINGAPORE -- Senior financial planning and analysis (FP&A) leaders gathered last week for the inaugural meeting of the Singapore AFP FP&A Club. The lively discussion focused especially on key challenges FP&A professionals are facing—particularly around talent management and forecasting.
Several participants named finding talent with the right skill set is their key challenge. Many candidates have a narrow focus on their work, they said, without understanding key issues such as business dynamics, the P&L, and how cost is linked to the balance sheet. Even as FP&A is evolving to a predictive model of telling what the world will look like, many candidates for FP&A positions are accountants who are only reporting what has happened. One attendee even said that candidates often cannot even explain the difference between reporting and forecasting.
Participants uniformly said that the FP&A prospects need good communications skills to explain their results to the business and a good commercial sense to understand the drivers of the business. As one participant put it, an important quality is “to be able to tell the story right.”
Additionally, while FP&A duties can be trained, it’s the candidate’s attitude and desire to learn that truly make the difference. “I don’t think an MBA or BA makes a big difference. As long as you have the attitude, you can be taught, said one participant.”
As Brian Kalish, FP&A, executive director, Global FP&A Practice, for AFP summarized it, FP&A is “looking for a quant who tells great stories and is curious.”
Many companies are increasingly using nontraditional ways of identifying talent. Kalish noted that when Starbucks couldn’t fill FP&A roles, for example, it started hiring store managers who had college degrees and understood the business. Wal-Mart similarly believes that people who are successful and understand the business can succeed, so they pull people out of the business units.
What is increasingly important to attract the new generation, one participant observed, is to provide the tools and technology they’ve grown up with. “Twenty years ago, you had better technology in the office than at home,” he said. “When millennials come to the office today, they step back in time—the office, spreadsheets, and data that is two weeks old. We need to provide the tools that make their life interesting enough, with state of the art technology and access for working from home. That’s a big contributor to hiring talent.”
Once companies find the right talent, they need to manage it well in a rapidly-changing environment where staff often have high expectations.
One attendee explained that his company positions FP&A as number two to the finance director, making it a coveted role in the organization. Only people who have the ability to lead across multi-disciplinary processes are considered for FP&A. “If you get into FP&A and do well, you probably will be the next finance director in the region,” he explained. Another attendee tells her team that if they want to move into the CFO role, they have to work in FP&A.
In Asia, multinationals and regional firms are also finding they need to adjust expectations and the work culture to optimize staff performance. One participant stressed that leaders have to appreciate different work cultures and organize the team and deliverables around them. “If there are gaps, you have to see how to fix the process or add people,” he said.
Several companies offer flexible hours, giving staff the responsibility to know their deadlines and figure out how to accomplish their work whether they work at home or in the office. “That becomes a talent retention point, if you have the flexibility to do work from anywhere,” an attendee noted.
Turning to forecasting, participants said it has changed tremendously because the old paradigm of managing a business is undergoing a reconfiguration. Whereas three- or five-year forecasts were fairly accurate, companies are now competing with completely different industries and forecasting is more difficult. As just one example, companies that make cameras are now under attack from an unexpected competitor, smartphone manufacturers.
Forecasting three years out is gone, one attendee said. “You do that only for shareholder understanding and to pitch to investors.” Internally, “it is at best one year.” Another observed that the LinkedIn and Twitter CFOs said they can’t even predict the next 12 months because their business is constantly evolving.
The result is that the forecasting cycle has changed over just the past three years from a five-month planning cycle into a shorter-term plan with less detail.
What may become important for consumer goods companies, one participant noted, is hourly or daily forecasting that becomes more practical, such as forecasting the weather to figure out what products to bring in. Another company could do a three-year strategic plan but then also look at innovation, the new product development cycle, what products to shelf and when to ship them on a quarterly or monthly level. “The key is to look at the business purpose,” the participant said.
Another attendee said forecasts can be a mixture of a five-year plan that provides insights into new initiatives, a strategic plan for investment with a long-term roadmap for where the company wants to play, and a current year forecast for annual planning. What FP&A also needs to do is to determine what steps the company should take to improve margins and reduce the impact of currency rate changes.
AFP FP&A Clubs create both an inspirational and educational setting for FP&A professionals across Europe, Asia and the Middle East.