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FP&A: Creating Value Through Insight

  • By James Myers
  • Published: 8/19/2015

VC1Never before have FP&A professionals had so much opportunity to change the course of history. Uncertainty is becoming the norm, and companies are struggling to be nimble. While disruption—the latest buzz word—creates winners, by definition there also are losers. So how can FP&A professionals help their companies navigate these uncertain times?

I view FP&A’s role as a value cycle, giving us the opportunity and framework to create real gains for the organization. We offer strategic support to an organization. We are now able to help guide the organization in line with its vision. We lead insight generation and are able to align business to the data and understand what impact it has on the business. Finally, we create value through insight, allowing us to guide the strategy of the business forward. FP&A professionals offer a high-value output through strategic support and insight, creating value from data.

Ultimately, the amount of cash a business generates dictates its success, so finance always has a seat on the executive team. Now we are seeing the role expand beyond the traditional back-office accounting support function into something more. We are seeing finance teams move closer to the action, empowered to be creative and suggest new ideas.

The great news is that all finance professionals can use what The Lean Startup calls “validated learning” to impact business decisions, supporting executives with data and then guiding their organization through times of uncertainty. FP&A is becoming the strongest influencer, outside the CEO. The cycle of strategic support, insight generation and value creation drives business direction, turn by turn, toward the ultimate goal.

FP&A’s Three Objectives

As FP&A professionals, high-value output should be our ultimate objective, and to really drive the value in an organization, we must focus on three main areas: strategy, business and data.

The challenge is these are often in addition to all the other requirements in our job description that include consolidations, budgeting, forecasting and monthly reporting. Yet, as we accomplish these tasks at hand, we also need to drive forward the value cycle as this is where the real business value lies.

Strategy: The direction of the company, including the long-term vision and shorter-term missions with tactical goals.

Business: The partners and customers externally and sales and marketing organizations and go-to-market teams internally.

Data: Data held in an organization internally or from external sources. In larger organizations there may be an operations or data analytics group that manages this data, but they can be found in many different departments.

Between strategy and business, FP&A’s role is to lead in strategic partnering. What’s strategic partnering? This takes the agreed strategy and helps the organization translate it into action, ultimately driving business success and shareholder value in line with the vision.

Finance teams have always played a role here, especially as they have adopted an independent advisory role and have served as custodians of their companies. Remaining independent from the rest of the business can mean that ideas and strategies are fresh and aligned to the vision. In my experience, a key part of decision-making is looking at new proposals from all angles. Finance teams must remain independent to ensure that they have a distinct perspective.

Between business and data we have insight generation. The role here is to work on translating business needs into queries. How often do you get a request from the business to pull a set of numbers together, and this inbound request doesn’t have many details or doesn’t even make sense? It’s our role to question the request and understand the true need so that we understand the drivers and are better equipped to find the right data to answer the questions. Here I often go through a process of problem diagnosis, customer analysis and data identification. A great tool to help you with this is the well-known “5 Whys” technique. Created by Toyota Motors, the “5 Whys” is an iterative question-asking technique used to explore the cause-and-effect relationships underlying a particular problem.

Finally, we have value creation. This is the key learning that helps guide a business through uncertainty. Decisions are now supported by data. This learning ultimately can determine the direction of the business and its vision, mission and tactical goals. Value creation often takes the form of data visualization, but there is wisdom in knowing that only once we understand what question we are trying to answer and figure out the right data to answer that question, we will be able to interpret the insight into business direction. Too often I see FP&A professionals creating reams of reporting without thinking, “What question I am trying to answer?” or “What action do I hope the business will take as a result of my interpretation?”

In the perpetual cycle, value creation keeps the spin going—between big data and strategy is the sweet spot for FP&A. Successful companies take a more analytical approach, moving away from a gut feel to a “validated-learning” decision, as entrepreneur Eric Reis calls it. With validated learning, we can influence the direction and strategy of a division, business group or enterprise.

The value cycle is our approach to redefine FP&A’s role in the organization, to take a leadership position and influence the direction and outcome. It is our role to help facilitate this process by taking the insight that we have generated and convert this into more long-term strategic thinking. That’s the place where true wisdom lives.

James Myers is a finance consultant for Hewlett-Packard.

This article appears in the July/August edition of AFP Exchange.

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