Think about today’s world: Is it stable, predictable, and slow-paced? No matter whom you ask, the answer is likely no.
Let me ask a different question. Can you accurately plan for the future of your company using a certain set of financials? In my experience, very few succeed—our forecast accuracy is too poor.
But the worst part about forecasting is that it seems to have become the purpose of FP&A, rather than having business conversations about strategy and business performance. We police other functions on their forecast input, then beat them up about not meeting the numbers—a process that is not conducive to a constructive conversation. Something needs to change.
There’s no straight route to strategic success
First, we must recognize that regardless of how well-thought-out our strategy is, it’s unlikely that everything will go as planned.
- That doesn’t mean we shouldn’t plan for a bold strategy with big moves. It means that we should have frequent conversations about how our strategy is working and if anything needs to be adjusted.
- It doesn’t mean we shouldn’t set up any goals or KPIs along the way to measure our progress. It means that we should keep track of a portfolio of initiatives that we have used to deliver the strategy—relevant metrics that must be true for the strategy to remain on track.
- It doesn’t mean we shouldn’t forecast anything or keep track of historical performance. In fact, we should track on a rolling basis how we have performed in the past couple of years and how we expect to perform over the next few years. For example, if you track a six-year period (-3 to +3 years), you should start to see the hockey stick forming and where you are on the stick.
If your rolling performance tracker and the metrics that need to be true for a successful strategy are not tracking in the right direction, then you must course-correct your journey. This is likely to happen naturally because your competitors and the industry are moving too. But with frequent strategy conversations, you will be able to course-correct swiftly when necessary—all you need to do is monitor your trigger points and start a strategy conversation every time a point is triggered.
Are you ready to start traveling?
Enabling this kind of strategy process obviously requires FP&A to transform its own processes too. Gone is the traditional budget with its detailed set of financials that becomes the mantra for business performance. Welcomed is a dynamic planning process that tracks where on the hockey stick your company currently is and if certain trigger points are breached, requiring a strategy conversation.
Planning doesn’t drive value creation and must never become the purpose of strategy itself. Planning is your tracking tool that helps monitor if you’re staying the course or not.
In addition to process changes in FP&A, the department must also submerge itself in the strategy conversation to understand what big moves are being made and what must be true for the company to succeed. FP&A can only do this if the department has a seat at the strategy table—not as a silent observer, but as the active facilitator appointed by the CFO to be the objective voice in the discussion.
In short, if your FP&A department is not part of strategy conversations today, it cannot transform the process or drive the right strategic choices for the company. So, ask yourself: Where’s your head of FP&A when the strategy conversations are taking place? Share your answer and let’s discuss how we can get FP&A a seat at the table that’ll define the future value creation of the company.