Time for Financial Planners and Analysis Professionals to Make Their Presence Felt

I was really energized by presentations and discussions at a recent FP&A conference in San Diego and am pleased to share insights. Michael Everson, CFO of GE HealthCare, provided a great foundation for thinking about the new role of Financial Planners and Analysts as they move to become trusted advisors to management. He opened with a brief video from Deloitte to set the stage for “Finance Business Partnering.”

This theme was a common refrain throughout the conference. Peri Pierone, CEO of Axiom, kicked off the conference by making a powerful statement, “Finance people are enslaved by the accounting function.” He suggested that the endgame for finance should be “business partnership.” Jacky Wu, CFO of American Tower, shared that his FP&A function partners with the rest of the organization to produce business cases with few key metrics and actionable objectives. He suggested producing five or ten metrics for the business, instead of a couple thousand. He also urged us to be more dynamic in a changing environment. Metrics may change with deals and context, and to be on top of it, we need to stay connected to trenches. Wu advocated taking a 360 degree view of planning. A bottoms-up perspective provides a forum for the Finance function to get in touch with reality. A tops-down perspective sets good guidance.

To be able to take both a bottoms-up and a tops-down perspective, one needs to use good tools. Wu suggested that we look for tools that are easy for our stakeholders and allow us to be consistent, dynamic and flexible. He emphasized the importance of establishing auditability of models by being able to document our assumptions.

Wu’s emphasis on simplicity was echoed by Stacey Woodroof, CFO of HCA Physician Services, who partners with her business to produce a single page scorecard to manage the organization. This is remarkable for the healthcare sector is highly regulated and complex.

In order to partner with the rest of the business, the FP&A function needs to understand the expectations of the C-suite. CFO of BT America, Chuck Christopherson, made a provocative prediction of what the C-suite needs of the FP&A function in the next 24 months:

How does one become a decision-support superhero? Christopherson said that the C-suite expects today’s data today. But getting the data immediately is not enough – it needs to be accurate. He issued a dire warning, “Inconsistency and errors kills the FP&A team. It is important to stop and correct errors on the spot.” He shared a story of how he stops analysts even in high-stakes meetings if he notices an error. This is reminiscent of the lean manufacturing principles, where problems are fixed as and when they crop up (e.g. Andon Cords used to stop the production line), instead of waiting for them to cascade and blow up the whole system. On assuaging the ego of the analyst who is caught short, Christopherson reminded us of the priority, “It’s far more important to focus on the health of the business and get that right.” He emphasized building trust through precision and accuracy.

Everson set a great standard for CFOs by sharing how he has made a discipline of spending the bulk of his time outside of fighting fires in the current quarter:

In partnering with his business, he focuses on three key areas: Core Business, New Segments and Blue Ocean. He made an interesting observation that CFOs can step into any area unlike CEOs and technical folks, who often have blinders. This sets them up very well for partnering with the rest of the business. Everson also noted the need to be clear about the differences between manufacturing finance, product finance and strict finance, and make models that address the needs of each area.

John Ross, CFO of Rural Community Hospitals, had a provocative message that will be central to finance-business partnering. He asked us to go beyond budgets. Given how the rest of the business is burdened by budgets, and treats finance with disdain for being forced to go through the motions, this is a message that should not be taken lightly if FP&A wants to play an active role in partnering with the rest of the business. Ross talked about doing six quarter rolling forecasts instead, so that planning would be a continuous and not a static process. This would be a lot more agile than budgets, where people often spend money to prevent losing it. He drove the point home by sharing that he used to be a big proponent of budgets, and now he wants to apologize to all the people he forced to do a budget. He suggests instead that we use high-level targets like EBITDA and productivity metrics (like 4% annual productivity improvement).

Thomas Paradise, Global Director, Finance, at Thermo Fisher, provided a clear vision of partnering with sales when doing pricing decisions, using market data. He talked about creating customer peer groups to compare market prices and knowing the reference price. This requires partnering with Marketing. Moreover, the conversation isn’t just warm and fuzzy. Paradise uses simple spreadsheet models to drive a very concrete conversation with the rest of the business.

Leslie Hazleton, CFO of Freeflight Systems, touched on an important aspect of Finance-Business Partnering – that of culture. She emphasized that it was important to understand the existing business process of the organization, develop simple tools that support that process (instead of using complex and heavy solutions that require complete re-engineering) and gain support of the rest of the business by involving them. Hazleton’s guidelines are a simple roadmap for bringing in Finance-Business Partnering to deliver results. For this work, Free Flight Systems received the Best Financial Transformation Award at the conference.

Our team has been driven by the goal of bringing respect and dignity to the economic evaluation process, and it was very heartening to find that the FP&A community shares a similar goal. I am looking forward to working with the FP&A community to enhance finance-business partnering.