8 Changes for FP&A to Make to Transform Strategy

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Eighty percent of economic profit created by companies globally comes from 20% of the companies. Yes, the Pareto principle applies here too! What’s the secret sauce for becoming one of the 20%? The bad news? There is indeed a sauce and a recipe for how to make it. The good news? The recipe is not a secret anymore! 

As we’ve been uncovering over the past months, supported by the book Strategy Beyond the Hockey Stick, there are only a limited number of factors that with a high degree of certainty can make your strategy a success and boost you into the top 20% of value-creating companies. The caveat is that the conversation in the strategy room is broken. It needs to be fixed and maybe even transformed. Who can do that? I believe it’s up to FP&A, because when I look at the recommendations made to transform the strategy process, FP&A plays a role in all of them. 

How can FP&A get this done? 

To start with, don’t wait for the CFO or CEO to come and ask. FP&A must take this role and proactively change the strategy conversation. I’ve laid out eight specific changes for FP&A to make to address the book’s recommendations to fix the strategy process. Here’s a summary of the changes: 

1. The planning process must change from a static once a year budget view into a dynamic process that looks back and forward in time to identify where the company is on the hockey stick curve
2. Start discussing real alternatives to what the company is already doing, because if your strategy only consists of one way forward, you’re not making real choices, and what you have is not a real strategy
3. Pick the initiatives in your strategy that you know will do well, and more importantly, deselect those that won’t. If you don’t deselect, you won’t have enough resources to fund your winners well enough for them to succeed
4. Stop thinking incrementally and start thinking in big moves. If all you do is move 3-5% every year, at best you’re only staying on par with the competition. Don’t forget that while you’re moving, so are your competitors, and none of you will create any significant value
5. Start freeing up resources to invest in your strategic initiatives on an ongoing basis. You should aim for always having 20% of your resources as liquid resources that can be channeled to the most strategically impactful initiatives
6. Stop sandbagging and hiding reserves up your sleeves. If you don’t know the true performance of the company, how can you make the right decisions?
7. Stop being too fixated on your performance as expressed by the numbers, but rather look at things more holistically. Ask yourself who’s delivered the best performance amid the given external and market conditions and relative toward your competitors—not compared to a fixed budget
8. I’m sure you have a great strategic plan that’s going to catapult you into the 20% of value-creating companies in five years. However, don’t forget about the first step! What are the first few things that must get done? What early wins are you aiming for? Are you ready to stomach that it might get worse before it gets better? After all, that’s what hockey sticks show, isn’t it?

FP&A plays a role in making all of these things happen. It won’t be easy. No one will ask you to do it. You’ll likely face resistance. However, do this well and your company will thrive. That surely won’t go unnoticed! 

What’s your first step? 

Enough talking and planning. It’s time for action! Here are some first steps you can take to get started on transforming strategy. 

• Look at your performance for the last three years and project it for the next three. It will tell you where you are on the hockey stick
• Revisit the latest strategy of the company and see if any real alternatives were discussed. If not, raise this point and suggest alternatives
• Revisit your latest resource allocation process and see how resources were allocated. Were they spread evenly across departments and initiatives like peanut butter or reallocated to initiatives with high ROI?
• Do a competitor check. Are you moving ahead of them or staying on par?
• Look at how resources are currently spent and create a 20% list of how you would free up resources to invest in making your strategy a success
• Go back through the latest quarterly accounts and see how many times questionable provisions were either made or released
• Start creating a context around performance and stop looking only at variance to budget 

These are all steps you can do within the next 100 days to get you started on your journey. Which steps will you take?

This was the tenth and final article in the series "FP&A Transforms Strategy". You can read the previous articles below.

Why FP&A Must Transform The Strategy Process

Stop Planning. Start Travelling. Strategy Is A Journey

How Do You Know Your Plan Is The Best Plan?

Pick Your Winners And Feed Them Big Time

Budgets Don't Create Value. Big Moves Do!

For Your Strategy To Succeed You Must Go Liquid

Sandbags And Accounting Sleeves Only Get You Into Trouble

It's Not Your Numbers That Make You

The Hardest Part Of A Long Journey Is Taking The First Step

You can read a lot more articles about FP&A, Business Partnering, and Finance Transformation below. It all start's with “Introducing The Finance Transformation Nine Box” where you set the ambition for your transformation. You should join the Finance Business Partner Forum which is part of the Business Partnering Institute's online community where we will continue to discuss this topic and you can click here to follow me on Twitter.

An Open Letter To The CFO: Are You Ready To Transform FP&A?

The Future of FP&A – Two Ways To Take the Reins

How To Create Value Through Business Partnering

Everyone Can Adopt A Business Partnering Mindset (part of a six-article series about FP&A Business Partnering)

From Business Partner To Working Within The Business (part of an article series where I interview finance professionals about their careers in FP&A and Business Partnering)

Is Your Product Optimized For Value Creation? (part of a toolbox series where we look at what tools FP&A professionals should leverage to drive value creation)

How Business Partners Turn Analysis To Insight (part of case study series where I interview business partners about how they drive value creation using real cases)

What Defines A Finance Master?

The New Career Path For Finance Professionals

How Finance People Can Be More Successful

The CFOs Roadmap To Transforming Finance

How To Become A Finance Business Partner

Financial Analyst vs. Finance Business Partner

You’re A Finance Business Partner, Now What?

Building A Team Of Finance Business Partners

Anders Liu-Lindberg is a Senior Finance Business Partner at Maersk supporting our largest product and I have more than 10 years of experience working with Finance at Maersk both in Denmark and abroad. I am also the co-founder of the Business Partnering Institute and owner of the largest group dedicated to Finance Business Partnering on LinkedIn with more than 7,000 members. My main goal at Maersk is to show how to be successful with business partnering and drive value creation as a trusted partner. I am the co-author of the book “Create Value as a Finance Business Partner” and a long-time Finance Blogger with 35.000+ followers.