Accountability Requires Empowerment, Managing Requires Measurement. All Require FP&A

What is accountability? Sometimes confused with responsibility, it is about acknowledging and answering for the consequences of that responsibility. One can only be fully accountable if empowered by information, so that one’s actions and decisions can be fairly assessed.

While managing, how do we know we are improving, or that our actions are generating the expected outcome? Only if we can measure. Measurement allows us to track progress, gain insights, make informed decisions to drive positive change. Without measuring we are blind.

There is a time-tested tool/routine/discipline that enables people in organizations to be empowered with information to manage improvements and to be fully accountable for what they do: FP&A (Financial Performance & Analysis). In this article, I’ll go into more detail about what FP&A is and how it should be best applied to achieve empowerment for full accountability.

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Striking the right balance between autonomy (the degree of independence and decision-making freedom granted to someone) and accountability (the obligation to answer for one's actions and decisions) is critical to drive healthy empowerment, success, and growth in any organization. Excessive autonomy without accountability leads to potential abuse. Excessive accountability without autonomy is unfair.

While autonomy is bounded by level of trust given by the organization, accountability can be more open-ended (e.g., scapegoating), shifting the balance towards unfairness. Thus, having the right level of information is crucial for people to use their autonomy to make better informed decisions and thus be more fully and fairly accountable for their actions.

Information comes from measuring. Measurement is the essential tool in management. It allows managers to understand if their actions are improving results or if a course correction is necessary. It enables managers to identify weaknesses, track progress, and make informed decisions to drive continuous improvement.

Measurement is the language of FP&A.

As discussed in my previous article, FP&A decentralizes the analytical and planning finance activities. It allocates capable finance talents to each division (here meaning any function or subdivision) in the company, extracting and translating data analytics into real-time, accurate, and actionable insights to their respective leaders, becoming their trusted “right hand”.

This in turn allows divisions to understand their performance, to be more strategic (see?this article?for the importance of empowering functions to make them strategic instead of transactional), and to have empowered accountability.

But simply hiring finance professionals to perform FP&A duties is not enough. If they are placed incorrectly in the organizational structure, if the wrong profile is hired, and if the expectations from the role are limited, these professionals can quickly become accountants who just report results, or worse, become “spies” of an overpowered and centralized finance organization.

Unleashing the full potential of an FP&A organization requires it to be adequately structured, adequately staffed, and provided the right autonomy and accountability.

FP&A Structure. It is critical to place FP&A resources into as many critical divisions as possible. FP&A should be decentralized since it is a driver of decentralization. That is even more relevant in high-growth organizations with high operational complexity (different businesses and geographies) and low market maturity.

This means FP&A should report full line into the leaders of each division and function (and potentially dotted line to the finance function, to drive standardization, coordination, and career development).

The ultimate objective is to create an “FP&A community”, a decentralized organization focused on driving insights and improvement in their respective divisions, but also sharing best practices and information across divisions and the central Finance organization.

FP&As should command the trust and respect of the divisions they work for. They should be adopted as the right-hand of these divisions, the leader’s ‘go to’ person to understand truth and an advisor on the best course of action.

FP&A Talent. Great FP&As are a special kind of talent. They should be finance geeks that are also business savvy.

From a technical standpoint, they should have strong analytical skills to manage complex data into simpler, clearer output. They should love number crunching and have a minimal understanding of finance: accounting principles, costing, budgeting, etc.

They should be mature to be entrusted to properly handle sensitive information and share info on a ‘need-to-know’ basis only.

Effective FP&A talents should be good communicators with strong influence and soft skills. They should be active listeners and communicate clearly and accurately, developing collaborative relationships in the organization. The latter is especially important because FP&A need to obtain information from people they frequently challenge on that same information.

They need to have commercial acumen, taking a pragmatic stance to focus on the right pareto, translating analyses into actionable insights, having a results-driven mindset. They should have some understanding of change management and have some exposure to the implementation of complex projects.

It is a steep learning role and should be seen as a steppingstone to leadership roles. It is a great role to place in a fast-track management career plan.

Many organizations unfortunately staff these roles with very junior accountants with little training or autonomy. These professionals are then unable to drive the right relationship with the divisions they work for, and thus gravitate closer to the central finance organization.

Ultimately, the visibility and empowerment provided by a healthy FP&A community can do wonders to an organization. It can improve decision making at every level, it can accelerate insight generation to action, and improve the allocation of resources to the right uses and opportunities. It can create a “one-source-truth” across the organization, so discussions focus on the insights and the actions, and not on whose numbers are “more correct”. FP&A greases the gears of a healthy organization, an important factor in the journey to become a Flywheel of Excellence.