Budgets Don’t Create Value. Big Moves Do!

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This article is not about the budget process—yet it plays a leading role—but more about the strategy process and the role of budget. When we look at the strategy process, our starting point is that we want to create value. 

However, once we leave the room, emphasis shifts from the great vision and the initiatives we want to take, to creating short-term plans and budgets. The process consumes so much time and resources and goes on for so long, that the ambitions from the strategy room are long forgotten once we’re done. That’s a problem because we then create less value than we intended—and to what end? So that FP&A can track variances and bang managers on the head when they’re behind? Something must change, and FP&A plays a leading role in driving this change. 

If budgets don’t create value, then what does? 

The answer is simple: everything you planned for in the strategy room. Or to be more precise, the big moves you planned for will create value. What’s a big move? It’s when you pull one of the 10 levers for strategic success, such as productivity improvements or dynamic allocation of resources, much harder than your competitors do. You can read more about these levers in the book Strategy Beyond the Hockey Stick. If anything, this is what your budget (or perhaps a slimmed-down version of it) should focus on.  

Now let’s consider in more detail what exactly FP&A needs to do differently or needs to facilitate better. 

• Build a momentum case rather than a base case to see where your current performance, including all planned initiatives, will take you.
• Analyze your past results to see what part of your value creation came from big moves your company did versus what was simply caused by industry trends.
• Perform a gap analysis between your momentum case and your strategic aspiration; for example, if your top line is currently US$0.5 billion and you want to make it to US$1 billion, you need to make sure you have enough initiatives planned to get you there.
• Benchmark your strategic initiatives versus your competition to ensure these are, in fact, big moves and not just enough to keep you on par with your competitors.
• Decide what moves you want to make before you start creating your budget. Budgets don’t drive value creation—big moves do! 

Can you see how FP&A plays a role in all of this? There’s prep work before going into the strategy room (momentum case and analysis of past results), gap and benchmark analyses when leaving the strategy room, and the facilitation of planning the right big moves—in other words, making the right strategic choices for the company while inside the strategy room. 

It’s time for FP&A to take the driver’s seat on the strategy process 

This is a massive opportunity for FP&A to take the driver’s seat in the company’s strategy process. Do you see the potential? We might not be invited to do this, but who needs an invitation? All you need to do is propose what needs to change and then roll with it. FP&A is already involved in all the key processes, so taking a proactive approach in changing them shouldn’t be too complicated.  

Are you ready to take charge? If you have any concerns, now is the time to address them so we can move forward with fulfilling our vision for FP&A, and boost our company’s performance into the top quintile of all companies. That’s where value creation really starts to take off! 

This was the fifth article in the series "FP&A Transforms Strategy". You can read 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

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 34.000+ followers.