FP&A deserves more respect!

Key points:

• Financial Planning & Analysis (FP&A) in business plays an important role in understanding business results and planning for the future, but yet is widely misunderstood. Why?
• FP&A professionals are extremely competent and often used to solve problems outside of their areas that distract them from being able to add the greatest value.
• FP&A isn't taught in Business Schools as a stand alone discipline, but as bits and pieces of various Accounting classes. Why? This is a missed opportunity! These are great jobs!
• The core skills of FP&A professionals are fundamentally different from those of Accountants. While each requires attention to detail, FP&A professionals are more focused on enterprise improvement, vs. controllership.
• Yet FP&A is often made subservient to Accounting, reporting into a Controller. Controllers by their training are not always the most effective business partners, or enterprise analysts.

#careers

Article:

I want to discuss and give my views about the current state of Financial Planning & Analysis (FP&A), an area where my work has been focused for about 25 years! FP&A is an area of huge importance to any business. Yet, in my view, it doesn’t get the focus or respect it deserves from universities, business schools, and most operating companies. I want to start a conversation about why this is, and how can it be changed? 

The people who work in FP&A fill vital roles in business as the financial planners of future financial and operating targets and the scorekeepers and interpreters of current results. In many ways these “Financial Analysts” are the inside journalists and reporters of a company who by their analysis, reporting, and inside relationships to business leadership can determine a company’s current and future investment priorities. FP&A tells the story of a company’s results internally, to its Board of Directors, and for outside investors. The people who do this work are very well educated (often MBA) “business partners” who when properly supported provide integrated business planning that serves as the glue to ensure that a company’s businesses perform efficiently and in a coordinated way. 

In the best organizations these leaders grow to assume senior roles in Operations as they understand better than most a company’s cost structure, product margins, and the levers that influence these most directly. For these reasons some large companies use the CFO position as a rotational opportunity along the path to CEO. Unfortunately, it’s far more common that FP&A teams are misused, either to fill process gaps in Accounting processes, or as a financial IT organization responsible for managing the vast amounts of data companies now have available, but with the tradeoff of no longer focusing on performance interpretation and business improvement.

·     FP&A teams are perceived as centers of competence and therefore given the most challenging information management problems to solve, even when this takes away from their core mission.

If this discussion gains enough interest I plan to write a series of follow-on posts that go deeper into each of these issues. For example:

• Why isn’t FP&A taught as a unique concentration at both the undergraduate and graduate level? Why don’t schools of management teach how to budget, interpret and present information effectively, perform a proper business case, how to utilize current planning tools like Hyperion and like products…vs. the on the job haphazard training for FP&A that happens in most companies today?
• Why do so many companies force FP&A to fill “shared services” or quasi-IT/report production functions, vs. allowing these analysts to identify true business opportunities and exposures, to add real value?
• Why do so many companies skimp on FP&A resources? Sure, FP&A is a G&A expense, but if you let FP&A do its intended job these teams can self-fund through the opportunities they identify (many times over!).
• Why do many companies assume that the best training for Financial Analysts is Accounting? Accountants play a critical and needed role in guaranteeing the accuracy of business results, but do you need to be an Accountant to understand capitalization rules, or the matching concepts for revenue and expense? Do most Accountants with a focus on accuracy, “T” tables, and compliance with standards have the necessary mindsets to provide the best business partnership, versus FP&A analysts with their more holistic approach to understanding the businesses they support?
• Therefore, why do so many companies opt for the CPA as CFO model? Might not the FP&A lead be a more effective CFO? After all, you can always hire a great Controller to support you!

These are all issues I’ve been facing since I left business school with my MBA and took my first role in FP&A. These ideas aren’t mainstream, but my hope is that they will resonate with many of you. If yes, please add a like, a comment, or send me a note. If there’s enough interest I’ll follow-up with additional thoughts on all of these topics, and much more.

Thanks for reading and participating in this discussion! 

Michael