Strategic planning – is your finance team involved?

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Strategic choices are the most significant choices in business. You can argue that defining a mission and vision is even more critical, but those rarely guide practical actions in daily life in a company. That’s why strategic choice and, hence, strategic planning take the top spot. However, as we showed in “More strategic leadership is needed from the CFO ”, many strategies fall short of expectations. Most fail to deliver returns above expectations.?

There are many reasons why this is the case. Leading management thinker Roger Martin argues that only 10% of CEOs have a real strategy for their company. He argues that the remaining 90% haven’t made real choices. Instead, they try to accomplish too much and fail to deliver on any of it. Another reason leading strategy consultants McKinsey highlights is that companies aren’t aware of the relevant choices they can make.?

A great finance team can fix both of these issues. We would like to remind you how to do it and deep dive into how the CFO and FP&A team can help better strategic planning.?

Fixing strategic planning is a three-step process:?

1. Make strategic choices about Where to Play and How to Win
2. Choose which levers you want to bet on to create excess value
3. Re-design your strategic planning process by making eight shifts?

In the article on strategic leadership, we covered 1) and 2), and you can see a summary below.

?Step 3) and the eight shifts companies should make to their strategic planning process to design winning strategies.”?

8 shifts to create a winning strategy?

In the book “Strategy Beyond the Hockey Stick ”, authors Chris Bradley, Martin Hirt, and Sven Smit highlight 8 shifts to creating a winning strategy. The shifts are derived from researching thousands of companies and learning from those that created excess value from their strategies.?

1. Strategy as a journey: Reality doesn’t change in a set rhythm, and we need to be prepared to discuss the strategy whenever it is relevant?
2. Real alternatives: A plan with no alternatives is rarely a good plan; hence, any recommendation we make for making choices should include a discussion of the real alternatives?
3. One-in-ten-wins: Too often, corporate resources are spread thin across too many initiatives. Instead, we should identify breakout business opportunities and bet big on them.?
4. Big moves: You can only create more value if you make bigger moves than your competition. It takes two or three big moves to move up the power curve.?
5. Liquid resources: If you allocate all your resources in the budget, you will not be maneuverable when reality changes. Ensure you have at least 20% liquid resources to seize the moment.?
6. Open risk portfolios: Instead of sandbagging targets, executives should be ambitious and present their best plans. This gives them the option to discuss risks in the portfolio openly.?
7. Holistic view: Create an unbalanced scorecard including hardcore financials and big strategic moves with an outlined probability of success?
8. Forcing the first step: Break your big moves into 6–12-month increments, making it tangible what needs to be achieved when and giving a chance to test the strategy in the first six months?

We also covered these eight shifts in the article “CFO, how are you planning for success?”

You can learn more about each of these shifts below.

To be honest, if you're doing well on these three steps, there’s no need to hack the process. Instead, let’s consider hacking Finance’s way into the strategic planning process. This is important because we should aspire to move beyond tracking the effect of historical choices to modeling and facilitating the impact on value creation from future choices.?

5 ways to hack our way into the strategy process?

We must consider positive approaches to showcase our value in participating in the strategic planning process. If we try to force our way in, we likely won’t be welcomed, and it will be an uphill battle. Here are five hacks you can try.?

1. Finance-driven strategic initiative: Lead an initiative to showcase the strategic role of finance.
2. Strategic finance summit: Host summits to discuss trends and foster engagement.
3. Financial innovation fund: Create a fund to finance innovative projects.
4. CFO Challenge: Organize a challenge to engage teams in presenting and refining strategic plans.
5. Scenario planning workshops: Lead workshops to explore strategic options and their financial impacts.

Let’s review these further to discuss their benefits and how to implement them.

Ad 1: Launch a finance-driven strategic initiative

Why?

Leading a strategic initiative yourself demonstrates how finance can drive growth and innovation. It sets a powerful example and showcases finance’s strategic value.

How?

• Identify a high-impact opportunity aligned with your company’s goals.
• Develop a detailed plan, including financial implications and potential outcomes.
• Lead the initiative to success, demonstrating the role of finance in driving strategy.?

Ad 2: Host a strategic finance summit

Why?

Hosting an event centered on strategic finance can elevate the importance of financial perspectives and foster cross-functional engagement.

How?

• Plan an annual or bi-annual summit with industry experts, finance professionals, and company leaders.
• Discuss emerging trends and financial strategies and showcase successful finance-led initiatives.
• Use this platform to influence strategic thinking and build relationships.

Ad 3: Introduce a financial innovation fund

Why?

Creating a fund dedicated to innovative projects positions finance as a champion of strategic growth and new opportunities.

How?

• Establish a fund to finance promising strategic initiatives with high potential returns.
• Evaluate proposals based on their financial viability and strategic alignment.
• Use the fund to pilot and fast-track innovative ideas.

Ad 4: Implement a CFO Challenge

Why?

A CFO Challenge engages the organization in strategic thinking with a financial lens, highlighting finance’s role in evaluating and refining strategic proposals.

How?

• Organize an annual challenge where teams present their strategic plans and financial implications.
• Reward the most financially sound and innovative strategies.
• Follow up with workshops to refine and implement the best ideas.

Ad 5: Propose and lead scenario planning workshops

Why?

Scenario planning helps teams explore various strategic options and their financial implications, fostering a forward-thinking mindset. By leading these workshops, finance can demonstrate its value in strategic foresight and risk management.

How?

• Set up regular scenario planning workshops involving cross-functional teams. Focus on key strategic areas and potential future scenarios.
• Guide teams through identifying assumptions, developing scenarios, and assessing financial impacts.
• Generate insights to inform strategic decisions, helping the organization prepare for various potential futures.

We’re yet to see companies implementing any of these hacks, and no matter how involved you are in your company’s strategic planning today, these hacks will elevate your impact. You also don’t need formal approval from the management team, so they are great ways to showcase the positive impact Finance can have on strategic planning.

It’s a must for Finance to get deeply involved in strategic planning. Not just to elevate our impact but to ensure that the company strategy realizes the value it was expected to generate (and then some)! How are you involved in strategic planning today? Have you implemented any three steps to improve your strategic planning process? Finally, which of these hacks would you implement?

This was the sixth article in our new series, "Hacking the Annual Wheel in Finance." In it, we will explore different hacks to transform our standard work in Finance. You can read the previous article(s) below.

Hacking the Annual Wheel in Finance

Hacking the Annual Report - The Holy Grail of Finance

Month-end reporting - the dreaded never-ending finance cycle

The 100-year-old management process - budgeting

Quarterly forecasting - your view of the future

If you want more trends in finance and accounting, you can read our previous series, "The Top 10 Priorities for CFOs in 2024." This series explored what critical issues CFOs should focus on in 2024.

The top 10 priorities of CFOs in 2024

How CFOs can manage the Next Normal

More strategic leadership is needed from the CFO

From CFNo to CFGrow

It's time for CFOs to whip their company into shape

CFO, your days as a co-pilot are over!

CFO, are you on top of your ESG reporting?

How CFOs can triumph in the war for talent

CFO, your time to get on top of data is running out

CFO, how are you planning for success?

CFO, it's time to break down the finance silo you've been living in

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Anders Liu-Lindberg is the co-founder and a partner at Business Partnering Institute and the owner of the largest group dedicated to Finance Business Partnering on LinkedIn, which has more than 12,000 members. I have ten years of experience as a business partner at the global transport and logistics company Maersk . I am the co-author of the book “Create Value as a Finance Business Partner ”, a long-time Finance Blogger, a LinkedIn Learning instructor , and a Top Voice on LinkedIn with 350,000+ followers.