It Is Time To Go Beyond Financial Planning

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There is a lot of debate around how exactly to transform Financial Planning & Analysis and Bain threw the latest suggestion by highlighting the key challenges and solutions in a recent article. The Association for Financial Professionals has organized a webinar where they deep-dive on this topic together with the authors of the article. It is on 21 April at 3:00-4:00 PM ET and you can click here to join.

Join me at Clubhouse at 1530 CET today to hear me discuss last week's article on the modern platform finance functions need to have to excel. You can join the event here.

Following a year where companies have been in constant planning to provide visibility into the future, it is time for all of us to take the next steps on planning. Historically this has been a disintegrated process in the company where each function would do its own planning. Sales would do account planning, Marketing campaign planning, Operations production planning, and Finance financial planning. Granted Finance would try to orchestrate a planning process around the budget where all functions would be consulted but it would still be on financial terms. 

This disintegrated and misaligned process is likely also the reason why we find “improvement of integration of planning processes” at #8 on the CFOs list of top 10 issues to deal with for 2021. Coincidentally this call to action comes at the same time as Gartner has launched a new planning term “xP&A” or “extended Planning & Analysis”. This comes at the tail end of a period where we have seen a bonanza of new planning terms emerge. To name a few we could mention “integrated planning”, “connected planning”, “continuous planning”, etc. We all know the planning process is wrong but at large we have failed to address it. In fact, it is the second-worst issue on the top 10 list in terms of our ability to meet expectations! 

The challenge is not a lack of approaches to do better planning but rather the lack of alignment (or ability to sell) on the approaches in the company. It warrants further exploration in terms of choosing an approach and selling it to the organization and that is what we will do in today’s article. 

Exploring the planning value chain 

In principle, the full planning value chain goes from the mission of a company to a published set of annual accounts. From an imagination about a future to a history that is set in stone. One rarely changes whereas the other will be added to as a continuous flow (although only published annually or sometimes quarterly). One is a guiding principle for all activity that should happen in the company and the other is a record of everything that has happened. In between, we have the planning process and the execution of the planned activity. We could visualize it as below.

For each box, every function would create its own plan or translation of the overall company version. This is where the first disintegration happens as typically this is an unstructured process happening throughout the company. At the executive management level, each CXO would then present their version, and everyone would get a mandate to go ahead with their plan. The proof is in the execution. Perhaps by magic, the company performs as expected (or even better) but often there are shortfalls, and the blame game starts. 

Companies that perform well over time typically have very strong missions and visions that employees can mirror themselves in. Then it does not matter so much how each function translates it because it does not need much translation in terms of helping people to do the right thing. Where this is not the case you need a strong planning (and execution) process for the company to perform well. I have previously described a very simplistic way to do this. 

1. Create a strategy that includes big moves to propel you ahead of the competition
2. Document that assumptions that would have to be true for it to be a good strategy
3. Establish confidence intervals for each assumption so you know when you need to act
4. Track and monitor the development in the assumptions as close to real-time as possible
5. Whenever an assumption breaches the confidence interval it is time to act 

Using these simple planning and performance management principles each function can easily do its planning and an aligned discussion around the overall planning process can be facilitated across the company. This process could well be facilitated by Finance as we can take a cross-value-chain perspective and act as a neutral facilitator. This would truly also help Finance to go beyond financial planning! 

The world beyond financial planning 

However, Finance would still need to convince other functions that we are best placed to facilitate the planning process in all functions. The best way to do this is to reverse our thinking and go beyond financials. Typically, Finance sees planning as the process to get to an outcome of a set of financials. Instead, we should see it as a process for helping other functions succeed and meet or beat their strategic targets, and more widely deliver on the mission and vision of the company. 

This changes Finance from being a controller of the plans to a strong facilitator and supporter (because we helped make them) of the plans. Moreover, it allows Finance through strong internal collaboration to become the focal point for the overall company plan. Preparing the financial forecast almost becomes an afterthought at this point. Changing Finance’s role in the planning process will ensure a much stronger alignment across functions and to the mission, vision, and strategy. It would also over time lead to stronger execution because there is a rigorous follow-up regime in place on business performance and a strong will for everyone to succeed. 

This is the way to go beyond financial planning but how do you see the potential for making this change? Do you think it is possible and if yes have you already seen examples of this? Would you recommend a different approach to ensure better integration of the planning processes? Make yourself heard and help Finance go beyond financial planning. Now is the time to act so get started today!

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You can read previous articles in my CFO series below.

The Top 10 Priorities For CFOs In 2021

How FP&A Becomes A Strategic Partner To The Business

Eight Ways For Finance To Go Further On Cost Efficiencies

Finance Professionals Are The Masters Of Analytics, Or Are We?

Re-Imagining Finance In The Face Of The Pandemic

Is Finance Winning Or Losing On The Talent Agenda

Is Your Finance Platform Up To Date?

Agility And Sustainability And The 8 Types Of CFOs

CEO AND CFO - The Most Dynamic Duo In Business

The CFO Is The Voice Of Reason In Business

If you want to become a better business partner you should consider taking our online course "Business Partnering Explained - Value Creation Unlocked" to get a better handle on the role. It's accredited for 5.5 CPD hours.

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.

All Successful Business Partners Are "Leaders" (the last article in the series about our new capability model)

Should We Keep Talking About Business Partnering? (part of a 17-article series where we deep-dive on the WHY, WHAT, and HOW of business partnering by putting it on a formula)

Your Journey To Successful Business Partnering Explained

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)

The Future Of FP&A: Two Ways To Take The Reins

What Is The Accounting Profession Paradox?

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

Finance Business Partner Is A Bullshit Job

How Business Partners Keep A Plan On Track

Anders Liu-Lindberg is the co-founder, COO (Chief Operating Officer), and CMO (Chief Marketing Officer) at the Business Partnering Institute and owner of the largest group dedicated to Finance Business Partnering on LinkedIn with more than 9,000 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” and a long-time Finance Blogger on LinkedIn with 57.500+ followers.