Why planning should always be aligned with strategy
Anders Liu-Lindberg
Leading advisor to senior Finance and FP&A leaders on creating impact through business partnering | Interim | VP Finance | Business Finance
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The first commandment of the Planning and Forecasting Bible is: “Thy plan shall always be aligned to thy strategy.” This seems obvious, but it is harder than it might appear, as FP&A professionals have discovered through the years.
Every organization has to have a goal. If the business has nothing to aim for then there is a fundamental problem that FP&A can’t solve. Once a goal is established - the top-level vision and mission - this has to be translated into a clearly articulated strategy of what success looks like, with many smaller goals and milestones.
What activities does this successful business undertake, and how does it get from here to there? The strategy will still be a broad brush, but this is where FP&A comes in. What resources does the business need to make its strategy a reality? What could change along the way?
Planning and forecasting go hand in hand with strategy. It quantifies the resources needed at each stage of the intended strategic development so that they can be in place to help the business grow. It provides clear indicators of performance for those strategic milestones. It offers carefully considered options to reach the same goal in a different way, responding to market conditions with the ultimate goal always in mind.
Sounds simple, right? So why does this not happen every time? And why is this commandment at the forefront when we consider good planning and forecasting?
The challenge of linking plans and strategy
There are several things that can go wrong in the mission to attach coherent plans to a business strategy. Communication is high on the list, along with company culture and the standing of the finance function.
Communication is the glue that holds plans and strategies together. Every operational unit strives to reach the organization’s goal, but without good communication across all functions (not just between FP&A and the C-suite), they will all pull in different directions.
The sales pipeline may be full, but if production is under-resourced for a particular range of goods there are problems. Does the optimum product mix align with market needs? Both functions believe they are doing their best to fulfill the company’s strategic goals, but without good communication and constant feedback in planning and resourcing for the best joint strategy, neither will prevail.
How does the company view the finance department? A mature FP&A function has a seat at the highest table, an overview of the whole business, and the respect of its peers. An embryonic finance function that has not yet achieved the right level of business partnering may be siloed and focused on recording and reporting and processing paperwork. FP&A has a pivotal role to play in aligning strategy and plans in a holistic way and needs the trust of the C-suite to carry this out.
How can we start to overcome some of these challenges?
It all starts with effective business partnering. Successful enterprises have many moving parts and FP&A can balance the whole and support the C-suite plans for the future. This is important for businesses of any size in the current environment of constant change but is particularly critical for rapidly growing and evolving enterprises.
Whether growth is organic or by acquisition, FP&A is central to ensuring that the resources available line up with the strategic goals of the business. When external factors conspire to derail the plans, FP&A is ready with a new route that aligns with the overall strategy.
If the plans don’t align with the strategy, look to the state of business partnering. Build relationships that matter, focus on understanding each of the moving parts, and develop mutual trust and respect in order to deliver the best strategic plans for the business.
How have you overcome this challenge in your own career? Let us know in the comments.
This was the second article in my new series about the Ten Commandments of planning and forecasting. You can read the previous article(s) below.
While you await future articles why not read my previous series "Charting the course for a successful career in FP&A"? You can find all the articles below.
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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.
Can we trust the machine for financial planning and analysis??(the last article in my series "Planning (as we know it) is dead".
The secret sauce of FP&A transformation?(the last article in the series "FP&A Transformation Talks")
How Finance should use its seat at the table?(the last article in the series "The Unfair Advantage of Finance")
The ultimate guide to decision-making for finance professionals?(the last article in a series about the decision-making process and how Finance should impact it).
The Mindset Change Checklist For Finance Professionals?(the last article in a series about the mindset change that finance and accounting professionals should make to become business partners)
It's Time To Decide If You Want To Be A Business Partner?(the last article in a series about the personality traits of business partners)
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 into the WHY, WHAT, and HOW of business partnering by putting it on a formula)
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)
Anders Liu-Lindberg?is the co-founder and a partner at the?Business Partnering Institute?and the owner of the largest?group dedicated to Finance Business Partnering?on LinkedIn with more than 10,000 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 95,000+ followers and 160,000+ subscribers to my blog. I am also an advisory board member at?Born Capital?where I help identify and grow the next big thing in?#CFOTech.?Finally, I'm a member of the board of directors at?PACE - Profitability Analytics Center of Excellence?where I support the development of new analytics frameworks that can improve profitability in companies around the world.
Organisational Behavioural Consultant
2 年Anders Liu-Lindberg, Thank you! Great-Insight to micro detail.
Strategy Execution| Financial Literacy | Chief Executive Officer | Chief Financial Officer | Operational Focus | CPA | Data Driven | Learning all the time.
2 年Love these conversations. It starts with, what do you what to be when you grow up, aka, the vision, a moonshot. Then you walk your way from there to see what you need to do, the strategy, to get there. Then you plan.
Fintech | Global Head of Finance @Thunes #fundraising #startup #fintech #Controller #CFO #Thunes #makingmoneyflooow
2 年Thanks for such useful articles to constantly reminding us that as finance, we have to gain good communication skills which is important for orchestrating different BU and resources for an organization success !
DIRECTIVO FINANCIERO CON AMPLIA ENFOQUE OPERATIVO Gerente de Finanzas y Tesorería en CERRACO MEX SA DE CV
2 年Financial Planning and Analysis may be an excellent tool for achieving Excelssius Operational Strategy but require direction and a sense of pursuit that should come from the Strategy team in which the CFO and the CEO, together with the Steering committee members, play key roles, FP&A should provide foresight and insights in the environment that must be feedback with all the members of the C suites in order to take advantages of the opportunities and cooperative strengths and take care and reduce the possibility of risk and threats.
Making a positive difference with an obsessive focus on client development and growth
2 年Anders Liu-Lindberg While this is valuable information, what should be done in the area of both planning and forecasting when it looks like we might see some turbulence ahead? Any ideas as to what to tackle first? Looking ahead, any "do not do" advice? Much appreciated!