Architecting Tomorrow’s FP&A Dream Team with Glenn Snyder

Glenn Snyder: My name is Glenn Snyder, and we are talking about how to architect tomorrow's FP& A dream team. So this is my background. I can go through. It's really quick because Rowan and Chris already covered some of this, but basically I have 18 years of experience in FP&A and eight years in corporate strategy at companies like Franklin Templeton, Visa, Charles Schwab, and Digital Realty. But let's dive into the agenda. So we're going to start off by talking really about what the role of FP& A is to make sure everyone's got a good grounded foundation. We're going to talk about the core functions of FP& A, and how an FP& A team should really look and be structured. Then we're going to go into the philosophy of FP& A, and then talk about how do you build and grow your FP& A organization. And finally, how do you continue to make that impact? But as we get started, I want to start with a quote. And this is actually my all time favorite quote from guy you've probably heard of named Albert Einstein. He said," Imagination is more important than knowledge." And this is really important for FP& A because it's not just about what you know and what the report says. It's about how you can take the information and apply it in ways that's never been done before, so that you can really solve those business problems that haven't happened yet. And you can make that bigger impact on the organization. So to me, imagination being more important than knowledge is really something that hits home in FP& A. So let's talk about FP& A. What is the role of FP& A? FP&A, and I apologize for reading this to you, but I think it's actually an important line here. FP& A is a centralized analysis and reporting team that works as a liaison between business units and finance to provide insights and understanding that enhances decision- making across the organization. So that's really what we're about. We're not about producing a budget. We're not about producing a monthly report with a budget variance. We're not about doing a business case. It's about enhancing decisions because that's what we influence. That's what FP& A is really there for. So when we talk about the evolution of FP& A. Well, when you start out and you don't really have an FP& A team, the whole focus is on really those core functions, that reporting and budgeting. Okay, now let's say you've got that down. You've got your regular monthly reports. You've got your budget process. You even maybe have a forecast process in there. Now how do you build and grow? The next place is to really get into the underlying data, those drivers and metrics of the financial data. And you tell the story of what has happened. Once you get through the storytelling, now it's about enhancing that partnership with the business to get to that point that we call a thought partner. Now, some people may have heard of this term. Others may not. So let me go through this. A thought partner is someone who says," You know what? I'm head of marketing or head of operations. I have an idea. I want to go and vet my idea, so I'm going to reach out to my finance business partner, and I want to get their thoughts on it." That's really what that thought partner is. It's that trusted advisor that executives and other business leaders can go to and say," I want to bounce an idea off you. I value your opinion." When you've reached that stage in FP& A, you're now the gold standard. So let's back up a little bit, and let's talk about the core functions of FP& A. There's really four main functions that I break it down to on this slide. FP& A does analysis. It does reporting, budgeting forecasting, and if anybody out there in the audience can think of a better word for knowledge, I don't know how to say FP& A does knowledge. It sounds a little weird, but FP& A does knowledge. The best I've got. So open to ideas for that one. When we talk about analysis, this is at the core. This is the A in FP& A. It's the internal and external data. It could be around acquisitions, financing, cashflow, headcount, revenues, expenses, whatever it is, we're analysts at heart. Give us data, we love to analyze it. On the reporting side, well, you get the data in FP& A, you've got to be able to send it back out to the business leaders so that they understand where they are. That's in monthly reporting, budget variance reporting, but it's also ELT or executive leadership team and portfolio level reports. This way people can see the bigger picture. Budgeting and forecasting. This covers a lot of different things. Everything from quarterly forecast, could be monthly forecasts. I've even heard of companies doing weekly forecasts. Various scenarios, annual budgets, long- term forecast covering debt, covenants, whatever it happens to be. You have to go over and say," Here we are today. We need to get to this point. We need to know where we are six months from now, a year from now, two years, five years, whatever it is." Budgeting and forecasting. And then finally this knowledge, this one that's a little more ambiguous. This is really about FP& A understanding not just the organization that you're a part of. It's not just understanding who to go to in legal and IT and HR, but it's also about what's the marketplace that you're in. What's going on? FP& A is that one area of finance that you have to have one foot looking outside the business itself at the market that you're in and one foot firmly grounded in the company. And that knowledge is very important. We're going to talk about how that knowledge is used when we talk about the FP& A corporate structure, which is right here. So there are three main functions in an FP&A team. The finance business partner function. These are those liaisons with the business leaders. This is your monthly budget variance reports that are going to be producing that ad hoc analysis, budgeting, forecasting, going and do all of that stuff, project analysis. This finance business partner role is really that direct contact with the actual people outside of the corporate finance area, meaning marketing, operations, sales, whatever. The middle group, consolidation and revenue. Now I know there are a lot of people out there with an accounting background and they think, hold on, wait, wait. Consolidations? No, no, that's accounting. I'm not talking about accounting close consolidation. I'm talking about bringing data together at a company-wide level. Often what happens... I'm going to divert here a little bit and tell you a little story. I was at a company. I'll keep the name of the company out of it, but they decentralized, I should say, their FP&A team. And each FP&A team went out and they did their revenue and expense forecasts. And what happened was when they pulled everything back together, you got 400% of the company revenue and 50% of the company expenses. I'm sure some of you out there could probably relate to that. So this consolidation of revenue team says," Okay, we're not going to be double counting or triple or quadruple counting revenue. We are going to focus on revenue all in one place and get inputs from the different areas. And then we're also going to be that liaison with the executive level to show the big picture of the company." But this team also will do things like driving the budget calendar or the annual finance calendar to let people know when are you going to do a forecast? When are you going to be doing the budget? When do reports come out? Those types of things to really manage that big overall picture for the company. The final one over here is really the group that would be interacting with companies like Planful. This is your FP&A systems, but it's not just about the system that you work on. It's managing the hierarchy, making sure you have the right template set up. It's making sure the data is connecting in the right way so that your FP& A team could do the proper analysis. It also helps with the back end function of designing models to make sure that you're using the data in the right way and defining it in the right way so you get the best results. But let's dig into this a little deeper. Your finance business partner function. On the left, you see all the business lines that you would have in a company. Most of them, sometimes you could have more. You have the finance specific partner functions sitting in the middle, and then you have those corporate functions to the right. This finance business partner role isn't just about, hey, we've got the budgets. We've got to do budget variance reports. We've got a project we've got to work on. But you're also that connection. This is where that knowledge piece comes in. If you're the Chief Marketing Officer, you may not know who to go to in HR or accounting or treasury if you have a question. But you know your finance business partner. You should be able to go straight to that business partner, and that business partner should know everybody in the corporate side and know exactly who to take that to. At the same time, if you're working with an accountant, who's trying to explain a variance of what's going on in the business, they should be able to come to you, and you should be able to go back to your business partner and get a better detailed explanation to explain the right story. So this finance business partner role is really that liaison between the corporate side of the business and the more forward facing or client and revenue driving side of the business. Now, our second group here is this consolidations of revenue team. So you can see that they sit in the middle, but they are the ones who are interacting directly with executives, with the FP& A systems team, and with the finance business partner team. And what are they doing? They're producing the executive dashboards. They're talking about the calendars and the big picture that they're working with the executives on. They're working with the FP& A systems team on making sure that the templates are set up in the right way. The calendar is going to be driven, that the FP& A systems knows when certain things have to happen. And then they're also going to be engaging with the finance business partners because they're the ones who are getting the knowledge and the data from the business that moves into those higher level dashboards. So this consolidations and revenue team really sits at the top, working directly with those executives, but pulling in the data from all the other teams. And finally here you have your FP& A systems team. This group not only works with the rest of FP& A, but also with the IT area and the data governance council. This is really important to make sure that the data is being defined correctly, that if you have a client with a client ID number in Salesforce in one place, that same ID and the same exact name is also what's in the general ledger and in your Planful system or whatever other system you may be using. That FP& A systems team has to make sure the data connects and flows properly. Otherwise your FP& A team is going to have a really hard time doing their analysis. Okay, so now we've talked about the structure of the team. Let's talk about what FP& A is really about. How do you approach FP& A? What's the philosophy for FP& A? Well, most people think about the core functions, standard reporting, requests from business units. The thing is, most of what you're doing is looking backwards. And this is very much reactive. I mean, think about your FP& A group today. How much are you driving versus some people asking you and you're reacting to what they are doing? But if you went out and you asked a business leader, what do you want from FP& A? Well, they're going to say," I want you to tell me where I'm going, but I haven't gotten there yet. If I have two options, option A or option B, which one's better? What's the impact? And tell me about the things that I'm not thinking about because you finance business partner are going to come from a perspective that I may not understand." So that's really what they're looking for. And so that means in order to be a high performing FP& A team, your FP& A team has to be proactive, and you have to spend more time doing those ad hoc projects than you are doing the standardized reporting and expected functions. So as we come into thinking about what this really means, I think about a pie. And this is going to be a little hard for me to interact with the audience here, so I want you guys to try and play along with me, if you will. If I was to ask you to bake a piece of pie, what kind of pie do you think about? What's your favorite type of pie? So I've asked this question to many audiences. I've heard apple pie, chocolate cream, coconut cream pie, blueberry, strawberry rhubarb, usually get somebody who says pizza pie, or maybe a Shepherd's pie. All of these pies are fantastic by themselves, but if you were to take a piece of those pies and put it all together, I don't know about you, but the middle of that's pretty disgusting. I don't want to be touching that. But this is what business leaders have to go through every single day because when they think about their pie, they're looking at data from the external market, from product, sales, clients, personnel, although it says person up there on the slide, sorry about that, revenues, and expenses. They're trying to piece all of these things together. And if they're coming from different places with different definitions, how can a business leader really tell the story? This is the next evolution of FP& A. It's about taking those different data points from all over the business. Grant talked about it this morning on the keynote. Taking all those business metrics and bringing them together to tell a complete story. So let's go through a quick example. You want to connect the dots to tell the whole story, so here we go. Incentive compensation is 10% over budget at Bob's TV Shop. Now being a finance person, my first thought is this is not a good thing. We're spending too much money on incentive comp, but what's the real story? Well, Best Buy raised their prices. That's what's going on in the external market. Bob happened to advertise 10% off Toshiba LCD TVs, which is your product. What did that do? It drove more customers through the door, which is your client's. Because of that, Bob's TV Shop sold more TVs and home theater systems. And because all sales personnel are paid on commission, you've now explained why your commission is over budget. But it's not a bad story, it's a great story. So telling the story using all the different data elements really goes over and makes sure that you're telling the right story and not just that one piece of information, because oftentimes that one piece of information, without the full context, can be very misleading. And remember, our whole philosophy in FP& A is to enhance business decisions. And if you're not providing that full context in the proper story, you could end up making the wrong decision. So in FP& A, you have to focus more than just doing financial analysis. You have to focus on telling the right story. Okay, so now you've got your FP& A group, but you've got demand. You've got a lot of things going on. How do you build and grow your FP&A team that will work well for the company and the environment that you're in? So here are a couple of do's and don'ts. One, I always liked the idea of creating a multi- year strategy. This is really important. Make sure that you know where you are and where you need to be in 2, 3, 5 years down the road and what needs to be accomplished in each of the years to get to that longer- term goal. But when you have that multi- year strategy, it's also important to share that not just within finance, but with all your business partners to make sure everybody's moving in the right direction. What you don't want to do is think short term because you might say," Hey, I've got a lot of demand coming out of this group. They've got this project that's going on. We need to go and hire someone new people." What happens when the project ends? Now you'll have excess people in your group. What do you do with them? Firing people and getting a room, that's not a good story. So you've got to make sure that you're thinking more long- term rather than short- term. Another thing that you want to do is leverage technology. I mean, come on, we're here at a Planful conference. We're all talking about technology today. This is critical because technology is a great way to scale. When you make your investment, you can build and grow your business without necessarily investing more. But if you are investing purely in people and having people do all the work that technology can do, you're going to need to keep hiring more and more people because of the expanded workload. So the other thing that you don't want to do though, is anticipate demand. This is really important. Don't think, hey, I know what I'm doing. I'm a great FP& A person. I need five people on my team. I only have demand today for two, but I need five because that's my long- term goal. If you do that, you are taking resources away from other areas of the company. And you're going to have people in FP& A trying to figure what can they do? And that's not good optics for the finance group, and oftentimes it could cost leaders their job. So you want to make sure that you have the demand in place before you hire, rather than anticipate that demand. And then you want to expand only when you have that demand. If you create excess supply, you're going to have a lot of people looking at the business saying," Hey, wait a second. I can't do my marketing campaign, but FP& A went over and hired three more people that don't really seem to be doing anything." That's just not a discussion you're going to want to have with your CFO. So make sure you're not creating that excess supply. And you're really working on the demand that is already in place. The other thing that I want to make sure you don't do is expand in a vacuum. This is really important. If you are going to say," Hey, I need another person to support the marketing team." Make sure that Chief Marketing Officer is behind that investment because they're the ones who are getting the support. Make sure that they're doing the work that will add value because they may that Chief Marketing Officer may come back to you and say," Hey, you know what? I'd like your team to be doing these things instead of these other things." You could stop doing those and that frees up the resources you don't necessarily need to hire. So these are all things that you need to think about. And finance has to remember we don't drive the revenue of the company. We don't expand market share. And so really FP& A is that support group. So you've got to make sure you're not taking those resources when you're growing away from the organizations that are really helping to build and grow the business. So here are some best practices. We talked about there's head count growth and there's technology. When do you want to do each? First of all, let's talk about head count. Head count, you want to grow when something is needed that is high touch, that can't be automated. It's analysis over production. You also don't want to do projects. You don't want to hire someone for a project. Even if it's a long- term project, it's probably better to use a contractor if you need a person rather than hiring a full- time employee. Ideally best way to do this is you've built and grown your team and enhance their skills, and you promote from within and backfill at that lower level. This is not only a good practice to save money for the company, but it creates that environment of growth that people really feel like they could have a long- term career in your FP& A group. And the other thing that you should really think about is focus on those innate skills, not the things that can be taught, meaning you can't teach someone to be a quick learner or be creative or pick up systems very well. But you can teach people how to communicate well with a business partner, how to do a budget, and how to build a model. So really focus on those things that you can't teach and teach the things that you can. On the technology side, really, this is all about automating as much as you can. Because the more you can automate, the more time your people are spending doing things that the system can't do and less time doing the things that the system can. Leverage your technology to build scale. Very important. Don't just solve for that immediate need, and this is really important. When you're investing in technology, you're going to have some immediate demands that you have to solve. But remember that long- term strategy. Think about where you're going to be because you don't want to build a system that solves today's issues, but doesn't solve what's going to happen tomorrow. And finally, technology takes time. Recognize that when you were making an investment in technology, it is going to take three months, six months to go through and put your technology together. You don't turn this around in a week or two, so make sure you have the proper time to invest. My last slide here on the content is really to talk about making that continuous impact. FP& A is a group that has to keep evolving and growing with the business. This is important. If you are stagnant and you keep doing the same reports and the same analysis over and over, you're missing the boat. You're not helping those business leaders build and grow and achieve their goals. So a few things to keep in mind. Over communicate rather than under. Even if you're not sure where that right line is, err on the side of over- communicating because the more you share with people, the more informed they're going to be and the better decisions they can make. Secondly, success is about a team. No one has ever succeeded by themselves. You always succeed because of the people around you who support you. So make sure that you are recognizing those team members, and you engage with those team members to show them how much you appreciate them. Failure, however, can be done by one person. And a good leader will recognize that and own the failures rather than point fingers at somebody else. Solve the questions that are not being asked, but validate whether or not they're worth solving. This is something actually, I talked to my teams about all the time. If you're writing up an analysis, and there's a natural question that that is out there and you're not answering it, why are you going to wait for the business partner to ask the question? Answer it. Be proactive. Solve those questions that are not necessarily being asked but add value. And if you're not sure if it adds value, you think maybe I'm writing too much in my analysis or my presentations can be a little too long, talk to your teammates. Talk to your business partners. Run it by them and make sure that you're driving those results that are going to have the best impact on the business. Not just, hey, look at all the analysis, the multiple pages that I've written. Develop the solutions for tomorrow, not yesterday. This goes back to that longer term vision. Make sure that you're staying on track and that everybody's on board. Don't just wait and say," Oh, well this was a big problem last year. Let's make sure we solve that." Yes, that's important. But you've got to recognize, are we going to have that same problem this year? And so you really have to think about what the problem is that you're solving and make sure that you're solving a problem that's not just about what happened before, but it's something that's going to recur in the future. And finally, don't be afraid to invite others in. This really comes back to that teamwork aspect. But if you're going to build and grow an organization, talk to your business partners. Talk to the accounting team and the HR team and the other people who are around you, who you rely on to do what you do. Invite them into the discussion, share with them what your vision is, and get their input because maybe you make a little tweak and it makes a bigger impact on other organizations. So those are the slides I was going to go through with you today. But I want to close on a particular quote, one that actually I was lucky enough to hear from one of my old business partners. When I was at Charles Schwab, Lisa Hunt, who was the Executive Vice- President there, she was telling my boss about me. And she said," I want my FP& A partner at the table with me when I'm making decisions." And being an FP& A person, I can't think of a better compliment. And that's really what we're striving for.