FBP - Series 2, Post 2: Sustainable Growth through Collaborative Financial Planning
II. Collaborative Planning as a Catalyst for Growth, Post 2. Sustainable Growth through Collaborative Financial Planning
Another two weeks have passed. Moving from stakeholder engagement to why and how to go about collaborative I’ve relied again to some of my favourite books (e.g. Thinking in Systems) as well as some recent podcasts (e.g. Breaking Down Annual Planning with CJ Gustafson of Mostly Metrics) to combine a narrative that I hope is helpful to understand how collaborative planning provides the foundation of sustainable growth in the business.
The structure of the FBP series that we’re close to concluding:
I. Strategic Alignment through Finance Business Partnering
The Evolving Role of Finance (9 October 2023)
https://www.roosimagi.com/p/fbp-series-1-post-1-the-evolving
Collaborative Tools and Strategies for Finance Business Partnering (20 October 2023) https://www.roosimagi.com/p/fbp-series-1-post-2-collaborative
Strategic Implications of Finance Business Partnering (3 November 2023)
https://www.roosimagi.com/p/fbp-series-1-post-3-strategic-implications
II. Collaborative Planning as a Catalyst for Growth
Stakeholder Engagement in Vision and Strategy Alignment
https://www.roosimagi.com/p/fbp-series-2-post-1-stakeholder-engagement
Sustainable Growth through Collaborative Financial Planning (today)
Being Directionally Correct: Navigating Business Constraints (15 December 2023)
Introduction
Collaborative financial planning is one of the cornerstones for sustainable growth. Finance business partners are expected to step out of their traditional controlling functions to a more forward looking strategic role. It's worth repeating that the job is no longer crunching numbers; it's about layering real insights on your technical fundamentals through understanding the business and stepping out of servicing to a real partner role.
Collaborative financial planning is in essence about bringing together diverse perspectives and expertise. Here finance professionals work alongside or are embedded into various departments, understanding their needs, challenges, and aspirations, and integrating these insights into a cohesive financial picture. To be a partner, you need to understand when you need to focus on operational efficiency and when on capital allocation and to distinguish what is realistic, you need to know the business. By approaching financial planning from collaboration perspective, we ensure that the outcomes are both robust and comprehensive (that we like in finance), but also that they resonate with and support the overall strategic objectives of the organization.
One of the challenges I’ll try to shed some light on is the need to make your work (models, financial plans) scalable and adaptable. Both when your organizations evolve as well as when the uncertainties are high, our setup needs to enable adapting the financial projections to accommodate new scenarios and challenges as well as ensuring that the core fundamentals can survive when business finds opportunities to scale up. This is where the concept of scalable finance processes, as highlighted by Russ Jones, former CFO of Shopify, was of interest. In his insights shared during the podcast "Turning Finance into a True Strategic Business Partner," Jones emphasizes the importance of developing finance processes that are not only efficient and effective but also scalable to support business growth without becoming a bottleneck.
This need for scalability is mirrored also by Anders Liu-Lindberg in the podcast “Finance 5.0 - Becoming Human Again in a Fearful Age of Tech.” Liu-Lindberg approaches the planning from a more operational perspective stressing the importance of breaking down large projects into smaller, manageable segments, allowing for quicker delivery and sustained traction. We need to keep financial planning remains agile and responsive to the changing needs of the business by not making the process a monster that we lose control of.
Bringing in again systems thinking (see also previous posts), as discussed in Donella Meadows' "Thinking in Systems," the concept provides a valuable framework for finance professionals both understand the interconnected nature of business operations. This perspective enables finance professionals to see beyond the immediate as well as how our own processes are systems of their own with emergent complexities that need to be reigned in.
Role of Scalable Finance Processes
Scalability in finance is a fundamental for both ensuring business growth in general (ability to process the transactions) as well as ensuring that planning processes do not break down when organization becomes ever more complex. Russ Jones, former CFO of Shopify, underscored this in "Turning Finance into a True Strategic Business Partner," stating from his experience the need for finance professionals to take on a role of mini-CFOs (i.e. ownership of the performance of the area they support) as well as think how efficient their processes are to be the relevant partners that business expects:
Takeaway from the podcast: Thinking of oneself in FP&A as the CFO and mini CFO of the CEO of marketing can change the perception of an FP&A person and expand their thinking on improving software efficiency and delivering information faster and with more insights.
FP&A professionals need to keep in mind a strategic, holistic perspective, a mindset. We are expected to use our financial expertise for the benefit of broader business success, even to support areas such as sales and marketing, not just look at the general ledger.
Scalability does involve creating frameworks that can handle increased complexity without proportional increases in costs or resources (or time). This is achieved through thinking of algorithms, automation in every step by leveraging technological capabilities so that finance teams can focus on strategic activities.
Additionally, scalable finance processes mean being able to integrate new business models/areas/ventures swiftly into the existing finance architecture. This could involve thinking in modular terms, knowing what API based thinking can mean, balancing best of class single purpose software with what larger ERPs can provide. However, scalability is not just about technological prowess, it’s also about developing a culture within the finance team that embraces change and continuous learning. I’ve heard that nobody likes change, but it seems that change is all we have, so we can do nothing other than work with it, not against it.
Jones also highlighted the importance of providing the “so what” and “now what”, i.e. not to get caught up in being happy to have achieved a good "what” given that finance professionals need to move from providing the data to highlighting the actual business insights and proposing areas for improvement. FP&A professionals are expected to (and if not expected, need to make themselves) move beyond surface-level data presentation or even “knowledge” presentation to actionable insights based on the strategic direction the company is in.
Bringing in some ideas from a book I recently read, "Effortless" by Greg McKeown, the role of scalable finance processes can be about simplification to enable the growth. Scalable processes should be designed to make finance management easier and more intuitive, allowing us to focus on what truly matters. And we will find out what truly matters when we have the time to lift our heads from the manual work we are happy to do to “fight the fires”. By automating the processes, we can reduce the cognitive load and through this make it easier for us to manage also the increased workloads without getting overwhelmed.
In short, we need to have scalable finance processes to ensure sustainable growth. To achieve this we need both a scalable and adaptable finance tech stack as well as a culture that takes changes as a given.
The Role of a Finance Business Partner in Collaborative Planning
Finance Business Partnering (FBP) is at the core of collaborative planning. There is no need to add one more layer between FP&A and business, but FBP as a mindset is needed. FBPs need to be the translators of financial concepts and fundamentals to business. They translate financial insights into actionable steps through fostering a collaboration and creating a shared understanding. There’s always decisions to be made on operational efficiency and capital allocation. To make these decisions, shared understanding and collaboration are needed.
A great FBP possesses a deep understanding of both the financial and operational aspects of the business. This dual focus enables them to provide valuable insights that drive strategic decisions. These professionals are not just number crunchers; they are interpreters and strategists who can see the bigger picture and understand how business decisions impact the overall financial performance.
CJ Gustafson's approach to annual financial planning as taken from the recent Role Forward podcast episode “Breaking Down Annual Planning with CJ Gustafson of Mostly Metrics” illustrates how Finance Business Partners (FBP) can foster collaboration. As Gustafson outlines,
It usually starts out the CEO and the CFO upfront... then you're going to work with the department leaders for input.
This approach shows how FBPs translate business realities into financial outcomes and actionable insights. It's about moving beyond the ledger to engage, understand, and influence various business areas.
Gustafson's practice of building cross-departmental consensus and alignment is core to the concepts of collaborative planning. He emphasizes the importance of understanding each department's unique challenges and aspirations:
It's about getting into the business and asking questions, then listening to what people will tell you about the business.
This approach ensures relevant financial planning outcomes that are aligned with the business realities and strategic objectives of each business unit, thus creating a unified direction for the organization.
The effectiveness of an FBP in collaborative planning depends on their ability to communicate complex financial information in a clear and accessible manner. Whether it’s about storytelling or being able to understand the needs of their stakeholders, we come back to the ability to bring out the 'so what' and 'now what' – guiding the business through the implications of financial data and recommending actionable steps.
In line with the insights from "Turning Finance into a True Strategic Business Partner" with Russ Jones, FBPs should challenge themselves and their colleagues to delve deeper. This repeats the sentiment from previous section, but I find the concept and mindset something that needs to be repeated again and again. Understanding the “why” behind business outcomes will lead to revelations that shape more effective strategies. And then from the “why” we can get to the “so what”s and “now what”s. Taking this leap may be as far from traditional finance scope as analyzing the quality of leads in marketing so that we can find ways how to materially impact sales performance for a better financial outcome.
Whether we price our products or services in one or another way or what payment terms we offer to the customers all impact what kind of cash runway we have. Only when we collaborate and have a shared understanding can business make the decisions that improve the key metrics of the company in a sustainable way. As FBPs we need to make sure that the business activities driving growth create sustainable cash flows, as focusing on the wrong metrics or on wrong tactics may ultimately create a larger cash flow hole than what the company can survive. Finance needs to be there to enable business to grow in a sustainable way and not only count the beans and be the numbers’ police that business doesn’t believe in.
Moreover, FBPs play a crucial role in implementing and overseeing collaborative financial planning tools and processes. These tools facilitate effective communication and data sharing across departments, ensuring that everyone works towards common goals with a unified understanding of financial implications. We need to have the same easy to use tools to ensure that we discuss real business scenarios and implications as opposed to arguing most of the time about whose numbers are more correct or who has understood the definitions in one or another way. FBPs need to build up and implement the solutions that foster collaboration and make sure that the solutions are easy to use for business so that they see the gain of not maintaining any manual workarounds that they may have become accustomed to.
Bringing in also the “effortless” approach, as advocated by Greg McKeown, one can see how FBPs can enhance collaborative planning by focusing on clear, simple communication and to eliminate unnecessary complexities. FBPs should aim to make finance related concepts easily understandable and relatable for non-financial stakeholders by having transparent tooling/reporting as well as focusing on what is essential for the stakeholders. This approach should foster better collaboration and understanding between departments. FBPs should step above the details that they are comfortable with and adopt a minimalistic approach in their analyses and presentations, focusing on the most impactful data and insights. It’s not easy to distinguish what is most impactful unless you have taken the time to understand the business and what is important for your stakeholders.
In conclusion, the role of a Finance Business Partner in collaborative planning is fundamental to the success of modern businesses. By combining financial expertise with strategic acumen and effective communication, FBPs can drive meaningful changes, aligning financial planning and guide business activities for sustainable growth.
Tools and Techniques for Collaborative Planning
The effectiveness of collaborative planning largely depends on the tools and techniques utilized to facilitate communication, data sharing, and thus creating a shared information space.
Modern finance teams leverage a variety of tools to enhance collaborative planning. This is a conscious decision. For example, there is a muryad of modern cloud-based financial planning and analysis (FP&A) tools available. These tools offer near real-time data access, multi-user collaboration, and integrated forecasting capabilities. Excel model-versioning hell of v116_final_final_sent is something that we need to let go of. We feel that we are more in control when we can micromanage the smallest details, but we lose accuracy and relevance when we focus only on being precise. No model is precise, as models are only representations, not reality. And any forecast in nature can be precise. Relevant, yes, but quoting George Box from 1978:
All models are wrong, but some are useful.
It’s time to believe in what was said almost 50 years ago and make finance “modern”. Ok, back to the topic at hand.
Modern tooling allow different departments to input data, view the results and outcomes of their provided inputs, and share insights in a centralized location. This fosters transparency and collective understanding of financial implications. When business does not need to wait 5 days for a model rerun, they can understand better what is changing what and through short feedback loops, iterate their thinking. It’s a different world completely when one can go through 40 iterations as opposed to knowing that any idea will take a week to test and all new ideas will only prolong the planning cycle.
Modern data analytics tools enable (e.g. Power BI + copilot; yes, Microsoft can be cutting edge…) finance teams to delve deeper into data from multiple angles, uncovering easily trends and patterns that it’s hard to understand when relying only on your spreadsheets. To utilize the capacity that the modern tools have, finance business partners need to have high data literacy in order to be self-reliant in connecting the tools to the relevant data source, automate the flows and know what different options of even handling missing data may mean for your analytical outcomes. I personally have not understood yet how to utilize predictive analytics in FP&A context, but I hope this remarks ages like milk.
Finance will need to be proficient also in collaborative project management software, a skill and expectation that is not part of the regular finance curriculum. We need to learn from our IT or BI counterparties on how to be agile (not Agile or SAFE, maybe) in the sense of making the processes transparent and open to fast feedback loops through accountability, ensuring transparent progress tracking, dependency mapping, sending friendly automated reminders to stakeholders that have not provided their inputs as fast as some others etc. The tooling will ensure that everyone in the financial planning process is on the same page, working towards known timelines and objectives.
Aside from tooling, techniques or approaches such as regular cross-departmental meetings, scenario planning will make the planning process truly collaborative. Ongoing communication ensures alignment. The meetings will enable discussing what the financial plans really mean, what are the practical decision-making point around resource allocation, who will need what capacity to fulfil their plans, where any assumptions seem to create unexpected outcomes. Scenario planning isn’t perhaps the easiest concept when fundamentals from tooling or data maturity are not in place. However, scenario planning can reveal what business decisions increase or decrease the chances of success and what do the worst case scenarios possibly mean for the company and how to be ready to survive these for sustainable long term growth.
Incorporating the “effortless” concept now also into the tools and techniques used for collaborative financial planning means choosing solutions that simplify and clarify rather than complicate. Easier said than done, including that what normal finance person would admit that their intricate and nuanced financial model is complicating things unnecessarily? Regardless, we in finance need to select tools that offer a seamless user experience, automate mundane tasks and provide clear, actionable insights. We need to be open to giving away 20% of the control in order to gain 5x rewards. When we can take the balance of 80% modelling, 20% discussions to 20/80, we do provide more value to business than managing the intricacies we used to love. The tooling of course cannot be the legacy ERP that takes 5 years to implement with the help of consultants, it needs to be something that finance professionals themselves are able to set up and maintain.
In conclusion, the combination of advanced tools and collaboration techniques is key to successful collaborative financial planning. Finance teams can work cohesively with other departments when they have more than a hammer (think Excel) in their toolbox both from modelling tooling as well as collaborative tooling in place.
Integration of Systems Thinking in Financial Planning
In the same way, as in the last post, I want to highlight how systems thinking is fundamental to finance professionals who want to have a strategic role to play. Systems thinking enables us to see beyond the individual components/inputs/metrics of the business and understand how they interconnect and influence one another. Based on concepts in "Thinking in Systems" by Donella Meadows, systems thinking encourages finance teams to identify patterns and relationships, leading to more insightful and impactful financial planning.
Systems thinking means viewing the organization as a complex system. It involves understanding how different business units interact, how external factors impact internal processes, and how changes in one area can ripple through the entire organization. By this we can anticipate and model the potential impacts of business decisions, ensuring that we can show business how their activities result in different possible outcomes.
Moreover, systems thinking assists in identifying leverage points within the organization. These are areas where small changes can lead to significant improvements in performance or efficiency. Business cannot on their own come up with the financial connections, it’s something that finance business partners need to take on as their role. By focusing on these points, FBPs can show the “what now”’s and propose without anybody asking from us what changes in strategy or tactics can yield material and sustainable benefits.
CJ Gustafson's approach as outlined in the Role Forward podcast episode to aligning financial planning with other business functions like R&D and marketing shows the power of systems thinking in finance.
You're trying to figure out what field we're going to play next year's game on and then work with department leaders to validate what you wanted to wrap your arms around is doable.
This statement encapsulates the essence of systems thinking - understanding the interconnectedness of different business areas and their impact on financial planning.
By viewing the organization as an interconnected system, Gustafson illustrates how changes in one department move across the entire business. His approach of aligning resources and objectives across various functions is all about a more holistic and sustainable growth. This is systems thinking in action -finance is not a standalone function but an integral part of the larger organizational mechanism, driving strategic alignment.
Systems thinking also aids in navigating the complexities of modern business environments. Systems thinking means also being conscious of and managing the complexity, knowing when it’s time to allow for added complexity and when we might be starting to lose control of it. Adaptability and understanding how systems work is crucial for finance to be able to play a role in maintaining the organization's competitive edge and ensuring long-term sustainability.
The Role of Checklists in Financial Planning for Effortless Collaboration
The use of checklists in financial planning, inspired by "The Checklist Manifesto" by Atul Gawande and complemented by principles from Greg McKeown's "Effortless," is a useful concept also in financial planning. Checklists, viewed as algorithms, simplify complex financial processes and significantly streamline collaboration for Finance Business Partners (FBPs). Aside from the regular automation or checklist-based validation controls, I bet it’s easier for finance professionals to use checklists for the “soft” skills. By this I mean to be able to take into account the needs of their less-technical or less-finance-savvy counterparties through algorithms rather than trying to conjure their economic intelligence capacities every time from scratch (naturally).
Algorithmic checklists to foster effortless communication can provide a structured approach to interacting with various departments, ensuring that all necessary information is conveyed clearly and systematically tailored to the understanding of your stakeholders. Checklists can act as a communication framework, detailing key points to be discussed, questions to be asked, and insights to be shared. Such checklists, when ensured to prepare for the meetings (including setting the agendas) ensure that collaboration is productive and smooth for all involved.
An example of a communication-focused checklist for FBPs setting up a meeting may include:
Context Setting: Briefly outline the purpose of the meeting or discussion.
Data Sharing: Share relevant data and insights.
Key Questions: List the questions to discuss the challenges at hand.
Strategic Alignment: Discuss how the current plans align with organizational objectives.
Feedback and Insights: Encourage feedback on financial plans and provide strategic financial advice. When feedback is not asked, it is usually not shared or just the loudest voices have a say.
Next Steps and Follow-Ups: Define actions to be taken post-discussion. And then make sure you followup.
By employing such checklists, FBPs can ensure that their interactions are not only productive but also less burdensome for both themselves and their counterparts. Clarity may feel daunting as who is finance to demand accountability from business and stating the plan exposes you to critique on the plan (no plan means often no critique, just grumbling about business as usual).
To sum up, integrating checklists as algorithms for effortless communication into financial planning elevates the role of FBPs. Checklists simplify complex interactions, ensuring that financial outcomes are effectively discussed and stakeholders are aligned between themselves and with finance. Checklists can transform financial planning from cumbersome ordeals to clear, concise, and impactful interactions that contribute to the sustainable growth of the organization.
Training and Development for Collaborative Planning
Training and development play a crucial role in equipping finance professionals with the necessary skills and knowledge for effective collaborative planning. Setting up expectations on competences and iterating on these when the landscape evolves is key. As change is the only constant, continuous learning is key to staying relevant as a finance professional facilitating business growth.
For collaborative planning to be successful, finance teams need a strong foundation in various areas including financial analysis, data literacy, and strategic thinking. However, the need extends beyond these technical skills. Training programs should also focus on developing “soft” skills such as communication, negotiation, and leadership, which for finance professionals are likely harder than the “hard” skills. Paradoxes. Soft skills are essential to effectively engage stakeholders, understand their perspectives, and drive alignment across the organization.
One effective approach to training is having workshops that focus on specific aspects of collaborative planning. These sessions can cover the fundamental topics of advanced financial modeling, data analytics, visualization best practices, or how to conduct scenario planning. On the soft skills side, workshops can also be dedicated to improving interpersonal skills, such as effective communication techniques or strategies for influencing and persuading others.
Additionally, cross-departmental training sessions and even rotation can be highly beneficial. Maybe not even training, but working alongside / being embedded into the business side can be a tool to use. Business training sessions allow finance professionals to gain insights into the operations, take on another perspective and understand the challenges of different departments within the organization. Finance is said to have a 360 degree view of business, so understanding what we’re seeing is invaluable in aligning financial planning with the objectives and needs of the organization.
Aside from the workshops, organizations should encourage finance professionals to pursue continuous professional development through certifications and courses in relevant fields. Individual asynchronous learning remains an effective approach. Certifications allow for attaining common skills level and practices to ensure the fundamentals. Furthermore, certification bodies do strive to keep their programs up to date and relevant, including that CFA Institute has incorporate Python into the curriculum.
In conclusion, effective training and development with a consistent and structured approach are key to empowering finance professionals to be able to conduct collaborative planning. Changing expectations mean that without training noone is really sure what is expected of them and engaging in discussions around competences and training keeps the organization on the same page also regarding expectations on FBPs.
Conclusion
Concluding today’s thinking on "Sustainable Growth through Collaborative Financial Planning," I continue to believe that the modern finance professional's role is pivotal in enabling sustainable growth. As we move beyond traditional number crunching, the focus is on understanding how business decisions flow into financial outcomes and having scalable and adaptable planning processes that support this work.
Finance Business Partners (FBPs) are central to collaborative planning. They translate financial insights into actionable business strategies, balancing operational efficiency with capital allocation to meet organizational objectives. This transition from servicing to partnering includes the ability to go from the “what” to “so what” and “then what” based on understanding business needs, fostering a shared understanding, and aligning the business stakeholders behind a common strategy.
I come back again to systems thinking, which enables finance professionals to grasp feedback loops, managing complexity and the interconnected nature of business and finance. This holistic view aids in identifying areas for efficiency and strategic improvements, essential for sustainable growth.
Effective use of checklists, as inspired by "The Checklist Manifesto," streamlines not just financial modelling (validation rules), but also collaboration during the planning cycle. This systematic approach ensures clarity in financial planning and making the complex interactions more manageable.
We do not become good at collaborative planning without conscious efforts. Development of both technical and soft skills is needed. By having both the needed hard and soft skills in our toolkit, we can aligning financial planning with business strategy and drive sustainable growth. We can harness both our data-first skills, modern collaborative tech stack for real insights and aligned views across the business to discuss what really matters.
By engaging in collaborative planning we ensure sustainable growth of the companies we have decided to dedicate our work to.
A thank you and a reminder on the series structure. Looking forward to the concluding post!
I. Strategic Alignment through Finance Business Partnering
The Evolving Role of Finance (9 October 2023)
https://www.roosimagi.com/p/fbp-series-1-post-1-the-evolving
Collaborative Tools and Strategies for Finance Business Partnering (20 October 2023) https://www.roosimagi.com/p/fbp-series-1-post-2-collaborative
Strategic Implications of Finance Business Partnering (3 November 2023)
https://www.roosimagi.com/p/fbp-series-1-post-3-strategic-implications
II. Collaborative Planning as a Catalyst for Growth
Stakeholder Engagement in Vision and Strategy Alignment
https://www.roosimagi.com/p/fbp-series-2-post-1-stakeholder-engagement
Sustainable Growth through Collaborative Financial Planning (today)
Being Directionally Correct: Navigating Business Constraints (15 December 2023)