A planning approach fit for the next normal
Anders Liu-Lindberg
Leading advisor to senior Finance and FP&A leaders on creating impact through business partnering | Interim | VP Finance | Business Finance
This is the newsletter "Here's the Future of FP&A and Business Partnering" which has more than 30,000 subscribers. You can subscribe as well to receive new articles straight in your inbox every Monday and the occasional Saturday.
Do you want to get notified whenever I post on LinkedIn? Then go to my profile and click the small bell icon below the front page banner on the right-hand side.
To follow my entrepreneur journey you can over to my Instagram account.
If you want shorter snippets of the future of finance and accounting then check out my Twitter account.
Where does the new paradigm for planning take us?
We have learned the lessons of the Art of War and understand the holistic journey towards our corporate goals. We need planning, good data, flexibility in decision making, communication skills, and an understanding of our strengths and weaknesses and those of our competitors and our partners.
We have examined different trends and preferences for planning, from traditional budgeting through rolling forecasts to the deep detail and nuance of activity-based costing and drivers of value. From these we can draw out three common threads, three pillars of a planning approach fit for the next normal.
Planning in all its forms relies upon historic records, real-time strategic tracking, and predictive analytics. Whatever approach we take to planning, we must know where we have been, where we want to go, and how we can get there. Let’s look at these in more detail.
The three pillars of planning
In actuals we trust. Our historic records show us what has been achieved with which resources in the past. From these, we can create trends of past performance to prove whether we have the capabilities for executing our future choices. There is, however, an important caveat. Data collection, the gathering of those historic records, must be well structured and granular to reveal accurate trends, reduce bias, and enable agile and flexible decision-making. Consider this when compiling your historic records, the first pillar of planning.
What makes your strategy a good strategy? Identify the key assumptions that would have to be true in order to follow an achievable path to success. What are the critical data points for growth that have to be tracked over the noise of the day-to-day running of the business? Build a real-time tracking regime around those key assumptions. Whenever reality moves too far away from the assumptions it should trigger an action planning conversation. Real-time strategic tracking is the second pillar of planning, helping you to react with agility to changes in the operating environment.
The third pillar is predictive analytics. Whatever people sometimes think, a crystal ball is not part of FP&A’s essential equipment. Take advantage of the advances in technology and let the machine take the strain. If you’ve been diligent in collecting structured, disaggregated, granular data on past performance and current conditions, machine learning and AI can support you with the best possible predictions. If too big of a gap emerges between these and your strategic expectations, this should also trigger an action planning conversation to close the gap and challenge your strategic thinking.
Implementing the Three Pillars of Planning
How can you establish these three pillars of planning in your company? Developing your planning approach for the next normal relies on cross-functional cooperation for data gathering and interpretation, clear thinking on the key assumptions of corporate strategy, and harnessing new technologies to support and enhance FP&A delivery.
We need to break through the cultural norms of long budget cycles and heavy paperwork to focus on strategy and flexibility. Resources should not be entirely focused on the five-year plan and iterative forecasts, but instead freed to manage real-time strategic tracking and agile action planning, and to gather data for future decision making.
This is a planning approach fit for the next normal. Where will it take you, and how will you implement it? Let us know your experience in the comments.
This was the fifth article in the series "Planning as we know it is dead". You can read the previous articles in the series below.
While you await future articles why not read our latest series "FP&A Transformation Talks" below.
Recommended by LinkedIn
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.
How Finance should use its seat at the table (the last article in a series about 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 on 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 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 70,000+ followers and 150,000+ 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.
Finance Business Partner | Writer | Geek
2yGreat article Anders! Thanks for sharing
Helping Finance Managers of ‘busy’ SMEs improve profits | Turnaround 'busy' loss-makers | Improve profits of the already profitable | A proven step-by-step process | 90-day projects | Training & Coaching throughout |
2yMaybe just one addition to the formulae?: "we must know where we have been", | where we are now |, "where we want to go, and how we can get there"