In corporate financial planning, is it the more the merrier?
According to Ben Lamorte, senior manager of customer excellence at Palo Alto, Calif.-based financial management software vendor Adaptive Planning, it is -- with the caveat that the various participants are involved to the right extent.
The overarching takeaway from Lamorte's session, "Three Ways to Drive Better Planning Across Your Business" at the Adaptive Planning Roadshow held in Boston last week, was that
While that's an admirable aim, the steps to achieve it aren't always obvious. Lamorte's three best practices broke down the strategy into smaller action items that can help finance leaders involve the right operations managers at the right times to drive more effective planning.
Get operations involved -- and excited to be
Lamorte said top-down and bottom-up corporate financial planning is often looked at as a dichotomy, "but the truth is, you need both." While top-level executives have a broader view of the organization, it's also necessary to include line of business leaders who see the day-to-day picture, he said.
But who should finance leaders recruit? Lamorte advised the audience to start by involving respected managers whose opinions have sway. He also said to make sure these managers are tech-savvy and comfortable with applications. "This is often overlooked," he said.
Training should be accessible and accomplishments -- even small ones -- should be praised to generate enthusiasm. "People don't like to feel dumb," he said. He also recommended organizations create training videos that managers can refer to as needed.
Construct driver-based plans with operations and collaborate on KPIs
Lamorte cited a statistic from Ventana Research to illustrate the current state of driver-based planning: Of companies with more than 100 employees, just 6% produce driver-based plans. However, Lamorte explained that this number doesn't include companies that build siloed driver-based plans at the department level, but only those producing an integrated plan, which is the optimum goal.
Models should be built with help from operational teams and "customized for different operators -- it's not one size fits all," Lamorte said.
But how should finance leaders ensure they're constructing actionable plans? "Before you build a model for [a department], ask them what decisions the model should inform. The operations people should be able to tell you," he said.
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This focus on target decisions will also help finance and operations to collaboratively define key performance indicators (KPIs). "People try to brainstorm KPIs; do not do that," Lamorte said. "I say brainstorm what decision you're trying to make." With the critical decisions in mind, KPIs will organically come into focus, he said.
But while Lamorte recommended starting with one department, "I'm not proud of you if you do [just] one" driver-based plan, he said. Instead, he stressed the importance of creating driver-based plans for all functions and integrating them to foster cross-departmental collaboration and form a consolidated, comprehensive plan.
To combat operations managers' perception that involvement in corporate financial planning is taking time away from their normal job duties, Lamorte said finance leaders should explicitly express the intention to act as a resource and strive to understand KPIs and reports already in use. He also encouraged the audience to enable operational managers to "plan the way they think" -- using inputs they are familiar with instead of general ledger codes native to finance.
Analytics for all
Lamorte's last tip was to give more people within the organization better access to analytics. As in corporate financial planning, operations managers should be involved with choosing metrics to track, he said.
To get started, he recommended finance leaders create sample dashboards to show operations managers in order to get feedback. However, they should display real instead of sample data, which Lamorte said helps to drum up interest.
The KPIs included on dashboards should be tailored by department and managers should be able to vote on which KPIs they'd like to see. Lamorte also suggested using industry-standard definitions for KPIs, which allows for benchmarking.
But Lamorte stressed the "key" part of key performance indicators. "Less is more in terms of KPIs," he said. "Don't have 25."
Lastly, he said finance should lead by example and should show operations managers dashboards and KPIs that the finance function uses to track its internal performance. "[Say] let me show you how we do this in finance," Lamorte said. "I'm not just the police."