To prepare for increasing demand for business decision-making support, FP&A needs to review its business partnering model.
When the business landscape is foggy, FP&A shines. Facing a period of economic and market volatility, FP&A leaders are preparing to provide more hands-on support to the business: A recent survey of NeuGroup’s Mega-Cap and Large-Cap FP&A peer groups showed that 100% of members anticipate (or are already sensing) a rise in demand for help from business leaders.
- Operational leaders are going to ask a lot more questions about how a recession will impact the bottom line. That impact will vary by line of business, so it’s essential that FP&A runs multiple scenario analyses.
- It also means FP&A will need to provide faster, better and more forward-looking insights to enable management to make smart business decisions about head count, cost reduction and investments.
Partnering best practices. Ensuring an effective partnering model is critical in today’s environment. A productive collaboration underlies “FP&A’s ability to help the company understand the challenges it’s facing and where it needs to pivot,” one member said. In group conversations and several in-session polls, NeuGroup identified three critical business partnering success factors:
- Dedicated partners. While finance organizations frequently talk about the importance of business partnering, not everyone is walking the walk. One way to gauge the true level of engagement is to see whether the function has full-time staff devoted to partnering with business units and other SG&A functions.
- A poll taken during a July 27th joint meeting of the FP&A groups revealed that 100% of respondents have dedicated business partners. By making business partnering a full-time job, FP&A can leverage its “intellect, horsepower and knowledge all across the board,” one member said. “If it’s a part-time job, it just doesn’t work because it gets less attention and doesn’t build the right level of credibility within the business,” said Nilly Essaides, NeuGroup’s managing director of research and insight.
- A clear engagement model. The other best practice is establishing a formalized interaction model between the business and its finance partners. NeuGroup research shows that most members have institutionalized collaboration between business and finance: 40% reported it is highly formalized.
- “You have to establish a process if you want there to be communication between and the business and the finance organization. ” Ms. Essaides said. This may include incorporating an FP&A review of all business cases, establishing a regular cadence of meetings, and ensuring there is an FP&A rep at all strategy meetings.
- Sometimes, the collaboration can start with a joint project. A recent cross-functional initiative to improve data visibility brought another member’s FP&A team closer together with other SG&A functions, which he said has increased the broader financial acumen of business partners.
- Support from the top. Successful collaboration with the business and other functions helps to provide a complete view of enterprise performance to the CEO. But for this to work, it’s crucial that FP&A is viewed as a strategic partner by leadership from the start.
- “Our CFO and CEO see how finance is strategic,” one member said. “It’s hard to force yourself in [to business conversations] if operational leaders don’t want you in.” That is why strong buy-in from senior management is critical.
An added bonus. Effective collaboration between finance and the business is not only the best way to deliver FP&A expertise, but also a way to develop and retain FP&A talent. Because employees in these roles have an immediate impact on business decisions, they enjoy their work. “These roles have broad benefits and high job satisfaction,” said one member. “It’s not just number crunching; it’s a more strategic partnership, and it helps keep these employees engaged,” she said. “Partnering is the beauty of it all.”