In a recent meeting of the Washington, DC Financial Planning & Analysis Board, regional thought leaders met to discuss opportunities for improvements and share ideas. The group had representatives from many industries including entertainment, life sciences and not surprisingly, government. Despite varied backgrounds there seemed to be similar challenges:
Alignment across the organization
Identifying value to the business
Expanding employee comfort zone to embrace change
The suggested option to address these challenges was to implement Extended Planning & Analysis or xP&A. xP&A is more than a solution label - it is a journey. The journey is to extend planning beyond the traditional offices of finance. Finance has been taking summarized input from functional departments for years, but it is hard to collaborate on a spreadsheet.
One directional communication has been adequate until now but the world started evolving too quickly to live on just an annual plan. Being agile requires creating plans that are dynamic and can adjust as market demands evolve or costs increase. A key component to dynamic planning is multi-directional communication between finance and all the departments to create a unified vision.
Mohawk Industries, based in Calhoun, Georgia in the United States, worked with Macrospect to implement xP&A across the enterprise. This collaboration allowed them to improve planning accuracy which freed up capital to invest in more high performing projects. It also increased their efficiency by transforming allocating 80% of their time preparing plans and 20% analyzing to the inverse enabling 80% of their time conducting business improvement analysis. - Macrospect Helps Textile Giant Be More Profitable with a New SAC Planning & Analytics Foundation
It seems logical that collaboration across the enterprise would be helpful. We have proof points of quantifiable business benefits. So why isn’t everyone doing it? The short answer is moving to full xP&A is not easy. The facilitator of the Washington, DC FP&A Board suggested breaking down the journey in consumable tasks. First assess where your organization is now and identify manageable steps that offer the highest return on investment.
To further elaborate, the facilitator shared a maturity model identifying the evolution of basic level performing companies up to advanced organizations. The model identified characteristics of the leadership team, functional groups, processes as well as data & analytics.
Leaders in optimal organizations have implemented fully aligned plans that address strategic & operational issues. These companies typically think long range, are analytic based and look to promote change. They have empowered multi-disciplined teams to work across all departments. The objective of this team is to optimize integrated processes that have the highest potential return over the next several years.
Analytics and data were found in all facets of the leading organizations. Multi-dimensional analysis was key to mapping potential scenarios and what the best course of action would be for each contingency. Automated forecasting and AI/ML capabilities to determine the probability of shifting market demands also had high impact to results. The best performers empowered finance & business professionals with self service analytics to make them more productive thus increasing efficiencies.
Another example of a company that implemented a collaborative plan across the enterprise was Roche based in Basel Switzerland. Roche developed plans that facilitated communication between the departments and tightly integrated with their ERP systems. This combination enabled them to improve forecast accuracy 7% and reduce preparation time from weeks to hours. - Roche: Advancing medicine by optimizing financial forecasting with predictive planning
Consensus at the end of the evening was a more collaborative, tightly integrated planning process was beneficial. The question moved from why to implement xP&A to how to get started. The answer – one step at a time.