Value dimensions
Financial value
Improving a company’s value through revenue generation, cost optimization and capital structure
From: a responsibility to be the reporting “scorekeeper” compiling budgets, forecasting, and conducting variance analysis
To: an expectation to answer the question “what will happen?” as opposed to “what happened?”
Why FP&A: FP&A is a champion of data-driven performance management for the enterprise and is positioned to effectively provide this foresight, enabled by timely and predictive insights. Consider the situation at one large construction and machinery manufacturer. Finance expanded its portfolio of innovative technology and processes to include blockchain, robotic process automation (RPA), artificial intelligence (AI), machine learning (ML) and chatbots. FP&A was able to reduce time and effort required to complete a forecast, cutting cost 60%. In addition, accuracy improved by 10%–12% due to the usage of ML, AI and business drivers.
Customer value
Designing, developing, and delivering products and services that meet customer or end-consumer needs, with an emphasis on innovation, trust and brand
From: a focus almost solely on internal data sources, with limited insight or analytics derived from external data sources
To: an elevated role in sensing the customer pulse through reports that integrate external data
Why FP&A: FP&A is highly skilled in integrating data across functions and time horizons to generate a consolidated plan. This is illustrated through FP&A’s leadership in Enterprise Business Planning (EBP), which aligns functional planning efforts with the overall strategic vision of the organization. EBP is an optimized, technology-driven planning framework where finance, supply chain and commercial collaborate to deliver one connected, unified plan on a rolling basis. This plan uses financial and nonfinancial metrics such as net promoter score and market share, to enable the organization to anticipate opportunities and understand vulnerabilities. FP&A uses customer demand signals as drivers of financial performance, providing near-real-time data insights that support responsive reallocation of resources to the products and services in highest demand. Through EBP, FP&A facilitates business partnership by distributing the best information to support management decisions.
People value
Creating value through the employment and development of people, with respect to culture, engagement, high-performing teams, leadership, expertise and skills
From: limited involvement in people value generation beyond the employment and development of finance team members
To: an enabling function that enhances and generates people value across internal and external stakeholder groups through deeper involvement in enterprise talent strategy
Why FP&A: FP&A is well versed in reporting and performance measurement, including integrating data such as capacity, capability, composition and cost associated with an organization’s workforce, to produce holistic performance packages. An example of FP&A’s role in people value can be seen through workforce planning, which is the process of analyzing, forecasting and planning workforce supply and demand to put the right people in place to fulfill strategic objectives. As part of this process, FP&A uses personnel costs as a driver to create linkages between strategic plan and measurement of outcomes. While HR teams own workforce planning, they do partner with FP&A to effectively analyze and plan for the needs of the organization regarding size, type, experience and knowledge of its workforce.
Societal value
Impacting a company from an environmental, regulatory, community and economic perspective
From: little to no involvement in societal value creation
To: a meaningful role in the reporting and accountability of the broader sustainability agenda
Why FP&A: FP&A is taking measures to define standards at the corporate level and provide the required cross-functional connectivity and accountability as these standards trickle into business units and profit centers. Consider the reporting of an organization’s environmental, social and governance (ESG) measures against stated goals. This topic is top of mind for CFOs as investors encourage strategies that use ESG measures to inform diversity, equity and inclusion (DEI) initiatives and more responsible and sustainable investments. While this trend is nascent and still evolving (due to not well defined ESG metrics, data that is not easily captured, and a process that is not repeatable), public companies are facing continued pressure from regulatory agencies and investors to increase transparency, consistency and disclosure of ESG information. Organizations rely on the chief sustainability officer (CSO) to lead this effort, with the finance function and FP&A teams involved to a moderate extent in the process of collecting, processing, reviewing and reporting on ESG data. Proactive FP&A teams are not only ready to incorporate ESG-related metrics into the planning process, but also to help hold all levels of the organization responsible for delivering on these defined metrics.
As expectations of the finance function continue to grow, delivering value across all four dimensions of the EY value framework will be imperative. FP&A is focusing on three levers to stay ahead of the curve.
