SWTCH by Pigment
Three days of predictions, insights, and advice from leaders in finance, sales, HR, supply chain and more
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SWTCH by Pigment
Three days of predictions, insights, and advice from leaders in finance, sales, HR, supply chain and more
Register now here
By Matt Poleski, CFO, Northeast and Mid-Atlantic Region at Arthur J. Gallagher & Co
One of my favorite sayings is – “if you say it enough times, it becomes true”. Within my organization, I’ve heard many sayings I know are simply not true that become believed. For example, I used to hear: “We added $80 million in revenue and have not added a single person to the support team”. Nobody disputed the statement, and multiple people were repeating it to demonstrate how hard we were working. The main point of the statement was correct – we had not added proportionate support resources relative to the increased revenue, but the numbers in the detail were wrong. There were 4 new positions added.
This article addresses how FP&A can present context to arguments using real numbers and preventing fake news from being repeated. In an era where FP&A professionals are pushed to be more “playmakers” than “scorekeepers”, keeping score fairly is critical to making sound business decisions and remains a tremendous value add.
Here are some examples when the narrative does not match the numbers.
The bias to focus on the numbers supporting one’s position is described by Robert Cialdini, in his book Pre-suasion. Cialdini describes what’s focal is causal, meaning that whatever is put squarely in the center for an audience to view is going to be believed to be important regardless of its true relevance. For example, we had a business manager who could not understand why his year over year growth was negative 5% when per his analysis, he hadn’t lost a single account. When we ran this year over year numbers, we showed him several accounts that he lost. His response was he has excluded the business he knew he lost from the prior year, and only included lost accounts we did not know about! Unfortunately, the known lost accounts were driving his year over year revenue decline.
FP&A provides solutions to the above problems. Our FP&A team works to get the numbers supporting the narrative correctly. Our FP&A structure is setup in and hub and spoke manner similar to what Richard Reinderhoff describes in another FP&A trends article. We have financial analysts in the field to work with business leaders and a centralized hub team to distribute reports and act as data scientists.
Here’s how we utilize that structure to get the calls right:
In conclusion, there is a lot of importance in getting the numbers right for decision making. Despite a recent push to have FP&A professionals move from scorekeepers to playmakers, the scorekeeper is actually an important position that requires a lot of judgment. The ability to interpret data based on business knowledge to see the pros and cons of upcoming decisions makes sure the data is presented fairly in a proper context.
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