The most important decision for top management is where the money goes. Capital allocation not only defines the money flow but also who will be spending it. Since many companies are threatened by disruption, intrapreneurship is now more important than ever. FP&A specialists can hold a key-position when it comes to facilitating the process of capital allocation.
Running a company, among other things, requires dealing with ambiguity. How this is done depends on the people – some are more open to embrace the challenges, while others prefer to continue with the past practices, thinking that the change is not going to last. The behavior is not exclusive to a specific industry, it is primarily to do with the management style of people leading the company.
Normally, integrating actuals into the planning cycle is not an easy task. Often financial and operating results are spread across multiple databases and actual results and plan detail are at different levels. All of this makes meaningful Performance Evaluation difficult.
In December 1999, Gartner introduced the concept of Corporate Performance Management (CPM), which they defined as the “... the processes, methodologies, metrics and systems used to monitor and manage an enterprise's business performance”.
A British retailer recently announced plans to close over a hundred stores. Could part of the problem be an FP&A group whose ideas are outdated? The responsibility of FP&A extends far beyond forecasting and reporting financial numbers, to providing advice and insights into managing, nurturing, protecting and growing intangible assets such as customer and brand loyalty, as though they were tangible assets.
I like to think of the various EPM/CPM methods as an analogy of musical instruments in an orchestra. An orchestra’s conductor seeks balance and guides the symphony composer’s fluctuations in harmony, rhythm and tone.