The document discusses how boards view enterprise performance management (EPM) from their perspective, emphasizing the importance of compliance, trust in accurate reporting, shareholder value creation, and maintaining realistic expectations. It highlights key board priorities such as timely reporting, growth, profitability, and a transparent narrative that aligns with the company's performance. Additionally, it outlines strategies for effectively communicating with boards, building credibility, and fostering collaboration across teams.

1. The Board View
What EPM Looks Like from the Board-Level
Dave Kellogg
Blogger, Independent Director, Consultant, Angel Investor, and closet FP&A Person
May 22, 2019
Revision 2.0

2. Alternative Title: Boards Just Wanna Have Fun

3. Shameless Blog Plug
• Startups
• Metrics
• SaaS / cloud
• Venture capital
• Leadership
• Silicon Valley
• Management
• And more …

4. What boards want
How boards think about …
How to give it to them
Agenda

5. Our Focus Today: One Question
How does everything we do look from the Board-level?
( A chance to step back and get above the trees)

6. What Do Boards Care About?

7. What Boards Really Care About
• Compliance
• Trust in the numbers
• Shareholder value creation
• Growth
• Profitability

8. Compliance and Trust
• The Foundation
• Reporting the right numbers to the right parties at the right time
• Having faith that the numbers in those reports are correct
• Audit is for financial reporting, not management reporting
• But certainly provides an indicator on how tight a ship is being run
• Board meeting slides and monthly board reports are the basic tests
• Getting stuff done on time is a huge tell-tale
• Late numbers = suspect numbers
• Late numbers = not really in control
• Establish and hit realistic expectations for when things wills be delivered

9. The Impact of One Bad Number
• Makes everything else suspect
• Rule 1: There is always at least one savant on every board
• Will find a bad number before CEO can finish saying
“Good Morning”
• Cockroach principle
• If you see one, you know there are 50 more hiding the
in walls
• Dangers of copy, paste, attach at 2:00 AM when one
change means 15 charts need to be updated
• What we do
• 8-eyes tests → replace with automation

10. A Private Equity Perspective
• Bad numbers are career-limiting for the CFO
• First strike: we all get concerned
• Second strike: we probably start a search
• Third strike: you’re out
• (Note: some don’t even believe in three strikes.)

11. More Subtle Type of “Bad Numbers”
• They don’t match the story = cognitive dissonance
• The words need to go with the music
• You say
• We are beating lead generation targets
• We had sufficient pipeline coverage at the start of the quarter
• That we have strong win and close rates
• That our sales cycle length has not increased
• Yet many deals slipped and few reps seem to be handling their opportunity capacity
• So why did we miss plan again and was week 3 forecast accuracy 68%?
• Is weak pipeline a cause or a symptom of the problem
• If we recognized pipeline was weak at the start, could we have done something
about it?

12. What The Board Doesn’t Want
Sunshine on a cloudy day Sunshine blown up their collective a**

13. Shareholder Value Creation
• A long-term financial model that creates value for shareholders
• Usually a combination of growth and profitability
• But some are more profit-focused than others – “I Love EBITDA”
• If they’re smart, a model that wins markets at the same
• It’s easy to go out of business beating expectations if expectations are to grow
at 50% of the market
• The fundamental tension: “make a plan that you can beat”
• Aggressive enough to create value and win markets
• Conservative enough that you can beat it 9 out of 10 quarters

14. Growth and Profitability
Growth
• Should be about market share and
winning markets
• The GE rule: be first, second, or exit
Profitability
• Should be about continuous
improvement and benchmarks
• Assumption is not be average /
benchmark on all things
• Strategy should dictate variations
• But when not strategic, convergence
to benchmark is the name of the game
• A debated, agreed-to long-term
financial model really helps here

15. What The Board Wants
Reality and what to do about it
• Realistic recognition of company strengths and challenges
• Logical, data-driven explanations that are consistent with numbers
• The story needs to hold together (i.e., lyrics and music)
• A sense of transparency and openness
• A sense of accountability – can’t have the same problems too many
consecutive quarters
• A positive tone that recognizes problems but focuses on solutions

16. What boards want
How boards think about …
How to give it to them
Agenda

17. Consolidation
• Frankly, unless they’re audit committee chair they probably don’t
worry about it that much

18. Forecasting
Are you in control of the business?
• Not be confused with are you growing the business?
• Or are you running the business efficiently?
• But, simply, are you in control of the business?
• Do you know where you are going to land and managing to it?

19. Two Dimensions of Business Performance

20. Planning
Can you accurately plan one year out?
• While converging to a long-term, benchmark-based financial model?
• Says nothing about market share gain or loss
• Determines a lot about executive and company compensation = top use
• If public, can you consistently beat-and-raise?
• Do you have smart system for rolling and revising the plan?
• Are you constantly increasing or decreasing the plan at mid-year?
• Does your plan hit financial goals by “forgetting” about next year?
• Is your plan strategy-driven, trended, or top-down spread?

21. Reporting
Can you tell us what’s going on?
• And, if you can’t, how are you flying the plane yourselves?
• Do you have the basics in place? Definitions, historical comparability,
meaningful presentation, …
• Have you chosen “everything” or a key set of the right metrics?
• Are those metrics key to the strategy and/or top operational challenges?
• Finance should keep handy way more metrics than they show
• Are you constantly changing your systems and definitions?
• If so, is it poor decision-making or deliberate continual obfuscation?
• Aside: I’ve never met a board member who’s afraid of a table of numbers
• (And I’ve met many who dislike complex visualizations.)

22. AI and Machine Learning
A little afraid of it, but want you experimenting
• Generally don’t understand the technology
• Generally dislike black boxes
• But want the company to leverage big data and data science, typically
via an expert team
• Want to see results of working with models, not explanations of them
• Don’t want to see the math
• (“I’ve never seen a board slide with an exponent before”)
• Worried about over-fitting and correlation/causation errors

23. Spurious Correlations, I

24. Spurious Correlations, II

25. Spurious Correlations, III
• For more, see https://en.wikipedia.org/wiki/Correlation_does_not_imply_causation
• Or https://www.tylervigen.com/spurious-correlations

26. What boards want
How boards think about …
How to give it to them
Agenda

27. How To Give It To Them, #1
Build credibility by running a tight ship
• Monthly reports out like clockwork
• Board decks out consistently in advance
• No spreadsheets called “2019 plan, v2.5 final final final, r2”
• Numbers that always foot
• Numbers driven off databases (“how come he’s pulling from a
database and we’re always opening spreadsheets”)
• Clean audits / happy audit committee

28. How To Give It To Them, #2
Plan your work and work your plan
• Hit operating plan timeline milestones
• Never be in February without an approved plan
• Build realistic plans that you can beat
• Don’t plan to double headcount and constantly be behind (“cushion!”)
• Help the business figure out what they can and should sign up for
• Build in enough room that anticipatable “surprises” aren’t surprises
• Run the business off rolling forecasts – avoid the December cliff
• Think trajectory

29. How To Give It To Them, #3
Be a great partner to the business
• Most boards prefer finance-as-partner to finance-as-police
• Want to see collaboration across the team
• Forecasts and plans are more accurate where there is such collaboration
• Don’t be “Doctor No,” instead be “Doctor How”
• Offer your opinions, but respect their accountability
• Goes from the CFO/CEO relationship on down throughout the organization

30. How To Give It To Them, #4
Bring insights beyond just bringing data
• If you spend every minute simply producing the data, you have no
time to analyze it
• The CEO/CFO shouldn’t be “sight reading” slides in board meetings
• Make time to review what you’ve created from analytical perspective
• Empower the CFO with those insights for review meetings and
rehearsals

31. Keeping the A in FP&A
Partner with data science and operations teams
• Is FP&A the “if it can be answered in Excel, we can answer it” dept?
• Other functions are increasingly providing reporting & analysis
• Operations (“ops”) teams are taking on some traditional FP&A duties
• Data science teams are bringing analytical tools and techniques to bear
• To remain a trusted business partner, we need to
• To embrace these teams as partners – take a ops person to lunch!
• To understand how they work – read a book or take a course on data science!
• Try (and it’s hard) Data Science for Business by Provost and Fawcett
• Let me know how it goes

32. Conclusions
• Boards love numbers
• Never let anyone tell you otherwise
• Boards see the work of FP&A indirectly
• Boards draw conclusions from the basic quality and timeliness of that work
• Boards demand absolute confidence in the numbers
• You are your metrics
• Boards can tell if you’re focused based on the metrics you track
• Boards can tell what you care about by the metrics you track
• Boards know it’s the teams’ job to run the company
• And the board’s job to determine who runs the team