The document outlines plans to improve the FP&A (financial planning and analysis) function over the next year at a company. It discusses assessing the current state, including issues with strategic planning, budgeting, forecasting, and performance reviews. The goals for FP&A are to continually improve processes and systems, provide better visibility and understanding of business performance and strategies, and become a more valued partner to the business. The year 1 strategy focuses on beginning to improve capabilities, creating visibility into drivers and KPIs, partnering with business leaders, and supporting strategy tracking.

1. FP&A Operating Model
Business Planning & Analysis 2011
October 21, 2011
Jim Robertson
© 2011 James A. Robertson, Jr.

2. Agenda
FP&A Design Considerations
Case #1 : Creating an FP&A Function
Case #2: Driving FP&A Towards World Class
Making It Happen
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3. FP&A Has an Almost Unlimited Reach
Strategic Planning/Execution New Business Support
• Coordinating/leading the process • Pricing analysis
• Developing business plans to achieve strategic objectives • Sales administration
• Modeling financial outcomes of strategic initiatives • Contract review
• Identifying KPI’s which link to the strategy • Business cases
– KPI Tracking and Reporting • Product development modeling
– Identifying initiatives driving KPI’s and linking to budgets
Financial Planning API Between Data and Information
• Annual Planning – driver based
• Single and multi-quarter forecasting
• Tools, methodologies, templates Managing/Coordinating/Reporting Business Performance
• Monthly/Quarterly/Annual Business Reviews
Financial Analysis • Investor Relations Support
• Return on Investment – e.g. projects, IT, marketing • Reporting/analysis packages for internal and external
• Profitability analysis – market, customer, product, business customers
• Variance analysis
• Capital expenditures Compensation
• Incentive compensation design/measurement for annual
Other Areas and long term plans
• MA& support – due diligence, integration planning • Sales compensation plans and administration
• Product development modeling
How do you decide your priorities?

4. FP&A Design Considerations
Company Processes and Systems
• External • What is currently working/not working well
• Industry Maturity • How strong is IT group
• Competitiveness • Availability of and access to transactional and
• Smart or Dumb Competitors operational data
• Rate of Change • ERP
• Customers • Planning software
• Customer needs • Current reporting in place
• Products
• Technology
• Ownership structure and FP&A Team
expectations • Current Team
• Internal • Strengths, weaknesses
• Where is company in its life cycle • Ability/Interest to stretch/grow
• How do leaders make decisions • Organization
• Approach to accountability • Where does FP&A report
• Like/Dislike of process • Centralized/Decentralized
• Where are pain points • Relationship with Accounting
• How predictable is the business

5. There Will Be Some Pain Involved!

6. Plan for FP&A!
• Every Enterprise is unique
•There is no one way to get from
to
• What is certain is that you will not end up where you wanted to be how you
thought you would get there.
•Need to flex and adjust during the voyage
“Which road do I take?"
"Where do you want to go?"
"I don't know," Alice answered.
"Then, said the cat, it doesn't matter.”
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7. Agenda
FP&A Design Considerations
Case #1 : Creating an FP&A Function
Case #2: Driving FP&A Towards World Class
Making It Happen
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8. Assessment - 1
• Strategic Plan
– Developed March – June
• Lots of thought, people below leadership team not clear how they contribute to the
company’s
• Leadership team has not seen the strategy, which makes alignment difficult
• No process in place to cascade strategy through the company or measure performance
against the strategy.
• Annual Plan
– Developed July – September
• Finalized 3 months after Strategic Plan with major variances.
• Result of negotiation and ultimately “these are your numbers.”
– Linkages to strategic plan are inconsistent.
– Minimal focus on how corporate supports the businesses.
• No feedback loops between corporate support and businesses after first submission.
• Forecasts
– Provided monthly to the end of the current quarter.
– Limited accountability for changing/missing forecast.
– Focus is “are you going to make your number.” Limited visibility into forecast internal or
external drivers of financial results.
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9. Assessment - 2
• Monthly Operating Reviews
– Happen 3-4 weeks after prior month, focus on “what happened” vs. Plan.
– Lack of emphasis on applying lessons learned or discussion of where business is heading.
– No discussion of corporate support performance.
• Compensation
– Incentive compensation paid based on hitting plan numbers.
• FP&A Team
– One new dedicated resource, primarily overlay function on Finance & Accounting Team.
• FP&A Processes
– Some standard assumptions provided but not required.
– How plan is put together is up to each group to decide.
– Focus on consolidation and rollup, not analysis.
• FP&A Systems
– Intensely manual, Excel only.
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10. Internal Perceptions
We lack of information about where we are
And…
We have almost no visibility into the future
So we don’t discuss the future. Instead…
We focus on what’s happened
The situation is compounded by the fact that…
We don’t communicate well
And…
Our current process and structure adds little value:
As a result…
PEOPLE WANT HELP
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11. External Perceptions - 2
•“The budgeting process at most companies has to be the most ineffective practice in management. It sucks
the energy, time, fun, and big dreams out of an organization. It hides opportunity and stunts growth. It
brings out the most unproductive behaviors in an organization, from sandbagging to settling for mediocrity.
Most companies use budgeting as the backbone of their management systems. And the right budgeting
process can actually change how a company functions – and reinventing the annual ritual makes winning so
much easier, you just can’t afford not to try.”
Jack Welch, Winning
“If a train wreck happens, it’s interesting to go back and report why it happened. The key, though, is to try to
do things that avoid the train wreck altogether. This is where the real (finance) value is: anticipating how the
environment is going to change and making sure the business is properly positioned.”
Gary Crittendon, CFO Citigroup (also Sears Roebuck, Monsanto, American Express)
•“Planning ought to help run the business, to inform, to focus on longer term strategic business opportunities,
how to forecast and achieve objectives -- not how to meet an annual plan done 6 months ago.”
Steve Player, Director, Beyond Budgeting Round Table
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12. FP&A Mission and Goals
FP&A Mission
Help the company become the world’s leading provider of electrical and communications
services and systems through effective financial and business planning, resource allocation
and management of business performance, both short term and long term.
Key Goals (1-3 years)
• Continually improve FP&A team, processes, and systems towards world class
performance.
• Enable a better understanding of where the business is heading
• Become a valued business partner.
• Help company become more strategy focused by better linking and reporting
business and financial plans to strategic goals
• Ensure that resource allocation is driven by strategy and optimizes performance
across the entire business portfolio.
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13. FP&A Year 1 Strategy
• Begin to improve FP&A capabilities
• Identify operational drivers/KPI’s and create visibility into the
future
• Become a valued business partner with the group VP’s and
corporate functional leaders
• Support the business in tracking execution of strategy
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14. FP&A Year 1 Strategy
• Begin to improve our FP&A capabilities
– Recruit the team
– Build relationships
– Create forecasting tools using Excel
– Define the future vision for FP&A (process, tools, integration into broader mgmt. processes)
– Begin to execute the vision
• Identify operational drivers/KPI’s and create visibility into the future
– Understand business performance and impact on financials
– Identify key operational drivers/KPI’s
• External
• Internal
– Implement prototype, manual dashboards to be automated after KPIs are validated
– Integrate KPI’s into the planning, forecasting, and MOR process
• Become a valued business partner with the group VP’s and corporate functional leaders
– Provide insightful and actionable business analysis
• Work with groups to help identify opportunities for revenue growth and cost savings
– Create processes which speed up decision making (Flawless Execution – Plan/Brief/Execute/Debrief)
• Redesign reporting (board, MOR, monthly package) to be more forward looking, insightful, and action-oriented
– Knowledge Management: Get data to the people who need it in a timely and efficient way
• KPI’s and financial information
• Benchmarking, economy, market, competitor trends
– Help other corporate teams achieve their 09 objectives
• Support the business in tracking execution of strategy
– Clarify and translate the strategy into operational terms so that strategic objectives are clear and precise enough to be
understood, communicated, executed against and measured.
– Provide “early warning” on the successes and failures of IES’ strategy.
• Create quarterly strategic reviews
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15. FP&A Organization
CFO
VP FP&A CAO
VP, Finance &Accounting
Group VP
Manager, Business Analysis
Commercial VP, Finance
Open
Group VP
Manager, Business Analysis
Industrial & Residential VP, Finance
Open
Group VP
Manager, Corporate Planning
Key VP, Finance
Open General Mgr
Financial Analyst, Business Analysis Sr. Financial Analyst, Corp. Planning
Director, Finance
Filled Open
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16. Agenda
FP&A Design Considerations
Case #1 : Creating an FP&A Function
Case #2: Driving FP&A Towards World Class
Making It Happen
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17. Assessment - 1
– Clearly defined strategy, operating objectives,
– Clearly defined BU objectives
– Established driver-based financial planning and forecast process
– Gaps exist:
• Corporate targets based on Wall Street expectations
– No ability to know whether the company is committing right resources to the
right investment opportunities
• BU targets based on run rates
– Lack quantitative basis to allocate resources between BU’s
• No direct linkage between BU objectives and financial plans
• No business planning process
– No executive visibility to programs/projects
– No roll up, consolidation of programs/projects
– How do you know proposed programs/projects support the strategy and fit
the budget
• Lack of a Performance Management System to track non-financial plans to actuals
• BU’s currently investing in processes and systems that are not scalable
– Will drive redundant capital and operating expenses
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– Ability to manage projects varies widely across the company and within BU’s

18. Assessment - 2
What are the factors impacting What must we do in the future to address these
the company today/near future? factors successfully?
 Develop the “right” strategy and then clearly define and
communicate it to the organization
• Growth imperative • Corporate-wide measures which define success
• Integrated business planning
• Business diversification
 Have the right financial & business intelligence
• “One version of the truth”
• Increasingly complex business/strategy • Relevant & timely information
• Common decision support tools
• Need for continued leverage from the
business model  Integrate the business and leverage synergies
• Common business language
• Integrated business planning
• Execution risk • Standards and business rules
• Business process focus
• Increased competitive penalties for lack • Accountability model
of cross-business integration
 Execute the strategy effectively
• Expanding definition and requirements • Allocate resources to the right things
of business controls and corporate • Link operations and financial performance
governance (business risk) • Tightly manage performance against our strategic goals
• Effectively and efficiently implement program and projects
• Implement the strategy with any organization structure
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19. Corporate Planning & Performance
Management Mission and Goals
Organizational Mission …
Enable the company to achieve its strategic and business goals through effective business planning, strategic
resource allocation and management of business performance
Key Operating Principles & Goals (1-3 years) …
 Enable the company to become more strategy driven by better linking operational planning, budgeting and
performance management to the company’s strategic goals
 Broaden the definition of business performance beyond near-term financial results vs. plan
 Longer term, ensure that accountabilities and incentives are effectively linked to strategic goal
performance
 Ensure that company financial resource allocation (capital, operating expense) is driven by company
strategy and optimizes corporate performance across the entire portfolio of business/organizational units
 Institute processes, information and tools to encourage business integration, collaboration and
synergies
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20. Corporate Planning & Performance Management Process - “To-Be” Future View
Strategic Planning Business Planning
Environmental Business Plan
Scan Addendums
(August-September) • Operating model
Strategic Plan Business Plans Gap Closing
Business Plans (October)
(3 year) (3 year) (3 year)
(July) Business Plans
(3 year)
(3 year)
• Financials
External
• Strategic Goals •Performance Measure Targets
Expectations
• Financials Today • BU Goals
• BU Level Initiatives • BU Financials Budget
•Corporate Strategies •BU Level Initiatives With Resources (1 year by month)
• Corp. Performance Targets (VPM measures) • BU Performance Targets (VPM measures)
• Strategic Resource Allocation
Performance (October/
Monthly Reporting
Executive Report Card November)
Package/Binder
Strategy Session (April-May)
•Actual vs. plan, plan vs. plan
• Performance Measures (VPM)
VPM Reports • Financials
• Issues for Decision
Corporate Rolling Forecast
Operating
Business Update (4 quarters
(April, July, Reviews
(Quarterly) by quarter) (April, July, October)
October)
•State of the Business • BU by BU (April, July, Oct.) • First 2 Quarters - detailed
• Key Decisions • Agenda: • Last 2 Quarters - higher level
-Corporate Performance Report Card
- BU Management Summary
Exists today, minor or no changes required Performance -BU Performance Review
- BU Initiative Review
Exists today, some changes required
New activity
Management - BU Financial Review
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21. Corporate Planning & Performance Management Process - “To-Be” Future View
Strategic Planning
Environmental
Business
Scan Planning
Strategic Plan
(3 year)
(July)
Recommended Improvements …
External Refine the company strategy to further clarify company strategic goals and
• Strategic Goals define how these goals will be achieved (specific initiatives, performance
Expectations
• Financials Today goals, timing, capabilities required, accountabilities, etc.)
• BU Level Initiatives
•Corporate Strategies Establish corporate targets and accountability for VPM strategic performance
• Corp. Performance Targets (VPM measures) measures linked to company strategic goals
• Strategic Resource Allocation
Perform a high-level financial resource allocation/commitment to strategic
priorities over the planning period
Executive
(April-May)
Strategy Session What Do We Get?
Further clarification of company strategic goals and how these goals will be achieved
 Strategic performance goals & timing
 Performance targets for strategic measures
 Capabilities required
 Corporate strategies to achieve strategic goals
Performance  Clearer accountabilities for strategy execution
 Strategic resource allocation
Management
What Is the Business Benefit?
Strategy is further “translated” and “operationalized”
 Better ability to monitor strategy execution
Exists today, minor or no changes required
 Cross-company accountability for achievement of the strategic goals
Exists today, some changes required
New activity
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22. Corporate Planning & Performance Management – Functional Organization
Senior Vice President
Corporate Planning &
Performance Management
Planning (+1 FTE) Finance & Business (+2 FTEs?) Performance (+2 FTEs)
Intelligence Management
Business
Business Performance
Management
Modeling Management
Systems
• Model Development, • Systems Requirements • VPM Administration
Maintenance & Integration • Systems Strategy • Business Analysis
• System Maintenance/Upgrades • Performance Review Process
(TM1, Hyperion, VPM, VBIS, • Business Rules & Standards
Project Mgt., Profitability)
Planning & Program
Reporting
Forecasting Management
•Reporting Standards • Project Management
• Planning Process
• Common Business Language Processes and Tools
• Budget Administration
• Standardized Reporting
Business
Capital
Process
Management
Excellence
• Capital Program Administration • Business Process Improvement
• Business Case Review/Approval • Best Practice Benchmarking

23. Agenda
FP&A Design Considerations
Case #1 : Creating an FP&A Function
Case #2: Driving FP&A Towards World Class
Making It Happen
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24. D x V x S x A > Resistance to Change
• Dissatisfaction with Status Quo
– Burning issue helps
• Vision of Future State
– Somebody has to know what a better world looks like and how to move an organization there
– Right tools and processes in the right place at the right time
• Status of 1st Steps towards change
– Something has started
• Ability to Change
– Planning Team - process and change management skills
– Planning group as the vanguard of the revolutionary movement
• Make it look evolutionary, not revolutionary
• Incognito if needed
– Company – how used is it to change?
– Top Mgmt support – great if it’s there, but you can structure an approach which includes
winning their confidence by demonstrating how planning helps makes better decisions.
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25. Concluding Thoughts
• Organizing Theme: Planning helps people make better decisions – at all levels of an
organization
• Integrated process makes sure nothing (well, as little as possible) falls between the
cracks
– Strategic Plan (3+ years) Business Plan (1 year) Budget (1 year)
• Focusing upstream drives simplicity downstream
– Eliminate multiple budget iterations which strip away ownership and linkages
• Tools can help, but introducing or using a tool at the wrong time will wreak havoc
• The world is not your oyster
– Understand scope of influence and ability to change
• Plan for planning, continue to adapt to changing situations
• jarobertson2@gmail.com
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