FP&A Innovation, Issue 3

ISSUE 3 | FINANCE

FP&A

INNOVATION

ISSUE 10 | AUGUST 2014

‘ the evolution of the cfo ‘

inside: the burgeoning relationship between the cfo and ceo

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LETTER FROM THE EDITOR Welcome to this issue of FP&A Innovation.

As you may have noticed, we have undergone a redesign since the last issue. We would love to hear your opinion on the new layouts and artwork that we have included.

In addition to this, we are going to be launching an FP&A Innovation website, allowing us to include more FP&A and finance related content. Follow @theiegroup and @ie_finance to keep up to date to when this will be released.

This issue of the magazine is predominantly revolving around the rise of the CFO as a strategic influence in the past decade. We talk to Peter Spinelli, the CFO of CFO publishing about his experiences and how his role has become progressively more strategy focussed. In addition to that we talk to Ian Charles, CFO at Host Analytics about his role in a growing business based in the heart of Silicon Valley.

We also look at the FP&A functions at Louisville Slugger to see how a century old company is updating for the

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21st century.

Tesco PLC is on of the biggest retailers in the world and we look at a recent presentation given by their Director or Finance, Carl Rogberg at a recent FP&A Innovation Summit.

Pasha Roberts talks us through predictive talent analytics and the impact that it can have on the FP&A function and Daniel Miller reports on the presentation given Dan Piries, Financial Director of the Asia Automotive Lighting Business at Philips.

As always, if you are interested in contributing or have any feedback on the magazine, please contact me at ghill@ theiegroup.com

Managing Editor: George Hill Assistant Editors Simon Barton Art Director: Joe Sanderson Cover Design: Chelsea Carpenter Advertising: Hannah Sturgess hsturgess@theiegroup.com

Contributors: Daniel Miller Harriet Connolly Pasha Roberts

George Hill Managing Editor

Wiliam Tubbs

Are you are looking to put your products in front of key decision makers?

General Enquiries:

For Advertising contact Hannah at hsturgess@theiegroup.com

ghill@theiegroup.com

2014

CONTENTS

8 FP&A AT PHILIPS We talk to Dan Piries about the FP&A function at Philips, and how he is playing a key role in Philip’s FP&A advancement.

11 AN INTERVIEW WITH IAN CHARLES Ian Charles, CFO at Host Analytics, shares his insights about the finance function at a company currently undergoing considerable growth.

4 THE EVOLUTION OF THE CHIEF FINANCE OFFICER We speak to Peter Spinelli, CFO at CFO Publishing about the evolution of the Chief Finance Officer.

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CALCULATING EMPLOYEE VALUE

FP&A AT LOUISVILLE SLUGGER

Employee churn is predicting who, when and why employees are leaving their positions. Pasha Roberts gives us her insights into how companies are going about it.

We look at legendary baseball brand, Louisville Slogger, and how their FP&A function is modernising in line with their innovative product line.

23 TESCO’S FP&A JOURNEY Tesco are one sof the biggest retailers in the world and we look at how they have redesigned their FP&A function to meet the demands of the modern day retail market.

THE EVOLUTION OF THE CHIEF FINANCE OFFICER Simon Barton | Assistant Editor

THE EVOLUTION OF THE CHIEF FINANCE OFFICER

The CFO role has been typecast as a typical ‘finance guy’ in the past few decades. They were not seen as an individual who’s likely to be central to strategic planning or a pro-active strategist, they crunched numbers, balanced the books and analysed the financial impact of a company after a move had been made.

Effectively, that was what ‘finance guys’ did, it’s just that the CFO was at the top of the pile.

This was my general perception of the CFO until a few of years ago. Numerous modules at business school gave me little reason to doubt the CFO profile that had been forged in my mind. It wasn’t until I started to look at the role in more detail that I came to the realisation that strategy and finance were like two sides of the same coin.

Nobody knows the strategic limitations of a company like the CFO, what it can afford to lose and what industry trends are likely to impact the financial stability of the company most readily.

The important distinction for anyone looking to grasp the evolution of the CFO is that where they were once reactive in nature their role is now proactive. In fact, the CFO should be working closely with

the CEO and CSO to guarantee that the state of the company’s finances are given the upmost attention when determining which strategic ventures to look into next.

We wanted to see what had changed, so Peter Spinelli, CFO at CFO Publishing, is the ideal person to give us his perspectives on the role’s evolution. A common theme throughout the work on the CFO looks in detail at the relationship between the CEO and the CFO and how it has changed. Pete was keen to back this up ‘The relationship between the CFO and the CEO has definitely evolved over the years, they work very closely together, versus the CFO being a financial partner and the CEO being an operational and strategic partner’. It’s now more of a support role to the CEO, an extension on the sales team and a strategic partner that looks at growth within the company.

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It’s not just the CEO that Peter works closely with, whether it’s the chief strategist or the head salesman, in Peter’s words, they’re like a ‘team’ - he says ‘it’s evolved into a team where everyone has the same goal - a strategic plan for growth and profitability’. This newfound team-working only really

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emerged in the late 1990s, then, all the departments were working separately and the CFO was purely a number cruncher. This ‘all-together’ approach has been the main platform for the CFOs newfound responsibilities.

The important distinction for anyone looking to grasp the evolution of the CFO is that where they were once reactive in nature their role is now proactive.

The proactive nature of the CFO was explained nicely by Peter ‘It’s not about saving money, it’s more about investments’. This reflects the need for the Finance department in general to add value beyond the confines of their department - this is in reaction to the upturn in the global economy. It was easy to understand why the CFO was a number cruncher when the organisation was in survival mode - now it’s not acceptable.

Peter’s pro-active role goes as far as looking at customer behaviour; ‘I know personally, I spend a lot of time from a strategic standpoint, understanding the customers

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and the relationship patterns that we see with them - it’s a pro-active role’. This insight was particularly interesting and a task that I didn’t necessarily think a CFO would undertake.

The main facet of the CFO’s role that has developed is to streamline processes to make the organisational workings easier and quicker for operations - Peter says; ‘It’s how we get information quicker to the people that need it so they can make conscious business decisions’. In the turbulent economic climate that many of us operate in, it’s increasingly about who gets there first, so streaming is clearly imperative to the successful running of any organisation.

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When discussing the evolution of the CFO, it’s easy to forget that the role adapts and changes depending on the market the company is focussed on. A CFO’s role in emerging markets like Africa

A CFOs role in emerging markets like Africa and South East Asia will be different from a CFO operating in mature markets like North America and Western Europe

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THE EVOLUTION OF THE CHIEF FINANCE OFFICER

and South East Asia will be different from a CFO operating in mature markets like North America and Western Europe.

In the emerging markets, the concentration of growth through innovation will not be so heavily required, because of this such the role will take on new responsibilities - clearly, when we look at the evolution of the role we shouldn’t be blind to this.

From speaking to Peter, any doubts that I once had about the extent of CFOs strategic responsibilities have now been quashed. Over the last 20 years it has evolved substantially and it’s pretty clear that they’re now the CEOs right hand man, a truly vital strategic role in the company.

CFO Rising Europe Drive the Performance of Your Finance Team September

17 & 18

London, 2014 Speakers include:

For more information contact Zain Yasin

+44 (207) 193 0569 zainyasin@cfo.com www.theinnovationenterprise.com/summits/cfo-london2014

FP&A AT

PHILIPS Daniel Miller | Organiser FP&A Innovation Summit

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FP&A AT PHILIPS

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Dutch powerhouse Philips, is for many, a household name. A strongly diversified company, they work across three different sectors; healthcare, consumer lifestyle and lighting, priding themselves on being an adaptable company capable of handling the most wide-ranging projects. They recently became responsible for lighting up the Buenos Aires skyline, a city with a population of more than

Philips know that they are a global brand that has success at its heart thirteen-million people.

At the FP&A Innovation Summit, Hong Kong 2014, we were lucky enough to hear from Dan Piries, Financial Director of the Asia Automotive Lighting Business. With over 10 years experience in a multinational and dynamic environment, it was really interesting to hear his insights on the future of Philips’s FP&A function.

Some of the stats Dan threw at us thoroughout his presentation were staggering and made their adventurous target of touching the lives of three billion people by 2025 a real and feasible objective.

For example, their brand is

estimated to be worth in the region of $9.1 billion dollars and currently they employee around 115,000 people in over 100 countries. A truly global brand, they want to become the best place in the world to work and deliver superior value for their customers and shareholders.

In 2011, in the face of new challenges, they set about embarking on a program that would allow for increased agility throughout the organisation and a more customer centric approach. The initiative is called the ‘Accelerate Program’ and has been in motion for three years. As a method for reshaping their FP&A processes, it recognises their need to adapt and innovate.

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At Philips’s they know that they are a global organisation that has success at its heart.

They have a highly valued global brand, many quality businesseses and products all of which have an excellent reputation for innovation.

However, they are also fully aware that these plus-points could be negated if they fail to become less bureaucratic, agile and transparent. Increased bureaucracy naturally leads to empowered teams that are capable of delivering end-to-end innovations to their customers. If achieved, it

should set the foundations for Philips’s bright future, one in which they ultimately fulfil their potential.

The need for these changes is not born out of desperation, the financial function at Philips is widely regarded as one the strongest divisions within their organisation. Having said that, Dan feels that the division has the capacity to develop even further so that it becomes a more efficient unit that uses a more centralised approach to work and makes better use of IT solutions. They also want to become more cost effective and rely on more standardised,

Philips certainly has the right mind-set, improve whilst you’re not in disarray consistent data.

This new centralised approach takes the shape of ‘Centres Of Expertise’ that sees the financial function concentrated so that expertise can be fostered.

All of these departments have been subjected to an implementation process.

For example, the Talent Management function was developed so that a new career model was embedded into their talent management function. Other functions that

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have developed over the same three-year timeframe include the Organisational Model, Enables and Communication and Change Management.

This centralised process has allowed them to learn a lot of new things, which they have now been able to address and implement; these have included the importance of communication and that rigid standardisation is possible and required for a successful FP&A function.

Philips certainly have the right mind-set, improve whilst you’re not in disarray.

Compared to some of the other

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FP&A AT PHILIPS

companies we have looked at, Philips still represents an innovative, modern company that is now working at the height of its powers, as an effective, centralised FP&A function. As an important cog in their development and advancement, Dan Piries, is sure to have an exciting role to play in their continued success.

AN INTERVIEW WITH

IAN CHARLES CFO AT HOST ANALYTICS George Hill | Editor

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AN INTERVIEW WITH IAN CHARLES

Silicon Valley plays host to the world’s largest technology companies anybody who’s anybody has a base there - from Apple to eBay, it’s the definitive tech hotspot. In addition to the world-renowned companies, it’s also home to thousands of small startups. Because of this, Silicon Valley is a hub for technical innovation and takes centre stage when high-tech developments arise.

In our article with Peter Spinelli, CFO at CFO Publishing, we looked extensively at the development of the role of the CFO. It’s clear that the general consensus is that whereas the CFO was once a number cruncher, they’re now an essential strategic stakeholder.

Ian echoes this and states ‘The data required today to run an effective finance organisation is tenfold what it was a decade ago’. This reliance on data has elevated their standing within the organisation significantly.

We were therefore keen to speak to Ian Charles, who has years of experience working across high-tech companies and who is currently CFO of Host Analytics.

Host Analytics is a truly innovative company, offering a complete collection of enterprise performance management applications built from the ground-up as cloud-based applications. The project has finance at its heart, allowing for increased accounting and finance flexibility and a platform where IT professionals can gain more adaptability for their project backlog and budgets.

Interestingly, Ian feels that although the role has developed over the last decade, the strategic responsibilities, which we now deem essential for a CFO, have actually always been part of the role, but now have additional importance . ‘I wouldn’t necessarily categorise it as aspects that didn’t exist a decade ago, but I would categorise them as maybe not as important as they are now, they were on back burner, not as front and centre’

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Ian also understands the importance of SaaS, and the insights that can be leveraged from using predictive analytics.

The market is dictating that the customer is now buying and managing their technology and software in a way that suits their needs, the challenge for the CFO and the company as a whole, is to find a way of

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The data required today to run an effective finance organisation is tenfold what it was a decade ago

responding to that. Ian says; ‘the challenge that a CFO from a traditional software company is facing, is very different from the challenge of managing a SaaS business’. For Ian, being ‘SaaS-capable’ allows for the company to align itself with what the customer wants more readily. It is something that Host Analytics has been building on consistently, and an area which they are continually improving.

Host Analytics is an innovative and agile company who have managed to adapt to their customers’ needs as well as growing significantly in the past 5 years. This focus on growth is engrained in Ian’s approach, ‘We’re still trying to grow and capture market share - not decrease costs - I am more oriented in the growth direction instead of cutting costs’.

In order to guarantee Host Analytics financial efficiency, Ian

AN INTERVIEW WITH IAN CHARLES

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company.

The market is dictating that the customer is now buying and managing their technology and software in a way that suits their needs, the challenge for the CFO and the company as a whole

pays great attention to the COA ratio, which calculates how much money the company is spending to generate a new dollar in recurring revenue ‘you’re trying to figure out where’s the tipping point of not spending, so we look at these metrics in a way that at this point in time it’s not worth spending additional dollars on this part of the market’

This tipping point is becoming closer as Host Analytics go from strength to strength. Host Analytics more than doubled their new annual recurring revenue in their first quarter, but with rapid growth, a number of challenges emerge. Ian says; ‘how do we continue that growth and bring on the right staff and right salesforce and penetrate the right markets?

The last thing you want is year on year growth and then a stall in the future’. Bringing about continued success boils down to a simple thought process - delivering what the market wants. Ian says Host Analytics is doing that by ‘launching applications and products that address what the customer wants’. It seems that with Ian at the helm, Host Analytics is on track for even more sustainable growth.

It seems that Ian puts a lot of emphasis on maintaining a passion for growth, whilst also guaranteeing that money is not wasted in areas of the business that are unlikely to bear fruits in the next financial year or that do not provide value for customers, a key foundation for any growing

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Ian says ‘The rock star CFO of tomorrow is definitely going to be the person who manages risk while seizing the opportunity of the technological changes that you can deploy today’.

Technology is helping CFOs not only to manage a budget but create an advantage for various segments of the business. Now more than ever, it’s about calculating the ROI of deployment and as Ian says ‘This is where technology is flowing through finance, what ROI is the business getting from the various implementations of technology?’. From listening to Ian, it’s plain to see that the evolution of the CFO going forward will be directly impacted by technology and the CFO’s ability to leverage insights from it. It is therefore a great match for Ian whilst working for Host Analytics, who have put this at the centre of their business.

According to Ian, budgeting is a team sport ‘because in the past budgeting was centralised in the department of finance - targets were distributed from the top down instead of the bottom up - the cloud tech that Host [Analytics] deploys allows for that decentralisation of the team environment that budgeting needs’. The technology and data that Host Analytic’s deploys allows them to pin-point, in real time, what should be concentrated on, which means

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AN INTERVIEW WITH IAN CHARLES

that now more than ever, everything is outside ‘the glass house of finance’.

Where fear once dominated CFO’s vision of innovation, they are now embracing it and are willing to include it in what they’re offering as the Financial head - the fear of inaccuracy has definitely subsided. As Host Analytics are demonstrating, technology is having a profound effect on the way the CFO operates. Their standing within the organisation has changed significantly over the past 10 years, as has their proximity to the CEO. Having listened to Ian’s experiences I am sure that as a CFO with technology at the forefront of his thinking, he will be more than ready to face the new challenges that will undoubtedly come the CFOs way and be able to translate into the ways that Host Analytics helps their customers.

EMPLOYEE CHURN 201:

CALCULATING EMPLOYEE VALUE Pasha Roberts | Chief Scientist, Talent Analytics

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EMPLOYEE CHURN 201: CALCULATING EMPLOYEE VALUE

Much has been written about customer churn - predicting who, when, and why customers will stop buying, and how (or whether) to intervene.

Employee churn is similar - we want to predict who, when, and why employees will terminate. In many ways, it is smarter to to focus inward on employees. For one thing, it is far easier for a company to change their operations or even the behavior of an employee than that of a customer. As we will see, employee churn can be massively expensive and incremental improvements will give significant results.

The most important difference between employee vs. marketing churn is that a business chooses to hire someone.

The most important difference between employee vs. marketing churn is that a business chooses to hire someone. Unfortunately, you usually don’t get to choose your customers. There is also more at stake - this person will literally be the face of your company, and collectively, the

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employees produce everything your company does.

Employee churn has unique dynamics compared to other problems. To jump-start the ‘business understanding’ phase of analytics efforts, we are writing a series of articles to translate employment processes into tractable data mining problems.

Calculating Net Value = (benefit - cost) A new hire ideally ramps up to full productivity over a few months, going through on- boarding, training and certification. In one client engagement, a call center employee had to train for months to pass a Series 7 exam, before even being legally allowed on the phone. During all of that time, an employee delivered no value... they were just preparing to start working.

Quantitative Scissors To decrease the overall costs due to employee churn, something has to budge on these curves: • D ecrease hiring/onboarding costs • D ecrease time to full productivity • D ecrease salary/productivity ratio • I ncrease overall productivity (which is at odds with all above points) • D ecrease employee turnover prior to the full productivity phase • H ire to increase the proportion of employees who are likely to ‘survive’ to the full productivity phase Like quantitative scissors, there are no other options in this model.

EMPLOYEE CHURN 201: CALCULATING EMPLOYEE VALUE

Cost Measurement Unfortunately, few companies have any idea of what these costs and benefit numbers are for any given role. Many have worked out the lifetime value of a customer to 5 decimal points, but few have ever considered the lifetime value of an employee. And, not all roles are ‘producers’ like sales reps or factory workers - for example, what is the monthly corporate contribution of a data scientist?

Data Science may be ‘the sexiest job of the 21st century’, but no one really knows how much we ‘make it rain.’

At Talent Analytics, we have found it simpler to evaluate employee cost relative to a potential performance level.

Simple heuristics can begin to build the curves defined in Figure 1. The shocker comes when we subtract (benefit cost) and take the cumulative sum to find a break-even point.

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Customers provide profit right away, so customer churn analytics is just trying to keep the gravy train rolling.

Employee churn analytics is more like trying to get the train to run long enough to provide any value at all.

In this stylized example, the employee starts providing monthly value after 10 months, and does not break even until after 2.5 years. By comparison, in our engagements we often see impressive attrition after just 3-6 months.

Figure 1 shows a stylized cost/ benefit plot for one employee across three years of tenure.

At time zero, costs are very high - an expensive recruitment process, administration, training, supplies are all above the normal flow. In this model, after about a year, the main monthly expense is salary and overheads. In this hypothetical job, an employee takes a year to ramp up to full productivity.

Different jobs will have different curves, but this sigmoid curve is common.

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EMPLOYEE CHURN 201: CALCULATING EMPLOYEE VALUE

Predictive Talent Analytics With the employee value proposition laid out, we can begin to crack this nut and save the business some money.

We are looking for signals that will let us score the likelihood of a person to stay in a role inside a given time window. By deploying the right predictive model, we can decrease the impact of one or more of the ‘scissor points’ above Hint: The most powerful place to solve this problem is before you cut the first paycheck.

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Customers provide profit right away, so customer churn analytics is just trying to keep the gravy train rolling.

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FP&A AT

LOUISVILLE SLUGGER Harriet Connolly | Organiser, CFO Rising Europe

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Hillerich & Bradsby, or Louisville Slugger, the name by which they have become known as, pride themselves on being the number one brand in baseball. They have a rich history that spans two world wars and a number of economic depressions. Product diversification has always been a mainstay of their approach and has even seen them move away from baseball equipment to rifle stocks when the US army needed their help in the Second World War.

They now produce products all across the baseball spectrum and continue to produce innovative equipment for the masses. They are however in a period of transition, a period that has been born out of a flat-lined market that doesn’t allow for natural growth, instead it requires the

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FP&A AT LOUISVILLE SLUGGER

acquirement of market share from other competitors.

At a recent summit, Kyle Beaird, Director of FP&A at Louisville Slugger, talked us through the challenges that face them and what they are doing to bring about effective change.

As mentioned before, the baseball retail market is flat; there is no room to grow unless you take market share from others. The second major issue for Louisville Slugger, from a financial perspective, is that they have a relenting desire to keep their production onshore, and this in itself throws up a number of problems.

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It is a common rhetoric in the modern day business landscape, old successful company, but needs to reshape and innovate to remain competitive in the face of increasing pressures. The people at Louisville Slugger go along with this to a certain extent, but refuse to go the way of their aggressive competitors.

Instead, it needs to be a happy medium, one which mixes their old ideals, with newer, more progressive ones.

Louisville Slugger still has momentum and a very strong proportion of the baseball retail market. Kyle, though,

reminds us of how quickly momentum can stop in the sporting world. He tells us how crushing a Red Sox defeat in 2007 was to his favourite team, the Rockies and how momentum means nothing if it can’t be sustained.

It is a common rhetoric in the modern day business landscape, old successful company, but needs to reshape and innovate to remain competitive in the face of increasing pressures It is for this reason that Louisville Slugger are actively looking to refresh a number of their financial processes.

Kyle refers to it as ‘throwing a change up’ and the first thing to be subjected to this ‘change up’ was budgeting. In the past, Budgeting managers would have to delve through thousands of irrelevant lines and nonspecific information.

To add to his, the consolidation process was long and complex and lacked a dynamic edge that was needed in order for it to be updated when it was necessary.

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where you will win share is imperative. Kyle states that in the past, Louisville Sluggers weren’t disciplined and lacked the ability to predict when and where they should invest. Now however, revenue forecasts are supported by specific product strategies and they have been streamlined so that people within the company are better placed to understand relationship costs and margins.

The process now looks a little different; the once convoluted information was narrowed and streamlined, so that not only was the process quicker but the outcome was more succinct and accurate. They also increased the amount of budget meetings they had.

The once annual meet-up, which was for all intents and purposes incredibly unhelpful, has now been updated so that they now have monthly reviews. This means that changes can be implemented when and if they are needed.

Another area that they have looked to improve is their ability to forecast. With a flat market, a need to know exactly

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Another area that they have looked to improve is their ability to forecast

One part of the FP&A process that is yet to change significantly is the reporting process, which is still compiled manually. But Louisville Sluggers now have a vision of how they want this area to function, with automation and analytics clearly a central cog.

Louisville Sluggers are an established company with an entrenched culture of excellence and innovation amongst their baseball product line. They have been reinventing their product line recently and their FP&A analysis is now gradually falling in line with modern day standards and with the developments mentioned by Kyle Beaird, it shows that even for a company with a 128 year history, change is not only viable, but it can be successful too.

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TESCO PLC’S FP&A JOURNEY

William Tubbs | Organiser Compliance & Regulation Summit

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Retail giants Tesco have been one of the most successful UK companies of the past decade. Despite not breaking the U.S market to the degree they would have liked, they have eclipsed the competition in the UK and currently stand as the second most profitable retailer in Europe, just behind German giant, the Schwarz Group.

Tesco operates in 12 countries with a strong base in the UK and Asia. They have however experienced challenges in the last two years with German discount supermarkets Aldi and Lidl beginning to grow in popularity in the UK market.

The impact of this competition has reportedly seen their value decrease from £20 billion to £10 billion in the space of a year.

Despite this, Tesco have confronted some of the criticisms that had been put before them at the turn of the decade. One of the sticks with which they have been beaten is that they

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TESCO’S FP&A JOURNEY

are technologically inefficient and lagging behind their competitors.

In reaction to this, they have taken it upon themselves to embrace technology as much as possible. They released their own budget tablet, the Hudl, to significant praise and have also looked at new innovative ways to expand their Internet shopping business. In Seoul, they created a virtual store that allows for shoppers to buy their groceries before they go to work by taking photos on their smartphone.

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Their FP&A function has also gone through a process of technological evolution, and in line with this, we were lucky enough to hear from Carl Rogberg, Director or Finance at Tesco at the FP&A Innovation Summit in London.

Carl says; ‘We’ve been on a journey, quite a quick journey, and FP&A has always had to catch up and

patch up things rather than staying ahead and planning things properly’ At Tesco, their FP&A function was more of a reactive system, developing through the impacts of strategic decisions that were out of their control.

Tesco have confronted some of the criticisms that had been put before them at the turn of the decade Considering the size and financial power of an organization like Tesco, their methods were relatively outdated. Carl explained; ‘This 70 billion pound company was consolidating its international accounts on Excel, today, it’s fortunately not the case, we’re now much more system implemented which is helping us a lot’. Even for personal accounting, Excel can be limiting, imagine managing a balance sheet the size of Tesco’s through it - this just wasn’t feasible and was always going to lead to slower processes and ultimately negate the competitive advantages that the FP&A department could bring.

Although Carl sees the ‘P’ (planning) in FP&A as an important cog, he feels that the ‘A’ (analysis) is too often ignored and should be treated with

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TESCO’S FP&A JOURNEY

more importance within the finance department. Carl states ‘it’s very common to forget about the ‘a’ in FP&A, many organization’s that I have been in, focus on financial planning and forget about analysis so the planning cycle never seems to stop’. If you’re forever planning, there is no time to take stock of what the finance function is doing right. In essence, if analysis doesn’t take place, planning suffers.

Due to this, the FP&A function at Tesco has put together a designated team to look after analysis. He says; ‘we changed the processes a lot and had a separate team looking at analysis’ Carl explains that they are looking at the company’s economic model, assessing it so that the intricacies of the FP&A department can be communicated to the rest of the company. This will allow for a better understanding of the function, and in turn, create actionable insights that will help the company grow. Carl says that this has led to a ‘better balance in terms of analysis’.

As well as analysis and technology, people are central to the successful FP&A function in a global environment and in the words of Carl; ‘There are skills and behaviours that can take the FP&A function forward and

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some that can hold it back’.

He uses a hypothetical story about the redesign of a new supermarket as an example, the CEO visits and makes his judgments about what needs to be changed. In reference to the changes Carl mentions ‘we do it because that’s what the boss said, but if he had seen the numbers I don’t think the answer would have been the same’. This is where bravery becomes an important attribute for anyone working in the department. If an employee in a position of power demands changes that are not financially sound, the FP&A department needs the bravery to stand up to these demands, Carl says; ‘you can’t not speak your mind when you’re working in FP&A’.

Effectively, if the boss had asked for another expensive redesign, the FP&A team would have had to turn around and say that, financially, it would be a poor decision.

Carl explains ‘There’s a tendency to focus on the past, FP&A should work in the future’. This

As well as analysis and technology, people are central to the successful FP&A function in a global environment

highlights the importance of innovation and broad thinking, where avenues for financial change are welcomed.

Forever looking back will impede the department’s chances of working towards proactivity. Innovation is increasing in importance in retail - there is so much competition that the ability to diversify can be the difference between staying afloat and being an industry leader.

‘Its very easy to ask why and walk away, if you’re not happy ask the question again’ says Carl, this is an important point and highlights the need for the FP&A function to understand why things are happening and how that can affect the financial analysis. In the retail world, small changes can have an impact on the financial efficiency of a company and noticing anything that can be saved will increase agility and responsiveness.

It is clear that Carl is leading Tesco’s FP&A function towards a leaner and more technologically capable future. With Tesco looking to pull themselves out of their current situation it will be important for their FP&A department to be as slick as possible.

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CO M IN G

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