Letting Go So You Can Move Forward | Steve Player

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This is a podcast episode titled, Letting Go So You Can Move Forward | Steve Player. The summary for this episode is: <p>We’ve all faced the frustration of improvement efforts failing to have the expected results. And with today’s finance and accounting teams struggling to meet constant challenges in an ever-changing environment, it’s harder to find ways to increase impact without team burnout. Join noted author and FP&amp;A visionary Steve Player, Managing Director at Future Ready Finance, as he shares lessons learned from leading-edge FP&amp;A implementations. He’ll explain how companies have dramatically reduced the time needed to plan by moving to rolling forecasts. He’ll then explore best practices for dealing with uncertainty using scenario planning and show how you can quickly create the capacity to move forward and become future ready.</p>
VUCA - volatility, uncertainty, complexity and ambiguity
00:44 MIN
We need to make choices not decisions
00:53 MIN
Focus on building the new - 7 things you need to do after you've let go
00:29 MIN

Steve Player: I've been working with Planful since a long time ago, before it was called Planful. So, I've got a very interesting presentation here called Let It Go. It's very different than most of the presentations you hear at this kind of session. It will talk about some of the things Grant talked about yesterday, but I'm really here to help plant some seeds. So, I'm going to warn you. This is my warning. I'm planting seeds here. I have no idea how long it's going to take for those to grow, but you will wake up one day and that seed will be growing inside you. Cause you'll be thinking about," Why are we doing so much dumb stuff and what can I do to stop it?" When you feel frustration, when you feel rage, realize one of those seeds may be taking root. Because I'm going to show you some completely different ways to do things. But I've learned, over the many, many years that I've been doing this running the Beyond Budgeting Round Table in North America, where we teach you how to run your company better without budgets. Let me say that again. I can firmly show you how to run your company better without budgets. So, it's very hard for me to come to a conference put on by a software vendor who sells budgeting software and talk to a bunch of people, who've come to learn how to do better budgeting with better budgeting software, and my main message is, if you do it perfectly, it won't help. It will solve a lot of problems in the frustrations that you have. But even perfectly, you're going to be very, very frustrated. Why? Because it's built on fundamentally unsound principles. What is a budget? It's a plan of what we hope to do. But what's it based on? Critical flaw in all budgets, they're based on assumptions. Why? Because we don't know what the future's going to be. At one point, I wrote a book with Steve Morlidge called Future Ready: How to Master Business Forecasting. We thought about, at one point in time, calling that Future Perfect, we thought that was the great title and you'll hear a lot of speakers, I've even heard some at this conference today talking about being futureproof. You want to be futureproof? I get cringey every time I hear that. Why? Because why would you want to be proof against the future? I don't want to be proof against it. I want to live in it. I want to enjoy it. I want to benefit from it. And I hope it's better than the past. So, I want to be able to take advantage of the future. I don't want to be proof. But when we talked about the book title being Future Perfect, about three days in, I woke up one morning in a cold sweat, because I've had this dream. What happens if somebody really believes that title and they buy the book and they read the book and all of a sudden their future's not perfect? Because we can't perfectly predict the future. We literally cannot do it. I challenge you, if you ever find somebody that can perfectly predict the future, give me a call, we'll go and we'll test it. We'll let them predict some commodity prices. We'll pick a few things. We'll make a few market bets. And if they're really, really good, we will buy an island and insulate it against the world and be done. Because if you could perfectly predict, why would you waste that great tool running it through a company where you've got so many complicated systems and processes and things to make magically come together? If you could perfectly predict, you could easily bet and win the commodities market. It's impossible to do it. But what we can do is be ready for it. And that's what I'm going to talk to you today about, being ready for it. But with a little bit of a twist in that I'm going to be talking to you about why we can't get where you want to go. And the main reason we can't get where you want to go is because so many of our companies are like this big monstrosity here. This is an old school way of speaking. You put a big monument, a big podium right in the middle of things. So, I have to stay balanced on this camera, because I want me to be marked right here. But if I want to go over here, because this might be a better place to reach you, I might be more accessible. I'm bound, because I got to drag this with me. Think about, I'm going to do this speech, I'm going to hold a hand on this podium the whole time. I just want to let it go. And I want you to think about all the things in your work and in your life that you need to figure out how to just let it go. Because you cannot go forward, in many cases, trying to carry all the baggage. Did you ever see that George Clooney movie Up in the Air? In that movie, what he's talking about is the baggage. All the baggage that we always have to carry around with us. And the baggage in your work life is the way we've always done things. We're hidebound by the way we've always done things. So, I want to challenge you to think about what should you be letting go of and I'll take you through some things here. Now, I'm also going to be a little bit different in that I find these conferences are far more interactive and far better when we're talking about what you want to talk about. I know lots of things. Some of my friends in the audience know I could pontificate for a long time. It'd be hit or miss whether or not you care about it at all. So, I find the Q& A portions far more enlightening than anything else. So, I'm going to force a Q& A process here. We're going to have Q& A, but we're not going to wait till the end. I'm going to get about halfway into this presentation, there's 27 slides, I'm not covering all of them. At least, if I do, they're going to be very fast. About halfway through, you're going to find I'm going to stop and we're going to have Q& A. If your question is burning and you don't want to wait till I get halfway through, just ask the question and we'll stop right there. Because what you want to talk about is far more interesting. At least we got one person in the room hearing something that they're caring about. So, get your questions ready, feel free to challenge me, I love a good conversation. That's me. This is the new picture. I used to have a picture. People used to tell my ex- wife," That picture looks great. He looks 10 years younger." She said," It should, it's a 20- year- old picture." So, we've updated the picture. I run an organization, Future Ready Finance, we do a lot of things. We help companies and organizations improve what they're doing. We work with software companies. We work with implementation firms. We're here to try to help you move forward. Why do we have to let it go? Because in many cases, what you're holding onto is preventing you from getting forward, for being better, from reaching your dreams. I was frustrated earlier in the conference, somebody was talking about wonderfully getting somewhere and I realized if you did all that, you had magically arrived at where you should have been 10 years ago. It's terrible to get vastly improved, but realize we should have been here 10 years ago. So, I want you to think about what can we do to break free? What to do? Go really fast. Now, we live in a world, you've heard of this acronym, VUCA? Volatile, uncertainty, complexity, ambiguity. Yes, it is a VUCA world that we're living in today. But we live in a post shutdown still COVID world. When I say still COVID, we forever more will live in a COVID world. That is the new reality. It's like the flu shot. We're going to have to get a booster. Just you're going to have to learn to deal with it. That's how we are. If we have to shut down or mask up or whatever, we'll do whatever we have to do. But that's just the new reality and that's what we have to do. We have to just get on with things. We've changed the way things work. We've had 10 years worth of development in two years, hybrid is the new way to go. They will be people working from home forever more. Now, you may come in one or two days. You may have a CEO that doesn't want to do that or a CFO that doesn't want to do that, and he can help figure out who all's going to replace, because some people aren't coming back. So, again, if they could do it for two years without it, why do you need them to come back? Focus on the output in terms of what's out there, it's the new world. Then we all think things are coming down, what all happens? We got a crazy Russian decides we want to start World War III in a police action. The bigger shoe hasn't fallen, the bigger shoe is a third of the world's grain comes from the Ukraine and Russia. We are heading into the summer with a massive food crisis on its way. Our oil prices, I'm from Texas, we love high oil prices, we're going to get to electric vehicles far faster than we ever thought we're going to, simply because we can't get anything going, but we're going to work our way through it, because that's how we have to be, that your company has to be agile or it's going to be gone. If you don't know about what agile is about, you need to study it, because you're going to have to be agile or you're going away. That's just the new reality. We're going to have political volatility. Could I predict it? No. I live in Texas. We have a crazy, crazy state. We have crazy, crazy politicians. And whether you're red or blue, they're crazy on both sides of the aisles. It's universally, they're all crazy. And how we go? We just got to work our way through it. And that's what you have to do in these kind of situations. How is FP& A spending their time? I always love this question, because how you spend your time is a measure of what you think you should be doing. This is a poll question I've asked many times. If you could take your FP& A time and split it across three categories, what would you have in terms of how much time do I spend doing value added analysis, versus administering the process, versus collecting and valuing the data? Today, how are you spending? What are those three categories? What's the number one thing you do? What do you spend most time doing of those three choices?

Audience: inaudible.

Steve Player: The bottom one, we still spend all our time, the vast majority collecting and validating data. What's number two?

Audience: Middle.

Steve Player: The middle one, administering. Number one, how long has it been that way? This is a poll I did 20 plus years ago. And we found that 47% of the time collecting and validating data, 30% of the time administering the process, just 23%. I work with Bryan Lapidus here at the AFP. We ran that same poll five years ago and the data was almost identical. Think about all the cloud base, all the stuff happening. The problem is, we can't let go of the data. We're still collecting and validating. It's going to get better, but we're a long way toward making that green pie bigger. That's what's happening. So much of your FP& A department gets consumed in doing the stuff. It can't let go of the stuff. You got to do it. You can't collect... You can't gather data until you find better, faster ways to do it and making sure you've got the right definitions and this data that you can use. So, again, we got to find ways to break free. Now, this is an interesting... This is new quote I've actually, this is first time I've ever used this. Here's a big problem we always talk about and I hear these presentations here and everybody's talking about corporate speak that I've heard for a long time. We're trying to get the people to take ownership of the data we want them to make decisions. You hear it over and over and over. The problem is, the choice isn't between alternatives and... If that was just do this or do that, that's an easy decision to make. The reality is in FP& A, it's about what are the decisions? So, I don't need manager to make decisions. I need them to make concrete choices. Which products are we going to sell and why? Where are we going to focus? Michael Porter, the great strategist from Harvard. You know how he defines strategy? Strategy is deciding what you're not going to do. So much of the time we don't ever decide what we're not going to do, so we end up trying to do everything for everybody, and we only have 168. Everybody understand the significance of the number 168? What does 168 mean? We all have 168, nobody gets anymore. The number of hours in a week. Every one of us has 168 hours and we got to eat, sleep, everything we do only fits in the 168. So, when you end up spending, if I go back, if you end up spending your time collecting the data, that's eating against the 168. If you spend your time working 14 hours a day, it's still eating against the 168, it means you're not sleeping much. It means your family time is going down. So, keep that in mind. There is a hard constraint that's a reality. That is a theoretical, it's not theoretical. It is the practical capacity. You only get 168. So, think about that. What we've got to do in FP&A is come up with really being better at framing what business decisions need to be made and how do they need to be made? What information needs to support them in terms of what's out there? Now, this has got Grant all excited about the number one thing we got to do is just stop doing dumb stuff. When you think about it, if we could stop... I wish there were a more polite way to say it, but there's so much stuff we do in FP& A and in finance in general, that is just, no other way to say it, it's dumb stuff. Why do we do it? Because we've always done it. We haven't been smart enough to figure out how to redefine our choices and decisions in terms of what's out there. So, if I had longer, I'd take you through a dozen different reasons of what we still do. But the number one item I have is we got to stop doing budgets. Why? Because the budget is a tool that's like this wagon, it is severely overloaded. Think about budgeting. When did budgets come into use? Over a hundred years. They came into use before 1921 or 1922, James McKinsey, the guy that eventually found the firm McKinsey& Company, he wrote a book called Budgetary Control, that codified what was existing practices of how you do budgets in the federal government. That became the Bible of how nearly all budgets are done today. That we're still using that same basic blueprint for doing budgets today. Think about all the things that happened to technology. We've made it faster, but we're still doing the same thing. We decide a year in advance what we want to do, how we're going to do it, what resources we're going to do. We had session in here before talking about workforce planning. We're trying to figure out who we're going to hire and everything. These people are quitting right and left. You got to get something that works a little more proactive, a little faster than trying to perfectly predict a year ahead in advance how we're going to do things. But when you take budgets, when you think about it, number one question, if you want to think about your budget, when you get back home is why do we do it? So, go ahead just answer, why at your company, why do you do budgets?

Audience: Lenders requirements.

Steve Player: Lenders require it. Why do you think lenders require it?

Audience: They want to make sure that you have compliance.

Steve Player: But why do they give you compliance requirements? Why do they give you covenant requirements? What does a lender really want to know? It's two things. One, are you going to be able to pay the money back? And are they going to get their interests? That's the only reason they require it. So, whenever you get lenders required, always probe behind, why do they require it? If your lender didn't require it, would you still do budgets? Why? Fundamental question. If we're supporting budgets to support our business, why do our leadership want to do budgets? What are they really trying to do? Why does the board require it? What does the board really want to know? Huh?

Audience: Performance.

Steve Player: I'm sorry.

Audience: Track performance.

Steve Player: Track performance. Okay. We want to do budgets because we think it enhances performance. Let me break it down, because I don't have a whole lot of time here. You think about budgets, we usually talk there's about six things they want to do. I start with a mission and go, assume we have a strategic plan, some companies don't, some companies don't have any idea where they want to go. But assume you have a strategic plan that defines where you want to go. From that, you do five things, the planning tasks. I set targets. That's where we want to go, what's the target? How do I make it a metric so I can know if I'm making progress for getting? How do I know what performance I'm trying to achieve? What is my performance target? I want to align incentives. We often, particularly in the West, we believe we got to pay people. We don't give them a bonus, they won't do anything. And it's interesting, the worker will work without a bonus, but the executive, he's got to have a bonus. I never have quite figured that out. But we do it for bonusing. We do it, because what is the action plan? If we're going to go out there and reach those targets, what are we have to do differently? So, there has to be an action plan. Action plans don't happen by themselves. So, the fourth thing is we allocate resources. So, what manpower, what capital are we going to invest? What do we do to take those action plans to reach those targets? And finally, because no part of the business does it by itself. We got to coordinate. We got to have ways to get the parts working together. Those are your five planning tasks. Those five planning tasks come down there, they create this thing called the budget. And then we come back, because we don't trust ourself. We want to control to make sure we're actually doing all those things. So, we can break that down into quarters and into months and so forth. We tackle all those things. So, we put all that together and that creates the budget process. Now, if I take those purposes and separate them into their respective parts and then ask the same question, what are we trying to do? And why do we want to do that? And ask, is there a better way than using an annual budget, a single wheel barrel loaded to the hilt with all those things? If you break it down, you can separate those things and improve every one of them. So, in terms of targets, rather than have something on an annual basis, I want my targets... Think about it, really I'd love them to be self-imposed. I'd love my people to be motivated to reach the target. I would love them to be aspirational. How many of you as finance people want targets that are easy to reach? Now, we want them aspirational. We want people to reach for the target in terms of what's out there. We want to be the best, we're trying to be top of the mark. We don't want to be average company. We want to be a top company. Now, if I come to look at that second thing, when I'm looking at planning and forecasting, when I pull those together, what adjectives would you use to describe your forecast? Do you want your forecast to be aspirational?

Audience: You want to be accurate.

Steve Player: You want to be accurate. You want to be-

Audience: Honest.

Steve Player: ...honest. You want to be realistic. I want to really come in there when I look at forecasting, I want to know if a forecast is a good forecast, it's not artificially bending to reach the target. It's our best guess of where we want to go. I want an honest forecast, a realistic forecast. The minute I start combining forecasting with target- setting, I start tainting the process. I have seen so many forecasts that are like hockey sticks. They go out here for far as we can see, and they don't do much and then at the end, they magically reach up and hit the Target. That's a hockey stick forecast. It's an aspirational forecast. It has no basis in action plan or fact. So, you separate those two. You get a better way of forecasting and a better way of target- setting. Resource allocation, I don't want to do that once a year in advance, try to perfectly predict. I want the resource allocation to be more real time, to work on really what's happening. If my business is taking off, I want to be funding it. I want to be going after it. If my business is crashing, I want to be defending. I got to pull back. I got to take those resources and do something differently. So, resource allocation needs to be not once a year in advance. It needs to be real time based on what's happening in terms of what's out there. And then measuring control, I want that holistically. I want to know exactly where we are. And oh, by the way, here's another dumb stuff we do in finance. We are the spikiest people in the world in finance. We all walk around with spiked hair. Why? Because all our work is spiked. Think about it. When do we close the books? Once a month, we have a spike. We have this big work spike. We pile it all on top of that month. We do monthlies, we do quarterlies, we do annuals. When do you do your forecast? Can't tell you the number of people that do the forecast at the end of the month or the end of the quarter. Why? Because that's when we do things. Why? Is the busiest time of all, that's when you never see your kids. We do that simply... When does management need its information?

Audience: inaudible.

Steve Player: Real time. There's a group here that focus on helping you close the books faster. There's a hundred good reasons why you want to close the books faster. Getting operational peaceful, more timely information is not one of them. Why? Because the operating manager is not wait until the end of the month anyway. The operating manager is wanting real time information. They want continuous. They want it every day. So, we got to think about how do we change what we're really going after? We really want controls to be continuous in terms of what's out there. So, if we had more time, I would take you through... This is the first slide of things. I'll take you very quickly through seven things that we need to start doing after we've let go. Our secret is inaudible. I want you to focus your energy on what you want to do differently. What should be new? Not trying to fight the old. If you try to go out and fight the old... Get rid of the budgets, you'll fall into a deep hole and we'll never hear from you again. The way you sell this, you got to start talking about what would be better? Continuous planning would be better, continuously forecasting, continually updating where you're going. That's where we're going to go. That's where we're going to make it better. So, the first thing is start continuously monitoring. When you think about it, if you believe in budget and you love budget, why wouldn't you do it all the time? Why wouldn't you do it year- round? Most people say," Because we'd die. Takes us four months to do the budget. We can't do it year- round. We'd be overlapping." So you want to shift. You want to make it move to continuous monitoring. So if I go to continuous monitoring, if I go to a light touch rolling forecast, a driver- based rolling forecast, where I'm forecasting... I got to tell you, it's depressing for me to come to these sessions here and see so many screens put up here and it's like we're looking at rows and rows of numbers, columns, and columns and columns of numbers. At least I saw some great presentations dashboarding, where we get to look at some graphs. But the columns and columns of numbers are making us blind. Literally, all the finance is slowly going blind. And when you think about forecasting, most people's forecasts are merely numerical representations. I look at these and I see Planful, I see this column on the sheet and it says driver, and there's nothing in it. When you do forecasting, figure out what is driving that business. What is causing you to want to have that, man? How many sales do you have to make? What's the average sales price? How do I link that upstream into the sales pipeline? So, I know how many proposals we have outstanding. I know how many we have in the funnel. I know of each one and how they're going to convert. I want to be able to look at the sales pipeline and predict revenue just based on that, looking at the operational data, that's where we need to go. So we can look continuously in terms of monitoring. So, at any point in time, we could tell you what we look like. Because as soon as we can identify a problem, we can start working to improve it or working to take advantage of it. See, the things we identify are not all problems. Some are opportunities, if we have time to look for them. In lots of cases, finance never helps with opportunities, because we're so busy trying to close the books or explain the variances or talk about what happened and why it happened and why we messed up the budget in the middle of last summer and why we're still explaining that, even though it's seven months in and every month we have to explain why we messed it up. That's why we don't have a good reputation, because we're stuck on how we screwed up last summer. Move on and start moving this continuously. And there's lots of ways we can tackle this. Get to driver- based forecast. Everything you want to have in the forecast should have an operational driver underneath it. And it ought to be an operational driver that you could predict so that you begin to see what are they? How are they? And then you understand, you begin to understand the predictive logic of the business. That is nothing more than an algorithm that says," For this much revenue, I've got to have this many proposals. I'm going to win this percentage of them at this average. To get that many proposals, I got to have this much marketing activity to drive this many leads." There is a logic to your business, if we can take time to figure it out. And once FP& A understands that logic of the business, you're going to be much more effective in understanding what's going on. Because you'll understand. Then you'll be able to track and change. Are we getting better leads or worse leads? Are we closing at a higher percentage or a less percentage? Is our average sale going up or going down? All these things are baked into your plans, the quicker we can begin looking for the data that validates them, the quicker we can know if we're on track or not. So, focus on driver- based approach in terms of what's out. Now, if you read the Future Ready, the five levels of diamond level forecasting, they're timely, they're actionable, they're reliable, they're aligned and, finally, they're cost effective. Got a whole training course on this if you need more on rolling forecast, we can take you through that. The five attributes of diamond level forecasting. Leveraging on big data. We've got to start doing stuff using outside data. It's not just about the inside stuff. There's a lot of outside tests that tells us what's happening with the environment, what's happening with our supply chain, what's happening with our key competitors, our key customers. FP& A is more than just looking at your internal data. You got to be looking at both internal and external in terms of what's out there. Technique, if you're going to get future ready, you got to get into scenario planning. My forecast is what I think is going to have happened. It's nothing more than that. Based on everything where we are, based on how fast the ship goes, it's what we think is going to have happened. It's not the target. The target is higher or low. If I've already officially inaudible to make the target, that means I've fudged it. I don't want to a fudge forecast. I want a realistic forecast. Now, stuff happens all the time. How many of you out there excellent planners planned for us to have this Russian- Ukrainian war? How many had that in your forecast when you put your budget together? Huh? How many had the Fed going through the roof? How many had 8% inflation? There's stuff happens all the time that we don't know about. How do we protect ourselves? How do we be future ready for that? Well, the only way to be future ready for that is have your forecast of where you think is going to go, but then have a set of scenario plans. And the scenario plans are all the good things and bad things that can happen to you that you didn't plan for. So, when I think about scenario planning, I want to look at that and I want to look at my good and my bad. So, I'm going to develop multiple scenarios. This is going to be overwhelming, you're not going to be able to do this the first time you do it. So, think about just doing a limited set. I want you to start with one that is so bad, a scenario so bad that it threatens bankruptcy. Just what could wipe you out? What are the things you really want to keep you from wiping out? And I want one so good that you can't spend all the money you're going to be making. I actually want you to do your first scenario plan on the C, on the one that's so good. Don't be Dr. Doom all the time. What could make your business so good you couldn't spend all the money you're making? What product could you break through? What alliance? Because lots of times in finance, we never think about that. We're always worried about risk mitigation, risk control. We never think about what we could do could really break our organization free. So, spend some time on the upside scenario. Spend some time on a downside scenario in terms of what's out there. Look at the issues and the opportunities that cause it, that's what you're looking for. Eventually, you'll continue to develop lists of these scenarios that over time doesn't have to be all done at once, doesn't have to be updated every year. Once you have your scenarios out there, you can update them sporadically as things change. They don't have to be on a spiky annual cycle in terms of what's out there. But look at what causes those things and look for the leading indicators. Not only what causes it, but what could I have been looking at to tell me that it's coming? What should we have have been looking at that tell us that a Russian invasion of Ukraine... It had been talked about for quite a while, ever since Crimea. So, again, in hindsight, it's easy to see, but what you want to do in scenario plan is look for those leading indicators. And you're looking for those indicators to know what's the trigger point. At what point have we crossed the line that I need to start thinking about bringing in a plan? Because ultimately I'm building game plans. And the most important part of this is building game plans about what you would do instead. So, if something threatens you, your bankruptcy, what are you going to do? You're going to figure out how to pile up cash. You're going to figure out how to get real flexible to be able to survive a long downturn. If I'm going to have something grow, what am I going to have to have to be able to grow? You're usually going to have to have investment cash. You're going to have to have ideas. You're going to have to have... Think about that. Could your key competitors merge? What would that do to you? Could you have supply chains? The whole point of this is to try to think about in advance what could happen and, if so, how would you mitigate it? And those game plans are how you mitigate it. Now, you're thinking," Hey, something's going to happen. I'm not going to have thought about it." If you've done your scenario planning, even if you haven't thought about that particular one, you're in better shape. Because when you think about this, you're putting together game plans. Companies only have so many plays they can run. So, when you see a new scenario, you can quickly say," Okay, what does this scenario require in terms of plays, in terms of countermeasures, in terms of what's out there?" And you pull from the plays that you've already developed in the other scenario plans. So, you're better after you've done two or three scenario plans, even if what you've planned for doesn't actually happen, because you better understand what's going on. You're also better in that, if you see something happen and you have no plans for it, you at least then have time to react, to create the capability." Hey, our key competitors could merge and that would put us at a disadvantage. We haven't really ever thought about that. So, to counteract that we probably should start some discussion, so if mergers started happening, we would know who we might want to merge with." So, it's a matter of being proactive and that's what makes you future ready is doing it. Now, can you do that while you're dragging around this annual budget inaudible? No, you got to let go of some stuff to create time and capacity to be able to take on some of these new activities. Then you build that down. This has comes from American Express. They knew from the first Gulf War, basically, downside effects would take them down. They knew what their countermeasure was, what were the management actions they could take to bring themselves back up. That's what you're looking for, creating playbooks of how you're going to handle it whenever things happen in terms of what's out there. If you guys one of these slides afterwards, just give me your card. I'll be happy to send you the entire slide deck. So, you can take whatever picture you want, but give me your card and write slide deck on it and put the date on it and I'll send you the whole slide deck. Again, we're trying to make decisions faster with visualization reporting. Tables and tables of numbers, takes magic to figure out what's there. Use the pictures, tell the story, make it instantly recognizable what's important and what you want to talk about. Use visualization and it's lazy not to. It requires us to get out of our own heads and get out of our numbers and get out of this junk that we've been carrying around and get into visualization. But there's far better ways to communicate with visualization. Redesign and finance work, we got to move from this stop- start into continuous flow. When you think about finance transformation, what we're really trying to do is get finance where it's out of batch mode. Which is more efficient, a stoplight or a roundabout? If you're from Europe, you'd answer the question real easy. But from America, there's a handful of cities you live in you know the answer. Study after study has shown a roundabout is far more efficient. Why? Because nobody's wasted sitting on stop. Now, which is harder to do from a mental point of view? The roundabout. Everybody's got to be thinking at the roundabout. Everybody has to have shared values in the roundabout. If they don't have shared values. So, it's important, when you go driving somewhere, you know what the rules are. If you're in the Middle East, you know what the rules are when you come up the intersection? Who has the right of way? Whoever honks first. You need to know the rules and the culture wherever you are, but think about how do we get into a continuous flow in terms of what's out there? Then ultimately we're trying to focus on business transformation. Let me just give you this visual. As an FP& A team, what you are is first and foremost understanding what the ship is that you have. You're a ship on the ocean. You have certain capabilities. You can go certain speed. No matter whether you're in an annual plan or not, that boat only does what that boat does. Now, you can change it, but you have to do that over time. And what your five year plan tries to define, your strategic plan tries to define, what should that boat look like five years from now? What is it? What can it do differently? How much sleeker is it? How much fancier is it? What more can we do with it? And really what we're trying to do with transformation is move from the bottom right to the upper left. The only difference is, if we were really trying to retrofit a boat, how would we do it? We'd pull it into dry dock. We'd take it up. We'd get it out of the water. We'd sand blast. We'd do all kinds of things. You got to change your boat while you're fully under sale, while you're out delivering your mission, you got to do it while you're doing the regular business. That's what makes this hard. But it's not based on an annual cycle, unless we put it on one in terms of what's out there. I'll leave that up there. Now, this is the Q& A part. I got more slides, but I've challenged you with a lot of stuff and I'm sure a lot of you don't agree with me. So what questions do you have? Yes, sir. Brian.

Brian: Yeah. So, I pitched this years ago.

Steve Player: You pitched it years ago?

Brian: Yeah.

Steve Player: Okay.

Brian: 2018.

Steve Player: Okay.

Brian: Immediately got inaudible. Biggest problem with this is we benchmark for the full year. How can we draw up and down forecast on a continuous timeline while still maintaining some sort of conversation with business partners about the full year benchmark they're currently trying to get to. So you scrap the budget, you can still quarterly re- forecast and try and get them to what's your margin within a year? Where are you going to be at, at the end of the year? But also, Hey, there's another six months beyond that, that we can counteract inaudible.

Steve Player: Did everybody hear the question? Do we have mics in here, guys? If we could... Basically, your question, Brian, is how do you get people to benchmark with that?

Brian: Yeah.

Steve Player: So, to begin with, when we go to rolling forecasts, we go to a rolling forecast that's beyond the 12 month horizon. We don't just forecast to the year end. We don't forecast to the wall. We don't stop at year. Anybody that's doing rolling forecast and you stop on year end or December 31st. You're not doing rolling forecasts. You're forecasting to the wall. And you're not asking about the future. You're asking about the budget target you agreed to. When you only look to the end of the year, all you're doing is re- verifying. Are you going to hit your target, Brian? Because if you don't care what's happening in January. That's not a rolling forecast. Rolling forecast has a consistent horizon. And it's typically 12 months at a minimum, more likely 18 to 24 months in terms of what's out there. So, what we're asking is always looking at the same thing and think about my boat analogy. We're asking how fast your boat can run. So, we're asking the question, and the margin question I would ask is, on a 12 month rolling basis, is your margin going to reach the target it needs to reach? And if I always look at 12 months, I can always say where you are. And if on that annualized 12 months of what you've done and what's coming ahead, you're not going to get there, then we identify a gap and then we have to ask the question, what new actions? How do we have to change our... We won't get there if we don't change something. You can't just wish and hope," Everybody, work harder, do better." And we magically get there. We have to change something. We have to change our sales tactics. We have to change our headcount. We have to do something differently. So, what you're looking for is what is the action plan that when I apply that to the model of what we think is going to happen, this is the changes, we do these actions, these are the changes we're expecting to happen. Based on that, this is the result. And oh, by the way, when we factor in that action, how long does that action take? The biggest problem we have is we have action plans, but you got to bake in how long is it really going to take? If I'm going to hire new sales force, how long is that going to take? So, you got to bake in and make it time face to see really what's realistic. And what you're trying to get to is a more realistic conversation in terms of what's out there. But the good news when you try it again, because I'm encouraging you to try that again, contact me and we'll talk about what LT Apparel did when they eliminated their budgets in 2018, I've got case studies of companies that have done this that'll help you articulate what would happen. But the key thing is having good action plans that say," What do we do to bring this up to where we need to be?" Brian's got... He's got a question over here, Brian, who's next after that? So I'm going to have Brian running all over the... Thanks, Brian. I appreciate you.

Brian: Is this on?

Speaker 4: Thanks. So, we just switched to a quarterly forecast last year, and one of the issues that we've been running into is, I'm sure everyone's familiar with an AOP. An AOP requires a lot of heavy lifting and input from all of our partner teams and to do it on a quarterly basis has been pretty burdensome on them. They're not able to focus entirely on their regular initiatives. They have to dedicate a lot of time to this quarterly forecast. So, what are some of the ways that you kind of balance that and reduce the burden on the stakeholders across the company?

Steve Player: I would take my annual process and I would stretch it out. How far out do you annually do that today?

Brian: For our rolling forecast?

Steve Player: Yeah.

Brian: It's about two to three years.

Steve Player: Okay. So, I'd taken and focus on a three year process or two to three year process, how far they can realistically see? So what I'm looking for is I'm looking for them to start making this a start- stop exercise, and to make it a continuous exercise. So, what am I going to do over that three year process to improve my operation, to get up to where it needs to be? Then I'm monitoring to say, is the action plan that you had baked in there actually getting there or not? If it's getting there, great. If it's not getting there, what are you going to do differently? So I'd get people out of the old mode, because what you're condemned with is people on the old budget mode. I figured out how to shift them out and get them into moving on a rolling basis in terms of what's out there, where we're looking at the action plans you have on the books, the expected improvement that's going to make and whether or not it's achieving. If it's achieving it, great, if it's not achieving it, what are you going to do instead? But just get them into this continuous... And then figure out how to make the process driver base, so that when I'm really saying this is what's happening and I'm focusing everything on the action, but focusing everything on the thing that's going to make everything improve and breaking down that way. And I think if you'll get them thinking more in terms of that, what's happening over the next 18 month horizon. Other questions. Yes. One here and then one in the back.

Speaker 5: Thank you. Just kind of piggybacking back off of her question. Is there something that, for lack of a better word, suffers, so is there a level of granularity, for example, that you may no longer go down to in order to make this a more continual process? Are you following trends on certain-

Steve Player: When I'm looking for this, I'm not trying to budget at the line of account, the chart of account level. Because in most situations, 80% of the chart of accounts aren't really critical. They're not the critical driver. They're not what really makes it. I want to look at the handful of key performance indicators and focus things on the things that move the business. I want to think about what's a handful of things, if I get these right, we're going to get there? And quit wasting. One of the dumb things we do is we spend a lot of time on the 80% of the stuff that whether it's right or wrong, it didn't make a difference. We mechanically have to, because that's where the budget process is we're supposed to do. But if I look at it in the grand scheme of things, it doesn't matter. We just got to quit wasting our time on stuff that doesn't matter and focus instead on the critical things that do. We get those right, we're going to be a whole lot closer to being where we need to be.

Speaker 5: Thank you.

Steve Player: Okay. I think we had one on the corner, Brian.

Speaker 6: For my situation, it's more, I'm on the nonprofit side. So, how can we have a rolling forecast that goes beyond a year when most of our grants, because most of our money comes from grants, they're for a year. We do have a few that can go anywhere from three to five years, but then the rest of them, all that money is like, we can't predict whether they're going to be renewed, come in.

Steve Player: You could look at your history to say, what history we have in terms of renewal? You immediately could look to start trying to switch to three to five year grants. Because it would make you more predictable, more stable, everything. So, I'd first start trying to do that, because that's a better long- term solution. But then you could look at... And then the second thing you do is how do I make my cost structure flexible? And then the other thing is get out of the calendar mode. If people only want to give you a grant for 12 months, that's fine. Take a fourth of them, get them for the first quarter and have them go to the first quarter of the following year, get another fourth, the second. So, that you're still doing just 12 month grants, but you've got their end date spread out so that you've got a steady flow. So, if you had a fall- off, you have time to adjust for it. So, just some quick strategies to tackle that.

Speaker 6: Yeah.

Steve Player: How are we doing time- wise? Am I out of time?

Speaker 7: You got seven minutes.

Steve Player: Well, I got seven minutes. Okay. Don't let that stop for your questions. I just don't want to run over, because somebody else has this room afterwards. Brian.

Speaker 8: So following on, on her question over there, and you had a note on one of your earlier slides to fund activities and not budgets, or fund activities and not the GLs on slide 14. How do you do that? Well, I guess, how do you do that? Because your accounting is set up in GLs. The operating team works in budgets. And unless you have a really robust activity- based costing that's going to link the two, then you're always going to be rationalizing.

Steve Player: We have done this magical thing called the budget that authorizes people to spend money. It's like your daddy gave you an allowance. I got budget for that. And that's really what the budget is for a lot of people. It's your allowance. You go talk to people, they just are magical," I got budget for that. I can spend like a inaudible. That's how a lot of people treat it. And that's what budget in a lot of companies have become. When's the best time to sell to a company? Right before the end of the year. Why? Because if they have any budget left, they're going to spend it whether they need it or not. Why? Because next year's budget's usually based on this year's actual. So, they want to make sure they get to use it in terms of what's out there. That's the main reason. But if instead, think about it differently, if instead, if we use the budget to cost control, then I want to think what's a better way to control costs. And a better way to control costs if you go to an expense ratio analysis. So, basically what I want you to think about is what is the cost per output. If I'm a department, a service department, what do we produce? And what is the cost per output? Is it grants? Is it invoices process? Each function has... Is it, we had X number of recruits? Think about what is the output you do and what's the cost per output. Then to manage costs, have everybody focus on how do I improve my cost per outputs? And I can use benchmarks to focus on improving cost per outputs in four simple benchmarks. The first one starts when you have no information at all, other than what that department does. So, everybody could always track their personal best. So, for the invoicing department, what is my cost per invoice process just looking solely at what we've done? What's the best we've ever done? And look at that over a history of time. And it is like an athlete. It's your personal best. You're always competing against your personal best, no matter how bad an athlete you are, you still have your personal best. So, you're always working and trying to get better. The second level, you bump it up and you have different departments doing similar things. Then you compare peer to peer. Internal department, you got four different divisions. What does their invoicing do across each of the four? Who's got the best? And what I want to use that for is whoever's doing the best, we want to learn what they're doing. Why are they the best? What can we learn from them? Because we're trying to get everybody up to that same best. So, peer to peer. Third level, we get to competitive benchmarking. How do I do versus my competition? This is real important, because if I'm not doing as good as my competition, they're better than we are. And if they're better than we are, they're going to get bigger and stronger and we're going to eventually go out of business. So, we got to at least meet the competition. The fourth level is, once you're... If you're Southwest Airlines, and you're beating your competitors on a regular basis, then you got to up the game and start looking at world class best. Who is the best at that function and what can we learn from them in terms of inaudible? But it's changing, getting out of this allocation mindset and getting into a different way of managing costs on an output basis that's flexible as business goes up, business goes down. If my outputs go up, I get more money. If my outputs go down, I get less money. So, I build a flexible budget, a flexible operating plan, when things go up or down, that self- adjust in terms of what's out there. Now, I realize that's a whole lot to say, it's a gross oversimplification to tell you that in 60 seconds and say," Okay, go forth and prosper." So, call me when you have questions. I have white papers. I have a lot of backup that help you further understand and learn this. Okay. Other questions. Let me very quickly just show you what the rest of the slides were. I'm not going to have time to go through them but these will be in the deck and you can call me and ask about any of them. Basically get to continuous planning. What we're really trying to do is really understand where are we falling short and what's our plan? Until you've planned that action plan to overcome the shortfall, you really haven't planned yet. That's what we need to be doing in FB& A, that's what adds value is figuring how to change that in terms of what's out there. That's my email on the bottom. Just reach us at futurereadyfinance. com. Other questions. Yes.

Speaker 9: So just getting my mind wrapped around getting away from an annual budget. Sorry, how do you think about incentive plans just in terms of, hey, I'm not going to a annual budget anymore. Yeah.

Steve Player: First thing you have to think about incentive plans is, do I have to incentivize people to do something? And then I think about incentive plan, I want to pay them for what they actually do. I don't want to pay them for being really good at negotiating a low target. So if you build your incentive plan based on some percent of accomplishment that has a measurable thing, if our company as a whole does something, then this is... There are ways to build incentive plans based on target numbers and things like that. And beyond buzzing, we are firm believers in group incentive as opposed to single incentive, unless you're an individual salesperson, usually you're never doing anything by yourself. You're usually part of a team. So, we find group incentives are more fair and work better than individual incentives. Group profit sharing plans and things where there is everybody sharing in the benefits are very in tune with how we think about things, how we've seen other companies. We could just show you the different examples from the company. The difference in our research is it's not Harvard academics dreaming this stuff up. It's deep research into what real companies have done and we've documented case study and pulled out the Beyond Budgeting principles from observation of what people in the field have done.

Speaker 9: Great. Thank you.

Steve Player: Yes. Right over here. Go ahead. He'll bring it while you talk.

Speaker 10: How do you recommend month end reporting? It's usually an actual budget variance analysis, what accruals did we miss? Is it year- over- year comparison?

Steve Player: How do we recommend month end period end reporting? I quickly would say, if you stop doing budget, you can immediately replace it with actual to actual. So, what is this month to last month? What is this month to the same month? The previous year? The previous quarter? I can immediately look at actual. Now, the benefit of actual, if I look to a budget, I made a bunch of assumptions about what the budget should be and some of those assumptions have been true and some of those assumptions have been false. So, I'm trying to basically get rid of having to think about that. Yes, the prior year actual would've been different, but everybody lived through that. So, if you want to just stop doing budgets and do actual to actual, actual this year, last year, that'd be a quicker, better way to do it and it'd be more factual in terms of what's out there. Again, what we're looking for is to strip it down into the things that help you and give you a valid comparison without a lot of assumptions and things that can create dumb stuff. I mean, I could go into all kinds of rants about why the calendar is terrible way to do it. Think about months. Months could be 28 days, 29 days, 30 days or 31 days. They can have multiple weekends. We'd be all better off if we created 13 four- week months, if we just quit following the Julian calendar and went to, okay, we're going to have four weeks each month, they're going to start on a Sunday. They're going to end on a Saturday. Every month would look the same, they'd instantly be comparable. It'd be a whole lot better model than the mathematical when we built using calendars. But we've always used calendars. Everybody's used to using a calendar. So, again, we take dumb stuff and we embedded in our processes and we wonder why we get to have to do crazy stuff that really doesn't make any sense. Stop the insanity.

Speaker 10: Thank you.

Janet: inaudible 13 four- week period still requires you to have inaudible week every seven years.

Steve Player: I can't change the rotation of the sun. I hadn't figured that one out yet. So, you got me. You got me on that one. But if we only have to do it every 13 years, why don't we just declare that world holiday? Hey, we're on the 13th, let's just have world holiday week. You are correct. I like you thinking, Janet. Thanks. Thanks. Yeah. Yeah.

Brian: Okay, guys, we'll probably take one more question then we have to wrap up, because we have another presenter in about five minutes.

Steve Player: Oh, I'm bleeding over. I apologize. I'm supposed to have a 20- minute break here, but I'm bleeding over. Guys, I'm around for the rest of the night. If you want the presentation, just write the date on the card and give it to me and happy to chat with you about this. You can find me afterwards, happy to talk. Love the Planful group. And I love what you're doing. Don't let this depress you. It is supposed to inspire you. So, thank you very much.


We’ve all faced the frustration of improvement efforts failing to have the expected results. And with today’s finance and accounting teams struggling to meet constant challenges in an ever-changing environment, it’s harder to find ways to increase impact without team burnout. Join noted author and FP&A visionary Steve Player, Managing Director at Future Ready Finance, as he shares lessons learned from leading-edge FP&A implementations. He’ll explain how companies have dramatically reduced the time needed to plan by moving to rolling forecasts. He’ll then explore best practices for dealing with uncertainty using scenario planning and show how you can quickly create the capacity to move forward and become future ready.

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Steve Player

|Managing Director at Future Ready Finance