Before becoming Vena’s CFO,Darrell Coxspent most of his career in FP&A seeing what planning processes worked for some companies that thrived and what proved costly for others. He has long advocated for integrated business planning and tearing down data silos between finance and operational departments.
Eager to share his experiences and lessons with business leaders and finance and operation professionals, Darrell’s “taking the stage” at theVena Nationvirtual conference as a keynote speaker to discuss how agile integrated planning is key to companies not only surviving, but thriving in times of change.
We sat down with Darrell ahead of his must-see Vena Nation keynote on May 12 to find out what agile integrated planning means to him, what makes for a successful planning process, how to thrive in the face of change and how to make the best planning decisions for today and tomorrow.
What are the essential elements of a successful finance-led business plan?
The best plans are the byproduct of effective planning processes, the most successful ones sharing two essential elements: they’re aligned to company-wide business objectives, and they’re optimized to pivot quickly to detect early signals (good and bad) and facilitate appropriate course corrections.
Being ready to pivot is—simply put—pivotal. The one thing I can tell you about a plan, any plan, is that it is going to be wrong at some point. It’s just a matter of when and by how much. At some point, you will need to move to a new plan. This means knowing when to anticipate a change for the business, how to be agile to make that change, how to adapt and how to move forward.
Delivering a successful plan requires lots of good data at hand, an effective and efficient process and a great planning tool that orchestrates all these elements in a single, finance-owned system.
Can you speak to an example of a company that got agile planning right?
One of the most dramatic and well- known examples is Netflix. You may recall the firm decided early in its history to focus on renting movies instead of selling them, poivoting its business model to the subscription and streaming product we know today. If they hadn’t done that, Blockbuster might still be a household name today.
Closer to home, just East of Toronto, there once was a very prosperous company called McLaughlin Carriage Company that started manufacturing carriages in 1869. By 1915, they were really good at it, producing a new carriage every 10 minutes.
But while business was going well, 1915 was also the year McLaughlin sold its carriage operations to focus on building car bodies and installing drive trains from Buick, another former carriage manufacturer. Eventually Mclaughlin became General Motors Canada. You can imagine where they’d be if they had stuck to the horse and buggy market instead.
What are some of the main benefits of effective integrated business planning to companies? To finance departments? Or to you as a CFO?
Effective planning helps to prioritize and set objectives for the company as a whole and for each of its departments. You can’t do everything and neither can your company, so you’ve got to prioritize and focus where you spend your time and resources (i.e. cash).
Effective planning also aligns people around these prioritized goals and objectives. Netflix decided to focus on renting movies rather than selling them, even though sales were driving the business at the time. The entire company needed to be aligned to be successful in making this change and an integrated process ensured this happened.
A successful plan will then establish an effective framework for decision making. It will help ensure everyone is making decisions that work in concert with that framework, and again, that roll up to support the overall company’s priorities and objectives.
For finance leaders and their teams leading integrated planning processes, a particular benefit is maximizing the impact of the finance function at their organization—ultimately maximizing the potential of the business as a whole.
How can CFOs ensure their plans are set up to pivot? What are the best practices for a plan to be agile and adaptable?
As I’ve mentioned, while I can’t tell you when or by how much, any budget or plan will prove to be wrong at some point. Good or bad, that’s simply a reality and there’s no point worrying about it. You just need to be ready for it. Uncertainties arise from inside and outside the company all the time and they can be your enemy—or your friend.
The best way to be ready for your plan to be wrong is to optimize your planning process from end to end. I set up my process to detect the earliest signals I can that a plan needs to be changed by analyzing and reporting on leading indicators and not by relying on traditional, lagging indicators.
I make sure I bring in as many stakeholders into the process as early as possible, getting their input and encouraging discussion and debate. And I always remember to be open and transparent. I also use a planning system to ensure I can do all of these things as fast as possible without compromising on things such as data timeliness and accuracy. You need to have a fast and efficient process to be agile and adaptable.
You mentioned that for a planning process to be agile, you need to focus on leading indicators. What do you mean?
To use a baseball analogy, consider that hitters need to start their swing before the ball crosses the plate or—for the best hitters—before it even leaves the pitcher’s hand. If hitters wait until the ball crosses the plate, there’s no chance they can score a base hit.
Put another way, the umpire calling a strike is the lagging indicator. The leading indicators start while the pitcher is still winding up for the throw.
As a finance leader, if you want to react as quickly as possible to increasing or decreasing sales, you need to be looking at leading indicators such as pipeline health and the quality of sales leads; leads that will eventually cross the plate and convert into sales. If you are only looking at sales or revenue, you are waiting for the umpire to make the call.
The great news is that with a solid planning solution, you can bring leading indicators into the planning process early and often. You can have the necessary historic data on which to base your plan and to report against it in a timely and efficient manner.
Leading indicators are critical to me in my CFO role, which I often refer to as Vena’s chief storytelling officer. Yes, my job includes delivering monthly financial statements (lagging indicators), but more importantly, it’s about using leading indicators to tell management and my board a compelling story about where the company is, where it’s headed and where we should be going. And that’s how CFOs can best inform the smartest decisions about the future, to plan with agility and confidence for today and tomorrow.