The final quarterly meeting of the London financial planning and analysis (FP&A) Club in 2013 was held in the UK capital this week on 1 October at the Mountcalm Hotel in the City of London. After a successful inaugural year the organiser of the Club, Larysa Melnychuk, restated its founding principles of democratic selection of topics to be debated; its no vendor, non-profit status; and how it must act as a networking forum for sharing best practice and a means of increasing the influence of FP&A professionals within corporations and finance departments.
The FP&A Club has recently expanded its reach, hosting its first meeting in Ukraine last month and announcing another one in Moscow to follow this month. The Club, which started out in London, UK, at the turn of the year is also looking to establish chapters in Sweden, Switzerland, Dubai, UAE, and elsewhere in the world as more and more FP&A professionals become aware of its existence. In addition, a London FP&A Advisory Board has been established to guide its future development.
Jim Kaitz, chief executive officer (CEO) of the supporting Association for Financial Professionals (AFP) organisation was also in attendance at the fourth London FP&A Club meeting to update attendees, such as Lewis Girdwood, head of FP&A at easyJet, about the new AFP FP&A test and certification programme http://fpacert.afponline.org/ which is designed to provide a professional standard for this growing field and support the Club’s aim to increase the influence of FP&A professionals.
“The curriculum has been developed by 12 corporate practitioners and the certification programme has now launched,” said Kaitz. “You can register to take the first exams in the spring of next year, alongside 120 people who have already signed up from around the world.”
Kaitz emphasised how the new curriculum covers numbers but also communication and other skills, adding: “You have to be able to communicate your views, understand people, organisational cultures and management, so that you can share your expertise.”
Picking up on this point the keynote speaker for the fourth London FP&A Club meeting, Rupert Merson, adjunct associate professor of strategy and entrepreneurship at the London Business School (LBS), said that the alternative title for his address nominally called ‘Business Culture and FP&A’ could have been “how to get anal retentives to talk to human beings”. By which he meant how to get numbers-focused finance and planning professionals to communicate their ideas better. As an English Literature graduate who is also a chartered accountant and a qualified human resources (HR) professional, Merson said that he understood both sides of the divide between analytical numbers-focused professionals and more people-centric professions such as HR but he stressed that both had valuable lessons to teach each other. Anyone who could understand the type of person they were addressing and the organisational culture in which they worked would stand a much better chance of seeing their ideas, projects and status being progressed.
Professor Merson has taught at LBS for 15 years about management and culture, and is the author of six books including ‘A Guide to Managing Growth’ and ‘Rules Are Not Enough’. Indeed the title of this latter book is why he believes that culture is important; because rules are not enough and as his book title implies you cannot base a business solely around them and numbers. “You need to think about organisational culture, people, hierarchies, motivations such as performance-related pay, bonus incentives and so forth, and factor these into your planning.”
Analysing numbers is all well and good but they have to be the right numbers. The business culture – and its subsequent procedures and measurements – have to be correct in the first place to ensure a successful business. “It isn’t necessarily true that if you cannot measure it, you can’t manage it,” he added, citing the other famous saying that ‘what gets measured gets done’ as an example of how too close a focus on numbers, without enough attention being paid to culture, can present a risk to a corporation.
Cultural Capital: London FP&A Club Hears About the Importance of Culture
Objective and subjective measurements were discussed at the fourth meeting of the London FP&A Club meeting, with Professor Merson stressing that whoever designs finance, tax and remuneration schemes at a firm has to try and avoid dysfunctional outcomes and incubate good entrepreneurship. “It’s no good selling bad loans to people who cannot afford them, to get a bonus,” he said, by way of example.
Tax-driven dysfunctional outcomes were also highlighted by Merson who warned that many finance departments and corporations these days were locked into ways of working and structures that might be profitable in the short-term, but were not necessarily good for the future if regulatory and societal conditions changed. Organisational cultures have to reflect these wider cultural realities and good planning must be aware all factors that could impact the success of a business. A certain amount of flexibility is essential.
The issue of entrepreneurship was discussed by way of what is required to encourage it. Companies can do it but nations are crucial too as Charles Handy showed in his book ‘The New Alchemists’, said Merson, listing the qualities needed to support entrepreneurial spirit as:
- A vibrant educational system.
- Research-based institutions and universities.
- Diversity in population and liberal attitude to encourage enquiry.
- Easy access to risk finance.
The difference between big corporate and little company thinking was discussed at the Club and how it alters throughout the lifecycle of a firm. The founder’s personality initially drives organisational culture, said Merson, but this often dissipates over time.
Case Study: Firkin Pub Chain
Merson illustrated the importance of personality with a case study about David Bruce, the founder of the Firkin chain of pubs in the UK, who started out with a single pub in the Elephant and Castle district of London that didn’t have jukeboxes, sold on premise micro-brewed real ale, and was genuinely unique when it started because he was a real ale enthusiast. The founder eventually sold out to a large brewer, however, and as it was franchised across the land and even into the US, the distinctive qualities of the original brand that made it so popular disappeared. “For perfectly rational reasons little decisions such as the idea of reinstating jukeboxes because they make x amount of money per night, delivering in beer from a centralised location because it’s cheaper or it lasts longer, were taken,” explained Merson. “Before you knew it the Firkin pubs were just another bland chain. There are now no more Firkin-branded pubs in the UK.”
Organisational culture matters, concluded Merson, citing the Firkin pub example and FP&A professionals should take the time to understand it and factor it into their analytical models and planning decisions.
Vox Pop: Reaction Quotes
According to Ash Sharma, head of FP&A at Alliance Healthcare: “I would have liked to have seen more about structures tonight from the presentation at the fourth London FP&A Club meeting and to have some more take-aways about how FP&A professionals can master the softer cultural side of things, as opposed to just concentrating on the numbers. I wanted to find out how you can be a change agent for cultural issues, but I am not sure I have gained a model to follow. Having said that it was an enjoyable presentation and cultural issues are hard to ‘bullet point’. The London FP&A Club is also a great networking event and it was worth coming for that and the interesting debate.”
Conversely, Hans Gobin, a contractor who has just finished heading up the FP&A function at Marston Group Ltd, a UK debt collection firm that primarily works for the UK government retrieving court / traffic fines and so forth, liked what the speaker, Professor Merson of the London Business School, had to say.
“I really value a speaker like Rupert because I’ve headed up the FP&A function at four to five firms over the last few years, working as a contractor (mainly for private equity initiatives) and I recognise many of the things he is talking about; with different cultures evident at the different firms I’ve worked at. There are big differences between small companies and big corporations, between management buy-out (MBO) operations and private equity ones, and so forth. It’s important to recognise the differences and pros and cons of each. Rupert spoke well and made me think and question organisational structures, which is what I wanted.”
For Joseph McElligott, finance manager with HWPH healthcare, an effective FP&A process needs to recognise and actively consider the cultural dimension, which is why he enjoyed the evening. “The challenge for an FP&A professional is to find the best way to incorporate the formal and informal, the rational and irrational, into our planning,” he said. “The creative and the routine have to be accommodated to achieve optimum outcomes.”
- If you would like to find out more about FP&A and the plans for the Association for Financial Professionals’ (AFP) certification programme please follow the highlighted link for more information, sign up to the AFP FP&A e-newsletter or visit the FP&A website. There are also gtnews FP&A Interviews available with Lewis Girdwood, head of FP&A at easyJet; Jeremy Dahdi, director of planning and reporting at Pearson; Fabrice Domange, senior vice president (SVP) and head of financial planning and analysis (FP&A) for Europe, Middle-East and Africa (EMEA) at AIG Property and Casualty, and Ricardo Losada Revol, director of corporate finance at World Fuel Services – for those interested in reading more about the subject.
- To contact the London FP&A Club about the free membership for finance professionals, or to find out more details about forthcoming events, please email Larysa Melnychuk or join the LinkedIn FP&A Group. The next staging of the London FP&A Club will be in January 2014 when the topic will be implementing rolling forecasts.