Biz Articles

This page contains published business articles that I have written.


“FP&A Seasonality & Opportunity” appeared in the November 2014 edition of the Association of Financial Professionals FP&A newsletter.



FP&A Seasonality & Opportunity

Thomas W. Smith, CMA, MBA

If your company operates on a calendar-year basis, then there is a very good chance that right now your FP&A organization is experiencing all of the seasonality of a three-ring circus. When monthly closings, formal estimates and budget building all collide, the result can be extremely demanding, if not outright chaotic.

In trapeze-like fashion, we adeptly swing from current monthly actuals to current year estimates and then precariously stretch across to grab the next year budget ring as it flies by. Add in the all too often spider web of excel workbooks that surround these processes, and it soon becomes very easy to identify with the tightrope walker who makes his living out there on a wire high above the ground—without a net.

Ironically, budget season begins and ends with people outside of FP&A. Usually a top financial executive or senior member of management kicks off the process with great fanfare and optimistic proclamations. Budget pro- cess improvements are trumpeted and are promised to make our lives much easier this year. And then it is off we go as usual out into the wide open spaces. Typically our first purposeful steps land us in discussions with sales leadership about a sales budget.

Sometime soon after the inaugural euphoria and fuzzy sales talk ends, getting the FP&A detail work done takes over as top priority. A period of time typically follows where there is time spent working in solitary or with fellow FP&A or finance team staffers. After the initial roll-ups occur, it again becomes more about the people. After all is said and done, it is people who develop the stories and deliver the messages that bring the numbers to life.

 Opportunity knocks

At this point in the process, FP&A should hear its opportunity knocking at the conference room door. FP&A has a tremendous opportunity to add value in organizations by not only helping business leaders and senior financial executives to craft the budget story but also in helping to tell it to other top tier non-financial executives. Many a budget-building FP&A professional has feared the stressful impacts that budget presentations inevitably bring. But these forums are actually true opportunities for FP&A to shine. After all, what better way is there for FP&A to add value at budget time than being able to explain your business and the changes in it to the people who are ultimately responsible for its success but who do not work with its details every day?

Those who are leaders and mentors within FP&A organizations everywhere have both the proximity and responsibility to lead positive change in this area of FP&A performance.


“Dual Roles, Dual Perspectives” appeared in the September 2014 edition of the Association of Financial Professionals FP&A newsletter.


Dual Roles, Dual Perspectives

Thomas W. Smith, CMA, MBA

Some companies draw crisp distinction between their financial planning and analysis organizations and traditional controller roles. While specialization can be a necessity in very large organizations, the opportunity for FP&A to stand in the controller’s shoes can be unexpectedly beneficial for both the individuals involved and the organization alike.

Due to a controller vacancy and some pending reorganization at my company, a dual-role assignment came my way. For about a full year, I served as both controller and FP&A director for the same division. Beyond the challenges of the workload, it was a great learning experience that brought with it improved perspective.

Dual role differences

Because people, not positions, make up organizations, boxes on an organizational chart are simply empty shapes until someone breathes life into them. While the pressures were definitely there to keep each respective role compartmentalized, I managed to add my own signature and style to the hybrid position. What emerged in the role was somewhat surprising—a healthy latitude for some newfound creative freedom.

The dual role experience served to reaffirm my view that controllers are a breed apart from FP&A types. Controllers tend to value precision, schedule adherence, and predictability within their domains. On the other hand, FP&A often finds itself swimming in the murk of considerable uncertainty. Accordingly, FP&A is typically more comfortable in the exercise of directional accuracy and estimates than their controller counterparts.

For controllers, repetition, detail and process stability bring confidence and help maintain self-esteem. While apt to view these attributes as necessary, FP&A is more likely to see work laden with this content as perfunctory, boring and unfulfilling. Cross-functional collaboration, a more varied task set, and a closer connection to the business, are more likely to be among the motivators for FP&A.

Dual role expectations

Controllers are oriented toward very accurately processing large amounts of detail within time-defined parameters. Of interest is that with little variation controllers seem to expect the same from anyone who occupies a similar role. In other words, the controller’s crew was not about to cut their dual role partners much slack in this regard. They expected an excellence that was on par with their own.

Similarly, the FP&A team still had its own set of high expectations. The result was that both groups expected 100 performance on their side of the dual role. No one in either group seemed much inclined to compromise on any deliverables. Twice as many things became top priorities on a continual basis. Keeping both sides happy at the same time was the most challenging aspect of the dual role.

The dual role required the ability to move cleanly and quickly between simultaneous activities. As an example, “RVR Sarbanes-Oxley” documentation on the controller side versus analytical modeling support for new product

development on the FP&A side mandated versatility. Differentiation between these activities lies along a continuum of certainty. The former is largely a backwards look at compliance, while the latter helps others in the organization to turn their ideas into tangible products.

Dual role efficiencies

The most efficient part of the dual role was the ability to function as a self-contained unit. Acting as both quarterback and receiver, it was very beneficial to be the one who closed the books each month and then also performed the analysis and updated the estimates. Eliminating the middle man brought increased visibility into the results at an earlier point in the close and an ability to move forward faster post-close.

FP&A was now in control of its own destiny because it could directly influence the timing of the monthly close. It was no longer necessary to wait for the controller to declare that the month was closed. Unencumbered freedom to reorder tasks allowed for a quicker close, and this dual role efficiency proved especially beneficial during estimate and budget season. The handoff between controller and FP&A became truly seamless.

Dual role benefits

Most would agree that having two jobs at the same time is not for everyone. Nor is it a good long-term solution for any organization. However, the dual role became an excellent opportunity for me to revisit my inner-controller self, while still performing the FP&A work that has always felt very natural and has been the source of greater career satisfaction during my career. From the organization’s point of view, it successfully delivered the desired cost reductions.

The dual role assignment also provided two less obvious, but per­haps even more important benefits. The first was that some sacred cows died when necessary financial process improvements occurred in order to make the dual role work. The second and potentially less recognized benefit involved accelerated professional de­velopment for the supporting financial staff whose flexibility and talents were increasingly employed.


“Calculating the Total Cost of Ownership (TCO)” appeared in the September 2013 edition of the Association of Financial Professionals FP&A newsletter.

By Thomas W. Smith, CMA

Buyer’s Remorse

Buyers everywhere face pressure to deliver cost savings.  The problem is that too many eyes become focused on stated vendor cost rather than Total Cost of Ownership (TCO or “Tee-Co”).   Looking at an invoiced cost only tells part of the story. TCO brings clarity of true comparative economics.  The concept is one of leveling the playing field between vendors and vendor origins.  It is especially applicable to off-shore and low-cost country supply chain options.   It works for goods and services alike.

When is a bargain no longer really a bargain?   The short answers lie in typical buyer’s remorse.  It’s   when the product or service ends up costing a lot more than we than we thought it would ,or when it turns out that it really would have been cheaper to buy it elsewhere.   By the time a buyer unwittingly commits to an adverse purchase, it is often much too late to do anything about it.  The cake is in the oven and baked, and it’s rear-view mirror time – all too often without even the benefit of 20/20 hindsight as the incremental costs remain hidden or otherwise disaggregated.

Understanding True Costs with TCO

Maybe our buyers should have thought things through a bit more, kicked a few more tires, or looked harder for hidden costs before pulling the trigger. As individual consumers, most of us know this feeling all too well, and it’s really no different with larger-scale business purchases.  Without discipline and the proper tools, human nature predisposes us to make these same mistakes- only this time with our employers’ money.   With higher- volume spends, misinformed buying becomes a higher stakes poker game where no one wants to make the fool’s bet.

The TCO approach offers a way to put alternatives on the same basis by explicitly quantifying costs that were previously hidden or are disaggregated within typical accounting systems.  All too often, what we see on the invoice fails to tell the true story.  TCO unmasks the Other Relevant Costs of Ownership (ORCO) and allows for greater visibility of inevitable trade-offs.

TCO = Stated Vendor Cost + Other Relevant Costs of Ownership

TCO for Product: TCO for Service (Engineering or IT):
Stated Vendor Cost per unit Stated Vendor Cost per unit
+ Freight  + Extra Hours at Stated   Vendor Cost per unit
+ Customs & Duties + Internal Management Time
+ Tooling + Internal Analysis & Design Time
+ Product Lead Time + Maintenance & Ongoing Support
+ Net Working Capital + Net Working Capital
= Total Cost of Ownership = Total Cost of Ownership

TCO for Products

Usually cheaper labor is the factor that allows a perceived low-cost country (PLCC) vendor to get our attention with a low stated vendor cost.  We soon discover that it will cost a small fortune to ship that product at least half way around the world.  We also will encounter the added cost of getting the goods out of port on a timely basis. Ocean freight is cheaper than air but can add lead time challenges, which in turn greatly hinder our ability to respond to customer-driven demand changes.   If we choose to play a just-in-time game and use air freight, we can expect to pay significant premiums.  Tooling costs can also differ greatly, and net working capital trade-offs stemming from MOQ and terms differences also factor into the equation.  Taking a few minutes to understand the ORCO can pretty quickly turn our initial stated vendor cost comparisons upside down.

TCO for Services

The TCO service example is best viewed in the cases of Engineering or IT outsourcing to PLCC vendors.  Similar to our product example, the allure is in the quoted low cost per hour.  It appears to the buyer that the same resource costs a lot less.  The key here is to make sure that the resources truly are the same and can perform at the same level.   If the resources differ in capability and/or speed, we can expect to foot the bill for an excess of hours to complete the project as well as some potentially significant internal management costs expended to keep things on track.  Additionally, supplemental analysis and design support may be required because the PLCC resources lack specific knowledge of our businesses and applications.   Resulting design oversights can lead to higher ongoing maintenance and technical support costs.   With ORCA quantified, TCO shows us a view that may stand in stark contrast to our initial stated vendor cost comparison.

Toward Better Decisions

TCO is the type of cost analysis technique that may originate outside of Finance- in a buying or using department within our organizations.  Reality says that FP&A is not necessarily going to be the group that establishes every best practice that an organization adopts.  However, it’s good if we know it when we see it and can help it along.  FP&A is often uniquely positioned to help the originator of an improved method, stronger process, or otherwise great idea to leverage it for the good of the enterprise.  Spotting, sponsoring, and spreading the word on best practices are all part of what FP&A should be doing every day.  The idea is to recognize and propel good ideas and beneficial initiatives forward with greater velocity and impact so that our organizations can make better, more well-informed decisions.   Often, FP&A buy-in adds credibility to operational and business team initiatives and tools.   TCO is one such example.


 “Getting to Core FP&A Duties” appeared in the July FP&A (Financial Planning & Analysis) Newsletter published by the Association of Financial Professionals.

Getting to Core FP&A Duties

by Thomas W. Smith, CMA, MBA

Geoffrey Moore, author of “Dealing with Darwin,” categorizes an organization’s activities as context or core.  Context is work that on its own may be justified but does not yield competitive advantage. In contrast, focusing on core is how an organization achieves market differentiation and separates itself from the field. Repurposing or extracting resources from context to core is seen as the winning strategy.

Although spun from a strategic marketing perspective, this message is very applicable to financial planning and analysis as an emerging finance specialization. Too much FP&A time and focus is spent on context and not enough is spent on what those running the business view as core FP&A. That can leave the FP&A group standing still while the rest of the organization moves on without them..

Connecting to core can be extremely challenging, as leading examples of organizational context often remain attached to FP&A job descriptions. Closing the books, updating forecasts, performing monthly reporting, and building budgets are just a few time-consuming examples of context-centric FP&A. As such, a key challenge for FP&A lies in repurposing just enough of its available resources to allow for core connections while at the same time completing contextual job elements with the same zest, zeal, and competence as is shown to core.

Identifying core FP&A duties

You may ask yourself, How does the organization define its most important work? What do key business leaders see as the potential game-changers? Through which processes or products will the company achieve marketplace differentiation? What actions will maintain achieved differentiation and prevent commoditization of the offering?

Composing these questions is the easy part of identifying where core lives in the FP&A function. In many organizations, we may find that the answers to these questions have eluded clear articulation in strategic planning meeting minutes. Be aware that core assumes various sizes, shapes, and textures in different organizations and industries, so it becomes a safe bet that one may have to look under quite a few rocks to locate it.

Connecting to core FP&A duties

While FP&A must typically remain tethered to finance, the boundaries we encounter will typically be soft enough to permit exploration. Accordingly, establishing increased FP&A connection to core requires finding core-related activities in which to participate. Identify processes, projects, and people already involved in this work. Show an interest, and invest the time, to learn how they impact core. Pick a few bite-sized pieces with which to get started. Utilize both financial and non-financial skills to demonstrate the utility that the FP&A skillset can bring to the business.

Examples of FP&A’s core connection within my employer’s business include working closely with product managers to support new product introductions, leading an effort to improve product forecasting, and contributing both financial and non-financial participation as part of a brand management team’s preparations for its annual business review presentation.

Most business leaders will be receptive to increased FP&A support. In fact, some may be starved for this type of participation. Communicating an interest to the leaders and building rapport with the entire business team are highly beneficial endeavors.

As the organization leaders perceive increased FP&A business contribution, their endorsement paves the way for even greater opportunities to contribute. Be prepared to spend extra time to make this happen. Realize that core waits for no one.


“KPI Rx” appeared in the June FP&A (Financial Planning & Analysis) Newsletter published by the Association of Financial Professionals and was featured on AFP’s website.


by Thomas W. Smith

Good Tools in the Right Hands

As the old saying goes, “what gets measured will get managed”.  While this adage holds up pretty well over time, the successful implementation of Key Performance Indicators (KPI’s) is anything but a slam dunk and definitely falls well short of being a cure-all for all that ails a business.  Unfortunately, having these tools in place and checking off a box is not enough. KPI’s are not, on their own, transformational. They are simply tools, and there are a few basic pitfalls that all too often can accompany KPI implementation.  The good news is that FP&A (Financial Planning & Analysis professionals) can and should play a major role in ensuring that well-designed KPI’s end up being good tools when placed in the right hands.

KPI Quantity vs. Quality

Having too many KPI’s can defeat the very purpose of using measurement to focus on key business driver improvement.  After all, a limit really does exist as to how much information humans and their organizations can digest.  Simply stated, having too many KPI’s or the wrong KPI’s can detract focus and add hidden costs, as unnecessary administrative burden is imposed upon those responsible for collecting, summarizing, and analyzing KPI data.  In extreme cases, it becomes the classic case of analysis to paralysis.

Companies can maximize return on their KPI investments by paring the number of KPI’s down to the right handful of truly essential measures.  The selected KPI’s and associated targets should together paint the portrait of success that a company or business unit seeks.  FP&A can and should take a leading role in urging the organization to take a step back to assess or reassess whether or not it has selected a manageable number of high-quality KPI’s.

KPI Complexity vs. Clarity

Even the best of planning intentions can yield a set of KPI’s that the average employee does not fully understand.   Financial and technical measures are particular areas of risk in this regard, and this risk multiplies considerably when a poor or non-existent communication plan accompanies implementation.  Not to worry, though, as this only really becomes a significant problem if we are looking for people to understand how what they do impacts organizational success.  As long as the top leaders in the company understand the KPI’s, it’s all good, right?  Unfortunately, companies who believe this and think along these lines are destined to miss out on employee engagement as a key lever of KPI success.

The smart money says companies are well-advised to keep KPI’s as simple and straightforward as possible so that employees have half a chance of actually doing things that they know will drive a few simple, straight-forward measures in the right direction.  Again, FP&A can and should lead this charge for simplicity and clarity.

KPI Conflict vs. Coexistence

It is entirely understandable that a company’s top leaders will want to maximize just about everything that is good and minimize just about everything else that is bad.   Consider the case of a company that has already moved its production offshore to cut its direct costs of

production (no doubt one KPI nailed right there!), while at the same time establishing KPI’s to reduce transportation costs, improve time-to-market, and maximize customer service.  Well, reality is chiming in to say that it may not work exactly as planned. While each KPI is a good pursuit on its own, this highly-combustible KPI mixture makes for the perfect storm in terms of promoting competing objectives and sparking organizational discord.

It pays dividends for companies to take the necessary time to understand the potential conflicts and behavioral impacts that they may unknowingly be designing directly into their KPI measurement systems.  Perhaps they may also be giving managers too much credit for being able to mediate these conflicts on the front lines.  FP&A can and should play an important role in helping business leaders to quantity the KPI trade-offs that will be required to keep highly-interactive KPI equations in balance.

FP&A Call to Action

Current publications increasingly trumpet the emerging “star power” of FP&A and its potential to really rock the Finance world.  Just like the high-potential athlete who has tremendous natural abilities, it is clearly not a given or an automatic that FP&A will turn out to be a game changer.  KPI’s are an excellent example of where FP&A can and should play a major and highly visible role in helping business leaders and their organizations to succeed.  Think about it. What a great way for FP&A to achieve its full potential and maximize its organizational relevance!

“Collaboration Counts” appeared in the Association of Financial Professionals’ (AFP) FP&A Newsletter.

Collaboration Counts

By Thomas W. Smith, CMA, MBA

Most experts are clear in their beliefs as to the importance of traditional financial skill sets as imperatives for entry into the FP&A ranks.  In contrast, it is with less clarity and universality that cross-functional collaboration and other closely-related soft skills are advanced as keys to FP&A success.  The ability to work across the entire enterprise in truly collaborative fashion may just be what separates the top performers from the rest of the FP&A pack!

Business leaders tend to value financial professionals who understand the business and contribute to operational success.  Meanwhile, finance leaders, faced with unique pressures and influences, may have different views about how business support activities stack up in priority against closing the books, updating rolling forecasts, and building budgets.  Largely a matter of differing perceptions and competing priorities, it is exactly within this gap – of who thinks what is important – where FP&A is squarely caught in the middle. Somewhat paradoxically, this is also a golden road of opportunity for FP&A.

FP&A professionals need collaborative and other soft skills to constantly reconcile this apparent dichotomy and to seize the opportunity.  Moving beyond our traditional accounting and finance skill sets is developmentally essential, as we look to improve ourselves and to help others who look to us for leadership and mentoring.  This is not to suggest in any way, shape, or form that functional excellence be cast aside or that technical knowledge, financial models, and analytical methods be replaced with glad-handing, back-slapping, and an aversion to heavy lifting.  As financial professionals, we cannot and should not forsake the very skills that got us to where we are.

Rather than representing a single set of absolutes, the list that follows is intended to evoke imagery and be an illustrative look at a very important topic.

“The Gymnast”

Be flexible, balanced, and precise.  Flexibility in approach is critical. Balance financial and business priorities.   Be precise when it counts. Know that constant precision can wear on others.

“The Tailor”

Work the seams.  Find loose change in the pockets of opportunity that even the best business processes and change efforts leave. Be on the lookout for seam dwellers that need help.

“The Ambassador”

Build rapport and trust.  Span the boundaries between Finance and other company units.

Be the broker for solutions that engender organizational stability and forge process improvement.

“The Interpreter”

Remove the language barrier.  Recognize that colleagues may see even the most basic financial terminology as a foreign language.  Assemble a vocabulary and desk-side manner that works.

“The Educator”

Simplify and clarify.  Help others to understand financial concepts and initiatives.  Invest in the power of financial education across the business.  Make it easy for others to support FP&A.

“The Individualizer”

Adapt to differences among colleagues.  Recognize the diversity of skills and talents that exists in an organization.   Modify approach and style to achieve the best results.

“The Integrator”

Put the pieces together.   Create a mosaic by assembling the seemingly disparate perspectives and information that we encounter. Embrace the opportunity to unify.

“The Raconteur”

Tell the FP&A story.  Be the soundtrack. Inject personality and enthusiasm. Be interesting.  Focus on a few overarching themes. Create a story that encourages others to want to work with us.

“The Assimilator”

Ask questions and codify. Identify and learn about the primary business delivery processes of the organization.  Be the finance person who business leaders will say “understands the business”.

“The Realist”

Appreciate small successes.  Do not expect huge and obvious short-term ROI.  Accept that this approach takes time. Know that the FP&A train will keep rolling on through its scheduled stops.

The above list of ten role descriptors suggests that we can consciously choose to complement our more traditional financial skill sets with measured doses of behaviors characteristic of these roles.  Further, it is asserted that it is beneficial to do so. It would be easy to dismiss all of this as representing basic common sense, if, well… it was a bit more common in practice.

At the same time, it is useful to consider that it was long before FP&A rose to prominence as its own branch of the finance army, that collaborative financial styles were sought by business leaders.  Finance staffers with these skills have always been viewed by business leaders as the go to folks within their finance departments. This continues on today, and it leads to higher levels of FP&A involvement.  With this involvement comes the opportunity for FP&A to achieve increasing levels of organizational and business relevance.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: