Transforming the Four FP&A Key Pillars for Business Success

February 16, 2023 Mimi Torrington

executive leadership meeting to talk about FP&A and organizational success

In this episode of CFO Weekly, Carl Seidman, Interim CFO and Finance Director at Seidman Financial, joins Megan Weis to discuss the importance of integrating finance into the overall business and operations, how to transform your FP&A, and the four pillars of success for companies. He also shares his approach to helping companies develop financial professionals into more powerful performers and build FP&A functions so that financial intelligence drives organizational success.

Carl is a trusted business advisor specializing in FP&A, business strategy, and finance transformation. He advises Fortune 500 and middle market companies, helping establish effective FP&A practices, processes, and teams. At the same time, Carl supports financial professionals, positioning them for greater control over their careers by helping build their confidence while eliminating time-wasting activities and mistakes. He is also an Adjunct Faculty Member of the American Management Association and a Senior FP&A Instructor at Wall Street Prep.

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Welcome back to CFO Weekly, where we’re talking with financial leaders about how to build efficiency in their teams, create time for strategy, and ultimately get results with your host, Megan Weis. Let’s jump right in.

Megan - 00:00:31: Today my guest is Carl Seidman. Carl is a trusted business advisor specializing in financial planning and analysis, or FP&A, business strategy, and finance transformation. He advises Fortune 500 corporations and middle market companies, helping establish effective FP&A practices, processes, and teams. At the same time, he supports financial professionals, positioning them for greater control over their careers by helping build their competence and confidence while eliminating time-wasting activities and mistakes. Carl’s FP&A development methodologies and curriculums have been implemented by leading organizations as part of their financial leadership development programs for top talent and emerging leaders. More than 13,000 corporate finance professionals globally have attended his training programs, workshops, and seminars. Carl also serves as an FP&A advisor, fractional CFO, and management consultant to entrepreneurial businesses throughout North America and Europe and assists them with strategic financial planning, value enhancement, and revitalization. Carl is a certified public accountant (CPA), and has earned other professional credentials, including the CIRA, CFF, CFA, CGMA, and AM, Accredited Member in Business Valuation, as well as the CSP (Certified Speaking Professional), Certified Anaplan Model Builder and was a National Association of Certified Valuators and Analysts 40 Under 40 honoree. He holds a BA in finance and economics and an MS in managerial accounting. Carl lives in metro Chicago with his wife and twin sons.

Megan - 00:02:15: Hi, Carl, and thank you for joining me on today’s episode of CFO Weekly.

Carl - 00:02:20: Hi, thank you so much for having me, Megan.

Megan - 00:02:23: Sure. Today we’ll be learning about you, of course, as well as the importance of integrating finance into the overall business and operations. And you help companies develop financial professionals into more powerful performers and build FP&A functions so that financial intelligence becomes a key driver of organizational success. And I’m really looking forward to learning from you. So let’s get started.

Carl - 00:02:47: Great. Thank you so much.

Megan - 00:02:49: First, and as always, let’s start with you and your story and how it is that you got to where you are today.

Carl - 00:02:56: My background is a bit interesting, and my back story in terms of how it’s gotten me to where I am today is quite unique. So today, as you’d mentioned, I spend most of my time with mid-size and larger companies that are looking to advance their people and do more FP&A implementation to, again, use finance as a way of leveraging their strategic success. But my background is a little bit less traditional in that I started out in the Big Four, specifically on the advisory side, and a lot of my work focused on intellectual asset management or intellectual property. So I had the responsibility of building business models, valuation models, economic damage models, and analysis to help companies protect their copyrights, patents, trademarks, trade secrets, trade dress, and more. Thereafter, I ended up moving into turnaround and restructuring. And what that involved was going into companies that were largely distressed or going through some kind of a turnaround or revitalization and helping those companies, almost like an outsourced FP&A advisor or outsourced CFO be able to get a greater hold of their data, of their forecasts, of their planning, of their analysis and be able to leverage it, to be able to advance whatever it was their agenda was at the time. Thereafter, about eight years or so ago, I started my own practice, recognizing that there was a huge gap in the market for outside FP&A assistance, whether that’s for implementation, consulting, or training.

Megan - 00:04:27: And as you look back throughout your career, are there stories or particular moves that really stand out in your mind as a turning point?

Carl - 00:04:34: Absolutely. I would say that in the turnaround and restructuring environment, oftentimes I would go into these companies and some of these clients would say, you know, Carl, do you realize how much this is costing us? And we’re already in distress. So it almost seemed ironic that it was an expensive service to take on while they were already bleeding or hemorrhaging cash. And I said, yes, I do, but I can promise you that this is all going to be worth it. And weeks or months would go by. I would present them with my work product, and they would say, this is unbelievable. And I would be able to keep in touch with a lot of these companies for months or years thereafter and say, how are things going now? And many of them would say, we never would have been able to get to the point that we’re at today, many months or years later, if it wasn’t for the assistance that you brought. And so it’s a little bit ironic and that some of them were like, how much this is costing us? And this is just not great. And they were very upset and very emotional. But after the water cleared and after the storm clouds went away, they ultimately recognized the value that was created, and it allowed them to build a legacy for themselves. Whether that was a business they could sell or a business that was extremely profitable, created a lifestyle that they wanted, or to be able to hand that off to their children. Ultimately, a lot of business growth isn’t just about growing the business. It’s about being able to create a lifestyle and something that you can hand off to future generations or employees.

Megan - 00:06:00: That’s great. That’s got to feel really good. Just curious, were there or are there, in your opinion, companies that are just hopeless, and there’s no chance of a turnaround for them?

Carl - 00:06:14: Unfortunately, yes. I have a lot of stories about that. And even though I go to companies and I talk about successes and great results, the reality is nothing’s perfect. And there are instances where companies find themselves in a really difficult situation where they say, oh, we’re going to figure this out on our own, or this time will pass, or we can do a little bit of additional financing and that’ll help us get out of it. There have been some instances where a controller or a CFO will commit malfeasance and fraud and essentially say, oh well, if I just do this one time, we’ll be able to get out of this difficult situation. And then they do it again. They do it again, and it ends up becoming a snowball that gets out of control. So I can, unfortunately, name probably at least a dozen instances where I’ve gone into companies where they raised their hands too late, or they reached out too late, or it was just such a disaster of a situation that we ultimately had to wind the company down or liquidate it or sell it. Some really traumatic experiences whether it’s the owner or the people who work there some really unfortunate sets of circumstances for the lenders or investors who are involved.

Megan - 00:07:32: And your company, Seidman Financial, is dedicated to transforming FP&A. So what does that mean to you, to transform FP&A?

Carl - 00:07:42: Right? So when it comes to FP&A, a lot of people in our profession will talk about a handful of pillars. They’ll talk about technology, they’ll talk about people, they’ll talk about processes, they’ll talk about culture. And sometimes they’ll add even more to that equation. But those are probably the four key areas that a lot of FP&A professionals would talk about. And so when I go into a company and they’re saying, we really want to be able to build out our FP&A function, our function being built on those four key pillars or on those four key table legs. If you have one of those legs that are missing, the table is wobbly. If you have two or three that are missing, well, you have a very wobbly table. And so what I often do when I go into companies is I perform somewhat of an assessment as I sit down, I interview people, I take a look at data, I take a look at processes, I interview teams and I say, all right, well, what is the health of this organization? Where does it stand today? One of the metaphors that I sometimes use is if you think about an internist, a physician at a hospital, or a family practitioner, if somebody is not feeling well, they go into the physician’s office and the physician isn’t going to just start diagnosing or prescribing medication or putting the person into surgery. They’re saying, okay, well, let me talk to you. How is your lifestyle? What are you eating? Are you exercising? Do you smoke? Do you consume alcohol? What are some other ailments that you have? What are some of the symptoms that you’ve been experiencing? And through that, through combining with their own experience as well as through this assessment, they say, well, this is the regimen that I’m going to suggest and it’s not remarkably different in FP&A. So when we go through an assessment and say, well, let’s grade your people, let’s take a look at your processes, let’s examine your data, let me talk very candidly with your leadership and understand all of these pieces of this puzzle, then we can put together somewhat of a diagnosis of saying, well, what’s the biggest problem? Is it your data? Is it your people? Is it your software? Is it your leadership? And we identify what needs to be done. Several months ago I was working with a mid-market public company and they said, our problem is with our software and we’re just not getting the data that we need. And upon going through a couple of weeks of the assessment, I said, actually it’s not your software, it’s your process. The process of getting your data from those who are custodians of it to you to use is completely broken. So if you can address this process rather than go through this giant software implementation, you can probably carve out a lot of the problems. And so that’s what we do, are we use this assessment to determine what pathway we go on and then how deep we need to go into each one of those four key areas.

Megan - 00:10:35: And who is your ideal client?

Carl - 00:10:37: That depends. So my business is really put into three different areas. One is going to be training and professional development. Another is going to be consulting and advisory services. And then the third is mostly going to be coaching and masterminding. So in terms of training and professional development, a lot of those companies typically are mid-market and above. I work with a lot of the Fortune 500, a lot of public mid-market companies or middle market companies that are just growing and growing and wanting to position themselves as a larger enterprise that often involves anywhere from half-day to multi-day-long programs that are intended to upskill their people, give them exposure to techniques that they probably haven’t seen, change their mindset and position them for more universal practices across the function as it relates. To the coaching and masterminds that are also intended for companies, but also more so, just people who are high potentials, who are go-getter personalities in companies that are likely to take over financial leadership positions. And then as it relates to consulting and advisory services, that actually tends to be more mid-market and below companies that are saying, we want to be able to position for the next chapter of our company’s life. We don’t know how to do that. And oftentimes they either do have a CFO who might be limited in their capability, or they don’t have a CFO, and they need somebody with the CFO’s background who can say, well, I can come in for 10 hours a week or 10 hours a month or 20 hours a week or 20 hours a month to supplement what already exists in the company. Take the talent and the experience that I may have without having to bring on a full-time CFO.

Megan - 00:12:22: And what are the benefits to a company that does FP&A well versus a company that maybe isn’t as willing to invest in that function?

Carl - 00:12:33: That’s a great question. So what a lot of companies or a lot of FP&A practitioners are surprised to find is they say, oh, I can do FP&A at any size company, any industry in any geography. And I say, well that’s actually not all that true, because if you were to go into a small company let’s just define small as a company that’s doing less than $25 million of revenue, you could go in and say, well, I’m here to help you with your FP&A. And the CFO, even if there is one, or a controller or business owner is going to say, what’s FP&A? They have no idea what FP&A even looks like at a company like theirs. And you might say, well, are you doing any kind of strategic finance? And they say, well yeah. And you say, Are you doing any kind of budgeting or forecasting? They say, well yes, of course, we’re doing that. Are you doing any kind of analysis on your business financially? And say, yes we are. Do you say? Well, that’s FP&A. So at a lot of smaller organizations, they may be going through some of the motions of the functionality, but there isn’t a really formalized function. There’s also probably not anybody at the company who’s named FP&A Analyst Director of FP&A or FP&A Manager. So it looks very, very different at a small company that is for the most part probably acting in a largely reactive financial reporting kind of way. So you go into a smaller business, yeah, they’re doing some FP&A, but it’s mostly bookkeeping, financial reporting, taxes, financing perhaps if they’re at that level. And it’s really just making sure that there is a finance function that exists. When you go into a large corporation, say a Fortune 500 or even a Fortune 100, they have dedicated formalized FP&A functions. They may have hundreds of people who have the name or title FP&A in what they do. What’s different with a large corporation versus a smaller one is in a large corporation you may have an individual who is the Director of FP&A for North American Consumer Electronics. So it becomes extremely specialized. And they might be focusing on one business unit or one line item within one line item within one line item of the P&L, and that’s what they’ve been doing for 20 years. So the higher up the ladder you go to larger organizations, the chances are the more formalized, the more established, the more mature the FP&A function is, the more they are getting out of it through analytics and data integrity and robust rolling forecasts and more. Whereas if you go to a smaller business, you’re going to find a far less established function, if one at all. And you may have one or a very small number of people taking on everything, but not to the level of robustness that you would see at a larger enterprise.

Megan - 00:15:27: And the importance of integrating finance into the overall business and operations can, in my opinion, not be understated these days. So what is your approach to doing that?

Carl - 00:15:40: There is a need for FP&A professionals to be entrenched in certain operational parts of the business. And here’s why. If you’re a Fortune 100 company, and you are in perhaps a challenging economic time, and you say, well, given the expectations of our earnings and maybe we over-hired over the last couple of years, we need to be contemplating a sizable layoff. Now, the reality is, in human resources, which is largely responsible for that kind of decision-making, they might say, well, we don’t know who needs to go. We don’t know what level of salary is on the chopping block. We don’t know in aggregate how much needs to be taken out of this organization from the P&L. Well, there is somebody or there is a function that knows the answers to some of those questions, and that’s FP&A. So when it comes to certain operational activities, and in this example, again, just human resources, it’s FP&A paired up or partnered with human resources that can give the confidence, mitigate the risk, and provide the rationale to human resources in the decision that they may ultimately be responsible for. At the same time, you may have a manufacturing company that is going into a new geography, putting together a new generation of products. And you have procurement, you have product managers as well as program managers who have responsibility for rolling out this new generation of products. And they say, well, we can do the design, but we actually don’t know what kind of funding we need to have in place to bring this to fruition. We don’t know what the lifetime value of this new product release is going to be. We don’t know the right period of time to introduce it into the market so as to not cannibalize the prior generation of our product. Well, there is one function and one group of people that can probably help with that, and that would be FP&A. So, Megan, the challenge that a lot of non-financial segments have is they know what’s going on in their function, but they might not understand the data, the financial implications, and the financial strategy that ties into it. And that’s why FP&A is so valuable, not just to itself as a financial function, but in partnership and support, building confidence and managing risk in those non-financial functions.

Megan - 00:18:11: And how do you ensure that your FP&A team members are getting a seat at those tables?

Carl - 00:18:17: Well, I actually believe that a lot of that comes from the top of leadership in not just those functions, but also even the higher-up in the C-suite saying, this is what we believe in. Taking a look at FP&A, we don’t just want them to be a finance and accounting function, we actually want them to be teamed up and entrenched in these other functions. So it is partially leadership saying, we want to create a culture where finance is involved and then it goes reciprocal between the non-financial function itself, as well as FP&A saying, we want FP&A to have a seat at the table. So if HR says, oh no, well we are responsible for determining who stays and who goes. And we have all this information related to the financials, and while we can just do simple addition and multiplication, well, it should be them saying, well, let’s actually see how this connects into the business. Where does this create voids within other operating units? And where are we going to have morale problems? And where might we need to do additional cross-training and development from other people to fill some of these voids? Well, we need to talk to FP&A. And it’s also FP&A saying to human resources or to product development, hey, we know how to help you with this. We’re closest to the data and we have the analytical capability to support you. Please invite us to the table. So it’s really three-pronged as it goes back and forth between FP&A and the non-financial division, but it is also the culture of the organization and the language from the top that says we want this to take place.

Megan - 00:19:51: And how do you approach financial forecasting and budgeting for a company? What are the key considerations that take into account?

Carl - 00:19:58: Forecasting and budgeting in companies are as diverse as you can possibly imagine based on what industry it’s in, the maturity of that company, the size of the organization, the access to data, as well as the tolerance for possible mistakes or misses. So when I go into a company and I’m helping them out with their annual budgeting process or rolling forecast development, oftentimes what I’m going to do is I’m going to sit down with leadership. I’m going to sit down. With the department heads and I’m going to similar to what I said in the beginning with an assessment say, what is it that we’re trying to achieve? Why are we going through this process? Because some companies are significantly tied to transparency and accountability that comes from the budgeting process, whereas others might say, yeah, we go through this process, nobody really adheres to it and it seemingly is a waste of time. People hate going through this budgeting process. So what I’m always wanting to do is to try to understand what is it that we’re trying to do. Is this tied to a strategic plan? Is this only for internal usage? Are we using this to communicate to lenders or investors or equity analysts? What’s the whole point of going through the exercise? Then we take a look at the data and the existing process and we say, how good is the data? What does the current process look like in order to get to more of a future state? What is the gap? So we perform somewhat of a gap analysis and say in the future state this is what we wanted to do. This is in comparison or contrast to what we’re doing currently, what people need to be involved, what software needs to be built out, what queries need to do, what queries need to be developed, and what data we need to have this be possible when all of that infrastructure is in place and we know what the process looks like. That’s actually when we start rolling up our sleeves, meeting with the department heads and putting together the data from last year, combining it with the strategic plan, and saying, what is your budget or forecast need to look like? The error that a lot of companies get themselves into is they just say, well, let’s just take a look at last year, let’s roll it forward, and let’s just go through the process again. Whereas what they should be doing is really taking a look at the entire assessment of what they want to be accomplished through an improvement of continuous improvement, or I should say a process of continuous improvement, and say, what does that look like? Then build the forecasting and budgeting process to meet that, rather than just take on a mindset of complacency rolling it forward from year to year.

Megan - 00:22:22: That’s great advice. So can you talk to us a bit about the role of technology in making finance a seamless part of a company’s operations?

Carl - 00:22:30: Yes. So when it comes to technology, there are a couple of ways to look at this. It’s actually quite objective, is a lot of companies will say, oh, we’re going to do a new software implementation because this is going to save time, it’s going to eliminate errors, it’s going to make it easier and less frustrating for people to go about their analytical process, updating of the forecast. But the problem is that when people say, or when companies and their leaders say technology is the solution, it is a solution, it is not the solution. And going back to this concept of the assessment is saying, well, if you have fractured data, you have people who don’t understand what they’re supposed to be doing or they’re not up to snuff and at the level of talent that they need to be. If you have broken processes and if your culture is misaligned, it actually doesn’t matter that much whether you do a software implementation because you’re going to be layering a complex system on top of underlying pillars or table legs that are broken. And so when it comes to putting together a technology solution, it is still looking together at those table legs or those pillars and saying, let’s do an assessment of our people. Are they capable of utilizing this technology solution? Do we need to hire people? Do we need to upskill? Do we need to restructure our groups in the way that they report to each other? In terms of the process, you might say, well, we’ve got a really, really broken process, probably driven by or at least in part due to data problems or data integrity problems. But that’s often not the only issue. It’s oftentimes we’ve got a process that’s just not working. And if we were to layer on a new technology solution that’s not necessarily going to solve the process, it actually might exacerbate the fracturing of that process. So what do we need to do to craft that, document it, and say what needs to stay the same, and what needs to change? And then how do you continue to build a culture that is technology-forward, rather than technology solved? It’s utilizing technology to enhance what people are doing on the human resources and talent side. It’s making it more possible to execute certain processes that wouldn’t have been able to be done before the software implementation. And it’s also making sure that it is the right software or technology choice rather than going to a company with aggressive or confident salespeople that are getting a commission based upon the implementation. So what I almost always recommend is performing that kind of assessment across the four key pillars and then also exploring what it is that’s going on in the market rather than going to that one software solution that seems to have a high reputation, but might not be the right solution for your industry or your company at that current point in its life.

Megan - 00:25:33: And that’s great advice to look at the process, people, and culture first before just assuming that technology is going to be the golden bullet.

Carl - 00:25:43: It’s the same whether it’s a large corporation or a small business or a solopreneur. So just because there is the zest and appeal of what technology can do, it can be very seductive to think that it’s going to solve all of these problems. And I’ve had clients over the years who were sold on a great software package, but it was implemented in the wrong way or there were certain modules that the implementation specialist or salesperson said, oh, you need this. But at that point in this company’s life, they really didn’t need it. They needed to be able to grow with the software and have the software grow with them based on where they were at that point in time. So yeah, I completely agree that software can solve a tremendous number of problems, but is not the solution.

Megan - 00:26:35: And how do you manage and approach cash flow and financial risk management?

Carl - 00:26:41: Cash flow is perhaps the most important metric or financial performance measure to be tracked in an organization. And the reason why I say that is I’ve gone into companies that have been very profitable, that have been on the verge of blowing up because of their liquidity situation. And I’ve gone into other companies where their data is just not reliable. And we can’t go into the financial statements to say, well, we know truly what profitability is and what the cash flow forecast looks like into the future. But what we can do is we can take a look and track day-to-day, week-to-week, and month-to-month, going forward, as well as measure what has been historical, meaning the bank statements don’t lie. We should be able to take a look at that and be able to run a company off of cash flow alone because that shows us what the liquidity situation is and we can even back into certain degrees of profitability. This is whether we’re talking about a small startup with a little track record, or whether it’s a mid-sized company that’s just having some data integrity or reporting issues. So from a practical standpoint, I always want to make sure that the company has a good understanding and good grasp of its cash flow. If it doesn’t, that’s almost always a warning sign of deeper frustrations and deeper fragments within the business. If they have their P&L well put together and their balance sheet well put together, that’s great. But if they don’t have their cash flow well stitched, that’s usually an indication that there are some bigger problems at hand.

Megan - 00:28:14: And how can a company make sure that it has the right resources and personnel to effectively manage finance as a fundamental part of its operations? How do they right-size finance and attract the best talent?

Carl - 00:28:29: It’s a big question. In larger organizations, they often have very dedicated human resources processes and people to make sure that they hire the absolute best. I’ve had the great fortune of working with some very large enterprises that have truly dedicated human resources people specific to the finance function. So they might be the Director of Financial Leadership Development. They put together training, they put together the hiring process. They make sure that the pathway to growth and promotion is well in place. So not only is the company able to grow and make sure that it’s got the right resources in place, it’s also on the opposite side where the people who come in actually know what they’re supposed to be doing and what their growth process looks like. Again. I’ve had the great fortune of working with a couple of Fortune 100 companies where if a high-caliber finance professional comes in, they know what they’re going to be doing for the next two to four, maybe even six years through a rotational program, who they’re going to be working with and how they’re going to come out at the other side in a position of director of FP&A. For small companies, it’s a little bit more difficult because oftentimes business owners don’t have financial backgrounds. Oftentimes there might be a controller in place or a head of finance in place, but they might be coming. From a Big Four auditing background or maybe from an analyst role at a corporation. And so they might not necessarily have experience leading the direction of the company from a financial standpoint or managing a team of financial people. So where we often see some fragmenting in smaller businesses is just a lack of direction and a lack of know-how in terms of what they’re supposed to do. That’s why I found a lot of businesses in that mid-size and smaller of saying, hey, we need to talk to somebody with a CFO or senior level FP&A background who can come in and help support these people in their growth in the development of the function, in putting together some of these processes. But I strongly encourage hiring really good people who are go-getters who have an attitude of continuous performance improvement, not just in the company, but in themselves as well.

Megan - 00:30:50: I love the idea of those rotational programs for, well-rounded, finance professionals, but a lot of small companies just can’t do that. So what are some things they can do to make sure that their finance professionals understand the business and are well-rounded in the business?

Carl - 00:31:09: I think a lot of it goes back to what we talked about a little bit earlier as saying, well, finance should not just be finance. Finance should be engaged with others in the business. You might have a company that’s got a headcount of 100 people, maybe it’s a $10 million business, and you’ve got two people in finance, that’s it. But of those 100 people, if only two are in finance, that means 98 of the others are not. So hiring the right people who are go-getters and who want to say, well, I want to grow the business, I want to grow myself, I’m going to spend time with the CEO, I’m going to spend time with product development, and engineering. I’m going to spend time with customer service, I’m going to spend time partnering with marketing, and partnering with sales. So if you have somebody that says, I can take finance further by understanding what’s going on in these other segments of the business and telling those individuals, hey, I’m here to support you, and I want to learn more about you and what you’re doing, that is a ticket to furthering yourself and furthering the involvement of finance across the entire organization. In addition, things are changing dramatically in the FP&A profession as well as within just finance as a larger function. I regularly go to conferences. I’m regularly reading white papers. Even though I’m deeply entrenched in the training of companies and FP&A professionals, I still take on training myself because I don’t know everything, and there are lots of other smart people that I can learn from. That includes, again, skills from training, understanding developments in the marketplace or in the ecosystem, from white papers and research reports, and going to conferences and hearing about some of the latest trends in process, in people, in technology that I’ve never even heard of before. And just to give one last example, Megan, I was at a major professional conference back maybe in Q3 of last year, and I sat in on a conference that was sat in on session where it was a senior practitioner from a big consulting firm sitting next to a senior level finance person at a Fortune 500 consumer product company. And they were talking about how artificial intelligence is being used to develop proprietary algorithms using key performance drivers of the business that were not previously known to be able to update forecasting in a day’s time instead of taking weeks or months to do. I personally didn’t even know that that capability existed. And so being able to put me out there into the environment and into the ecosystem to hear what’s going on elsewhere is great education for anybody in a large company or in a small one.

Megan - 00:34:11: And let’s look at the flip side for a second of the business understanding of finance. But how do you promote a culture of financial responsibility and accountability within a company?

Carl - 00:34:23: So much of that has to come from leadership. Oftentimes where companies get themselves in trouble is you have financial leadership sans/without the CFO. So we talk about a CEO, a COO, or department heads who have no financial background. And while that’s not necessarily problematic by itself, a lot of those individuals have this maybe skewed mindset of, well, that’s why I hire a CFO, that’s why I hire a controller, or that’s why I hire a director of FP&A, because I don’t want to be involved in that. And that’s completely the wrong attitude because what that means is they’re deferring financial responsibility and financial awareness to those who already by default and by profession have it. But I’ve never met a business owner or a CEO or a chief operating officer or a head of procurement who’s been really successful in a successful company and didn’t have at least a willingness or an appetite for understanding the implications of finance on them and of them on finance. So I personally have a training program of basically finance for non-financial leaders, of saying, what is it that you need to care about in marketing, in sales, in product development, in engineering, in customer service, and in finance itself, of liquidity the profitability of certain margin targets, of certain efficiency ratios? What is it that you need to care about? And when you have leaders in a non-financial position who do care about finance and understand how it relates to them, you start to build a financial culture, not where everybody is speaking the language of finance, but at least where everybody can understand it. And it starts to enter into the conversations that non-financial and financial professionals are having in the boardroom. Those companies that are most successful have those types of people, and those companies that I often find are least successful are the ones who segment or silo that kind of understanding and say, I don’t want to I don’t need to understand finance. That’s why I hire smart finance people.

Megan - 00:36:37: It’s very insightful. So as you look back at the time that you spent with clients, what are some of the most notable challenges that you’ve had to overcome in integrating finance into the company’s operations? And then on the flip side, some notable successes.

Carl - 00:36:54: In terms of challenges that I’ve encountered. When we go back to those four pillars, those are four that are often thorns in the sides of the company of, you know what, we’ve got people. They are not upskilled or they’re not doing what we need them to do and they’re holding us back or processes, processes are broken. We were once a small company, and now we’re mid-sized, but we’re still behaving like we’re a small company. We need to be acting like where we’re going in the next chapter of our company’s life, not in the chapter we just came from or culture, as I’ve highlighted, where we have leaders who are a lot more siloed or not interested in understanding the functionality of the relationships across the business. Or we have technology where we’ve outgrown a certain system, or we’ve implemented a new one that is so far beyond the capability of what we currently need that people are intimidated and they’re not using it. So those four pillars continue to sneak up in a lot of these companies in terms of the tangible focus of what we want to be taking a look at. But Megan, something that I would say is often an overlooked intangible is the increasing complexity and speed at which companies are moving. Right now, we are at the most advanced, fastest moving, most complicated form of commerce we’ve ever been in in the history of humanity. And while a lot of people in business say, oh, well, other companies must be doing this, right, what are they doing? And I can tell you that having gone even into fortune 100 companies, the companies that you see in the news every single day that have extremely deep resources and expend tens, if not hundreds of millions of dollars into their resources, they’re still figuring it out too. So just because there is this belief that, oh, we must be missing something or I don’t know, what I don’t know, doesn’t mean that there is this perfect solution that you can get into, become complacent, and ride the wave. The world is changing so rapidly, technology is evolving so much that this constantly needs to be iterated and revisited, and changed to move forward. And then finally, Megan, just this last piece is the emotional, the political, the ego that factors into the human psyche. So you may have some extremely talented people, but their egos are getting in the way, or they’re playing political games internally to try to promote themselves for advancement, and oftentimes the emotional if I’m nervous about my own job security based upon where this company is going. I need to be able to protect my own turf, my own project, and my own initiative and then not cooperate as fully as I could. So all of those are some tangible issues that cause challenges in companies. Now as it relates to successes it’s pretty much the opposite of that. It’s companies that say they want to take a look at all four pillars. We’re not just going to invest in technology, we need to make sure that our processes are built and we’re going to be investing time, money, and effort into doing that. From the training standpoint, I often talk to companies that say, oh, well, we don’t really have much of a training budget. And so if you have a company that says, oh, we’re going to invest millions of dollars in tech, and we’re going to invest all this time to building processes, but we’re not going to invest in our people, well, that’s not congruent. The most successful companies are the ones that are investing fully in all of those pillars. And then finally another success is to break down the barriers of saying let’s get rid of these silos. Let’s make sure people feel that they are bought in, not necessarily that they have 100% job security but that they feel that it is safe to take risks, that it is safe to start stretching themselves and identify opportunities and to say I want to take on this opportunity because I see that this is something that’s needed. Or they say I want to partner with human resources or I want to partner with product development because I want to learn more about the business over there. Can I do that? Now, Megan, you brought something up a little bit earlier that’s a true reality, which is that a lot of larger corporations have the infrastructure and resources to be able to do that, and smaller companies, perhaps to a lesser extent. But it’s always in front of somebody to be able to say, I see opportunity. Can I move in that direction and take on that opportunity not just to further myself, but to further the direction of the business?

Megan - 00:41:38: That’s very true. It tends to be that large organizations are more pigeonholed like you’re forced into a specialty whereas with small companies you can wear multiple hats and take on multiple responsibilities and grow yourself in that way.

Carl - 00:41:56: Right. Yeah. And perhaps a little inversely related. And then you say well I’m going to go work for this large corporation because it’s so built out and they have so many resources. But you find yourself pigeonholed into again, line item within a line item within a line item of the P&L and you’re there for years. You say well I want to learn all these other parts of the business and there’s just not the ability to do that. Whereas in a small company, you might be taking on a whole lot more responsibility across the P&L, across all these various functions. But if you were to say what does this role look like next year? The CEO or the business owner might not be able to tell that person what that looks like. So there are certain advantages and disadvantages to working in FP&A or Junior CFO type of responsibility in small, mid-size, and large corporations or organizations.

Megan - 00:42:43: And last question but as you look at your own business or your client's businesses, what’s keeping you up at night? What’s around the corner that scares you the most?

Carl - 00:42:53: What scares me the most? And I’m not really scared of a whole lot because I have long built my career on agility and flexibility and the confidence of moving in different directions. But as I had mentioned, the rapid clip of change that’s taking place right now is unbelievable. I don’t know what the statistics are, but I’ve seen some data that says every day a certain amount of data is produced and it is as much as what was created in the first hundred years or last thousands of years. And so the move at which we are changing and expected to grow and adopt new techniques and new technology, it’s really a struggle for a lot of people. And it’s not just those people who didn’t really grow up with the technology that exists today. It’s not prior generations, it’s even younger generations saying well, I learned something in school and when I graduated, turns out that’s not really what I’m doing in my business because they’ve moved beyond that. And then after I did that for a couple of years, we moved into something else. So the ability to adapt and change and roll with these punches is perhaps one of the most important qualities that companies and people themselves need to be adopting. I think it’s quite relevant as of late with the evolution of artificial intelligence and machine learning and automation of not really knowing where this is going to go, but knowing that this is going to be a massive sea change in the way that we do business, the way we do finance and the way that we even do our jobs within finance. And while some people might be a little scared of that, saying oh well, all of these basic things that I do that’s going to get replaced by technology, that could be a little scary, but it’s also an opportunity to learn and go in a different direction that is more valuable to the business. And also, perhaps jazzes that individual more themselves. I think the people who are going to have the greatest to fear are those who are very complacent and happy just adhering to what they’ve been doing day in, day out, week in, week out, for months or years at a time. Because some of those more redundant or repetitive tasks I don’t see any reason why technology is not going to replace that. Maybe not in the next couple of years, but probably in the next decade.

Megan - 00:45:33: Yeah, I would guess that the world is going to continue to evolve and change at a rapid pace, exponentially over the next ten to 20+ years. I don’t think change is going away, that’s for sure.

Carl - 00:45:49: The change will never go away. I believe the pace is going to get even faster, which I think makes people very uncomfortable. But that’s the reality. And the reality of that change is that we need to change. We need to be comfortable with saying, oh, I just spent the last two years doing something. I’m no longer going to be doing that. I’m going to be leveling it up and doing something on top of it because what I was doing before is getting replaced either with a different person or with a different technology. And I need to learn that comfort in continuous learning and continuous improvement is a skill that’s going to separate those people who are employable from those people who may find themselves perpetually unemployed.

Megan - 00:46:32: Carl, thank you so much for being my guest today.

Carl - 00:46:35: Thank you so much, Megan, thanks for having me.

Megan - 00:46:37: Yeah, I really enjoyed speaking with you, and I appreciate you taking the time to be here with us today. And I wish you and Seidman Financial all the best to all of our listeners. Please tune in next week, and until then, take care.

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In this episode, we discuss:

  • What does transforming FP&A look like?

  • What are the four key pillars of FP&A?

  • What's the difference between the FP&A function in small versus large organizations?

  • Why is there a need for FP&A professionals to be entrenched in other business functions' operations?

  • How does technology make finance a seamless part of a company's operations?

  • How can finance leaders promote financial responsibility and accountability cultures?

Key Takeaways

The Four Pillars of Success for FP&A

Quote pillars of fp&a success

To transform FP&A, Carl looks at four key pillars: technology, people, processes, and culture. If one of these pillars is missing, your FP&A might be unstable and might experience issues. Carl performs an assessment of the company, looking at the data, processes, and teams to determine the organization's "health."

“If you have one of those legs missing, the table is wobbly. If you have two or three that are missing, well, you have a very wobbly table,” Seidman said. - 07:32 - 10:35

FP&A in Small Versus Large Organizations

Quote Carl Seidman, Interim CFO and Finance Director at Seidman Financial

Large corporations like Fortune 500 organizations have dedicated and formalized FP&A functions. Also, the FP&A role becomes hyper-specialized, and you might have an individual who is the director of FP&A for a distinct region, business unit, or line item. If you go to a smaller business, you will find a far less established function, if one at all.

“The higher up the ladder you go to large organizations, the more formalized, the more established, and the more mature the FP&A function is,” Seidman said. - 12:23 - 15:37

Integrating FP&A Into the Overall Business Operations

Quote integrating fp&a

There is a need for FP&A professionals to be entrenched in certain operational parts of the business. Many non-financial segments might not understand the data, the financial implications, and the financial strategy that ties into their functions. FP&A professionals can give confidence, mitigate the risk, and provide rational arguments for non-financial operational activities.

“The challenge that a lot of non-financial segments have is they know what's going on in their function, but they might not understand the data, the financial implications, and the financial strategy that ties into it. And that's why FP&A is so valuable,” Seidman said. - 15:37 - 18:11

Finance and Technology

Quote finance and technology solution

Technology can be used to make finance operations seamless, but it should not be seen as the only one. Remember, technology is one of the four pillars of FP&A transformation. Look at people, processes, and culture first before assuming technology will be the golden bullet that will solve all your needs.

“When companies and their leaders say technology is the solution, it is a solution. It is not the solution,” Seidman said. - 22:23 - 25:43

Building an FP&A Dream Team That Works Toward Success

Quote FP&A dream team for success

Effectively managing finance requires a well-rounded team. Hire go-getters with an attitude of continuous performance improvement who stay up to date on trends in process, people, and technology.

“I strongly encourage hiring good go-getters who have an attitude of continuous performance improvement, not just in the company but in themselves as well,” Saidman said. - 28:15 - 31:00

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