You’ve likely witnessed the battle FP&A teams face in balancing efficiency with high-impact and ROI.
But do you know the extent of damage caused by inefficient financial planning and analysis?
It’s hard to fault overworked Finance folks for being unable to choose deadlines over work quality, or accuracy over timely insights. Yet, FP&A teams are forced to make these tough decisions every single day.
If you’ve ever had to deliver high-urgency projects without a formal delivery process, you know how it quickly grows chaotic. At the same time, unstructured and poorly executed processes can severely slow teams down.
What if you don’t have to sacrifice fast, efficient processes for high impact and ROI?
In this article, you’ll learn why transforming your FP&A team into a super-efficient machine can multiply your impact on the business. You’ll also learn why the happiest teams are the most efficient teams, and how to get there.
The key differences between team efficiency and effectiveness
Let's take a step back to understand what it looks like when your team displays efficiency versus effectiveness.
For most business teams, efficiency is defined as an agile and high-performance state where deliverables are consistently on-time, accurate, and achieved through optimized resources. In simple terms, efficient teams get almost 100% of their work done on time, through minimal error and well-planned bandwidth.
On the other hand, effectiveness or efficacy refers to the overall impact of the team through its objectives, priorities, and decisions. Your team’s effectiveness is measured by the return on investment of each of your projects.
Take a moment to read through the differences between teams that prioritize efficiency over effectiveness - and try to answer this question: is it better to be an efficient team or an effective team?
What's better: efficiency or effectiveness?
Here’s the answer: it’s a trick question! Contrary to popular belief, teams are most successful when they balance the efficiency of their processes with the effectiveness of their outputs Why?.
With the onset of data-driven decision-making, teams are increasingly required to report on their contribution to the business. Typically, growth and revenue metrics are at the forefront of measuring team worth.
And when performance is ranked by impact metrics alone, most teams end up taking shortcuts or reducing expectations to win.
By adding a layer of efficiency as a support mechanism for high-impact work, you regulate how that impact is achieved. In other words, efficient processes are the backbone for a repeatable, long-term impact on the business.
The lasting damage caused by inefficient FP&A processes
Approximately $8 billion is lost yearly on menial data processing tasks by highly-skilled financial analysts. That’s what you stand to gain from improving outdated, siloed, and time-consuming processes.
FP&A sets the tone for the rest of the company, often acting as the starting point for sales planning, budgeting, and revenue forecasting.
FP&A teams are responsible not just for predicting results, but also for driving them. And the only way to drive accurate predictions and results time after time is through efficient processes.
Take the example of data preparation. An efficient FP&A team automates the process of integrating multiple data sources to save time on haphazard data wrangling, focusing instead on impactful analysis.
If you read that sentence carefully, you can see how easily efficiency leads to faster impact! And that impact goes beyond just faster turnaround time.
Harvard Business Review reports that a whopping 85% of Finance professionals have been seriously impacted by burnout. The reasons behind that burnout are telling - feelings of stress, hopelessness, and alienation due to high-pressure workloads.
When there’s a way to ease those symptoms, why would any Finance leader choose to continue down a path leading to an unhappy team?
By building a highly efficient team culture, leaders create an impact that can be sustained long-term without harming the mental and physical health of employees.
How to build a highly efficient FP&A team
Step one is always to secure team buy-in.
Make sure your team understands how improving efficiency can positively impact not just the business, but their professional development and job satisfaction as a whole.
The moment your team unanimously votes to become more efficient in their role as individuals and as a function, you’re ready to try the following steps for building a highly efficient FP&A team:
Improve existing processes
The good news about building a highly efficient FP&A team is that you don’t have to start from scratch. A loosely structured and chaotic delivery process is still a process.
What you need to do is to identify inefficiencies within your processes and work on smoothing them out. This could look like improving financial performance reports, improving internal communication, or better document management.
Small improvements such as reducing manual work (and the inherent human errors), updating data storage systems, and reducing siloes can directly lower the time spent on low-impact activities.
Tackling these smaller inefficiencies leaves your team with time to focus on innovative solutions for bigger challenges.
Play to your team's strengths
When was the last time you assessed your team's strengths? More importantly, how often do you reaffirm that your team likes what they’re working on?
Answering these questions can uncover a goldmine of opportunities for better task management.
A very common scenario is the difference in work style between introverts and extroverts. As an analytical field, FP&A can be a haven for introverts. However, the importance of external communication and presentation grows as Finance teams increasingly form strategic partnerships with the business.
This is not to say that you should stereotype your team into extroverted and introverted number-crunchers. Rather, take the time to get to know your team's strengths and the direction they wish to grow in.
Use the information you gather about each team member to assign meaningful tasks that allow them to showcase their innate talents.
Let the robots take over
Finance is evolving to automate everything, from budgeting and forecasting models to formulas, what-if scenarios, and workflows. Automation saves your team’s precious time, which is better spent on impactful analysis that drives decisions.
Earlier, we looked at the example of automated data integrations. But there's so much more you can automate or delegate to tools.
FP&A teams are dedicating a growing portion of their time to data analysis and reporting. To do this effectively, it’s important to understand all components of the business through the lens of financial analysis.
As you expand the scope of your analyses, the need for larger data sets from multiple sources grows as well. While it’s great to forge strong relationships with your data science team or onboard team members with data backgrounds, there’s a lot you can immediately achieve through existing tools.
Pro tip: get more ideas on offloading financial data preparation from our business planning use case for Finance teams.
Seek out opportunities for cross-functional collaboration
Collaboration has taken on a new meaning for companies across the globe. Physical location is no longer the barrier it used to be.
As the physical distance between teams grows smaller, the functional gap does as well. Cross-functional alignment is progressively recognized as the key to higher productivity and job satisfaction.
It benefits you to realize that you are not alone in seeking efficiency. For example, the Revenue Operations function uses processes, tools, and frameworks to promote shorter sales cycles and increased alignment between Sales, Marketing, and Customer Success. You could partner with your RevOps team to set up efficient processes for the entire org.
Whether you seek ideas to improve your own processes or active collaboration projects, joining forces with other departments has a positive impact on your team efficiency.
Track your team efficiency KPIs
Corporate FP&A teams communicate strategic recommendations to senior management well ahead of decision time. This high-efficiency communication translates to measurable long-term success for the business.
But how do you measure and evaluate efficiency in and of itself?
Keep in mind that efficiency aims to complete more value-adding work in less time. Check out this list of Finance team efficiency KPIs to get you started:
- Turnaround time: the time it takes to complete a project from start to finish
- Revenue per employee: the average revenue generated per employee
- Resource utilization: the percentage of available time that is fully used
- Accuracy: the percentage of deliverables free from error
- Bandwidth: each team member’s willingness and capacity to take on work
- Waste: the total count of incomplete projects or unaccountable blocks of time
In addition to the traditional efficiency metrics listed here, consult with your team to identify a KPI that is closely tied to improving team culture. For example, overworked teams may challenge themselves to reduce overtime hours.
The end goal of introducing KPIs is not to micromanage teams. Rather, adopting two to four efficiency KPIs can help teams self-monitor and improve efficiency over time.
Highly efficient teams are highly impactful teams
In all honesty, building an efficient FP&A team is hard. Efficient processes are rewarding in the long run but can feel bureaucratic in the short term.
The recognition gained from reporting your impact is much more addictive than building out a few processes. But if you’re lacking efficient measures and processes, you risk not being able to scale or repeat that impact.
FP&A teams are quickly growing to become key strategic business partners influencing critical decisions. This rate of growth can only be achieved with the right mix of highly efficient practices enabling long-term, sustainable impact.