FP&A: A new niche — and an expanded definition

Chris Ortega is speaking on multiple topics at AICPA & CIMA ENGAGE in June. One topic is a guide for CFOs on people and process optimization. Ortega, CEO of the consulting firm Fresh FP&A and a regular speaker at financial planning and analysis events, delves into the critical role CFOs played at the start of the pandemic and why he says FP&A practices are evolving. Also, hear his advice about vulnerability and taking chances and more.

Plus, get a summary of recent JofA news coverage on these topics:

• What companies are doing to recruit and retain employees.
• A closer look at how “SECURE 2.0” would expand retirement savings options.
• The obstacles faced by the Biden administration’s proposed billionaire minimum tax.
• New SEC rules proposed to help investors better understand SPACs.

What you’ll learn from this episode:

• How Ortega saw the role of the CFO change as a result of the COVID-19 pandemic.
• Ortega’s thought on six core principles for business.
• A preview of two sessions at AICPA & CIMA ENGAGE in Las Vegas.
• A new meaning for the acronym FP&A.
• The advice Ortega would give if he could go back and talk to his 25-year-old self.
• News related to legislation, proposed SEC rule changes, and the strategies companies are employing to recruit and retain employees.

Play the episode below or read the edited transcript:

To comment on this episode or to suggest an idea for another episode, contact Neil Amato at Neil.Amato@aicpa-cima.com.

Transcript:                                                            

Neil Amato: Hello. Glad to have you back for another episode of the Journal of Accountancy podcast. We’ve got news on multiple fronts, including SECURE 2.0, what that is, and where it stands in Washington. Coming up first is an interview that gives new meaning to the acronym FP&A, offers career advice, and previews some ENGAGE presentation topics. You’ll hear it after this word from our sponsor.

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Amato: Welcome back to the Journal of Accountancy podcast. This is your host Neil Amato. Again joined by Chris Ortega, who is speaking at AICPA & CIMA ENGAGE in June. Chris, thank you for being on the podcast. First, you have said that CFOs need to be “empathetic, data-driven, decision-making leaders.” How does that sentiment relate to a session you are presenting at ENGAGE, the “CFO Guide to People and Performance Optimization”?

Chris Ortega: One of the most important things that has happened and has evolved for accounting, finance, FP&A, CFOs, over the last, call it two to three years, is that it is becoming more important for the CFO, the office of the accounting, finance, FP&A organization to really be engaged with our people. When you think about during the peak of the pandemic when chief marketing officers and chief revenue officers and VPs of sales took the back burner and said, “Hey, CFOs, you have to navigate us through this uncertainty, this challenge, this difficulty that we don’t know how long it’s going to last.”

CFOs stepped up and said, “OK, we have to do that, but we can’t do that on legacy people, process, performance, platform, strategies that we had before.” We had to be new, we had to find a way to connect with our business. We were not in the office where we could get the VP of sales, and marketing, and operations, and client success, and all the business partners that we serve and support in one room and say, “Guys, this is what we’ve got to do.”

We had to be more collaborative, and we had to be more about the communication. We had to do more connecting to our teams. To me, I think that is where you take the traditional data decision-making process that I like to phrase as a framework called the decision cycle. Basically that decision cycle is processes drive data, data is then turned to information, information is shared through knowledge to ultimately make a business decision.

That data-driven decision-making framework has always been traditionally where organizations have looked at the CFO to say, “We need you to be focused on how we do this.” The empathetic side is processes aren’t the starting point now, it’s the people. Now that entire data decision-making framework is just people are driving the processes, that’s turning into information, that’s turned into knowledge, to ultimately make a business decision.

That people side of it was now marshaled as like the resounding point that CFOs needed to think about. Talking in the ENGAGE session that I’m really excited about to do — if you haven’t already, make sure you check out the ENGAGE conference. It’s going to be a tremendous set of speakers and host of topics. If you’re in the accounting, finance, FP&A community, that’s a conference that you don’t want to miss. I’m really excited to talk about that and give CFOs the framework, the plan, to say this is how you go implement, introduce, and ingrain an empathetic data-driven decision-making model inside of your organization and teams.

Amato: In the session description one highlighted part is the, I guess, identification of 30-, 60-, and 90-day strategies. Obviously, people are going to look at business longer, farther out, than just 30, 60, 90 days. But on those strategies for people and performance, what are they? How are they different from each other?

Ortega: Yeah. To the point, I think some industries and companies and teams have, through the pandemic, now some are recovering, some are out. Everybody is at different stages of business and where they’re at dealing with that. Some people may have only the accuracy of the 90 days. I know in some SaaS businesses that I’ve been a part of and working in and consulting on, the best visibility they still have is 90 days.

On the people side, I think when you establish the people side of evaluating where you are, the first step you have to do is always understand your baselines. To me, when I think about the higher level of business and financial transformation, it really distills down to six core principles that I call the six Ps: people, process, platform, partnership, performance, and profit.

Specifically on the people side, that’s one of the most important topics that any CFO is facing right now. How do we keep talent? How do we bring in new talent? How do we keep employees engaged? How do we provide opportunities for career development and professional development? How do we provide opportunities for our staff to make an impact and influence? How are we connected to our communities?

The people aspect is becoming so important. I think the first step that you need to do in that 30-, 60-, 90-day strategy, is establish what your baselines are on some of those key measurements or KPIs that I just mentioned. You have to know where you are. If you don’t know where you are, how do you know where you want to get to? To me, I think that’s one framework.

The second framework that you can have in that 30, 60, 90 days around people is understanding, we got the baseline, what are those specific strategies and tactics that we want to implement in that next 30, 60, 90 days to address some of the gaps that we have? The same framework that we go through in a lot of the planning, budgeting, rolling forecasts, and planning that we do just traditionally inside of our organization, we have to take that same rigor, that same methodology and framework, to now come up with strategies and tactics to address the people gaps that we have.

Then the third step that you want to do in that valuation is, now that you’ve established the baseline, you’ve identified those one to four strategies and tactics that can help fill some of the gaps of where you want to go, the third step is you want to continuously improve and have that monitoring and feedback.

If you’ve identified that, hey, our baseline around employee engagement is really low, but three things that we’re going to do is A, B, and C, how are you actually performing on those? The same way that you would measure, we want to improve our customer acquisition costs in this quarter by 25%, you want to take the same methodology and framework to do that around your people.

Same thing goes for the performance side of the shop, the same due diligence that you would go through for the process out of your shop, you want to be able to set those things and make them realistic. I think another thing that CFOs need to be aware of is, you need to be honest in that entire assessment of where you are. Now is not the time to fake it till you make it and think, “Yeah, we have the best employee engagement.” Probably not.

Really be honest with yourself and really be diligent about — also, I think another place to really have tremendous value in that is sharing that to the organization. I think there’s so many great things that CFOs do, but it’s always in a pocket. It’s always what the CFO, the accounting, finance, FP&A group is doing. But that can be another framework that we can say, hey sales, hey marketing, hey operations, hey client success, this is something that we’re doing to evaluate the people and performance strategies of our organization. Maybe this can be helpful for you or you can take it and model it to your team and organization that you could be supporting.

I think that’s a missed opportunity that a lot of CFOs don’t engage in because they’re not connected, they’re not collaborative, they’re not inside it and tremendous supporters of the business. That, to me, will be the framework and the processes that you can do to really assess honestly and proactively your 30-, 60-, and 90-day people and performance strategies.

Amato: You’ve been in FP&A for years. It’s at least 10, it might be 15. Time is getting away from me, I don’t know, but how has it changed, and where is it heading?

Ortega: To me, when I think about FP&A, I think in two stages, in two evolutions, call it, two renaissances, so to speak, of FP&A. The first renaissance of FP&A was financial planning and analysis. I remember talking at a couple AICPA sessions and I’ve been on the FP&A — which is now consolidated into ENGAGE — conference planning committee. I remember when FP&A was at its height and everybody was like, “Planning and analysis was the most important thing.”

When you hear it, planning and analysis feels very tactical, it feels very quantitative. In the data analysis, data mining, data assessment, it fills that piece of it, it’s very quantitatively heavy. That’s what the business needed from us, that’s what they wanted from us. They wanted for us to look at all the complexity, all the data that we have in the business, turn it into clear and concise conclusions that the business can go action upon.

That’s what they needed. That renaissance of FP&A, that was the value proposition that we provided. But now you look forward to this next stage in evolution of FP&A, the financial planning and analysis, don’t get me wrong, is definitely a foundation that’s important, but what’s becoming more important is the qualitative aspect of FP&A. To me, financial planning and analysis has evolved into financial partnership and advising.

That is the next renaissance and the next value proposition that we have. That change and that shift has caused the business to say, “You know what, I don’t want my FP&A business partner to be the best data miner outside the world. Technology has advanced financial planning and analysis way faster than what I can go do financial planning and analysis on.” Technology has filled that gap. Now the business needs and wants financial partners and advisers.

Getting back to the pandemic, that’s exactly what the CFO was needed [for]. They didn’t need somebody during the pandemic to be great planning and analysis persons. Like yeah, you need to look at the data. I know during the heat of the pandemic, working with some of my VPs of sales, client success leaders, we were looking at everything. But they needed a partner and an adviser. They needed somebody at the front of that ship navigating to say there’s an iceberg two miles ahead, if we don’t course-correct now we’re going to run right into it, or there’s an iceberg that we need a plan for process-wise and we need to advocate.

That’s what the business needs now, and that has opened up a whole other level of skill sets that is needed and demanded outside of the traditional quantitative things that we’ve seen.

The art of storytelling, being a great collaborator, building deep and trusting business partnerships, turning or communicating complexity into clear, concise conclusions. These other skill sets that, honestly, I don’t know about the listeners out there, but I didn’t take a class at the Kelley School of Business or was there a class offered in my MBA program that said to be the great storyteller in business. But those are becoming in demand.

That is what the business wants. They needed financial planning and analysis before and they still need that, but what the business wants and what the skill sets that are becoming a high demand are more qualitative in focus than they are quantitative in focus. To me, that has been the renaissance and evolution of where we were in FP&A and where we’re going to go and where we’re going to win big for our business partners in a team that we support.

Amato: Also at ENGAGE, Chris, you have a session on real-life applications for AI and machine learning. What can you tell listeners about that session?

Ortega: Yes. I talk a lot about artificial intelligence, machine learning, and RPA. To me, I think, over my experience in high-growth, entrepreneurial, SaaS, start-up to scale-up organizations, as well as the consulting that I’ve been doing for the last seven years for Fresh FP&A, is that finance has to not be laggards in technology adoption. Traditionally, we have been really risk averse about implementing AI, machine learning, and RPA tools.

Why? It’s because how do you audit a machine learning algorithm? How do you do that? How do you go audit a forecasting plan for the next six months around sales that was completely on prescriptive analytical algorithms? How do you go do that? Some organizations and teams have learned to harness that to produce what I call the gold standard of testing.

You have AI, machine learning, and RPA producing a budget, a plan, a forecast, a model that is able to, way faster than your team can do, quantitatively identify the risk in elements inside of a plan. That’s your A test side. Now you get into the B side where you can get into those partnerships, those conversations, those really knowing the business to develop another plan, test B.

Now, you can go through and test and see what actual performances are and retool those algorithms. You can get the machine learning and AI aspect of your plan better because now you have more data. You can have the people side of it be more informative because you’ve seen that deal be signed or that contract be closed or a customer be lost. To me, AI and machine learning has never been about replacing the CFO, accounting, finance, FP&A professionals — that’s never been the goal and objective.

It has been about putting the people element at the right place to have the highest value inside the organization. That is the value proposition. That is what it’s meant to do. I think one of the luxuries that a lot of CFOs don’t have is we don’t have the ability, like sales, that if sales are gangbusters and growing above our plans, you go hire more people. We don’t have that opportunity, so we have to be great technology adopters. We have to find ways that technology is optimizing our resources to focus their time, energy, and effort in the high-value activities. We have to look at ways that we can leverage AI, machine learning, RPA to automate a lot of the manual, low-value, routine things that we don’t have people focused on.

The Great Resignation has been a lot of things. The CFOs that are listening and VPs of finance and accounting and finance leaders, you’re probably feeling that. But it’s been about saying that people finally realize, “I have a skill set, I have a value proposition, I have a way and where I want to work, perform, have the ability to be empowered. I have a way of being able to do that.”

It’s not that the Great Resignation has said that the grass is greener on the other side of every opportunity that people are doing. The Great Resignation has validated that the grass may not be greener on the other side, but for accounting, finance, and FP&A people, at least I’m not the one cutting the grass now. That’s a key thing.

People have realized, there’s greater organizations that are doing better things, that are leveraging the tools and technologies that I can go have an ability to learn, impact, and influence, and have an ability to shape those successes in the organizations where they’re leveraging it. To me, that is really the compelling element of AI, machine learning, and RPA and its impact on accounting, finance, and FP&A.

Amato: I’ve never heard “I’m not cutting the grass” be compared to those rote accounting functions, but I like that. That’s good. We’re going to switch to some career advice. Chris, this could be career advice for you by you, I guess. If you could go back in time and talk to the 25-year-old version of yourself, what would you say?

Ortega: First thing I would say is the 25-year-old version of me, I will be more fiscally responsible with my life at that time. Twenty-five-year-old me was enjoying life. I would go back and say to me, first, four things. The first one is really understanding and being in tune with your why and your purpose. I didn’t think I really realized what my why and my purpose was till later on.

You’ve got to find it. Some people never find it. Some people find it, like Steve Jobs found it really early in life. Everybody is on the different wavelength around it. But to me, I think your why is the reason you do what you do. It’s the reason why you’re here. To me, my why is to be the best CEO I can be personally and professionally; that’s my why. My purpose is to use my skills, passions, and talents to help others realize and achieve greatness. I didn’t learn that and I didn’t have those North Stars till later on. I think, to me, if I would have been more focused on aligning those things in my life earlier on, I think I could have accelerated a lot of different career choices and the decisions that I would’ve made.

I think the second advice I would give to that younger version of myself is be honest, be open, and be vulnerable. There’s a common misconception that leaders should have every answer to every question and people should be making decisions and asking the leader what we should do. To me, I think, once I didn’t want to be the smartest finance person in the room, I wanted to be the best collaborator in the room. I wanted people to feel safe in that room to ask any question or concern that they had. I think that really opens you up to a lot of things in your career, in your personal life, in your professional life because those are the pillars that you stand on.

Really solidifying what are your leadership and what are your professional pillars, and where do you want to walk authentically in your truth and where you want to be honest, open, and vulnerable about, is really important.

I think the third one, the other career advice that I would give, this to me at 25, but just for people out there listening, as you think about opportunities, as you you think about your career the next five to six years, as you think about all those different things and maybe you guys are getting an interview question like, “Where do you see yourself in five years?” The worst answer you could ever have in that is saying, “I see myself as a CFO or a CEO in five years.”

Don’t ever do that. I think when you look at that question, and how I’ve looked at my life is like, I’ve never looked at it as a title or a destination. I’ve always looked at those as where do I see myself increasing, challenging, broadening my comfort zone, or developing other skills, passions, and talents that I didn’t think I had. I think right now, a lot of people get comfortable. To me, it’s like, you’ve got time to be comfortable. Now, 25-year-old me, still, I would advocate, take those risks, take those opportunities. Because to me, if you develop the mindset that there’s only two options in life, that you either win or you learn, you put yourself in a situation where you have that opportunity to develop and grow exponentially in all aspects of your life, whether that’s your career, whether that’s your personal life, professional life. To me, I think that would be the advice that I would give 25-year-old me.

I would probably get 25-year-old me to eat a little bit better. I was smashing a lot of unhealthy food when I was 25, probably like most, you get carried [away] like, “I’m going to eat this burger and everything.” But to me, I think from a career perspective, from a life perspective, from a professional perspective, those four things will be the look-backs. As Steve Jobs would say, those would be the connecting dots that I will look back on that I would want to tell myself.

Amato: Chris, thanks very much for your time on this episode. Anything you’d like to say in closing?

Ortega: Neil, thank you so much, and I really appreciate this time with the Journal of Accountancy. If you have any other questions, clarifications, anything else you want to learn, feel free to look me up on @FreshFPA on all my socials. Neil, thank you so much for this time. Thank you for this discussion, and to all those accounting, finance, and FP&A superstars across the globe: Keep pushing, never settle, and the best is yet to come. Let’s get it.

Amato: Again, that was Chris Ortega. He’s speaking in June at AICPA & CIMA ENGAGE in Las Vegas. You’ll hear more from ENGAGE speakers on future podcast episodes.

In other news, new data from a survey of CPA decision-makers in business and industry shows that more companies are raising pay and offering flexible work options in an attempt to hold on to employees or find new ones. Some also plan to offer signing bonuses in the midst of the Great Resignation and higher inflation.

The JofA‘s Paul Bonner has an article describing what’s in the Securing a Strong Retirement Act, aka SECURE 2.0, which passed the House of Representatives on Tuesday and now heads to the Senate. The act builds on the expansion of retirement plan opportunities enacted in 2019 by the original SECURE Act.

Paul also writes about some tax experts’ opinions on the so-called billionaire minimum tax in the Biden administration’s proposed budget for fiscal year 2023. In the article, you can learn about why a university professor, a CPA, calls the proposal “problematic,” also using the phrase “compliance nightmare.”

And finally, Ken Tysiac has coverage of a proposal by the Securities and Exchange Commission that would provide investors with more information and protection in initial public offerings by special purpose acquisition companies, or SPACs.

That article and all the other articles mentioned can be found in the show notes for this episode or by visiting journalofaccountancy.com.

That’s our episode to close out March. Thanks for listening to the JofA podcast.