In a recent webinar, Kinnari Desai, Workday’s senior director of corporate finance, provided insight into scenario modeling and how Workday approached this following the outbreak of COVID-19. We spoke with her to get more best practices and tips for financial planning and analysis (FP&A) teams.
How did Workday have to adapt its business planning process following the start of the crisis?
We were coming off the back of our annual planning cycle and thanking our teams for their efforts in delivering “Plan A.” Then of course, everything changed with COVID-19. We had to spring right back into action, modelling scenarios in an environment that was so new—and seemingly changing hour by hour.
I believe that in an uncertain environment like this, it’s very important the FP&A team aligns with the leadership team, understands the context of what’s happening, and looks at a small number of relevant scenarios. It can be easy to get carried away producing several scenarios, but the goal is to provide the leadership with a range of likely outcomes and provide data, in a simple way, that would enable decision making.
In these situations, I’d imagine speed is of the essence, but you have to get it right if scenario modeling data is going to be valuable to your business leadership?
I do think it’s important to execute quickly, but in order to achieve our objectives, we had to be thoughtful in our approach.
As a business, you have to agree on your priorities. Are you going to focus on top-line growth, cash, the impact of employee relief programs, hiring pauses, and so on? Then you should consider the impact of those on the P&L and cash flow.
The next big thing is getting input from the business. While we are always in lock-step with our business partners since we can’t model in a vacuum, it’s more important than ever to meet with the operational business leaders, gather their perspectives, and understand what’s top-of-mind for them. You should be meeting with leaders multiple times to quickly narrow down focus areas that are a priority for them, such as support for employees, availability of equipment, and hiring direction.
From there, how do you start thinking about how you’ll use scenario modeling to drive decision making and elements such as forecasting?
In our case we had to adapt our scenario modeling frequency to help us make decisions faster. This impacts things like forecasting —we could no longer rely entirely on a monthly forecast process, so we adjusted the process slightly. This has led our FP&A team to a more continuous approach to planning, versus point-in-time or quarterly updates.
There are areas like revenue and cash that we are visiting on a weekly or even a daily basis. Then there are other areas that we may not review daily, but look at more frequently than before. We also discussed as a team that at times, the level of guidance we can give to other internal teams may not be as detailed or defined as it has historically been, since the situation is constantly evolving. As a result, we all need to remain agile.
Last but not least, we also identified drivers of large spend, and cost levers that can be pulled should the need arise.