Workday Podcast: Getting in on the Act with Active Planning

Kerman Lau, vice president of financial planning and analysis at Adaptive Insights, discusses active planning: what it is, why it matters, and what successful planning looks like.

Making a plan isn’t typically the hard part, but sticking to it is. Today, technology can enable active planning, which is updated continuously and can guide the business. I talked to Kerman Lau, vice president of financial planning and analysis at Adaptive Insights, about active planning: what it is, why it matters, and what successful planning looks like.

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Do you prefer reading? Here’s the full transcript, edited for clarity. You can find other Workday Podcasts here.

Greg Thomas: Everybody plans. Planning bridges strategy and execution. But historically, planning has been a painful process—yearly plans that gather dust on the shelves. But that’s changed with technology that can enable active planning, which is updated continuously and able to guide the business. 

I’m Greg Thomas, and today on the Workday Podcast, we’re going to talk about active planning, why it’s important, and what successful planning looks like. With us is Kerman Lau, vice president of financial planning and analysis at Adaptive Insights, a Workday company. Welcome, Kerman. 

Kerman Lau: Thank you, Greg. Great to be here. 

Thomas: For those who don’t know exactly what FP&A does, why don’t you give us the dime-store tour of what FP&A is responsible for within a company.

Lau: I think the number one aspect of FP&A’s role is really around measuring the performance of the company and identifying the key metrics that drive that performance. And coupled with that is also being able to then partner with the business, so business partnering becomes a significant portion of FP&A’s role. It means working with our counterparts in sales and marketing to get that holistic view of what really drives the company. And then, ultimately, it comes down to being able to forecast and plan for the business, helping the business partner do that. 

And then also helping just to measure, making sure that we’re on track, that we’re hitting our targets, and really guiding and partnering with the company to do that.

Thomas: So kind of a mix of understanding for each business what’s important to them, what they measure, forecasting what’s to come, and then helping to build the plan to get there.

Lau: Yes. Absolutely. And that’s really been a core part of what Finance’s role has been and continues to be—more collaborative, having the conversation with the business leader about what’s important to them.

Thomas: So you build a plan to guide where things are going. Sounds pretty simple. It hasn’t been a very simple—or a very painless—process to go through planning. Why has it been so challenging historically to put a good plan in place and then to carry it forward throughout, say, a year?

Lau: Well, there’s probably a handful of reasons why. A big part of it is a data challenge. There’s a lot of data out there that is required to do good planning. And if you have bad data, then your plans are going to be bad, right? Garbage in, garbage out. And so oftentimes finance organizations will be challenged with that data problem. And they’ll spend the majority of their time collecting that data and then cleaning it, making sure that it’s of quality so they can use it. And really what that does is take away time from actually then doing a good job at the plan itself. And so data becomes a huge component of it. 

Another element of it is that things change all the time. So oftentimes,because you’re spending a long time creating a plan, by the time you’re finished, that plan is obsolete or the information is no good. So then you find yourself wondering, well, we spent a lot of time doing that. And now, things have changed. For example, at Adaptive, we started the year on the path to go public, and we were planning that way, and we had all of our internal guideposts pointed toward going public. 

A few days before we were going to go public, Workday acquired us. So massive change, a pivot in our direction as a company. So then our plans of being a public company became obsolete, and then we had to pivot and create new plans as part of the Workday family. So just a big change for us. 

Thomas: Yeah, we talked about this a little bit before we started rolling tape. And even the idea you were sharing that even the elements you were putting together to report out on changed because you were selling the story to the street and pitching investment houses. And then you’re a business unit, right? That’s a very big change in what you need to report on.

Lau: Yeah. So data and then just change, the constant change. And then there’s the element of being able to partner with the business. And finance professionals, they’re not often the most extroverted by nature. They tend to like to sit behind a desk, behind the spreadsheet, or crunch the numbers. But now more than ever, it’s imperative for finance to really engage with the business to create good plans and forecast. So I think a challenge for good planning is to come out of your comfort zone and really engage with the business, and sometimes be uncomfortable and ask questions that you should know the answer to, because you’re looking to learn about the business.

Thomas: So what’s the answer to this broken—dare I call it static—planning process?

Lau: We call it active planning. 

Thomas: The antidote to static is active. 

Lau: Yeah. And we really characterize it around three areas. It’s comprehensive. There’s a collaborative nature to it. And it’s really a continuous process. And I’ll expand briefly on each.

In terms of comprehensive, in order to get a good plan, you have to plan all parts of the business—not just from finance, but from sales, marketing, HR, R&D, and sometimes even facilities is critical, especially for companies that are growing really quickly. If facilities doesn’t have the most up-to-date head-count plan and know when and where those heads are coming, they’re going to run out of space. And that’s not good, because if they can’t put people in the right places, people can’t hire.

So that comprehensive nature incorporates everything within the company. The collaborative nature—we’ve talked about it. It has really come up in the last five, six, seven years where finance has really been now pushed to partner with the business more. And in order to do that, you’ve got to know about the business, and you have to be working across the same data set, and primarily it has to be on the same platform. 

And then the continuous nature of planning is that you need to be able to have the latest information so that people can make decisions. You want the latest actuals from Workday Financial Management. You want the latest from Workday Human Capital Management so you can get the latest head-count information and open reqs. So when you can incorporate that on a continuous basis, you’re going to get better planning. 

Thomas: What would drive someone to change the processes they’ve been using?

Lau: I’ve talked to many customers and prospects, and there’s usually one of two things that brings them to the realization that what they’re doing today isn’t going to work for them as they move forward. The first is that they see things changing in their business, and they see that finance also has to change. Otherwise, they won’t be able to keep up. And so, whether they’re on a legacy platform or sitting on Excel, they see just the amount of work and the amount of change that’s happening, and they won’t be able to keep up. 

The other reason is that they’ve already experienced they can’t keep up, and there’s been an error, there’s been a time where they weren’t able to deliver either a forecast or a plan or some analysis that was critical to the company. And so, that compels them then to say, “Hey, we need a change.” Most often it is about looking forward and saying, “You know what? We’re looking ahead, and we don’t think we can stay on our current process without some significant change.” And then they go ahead, and they go embark on this process of transforming from static to active. Interestingly enough, I was in Los Angeles doing a customer event, and we had a panel of customers, and the question came up, “How did you personally benefit from making this transformation and this journey with Adaptive Insights?” And one the customers said, “You know what? After it’s all said and done, last year during the plan process was the first year that I was able to go on vacation.” And I thought that was amazing.

Thomas: That makes it real.

Lau: Yeah, when that customer was thinking about the impact, it impacted her in a positive way, and that’s amazing to me. We have many other customers I’ve spoken to where there’s similar transformation in the finance team, and it’s really amazing when that transformation happens across the entire organization, not just finance. That’s when you know that this active process has taken hold, not just that finance is benefitting from it, but that the entire organization is benefitting., I think that’s the hallmark of moving from an old static process to an active process where everybody benefits.

Thomas: Talk a little bit more about that notion of collaborating with the business. We heard from Adaptive Insights CEO Tom Bogan yesterday here at Workday Rising talking about how planning should be done by those closest to the business. What’s your perspective on that, and coming from the FP&A side of that equation, what’s the benefit to your organization that the business is more actively involved in planning?

Lau: I think one of the big benefits is that you get more accurate plans and forecasts because it is true. The head of sales is going to know a lot more about what’s happening on the field than finance will. And that goes for R&D. That goes for marketing. You need that collaborative process to be more accurate in your forecast. 

I think another element is that it really helps FP&A when they engage with their sales partners or their business partners to learn about the business and to understand what’s happening in the business. That’s better for everyone because then finance is closer to what’s happening, and they’re able to provide the insights that the business leaders need to make the important decisions they do every day.

And I think that when finance is collaborative and the business sees that,  the business goes from thinking, “hey, that’s finance’s plan, and we have our own” to  “it’s our company plan.” We’ve all been in meetings with finance and sales when finance puts a number up and sales says, “Well, that’s not my number. That’s finance’s number.” And no one likes to hear that because, no—it’s really the company’s number. 

And by creating this collaborative process, engaging in partnership, you can eliminate that and get down to the core of what’s really important for us to talk about as a business.

Thomas: For those finance professionals, that’s a different set of skills than spreadsheet jockeying, right?

Lau: Yeah, absolutely. 

Thomas: I imagine all those core skills around accounting and being good with numbers in very simple terms are still really important. But what has that shift meant for the kinds of skills that are important to someone to be successful in an FP&A role?

Lau: That’s a great question. In order to be collaborative, the one thing that finance professionals have to get better at is communicating—both face-to-face and writing down narratives of a story about what happened in the business. And that’s not something that was prevalent about 10 years ago. But today, it’s more important for finance professionals to be able to communicate well with their business partners, meaning engaging in the conversation.

Thomas: Explaining the numbers.

Lau: And learning about the business. Explain the numbers, but also provide some insights—”Hey, because we’re seeing these trends, here are things to look out for.” And then I think the bigger skill is being a good storyteller. That’s by far something that people in finance have to get better at. I was just having a conversation with Barbara Larson, the head of FP&A at Workday, about how one of the core elements she’s looking for on her team is to develop that skill of storytelling. Communication is becoming so much more important in the skill set of a finance professional.

Thomas: Yeah, I don’t think someone would’ve said that 5, 10, 15 years ago, right?

Lau: Yeah, absolutely. 

Thomas: It speaks to a broader notion. I’ve had conversations with CIOs who say very similar things—if we can’t speak the language of the business that we’re partnering with, that we’re supporting, that we’re helping to reach their objectives, then we just can’t collaborate at the necessary level because we talk past one another—not with ill intent—but we just don’t get each other’s language.

Lau: Yeah, absolutely. And I think a great story is from when I used to work for a video game company. I used to support from a finance perspective a gaming division. And the developers wanted to engage with finance, because you have to develop the budget and go through the process of really identifying how much it is going to cost you to not only develop the product, but to market it. Ultimately, what are game sales going to be? 

I found that they were much more receptive of finance being at the table if we knew a little bit about the game they were developing. So I started playing a lot of video games. I found that they were more receptive about input from finance—from me, if I knew a little bit about their game and their business. And over time, I got really good at video games, which is one of the reasons why I had to leave, because I was getting too good at video games. 

Thomas: That’s funny. There are worse things that you could have to spend your time on than playing games, right?

Lau: I agree. 

Thomas: So let’s bring it back to this idea of active planning. If someone’s listening and they’re still in that old world or they’re dipping their toes in and see the value but maybe they’re not completely there yet, what kind of advice would you give them on adopting active planning almost as a philosophy?

Lau: That’s a really good question. I think there’s a process component to it. You have to look at your overall FP&A process. And the process would include answering questions such as, what are my source systems? What kind of data do I need? And then after the data component of it, what kind of models am I employing in my business? What’s the sales model? What’s the R&D model? What’s the head-count model? And being able to understand all of your business models up-front really would help with any transformation process.

Another key element is who the consumers are of the end product of my process, of this FP&A process—management teams, boards, executive teams, budget managers, individual contributors who need information in order to do their jobs. So who are the consumers out there? And once you’ve laid out that blueprint of what is happening in your process, you can identify areas that you want to improve. And most of the time, there are data improvements that you need to do. There’s definitely understanding your business model better. And then there’s working with the constituents that will consume the information that helps you understand, okay, how am I going to present this information to them?

And then when embarking on any change management, or any change, being able to communicate and being able to get inputs and really get the feedback and say, “Here’s our current process. Here’s where we’re thinking of going. Today we only do a static process; we do it every year, or every six months. We’re going to change our process now to do it every month.”

Well, that’s a big change for people that are on a different cadence. So being able to communicate, see the benefit, and go through that, walk through the thought process around here’s why we’re making that change, because we have to be more dynamic, we have to be more active, and we have to be able to anticipate or react more quickly to changes that are happening in our business.

Thomas: The way you laid that out, you put data last. You put process and business modeling and that piece of change management first. Is that where people tend to get hung up? Do they not fully understand that this is going to be a different way of doing it, and we need to understand what we’re doing and what we’re trying to accomplish before we dive into data and systems and the like?

Lau: Yeah, I like to think of the process from the end, just what are we going to use the information for? And oftentimes there’s a core set of metrics that the company’s going to run on. There could be 20, 30, and you need to be thinking about that. Even before you’re thinking about the data, you’ll be thinking, “Well, what do I want to measure? What are the key metrics that drive the company? What are the important outputs?” There’s always a board report that you have to do; a quarterly business review deck that you have to put together; monthly, quarterly reviews with accounting, with the business; what we call flux analysis, where you’re comparing budget to actuals or you’re comparing year-over-year performance. 

All of those things are really important. So thinking about the end is critical. And then you can work backwards and say, “Okay, now that I know the metrics, I know the reporting and analytics requirements around the business, then I can think about the business models that support that.” And then when you’re done with that, then you can really look at data, because the data component will come in. It’s the first in line, but when you’re thinking about it from a design perspective, you should think about the end. 

Thomas: So we’ve been talking about active planning with Kerman Lau here on the Workday Podcast. Kerman, thanks so much for coming in today.

Lau: I appreciate it. Thank you for your time. And thank you for having me in the studio. 

Thomas: Absolutely. So if you liked what you heard here on the Workday Podcast, please subscribe and listen to more of our episodes. Thanks for listening.

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