xP&A in focus: Why planning needs to look beyond finance

xP&A in focus: Why planning needs to look beyond finance

Tools like IBM Planning Analytics highlight how planning can be removed from the narrow domain of finance to provide positive impacts across a business

Gartner has recently highlighted a big increase in interest for what it calls extended planning and analysis (xP&A).

xP&A is not a new concept. Day-to-day, tools like IBM Planning Analytics highlight how planning can be removed from the narrow domain of finance. Benefits-wise, integrated planning offers the ability to instantly see the impact of change right across the business, alongside continual and complete performance transparency. As Mark White of MHR Analytics explains, it’s not difficult to see why these capabilities are increasingly viewed as essential.

Joined-up planning gets a rebrand 

Gartner suggests that by 2024, 70 percent of all new planning and analysis projects will reach beyond finance to support operational processes. 30 percent of existing FP&A implementations will be extended to cover operations. To describe this trend, Gartner has coined the phrase, extended planning and analysis (xP&A): i.e. using an integrated model to take planning and analysis beyond finance into a much wider range of areas, including workforce, supply chain and marketing.

The label, xP&A might be new, but the concept of integrated, joined-up planning is not. The disruption of the last year or so has been a wake-up call for companies, so the renewed interest in it comes as no surprise. To respond effectively to suddenly changing market and operational factors, you need a complete view of the business, along with better processes for consolidating forecasts and performance metrics.

Recently, we flagged up the continued value of techniques such as zero-based budgeting and balanced scorecards. These are precisely the types of tools that deliver an accurate, enterprise-wide view of performance, and that enable you to measure your progress towards strategic goals from multiple perspectives.

xP&A speaks directly to this need to join the dots between different areas of the business, and it directly facilitates techniques such as ZBB and scorecarding. Here’s how…

xP&A in action

With traditional financial planning and analysis (FP&A), data categories linked to areas such as revenue, expenses and capital expenditure are pulled together for budgeting, reporting and forecasting. As its name suggests, FP&A’s focus is squarely on the financial perspective.

Meanwhile, HR has a plan to manage headcount. Production has a plan for plant and materials. Marketing has a plan to manage its ad spend… and so on. There are multiple operational plans in play. Trouble is, each plan is generated in isolation to the others (often in Excel spreadsheets). For anyone seeking to build a cross-departmental report drawing on different assets, different update cadences across functions, taxonomy quirks and input errors can mean a time-consuming and incredibly difficult task.

xP&A takes the automated planning tools and processes used by finance, and extends their usage to operational planners. The result is that everyone – from departmental managers through to the CFO and wider C-suite – gets a more complete and up-to-date view of the business.

To illustrate, here are a couple of examples:

Example one: Responding to demand

Your production department needs to arrange a slot for a maintenance shutdown. Ideally, this needs to be scheduled at such a time that the ability to meet demand is not jeopardised.

With all planning processes and data unified in a single solution, you can draw directly on up-to-date marketing and sales data to understand when demand is likely to peak and wane. From this, you can plan the optimum time for the shutdown, while still ensuring production demands are met. For implementing the shutdown project, HR can draw on the same data to determine when they are going to have to bring extra technical resources on board.

Example two: Managing ESG

As part of your broader commitment to measuring environmental impacts, the company is weighing up the viability of switching the vehicle fleet to electric.

Through xP&A, you can measure the full implications of this across procurement, logistics and HR, right through to sales, and ultimately, the bottom line. You can weigh up the cost implications of various vehicle leasing options. You can factor in the potential benefit of lower fuel expenditure. Taking into account the location and availability of charge points, you can see what this means not just for order fulfilment but also for staffing. In turn, the sales department can use these insights to inform pricing decisions.

Let’s say a large number of additional electric charge points are introduced. You can feed this data into your unified planning solution and instantly measure the impact across the board (e.g. how shorter wait times at service stations translates into daily fulfilments, and what this means for staffing).

A bigger picture

With siloed, spreadsheet-based planning processes, operational departments have a limited view of the larger patchwork of factors impacting their output. In addition, it can be difficult to ascertain how their performance impacts other areas of the business. xP&A breaks these boundaries, providing a deeper context to the numbers and delivers a more complete picture of performance.

Continual, collaborative planning

xP&A joins up financial, operational and external data. The planning tools that were previously the preserve of finance are now opened up to other departments, so that insiders from across the business can now potentially contribute to company plans. The planning process becomes more agile; inputs can be amended as circumstances alter, and key insiders can instantly see how these changes impact their area of operations and the bottom line.

Better KPIs

As we flagged up recently in Accountancy Age, scorecarding is one of those techniques that encourages you to examine performance holistically from four cross-departmental perspectives: financial, customer/stakeholder, internal processes and organisational capacity.

The core objective of xP&A is to break down silos across the organisation and to foster a shared vision of success. As such, it provides the ideal framework for appreciating the cause-and-effect connection between various strategic objectives, and for defining relevant, achievable KPIs across the business.

What next?

Successful xP&A implementation requires the ability to unify data sources, people and planning practices in a single solution. For a full and frank discussion on how best to achieve this within your organisation, speak to MHR Analytics today.

Click here to discover how MHR Analytics can help your business


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