CFOs: Going Beyond Short-Term Planning

By Nilly Essaides
August 13, 2020

The coronavirus pandemic sent a seismic shock through the economy, forcing many finance organizations to throw out 2020 forecasting and budget assumptions and start from scratch. The pressure to address the immediate challenges makes it easy to get caught up in short-term thinking. But it’s very important that finance maintains a steady focus on the company’s long-term strategy for creating shareholder value in the new normal.

While strategic planning typically happens at the very top levels of business/finance, The Hackett Group research shows that FP&A teams play an important supportive role. For example, 57% of FP&A teams are responsible for performing modeling and investment analysis, e.g. running scenario analysis to simulate the impact of strategic options, and 43% provide insight into resource allocation and funding alternatives. It is also FP&A’s responsibility to translate the operational plan into clear targets via the annual budgeting process.

Best Practices and Key Questions

In a survey we ran earlier this year, we identified best practices in strategic planning across eight subprocesses and them developed a list of critical questions planning teams should ask themselves to assess their relative capabilities.

Strategic portfolio planning

This process involves determining which initiatives to pursue and fund in order to realize the company’s strategic objectives.

Planning teams that are adept at modeling the strategic portfolio focus on assessing strategic initiatives against their ability to positively impact critical business drivers. This way, they can ensure the company’s resources are prioritized in an optimal way.

To assess their capabilities, planning teams should ask the following questions:

  1. Are strategic initiatives evaluated against strategic objectives?
  2. Is the funding of strategic initiatives systematically prioritized?
  3. Is the entire strategic portfolio reviewed with adequate frequency?

Strategy development

This process involves setting priorities for strengthening operations, ensuring that employees and other stakeholders develop agreement around intended outcomes and results, and assessing and adjusting the organization’s operating model accordingly.

A strategic plan should be established and clearly communicated by business leaders to all budget owners, prior to developing the annual plan. It is FP&A’s role to pressure test the strategy to identify and incorporate operational constraints. To enable a consistent level of planning focus, FP&A should provide guidance and templates to help planners conduct the right level of structured thinking to inform the development of key initiatives.

To assess their capabilities, planning teams should ask the following questions:

  1. What information is truly needed to fulfill the team’s mandate?
  2. Is clear guidance provided to business unit and functional leaders on strategic priorities?
  3. Is the input provided by the business unit or function designed to be a plan of action to deliver targets? Or is it more like process of negotiation around the appropriateness of those targets?

Strategic modeling

This process includes the development of strategic initiatives and related use cases through the simulation of base business, previous and new business cases.

Top performers in strategic planning deploy sophisticated economic value-creation methodologies, such as economic value added (EVA), and balance them by using capacity and prioritization models so management has the best information to support its decisions. They then use the outputs to support business cases and create an organizational capability, so the information is methodically included in decision-making processes throughout the company.

To assess their capabilities, planning teams should ask the following questions:

  1. Do we have the capabilities needed to effectively model the business case of strategic initiatives?
  2. What evidence underpins the validation of any business concept supporting the strategy?
  3. Do strategic simulations reflect the collective knowledge of the organization and its partners?

Communication of strategic events

This process involves orchestrating required planning events to communicate effectively and obtain stakeholders’ buy-in for the strategy.

To ensure clear accountabilities and a common set of objectives, the plan and associated targets must become the basis for the operational and financial goals of all budget owners. The best way to ensure effective communications is by establishing a dedicated resource or team to disseminate the plan to stakeholders, for example business unit taff, the board and investors. A single, central repository of strategic modeling and process- specific data and assumptions, plus collaboration tools, can be effective for managing interactions and communication during the planning process.

To assess their communication capability, planning teams should ask the following questions:

  1. Does it address the right audience and includes all elements required to assess the impact?
  2. Does the strategy include an array of communication channels to ensure that it reaches the intended audience?
  3. Are messages tailored to the needs of different stakeholders?

Strategic planning for SG&A

Strategic planning for SG&A comprises the execution of key strategic planning activities in the context of specific business services functions as opposed to business units or divisions.

The objective of SG&A planning is to help functions such as IT, HR, procurement and finance anchor their performance management framework to established KPIs. For best results, planning team members assigned to support this activity should have experience in corporate finance and accounting as well as a grounding in company operations to enable a more thorough understanding of business drivers.

To assess their capabilities in this area, planning teams should ask the following questions:

  1. Are models for SG&A efficiency, effectiveness and user experience based on empirical data?
  2. Is the process designed to incorporate best practices and emerging, innovative practices?
  3. Does the plan ensure that all SG&A functions are prepared to scale for growth?

Agile strategic planning

Agile strategic planning is the ability to plan for selected scenarios and use the outcomes to affect the company’s base scenario. This capability introduces agility by enabling organizations to consider changes to their plan and adapt to shifts in business conditions.

Sophisticated strategic analysis should identify causes of volatility and then model the sensitivity of the company’s strategic options. The plan should be revisited whenever an event can have a significant impact on the likelihood of achieving the company’s long-term goals, for example the outbreak of the coronavirus.

To assess their capabilities, planning teams should ask the following questions:

  1. Is there a clear understanding of the conditions that would trigger alternative scenarios?
  2. How should FP&A partner with company management to drive change in the organization based on different scenarios?
  3. What actions are necessary to manage changes to targets and their implications under each scenario?

Monitoring strategic realization

This activity consists of tracking progress toward achieving strategic outcomes, and the root causes of failure to achieve strategic objectives.
Having the best plan is not enough. The strategy and the effectiveness of its execution must be reviewed regularly to validate key drivers and the linkage of inputs to plan components; this clarifies potential improvement initiatives.

To assess their capabilities in this area, planning teams should ask the following key questions:

  1. Which of the primary characteristics of strategy delivery measurement are not well supported?
  2. Are there proper routines in place to process information and drive actions to address perceived gaps in performance?
  3. What is the optimal cadence of key performance steering events?

Strategic risk management

The process of identifying, assessing and managing the risk in the organization’s business strategy, including taking swift action when risks are identified.

Top-performing strategic planning organizations regularly scrutinize strategic drivers and inputs for improvement opportunities. They incorporate risk management frameworks into their planning process and routinely review risk models and test and update cause and effect relationships.

To assess their capability in this area, planning teams should ask the following questions:

  1. Are major risks incorporated into the strategic planning exercise for use in specific planning events?
  2. Is there enough emphasis on the consideration of alternative scenarios?
  3. Is there a clear connection between strategic planning and enterprise risk management?



The most commonly missing part of the strategic planning process is a lack of alignment around the key driving factors that underpin planning scenarios. These factors (e.g., oil prices, sales growth, etc.) should always be used to validate management’s assumptions. Every company needs to identify what is driving its performance today and what will do so as time goes on, particularly when experiencing material performance disruption, such as the Covid-19 outbreak, which may alter the business objectives and require new performance indicators. Therefore, planning teams should continually monitor internal and external information to assess whether changing conditions have the potential to undermine the feasibility of the company’s long-term objectives.