Only our second ever returning guest, Christian Wattig, a veteran former leader of FP&A at P&G, Unilever, and Squarespace, reveals new skills he has learnt as he created the recently-launched 8 week Wharton Financial Planning & Analysis (FP&A) Certificate Program, one of the most comprehensive FP&A training courses on the market. He describes highlights from his career, new strategy, and analysis, and how he sees the future of the profession.
In this episode:
- The common bond between FP&A educators such as Christian and former host Paul Barnhurst and Glenn
- FP&A at multinational consumer goods companies P&G and Unilever
- Startup FP&A vs Big FP&A
- Creating FP&A Prep to the new Wharton (University of Pennsylvania FP&A) 8 week Online Course
- Two great books I recommend The CFO Lens, Ravi Kumar, and Future Ready by Steve Morlidge and Steve Player
- Two Fascinating FP&A Things I hadn’t come across in 14 years previously: Business Driver Tree Analysis + Differences-in-Differences Analysis
- BI, financial analysis and data science vs FP&A
- Building an FP&A Team through four phases explained-data focus, story focus, and proactive value creation
- The importance of FP&A tools and choosing the right one
- Key insights and trends for finance we will see this year
- Practical uses of AI in FP&A
8-WEEK ONLINE COURSE Financial Planning & Analysis (FP&A) Certificate Program https://wallstreetprep.wharton.upenn.edu/financial-planning-and-analysis-certificate/
Sign up to Christian’s weekly (free) newsletter with tips and practical FP&A advice: fpa prep.com/newsletter
Connect with Christian on Linkedin: https://www.linkedin.com/in/christian-wattig/
Full Transcript
Glenn Hopper:
Welcome to FP&A Today, I’m your host, Glen Hopper. Today we have the pleasure of speaking with Christian Wattig, an accomplished fp NA expert with over 14 years of leadership experience in multinational corporations and fast growing tech startups. Christian spent 11 years at Procter and Gamble and Unilever leading FP&A and accounting teams before earning his MBA from NYU Stern and transitioning to the tech sector. He played a pivotal role in taking Squarespace public as an FP&A leader. Now, an entrepreneur. Christian shares his extensive FP&Aexpertise with finance teams through the Wharton School of Business and his own company, FP&A Prep. He serves as the director of the Wharton FP&A certificate program, works as a corporate trainer, offers online training programs and regularly shares FP&A best practices with his LinkedIn followers and over 30,000 email subscribers through his weekly newsletter, fP&A Tuesday. Today we’ll be discussing Christian’s transition from FP&A leader to teacher, the four phases of FP&A team development, and how modern FP&A tools can help finance teams advance to the next stage. Christian, welcome to the show.
Christian Wattig:
Thanks for having me, Glen.
Glenn Hopper:
Yeah, so I gotta say FP&A Tuesday, you’re on FP&A Today, and our good friend, Mr. Paul Barnhurst, former host of FP&AToday today, now has FP&ATomorrow. There’s a lot of FP&A and time. It, it’s like there’s a timeline we gotta keep up with here between today, Tuesday, and tomorrow, I guess <laugh>.
Christian Wattig:
Well, I think there’s not enough good FP&A education out there because it’s a topic that is really not covered that well by traditional university education. Right. It’s very technical, it’s very focused on, on theories, and so I think it’s great what you’re doing with this podcast, and we need more of that.
Glenn Hopper:
It’s funny, I, in, in talking to, in, in being in this role as a podcast host, and you certainly out there as a, a thought leader on FP&A and all the others that we talk to all the time, I love that. I mean, there, you know, there may be is a friendly competition between, you know, how many listeners you have or how many followers there are or whatever. But really there’s the amount of times that we end up interacting and working together. I think it’s, I I’ve really enjoyed that as, as part of the community, and I, and I a hundred percent agree that this really dialing in to the art art and science of fp and a and what we need to do is so important. And I think you’re really out there on the forefront leading and, and, and preaching this and and, and helping to teach kind of the next generation of fp and a people. So really appreciate the work that you’re doing.
Christian Wattig:
Thank you. Yeah, and I, I have to say, when I considered quitting my job in, in corporate finance, and we’ll, we’ll talk about that later, when I made the decision to be an entrepreneur full-time, I was concerned that it would be a lonely journey, you know, not having colleagues anymore, et cetera. But I realized that there’s this fantastic group of people like yourself and Paul, and also, you know, Nicholas Boucher and others who also devoted their career to sharing FP&A education and, and furthering people’s development in, in corporate finance. And yeah, exchanging ideas and, and going through this journey together and connecting regularly, you know, over LinkedIn, over Zoom, or even in person, makes this whole endeavor feel much more doable and much more fun as well. So, yeah, I appreciate it.
Glenn Hopper:
Yeah. And actually, so thinking about that, I mean, I think for all of us, maybe it’s similar and I, I haven’t really talked to a a a lot of the other folks out there directly about this, but I’m thinking of you before you decided to make this leap. You’re going along, you’re doing your work in FP&A, I’m, I’m wondering like what the early seeds of thought were and when you really started thinking, yeah, I’m enjoying doing this, but I could also teach others, and, and I’m, I’m just thinking about that shift from being in, in the weeds doing FP&A to moving more to this professorial role. Tell me a little bit about that for you.
Christian Wattig:
Yeah, so for that, I think it’s helpful if I share a bit about my, my background and how I came up with the idea to teach because it’s all closely connected. So I started my career at large consumer goods companies, spent four years at pro and gamble working out of Switzerland, and then seven years at Unilever, working out of New York City where I’m, where I’m based now. And I would recommend people who are early in their career or who are maybe still in school considering which role to take to start their career in a large company because their people have, their companies have the money to focus on having good tools, focus on having good processes. And many of these companies had decades of iterating and figuring out how, what’s the best way to, to do a forecast, what’s the best way to standardize financial modeling, et cetera.
And so it’s fantastic to learn when you’re new in a profession. And I had, you know, fantastic experiences at P&G. I was faced with a business partnering challenge right out of the gate where I was working with partnering with a sales team. And they were consistently over promising in their sales projections and under-delivering it was my job to help them bring more realism into their projections and, and improve forecast accuracy. It was fantastic. And then I also had the chance to lead a financial modeling process where P&G was considering building a new factory in South Africa. And it was a hundred million dollars investment. And it all hinged on my financial model to see if the NPV would be positive and if we would, you know, be able to have a, a payback period that’s decent. And I learned a lot during that as well.
And then at Unilever, I actually had the chance to lead the internal finance learning and development team. I was doing that on the side while I was leading the, the marketing, finance and analytics team at Unilever. And that was a fantastic experience because, you know, it was challenging at first. I, I felt like, what do I have to teach my fellow colleagues? But then when I said across from, from them and we were talking about pivot tables and how to become more efficient using those and, and I saw people’s eyes light up and they got something, you know, that was, felt super, super rewarding. And I think that was when I first caught the bug about, about teaching. And then later I had the chance to, to be promoted and to have my own direct reports and to lead the teams. And there also I realized that it’s what I enjoy most about being a, a manager is helping my team develop and helping them grow their skills and helping them learn.
But that wasn’t yet enough for me to say, okay, I’m going to quit my job and I’ll build an education company. But what was super eyeopening was changing industries. So after having spent 11 years in consumer goods, I did my MBA and then I moved into to a smaller tech company because the one thing that I felt a little felt that was a little challenging working at these large multinational companies was that decision making was slow, right? You, you have an idea, you have a recommendation. The global team has to approve, the regional team has to approve, the local team has to agree to everything, and it takes forever until these decisions are made. And so I moved to tech because my fellow students during the MBA program told me that decision making is much, much faster there. And that was true.
You know, I was just two levels removed from the CEO and owner of the company that was at Squarespace and which is a website builder company. And also I think when you work in software, there’re just fewer moving pieces. You know, the, you don’t have to design the product and then produce the product, make sure you have the machines to produce it first, and then, you know, ship it, store it, sell it, the software is much easier. You, you, you put something together and you can immediately release the feature to customers. That was very refreshing. But what shocked me in a way was that the challenges that FP&A a teams face are very, very similar compared to the challenges that people in the, at the multinational consumer goods companies face, even though the numbers were completely different. Now, I was going from $10 billion in sales in the US alone to, $600 million in sales.
And of course, the metrics completely different. The SaaS business has completely different metrics compared to a consumer goods business. But then the challenges, like how do we improve our forecast accuracy? How can we become strategic partners to the business and do more business partnering? Or how do we build a financial model that’s optimized for iteration? They’re the same, you know, they’re really industry independent, these challenges, and they’re also, it doesn’t really matter whether you’re a small or large company. And that was what really made me think, huh, maybe there’s a way I can help people navigate these challenges and improve their, their FP&A skills. And so I set out to, to create my first course and everything else is history from there.
Glenn Hopper:
Yeah. And you’ve moved now. I mean, the, the program that you’ve built for Wharton is, is pretty amazing. And I think that that’s I, I definitely wanna dive into that, but I’m wondering, my path has, it was a little bit different, but for me it was, you know, when I started my career, I started as a, a journalist actually before I went to business school. And and so writing was always a way that I sort of made sense of things. And so if I were trying to really figure something out, I would take these notes. And because I was trained in journalism, a lot of times the notes would end up looking like just, Hey, this would be a good blog post. And I sort of evolved from blog posts to ultimately teaching in a lot of this stuff. But I think that for me, the way the, the way to learn something really deeply is to, to break it down at that level, but then to sort of commit yourself to teaching it to other people.
Well, you, if you’re gonna be teaching it to others, you can’t be in Dunning Kruger mode. You have to really like dive deep and understand it. So I’m wondering, as you built out this and, and maybe I’m, I’m jumping the gun a little bit ’cause I do want to hear about the structure of the program, but as you built out the program, maybe, you know, take me through the process of if, if you’re gonna encapsulate FP&A into a single certificate, you know, that’s gotta be a, a pretty big project from just architecting it from your point. And I’m wondering, even as long as you’ve been doing this, did you find yourself learning something new or taking, or what did you take away by putting the course together?
Christian Wattig:
Yeah, absolutely. Maybe before we talk about that program, I can, I can touch on how I developed my first course because that really wasn’t what led me to be able to do this much bigger program. So my first course came out in, in 2021. It’s a, a live course called FP&A Bootcamp. It’s where we have four workshops, four, two hour long workshops over the course of two weeks. And the, the workshops are super hands-on, you know, the, you have lots of breakout room discussions and exercises. And that’s something I first had to learn because I had the, the FP&Aknowhow, but I didn’t know how to translate that into an engaging course. And fortunately, I had fantastic mentors there from a company called Maven. It’s a platform where they host these courses and they also teach subject matter experts to turn their knowledge into, into a a course.
And they had a fantastic training program there. And then I created this course and I decided, okay, I want to offer it every other month. And so I, that was in hindsight, was a fantastic decision because by iterating and by presenting it again and again to diff different groups of finance professionals, I got a lot of feedback. I got a lot of notes on what can I tweak, what can I improve, how can I make it even more engaging? How can I go deeper? What are the areas that people want to learn more about? So in total, now I taught, I taught this class 18 times. That was super, super helpful because it really helped me to figure out also where are the gaps, because people had the chance to ask me questions. In addition, I always had two full hours of Q&A sessions where people can just grill me and ask me anything. And that was also fantastic because I learned what people really worry about and what they, what keeps them up at night. And that then made creating the much more comprehensive program I’m doing with the Wharton school much, much easier.
Glenn Hopper:
Gotcha. Okay. Yeah, so that’s great. Sort of just iterative development moving through until you really crystallize it, kind of the agile approach to <laugh> to course design. And so then you reach the program for Wharton. So tell me what changed and give me a little bit of a, a run through of what the Wharton program looks like.
Christian Wattig:
The Wharton program, for those of you who don’t know, it’s an FP&A certificate program that was developed jointly by the Wharton School and Wall Street Prep. And I’m the program director, meaning I’m responsible for the curriculum and most of the content. So I’m, we’re also working with a number of other guest instructors and professors from Wharton who are also contributing content and who are teaching part of it, and was fantastic also having had the chance to work with you on that program as well, Glenn, thanks for contributing some of your insights there as well. And there are a few things that make this program unique. So it’s, it’s an eight week program where students go through the lessons in a self-paced way. So where they go through videos and exercises and can really do it on their own pace, can speed things up that they already know can slow things down.
But in addition, there are weekly live sessions where you have direct interaction with the instructors. You can ask them questions. There are also one-to-one sessions for when you want to maybe talk about a career aspect that you don’t want to share in, in front of a group. You can do that in a one-to-one. And we also have in person networking meetups where I’m traveling to different cities, cities and where people can meet in person, because I think there’s, it’s just so magical to actually meet face-to-face in these, these days when so much is happening over, over Zoom. And virtually And additionally, the program is very comprehensive. So it’s each weeks, each, each week is about 10 hours of workload. So it’s a combination of videos and exercises. And that was a real challenge for me at the beginning when I was tasked with creating a curriculum for essentially 80 weeks, 80 hours of content.
And I only had about eight hours of my preexisting training programs. So I had to build, go and build the remain remainder. I ended up putting together about 40 hours of content and other instructors put together the other half. But it forced me to go back, go back to research, and really look at, okay, what are other FP&A best practices? So I’m, I’m maybe haven’t really come across yet, and I haven’t considered yet. So I went and I read a number of books about the topic. Often people ask me, you know, what are those books behind me? And are there any recommendations? So I can re recommend two books specifically that I think will also be relevant for you Audience. There is the CFO lens. Can you see that? So, the CFO lens by Ravi Kumar, he’s a former CFO at IBM and in IBM India. And it’s a fantastic book about how to approach finance from a strategic perspective.
And the other book that really stood out to me was called Future Ready by Steve Morlidge and Steve Player. And this book is all about forecasting now about creating forecasts that help make decisions and analyzing the numbers to be able to create those forecasts. And there are a few other books as well, but these two really stood out to me. And when I went into, you know, know, creating this core, this, this course, there, there were a few things that I also didn’t come across before, even in 14 years of FP&A. And two things, for example, just maybe for you, for your listeners as well, if they haven’t come across this yet that I recommend is, the first one is business driver tree analysis. I don’t know, have you, have you heard that before? Walk me through it. Business driver tree analysis.
So how it works is, so imagine the challenges. You’re doing baron’s analysis at the end of the month and you say you, you realize you missed your sales forecast by 10%, but you don’t have a clue why that’s the case. And the goal in fp and a is always to come up with not just what’s driving the variance, but also what are the underlying reasons, what’s the root cause? And then ideally, what’s the concrete recommendation, right? And business driver tree analysis can help visualize that and help you find that root cause. So how it works is, you, you, you, you create a diagram, it looks a bit like an org chart, but at the top, it’s not the CEO, but it’s, okay, we, we missed 10 the sales by 10%, and then you put in all the levers, all the drivers that could potentially cause it.
So for example, did our promotions not perform as well as before? Did our conversion rate drop? Did our number of leads decrease? Did our customer change their order patterns? You know, and then for each of those reasons, you have further lines going down in the diagram that, that define all the reasons that drive that. And then you go, keep going like that until at the bottom of the diagram you have the true root causes.
And I always find when you can point to a root cause, then it’s much easier to say, okay, here’s a concrete recommendation about what you can do about, about this. So that’s business driver tree analysis. The other thing, the other analysis technique that I came across in my research was differences and differences analysis. And that’s a way to figure out whether there is a correlation between what you’re doing and the financial impact it has or to put differently It’s a way to find out how well you are marketing or whatever you’re doing to drive the business, how well that’s working and how well that’s translating into sales. And essentially, it’s an approach that’s borrowed from science. It’s where you have a treatment group and a control group, and then you measure the impacts differently. You calculate the differences and then the differences from the differences. And if you Google that and you looked it up, it’s it’s a really neat way on how you can figure out attributions and figure out how well your business drivers are working without needing a degree in statistics and without needing, you know, all these sophisticated statistical tools. Yeah. And, and now I’m teaching those concepts in as part of the Wharton program as well. And it’s really, that’s really one of the aspects I loved about this is I did had the chance to do a lot of research to read a lot and really get more in depth in terms of the, in terms of the FP&A skills that we’re developing here.
Glenn Hopper:
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Regardless of what your educational background is. I think that there’s a, a program like this, or any of the other FP&A specific training we’re doing is very important because you see, if you, whether it’s undergrad or, or, or master’s degree, when you’re studying finance, you end up having to take courses in like retirement and estate planning or international finance, commercial banking. You know, I, I’m trying to think of all, you know, fixed income and derivatives and portfolio design and all that, that is very, you know, hardcore. So it’s sort of, maybe some of it goes more towards CFA stuff. Some of it goes maybe towards accounting. So really lasering in on what we do in I’m, I’m wondering if you, what kind of backgrounds are you seeing people come in? Are you seeing people with masters in finance and MBA and mid-career? Or, or what are you seeing early on who’s signing up for this?
Christian Wattig:
It’s really a mix. It’s people who are, some people who are just starting their career, who maybe even wrapping up their undergrad, but about 70% of the students are, have at least five years of finance experience. So they could be either in accounting and they’ve been doing accounting and they want to transition into FP&A , or they are in a controller role at a smaller company, and their boss is telling them, oh, we need to be more forward looking. You need to figure out how to develop an FP&A process, go run with it. Right? And they don’t know where to start because their, their background is in accounting. But we even have people who have 15, 20, 25 years of experience in, in finance, or even in FP&A, and they take the program because they say they don’t know what they don’t know, right?
They don’t know whether they’re really following best practices across the board. And what differentiates this program also is that we are focusing heavily on interpersonal skills as well. So you learn the hard skills of financial modeling and forecasting and analysis, but in addition, we cover business partnering, building relationships, developing trust developing influence, different influencing styles, and also presentation skills. And I think, I really think that this is so, so critical, especially as the more manual tasks get automated. So I think where FP&A is going is really towards FP&A leaders needing to make use of these interpersonal skills more and more, because everything else that’s happening in Excel becomes, it’s still relevant, it’s still important, but there’s less time spent on that because our tools are getting better and we’ve become more efficient.
Glenn Hopper:
And, and speaking of the tools and, and you mentioned the, the soft skills, but also what I found early in my career is a background in, in finance and statistics was helpful, but I didn’t realize back then what BI is, and I certainly there was, I, I don’t think there’s anyone who has called a data scientist back then, but I’m wondering in the how much do you talk either in this course or just in general, how you see the overlap of BI and financial analysts and ultimately data science. Now, I know in an eight week program, they’re not gonna learn, you know, it’s not gonna be the equivalent of a master’s in statistics, but there is a big component of having that statistical knowledge and how you apply it in FP&A all that. So how, how much do you talk about this sort of beyond traditional FP&Aor, or maybe now traditional FP&Ais being left behind and it really is a lot more about the BI and the data science. What are you seeing there?
Christian Wattig:
I’ve been thinking about this, and I’m thinking about it slightly differently. I, I don’t think that FP&Ais left behind and BI and data sciences in the foreground. And I also, frankly, don’t believe that to succeed in FP&A, even in five, 10 years down the road, I believe you don’t have to become a data scientist. And the reason for that is, is twofold. One, companies at a beyond a certain scale, you know, have the budget to actually hire, quote unquote real data scientists. So those are people with a PhD in statistics, and they can do completely different work than your regular FP&A professional who tries to build their statistical skills on top can do. So I think companies are better served at keeping the skillset different is separate and separate teams, because it’s just so, such a different skillset. If you are a data scientist and you’re building machine learning models from the ground, or you’re even just combining different different statistical techniques, you tech, it’s a different skill sets because you need depth, but you don’t need the breadth that an FP&A leader needs to have.
You know, an FP&Aa leader needs to be able to use what the data scientists give them and maybe even ask them to, to do things a certain way or to, to investigate certain things. So they need to have that fundamental level of knowledge. But then FP&A leaders also need to know how to take that data, translate it into insights, get the story behind the data, connected with operational metrics, and then put everything together in a model, and eventually also essentially sell the recommendation to the other leaders so that it eventually, hopefully gets implemented. So it, I, I think it’s a different skillset and it will remain separate. That said, what’s important for FP&A leaders is that they have an idea of what data scientists are capable of doing, essentially. So what I teach in my programs is helping people at least understand some of the core concepts of what machine learning is, for example, what it does, how it can help, how it can supplement other forecasting approaches, and also what the downsides are and the watch outs and, and, and the negatives and some, just some of the terminology, some of the definitions and the, the language that data scientists use so that you can partner with them and you can engage them and ask them to go build a statistical model that helps you achieve your goals.
Glenn Hopper:
What you mentioned is when a company gets to a scale, they have someone who’s a PhD and is really, you know, they, they understand what’s happening at a statistical level and how to build these models way more than someone who, by the way, their day job is being a finance professional. So you’re not just gonna have a, a hobby of, of having that skill. So a lot of times, I think in companies that don’t have that luxury, you do find FP&A a people trying to extend and reach out and, and use some of that stuff, but you can get yourself in trouble if you’re using the wrong model. And you, or if you’re using like, drag and drop machine learning and you don’t know the difference between, you know, a, a clustering algorithm and a regression algorithm or whatever. So you, you know, there are downsides to people trying to, to get out over, over their heads, but I, I think that is the perfect world where as the FP&A pro, you understand what it is and the value of it, but you don’t have to then also go and, and build these complex, you know, models in Python or whatever.
They’re they’re building ’em in. So yeah. Great points there. And I know and you, you, you know, we talked about data science and how important data is to what we do in FP&A, but I, there’s something you and I have, have talked about before and it’s the development of an FP&A team through four phases. And I, I love the way that you put this, and I think you’ve got data, focus, story, then strategy, and then to being a true value creator. Can you walk me through this and maybe elaborate a bit on each of the phases?
Christian Wattig:
Sure. So I had this chance to work in many FP&Ateams because when, even when I was at Unilever and P&G every two years, I moved into a different team, and I found that there are four distinct phases of FP&A development. So what I mean with that is building out a comprehensive FP&Aprocess, you can’t do that from one day to the next. You know, it, it takes time. And there are some foundational criteria that have to be there until you can get to proactive value creation, which is at the top of the pyramid. And this, I i people told me that this framework is helpful because it helps finance teams determine at which stage of the development they currently are, which then helps them figure out what are should be the next steps to get me to the next phase, to the next stage in, in FP&A development.
And so it’s four stages. At the bottom of the pyramid is data focus. So that’s where the, the, the focus of the team, the majority of the time is spent on making sure they have accurate and timely data available. And I’ll go through the stories, the stages quickly, and then I’ll, I’ll talk a bit more about how, you know, in which stage you are. So the first stage is the data focus. The second stage is story focus. That’s where you take it a step beyond the data. And you, you are able to make connections between the data points and uncover two insights and the stories behind the data. But you’re not yet focusing on operational metrics. You’re mostly focused on the financial metrics. The next phase is strategy focus. That’s where you get out of the finance silo. You look at the operational metrics that are available across, across the different departments, and you understand their strategies and you understand how the strategies of the other departments translate into tactics and translate into action plans and important measurement.
And when you understand that, then you can say, okay, if this operational metrics changes by 10%, probably the impact on sales will be 5% or will be X. And that’s powerful because that helps you to become more forward looking. And then the last stage is proactive value creation. That’s where the finance team can add value by making concrete recommendations about where to take the business and concrete recommendations both about accelerating growth, and improving profitability. So to, to drill into that a bit, how do you know you’re still in the first stage data focus? Well, you probably spend most of your time on creating your accruals and preparing your actuals, and you’re spending more time on that, on getting the data ready than you actually spend on analysis and forecasting. Another indicator is that your monthly management reporting deck is, follows always the same structure, always the same slides, just with different numbers.
It means that you not really don’t yet have the capacity to figure out what the story is and what should be, what should be highlighted. And your forecasting is mostly top down and completed by the finance team without cross-functional ownership. That’s stage one, stage two story focus. That’s where you start to highlight the metrics that actually matter. You don’t just share 20 slides of reporting every month. You actually, you may still have those 20 slides, but in addition, you have three or four slides at the beginning that tell the story and that tell leaders what to really pay attention to this month and what moves the needle. But you’re not yet considering operational metrics and your analysis and reporting that comes next at stage three. And that’s where you actually have a closer relationship with your, with the cross-functional partners. You understand what their pain points are, what the challenges are, and how they want to, what their goals are and how they plan to achieve their goals.
And then you can help them measure that. You can help help them link that to the, to what’s happening in the financials, because that’s really the cool thing about FP&A is we have a unique perspective that no one else has. We see what’s going on on your profit and loss statement, your balance sheet, your cash flow, and at the same time we have visibility of what’s going on in operations in the factory. How are our, how is our website traffic going? How are the people moving through the marketing funnel or through the sales funnel and that unique perspective. Then if we develop that business understanding, right, that’s super, super crucial here, that understanding helps us connect the dots and then really help drive strategy. And then the last stage, proactive value creation, you know, you’re there when you can, you, you do your variance analysis and you don’t just find reasons for why you’re missing or you’re, you’re exceeding expectations.
You’re actually identifying real risks and opportunities and you’re making concrete recommendations about how can companies capture the opportunities or, or mitigate the risks. And another indication that you made it to the point is that leaders from other departments actually come to you, the finance leader, and ask you for advice about big decisions that they are considering. If, when that happens on a regular basis, you know, you probably hit that level of proactive value creation. So that’s the framer in a nutshell. And what’s important to understand is that you can’t just jump to proactive value creation right away. You need to have your house in order first. You need to make sure that your data’s accurate, it’s timely, and you need to make sure that you, you’re building it step by step until, until you can get there.
Glenn Hopper:
I love that evolution because to me it kind of goes along with two other sort of evolutions. One is a company’s data maturity level. So at your data focus, it’s, it’s sort of that lowest level of data maturity of a, of a company where I picture <laugh>, everything seems like an ad hoc report. You’re going, you’re just constantly grabbing data and putting it into in, into Excel, and you’re, maybe you’re manually running your depreciation, whatever it, I mean, it’s just, there’s not a good data security or not security govern. It’s just a total data governance policy. And then, so I think about the levels of data maturity, and then I think about also the types of analytics that are out there and how you’re able to leverage the data. So when you can get out of that sea of just fighting with your data and trying to do so much work to create reports, then you are able to start kind of seeing the, the forest for the trees and see the, be able to see the big picture and able to move on to where you’re really creating value.
And I do think that as you are able to move up and get a better handle on the data and have everybody sort of playing from the same sheet of music when it comes to what the metrics are and what the sources of truth are and data and everything, that that’s how you really get to a level where you’re starting to provide this value to the company. Not just, you’re not just the rear looking you know, reporting. It’s like I’m identifying things based on, on data here. And I think that having that data foundation is important, but then being able to use analytics to drive that decision making and to drive that strategy and add value to your mind as you move through those, how do you leverage data and analytics to move up on, on the pyramid? Having
Christian Wattig:
Accurate data in place is, is super important. And not just accurate, but you, you mentioned an a, a critical concept, which is single source of truth data. So when I, when I think about single source of truth, there are two ways to of looking at it. One, you wanna make sure that your data is in a place where you can easily access it a ideally in, in, in one place. And everyone knows that this system, this repository is the truth. You know, it’s, it’s the correct number and there is no debating about whether the number is right or wrong. This is the number. And the reason that, that this can sometimes be challenging is that companies are adding different systems on top of each other. You know, that it starts with your accounting system, but then there may be another ERP system connected to that and another sales system and another system.
And sometimes the numbers change a bit when they move through those systems. And so you need to be very clear about what is the single source of truth where everybody goes to get the numbers. The other aspect of that is is single source of truth of metric definitions. So I, at, at a company I worked before there was a big challenge there because there were some metrics that the, that the product team was measuring and the finance team was measuring, but that didn’t align. And so when we had discussions with leaders about how to interpret them and what they tell us and how we need to take action, it was, it was a mess because finance, we would say, oh, this metric is going down, we really need to do something about that. And the product leader said, what you’re talking about, it’s fantastic.
Look here, I can show you all these charts and graphs to that build. Look, it’s perfectly stable. There’s no concern. And then you’re just, just losing so much time and energy about discussing which number is right and which definition of that metric is right. And so that’s why, you know, when, before you even think about going deeper and investing into your analytics, you need to make sure that your, your house is in order, a single source of truth is there. And then once that, once that is, once that is clear, it really comes down to what I like what, what some people call XP&A right. So I, I agree with that. I agree that financial planning and analysis is a misnomer. It really should be not just about the financial data, it should be about the entirety of the data set in a company.
Because the real value from analytics in, in my point of view, comes from connecting them. So for example, there, most companies have a consumer hotline, right? And it’s not traditionally something that finance pays a lot of attention to, but they really should because when they see the, the call volume suddenly increase in your consumer hotline, it probably can tell you something about something going on in the product that is not, that is, could be a concern, right? It could be a quality concern, and you don’t typically notice that right away in your sales, but you will a little bit later, maybe in the next quarter. And the finance can be close enough to the business to first have access to these data points and then to understand how they translate to financial performance. That can make a huge difference in being able to see spot changes to trends earlier, and then ideally early enough that you can actually do something about it.
Glenn Hopper:
I love to hear you say that because I think throughout my career I have believed from my first financial leadership role, and I think it’s because I came up, I, I kind of came a secu circuitous route into finance through, I was the finance guy for the COO and, and had to adversarial relationship with the <laugh>, the finance team that rolled up with the CFO initially. But I understood, because I rolled up to the COO, I had all these ops metrics. So when I was doing my forecast, and this was in telecom, and so I could see network outages and if there’s a network outage, what is the impact? And or if there’s this, a, a client has, or a customer has this many trouble calls in a month, they’re now, they’re a red flag for churn. But having access, this is back in the days of, of where everyone had data silos because you, everyone was kind of reinventing their metrics early on <laugh>.
And so if you’re, if you’re, you had a number that was looked down this quarter, well, let me just redefine. We’re not gonna report on that anymore. We have a new metric we’re gonna track or we’re gonna report a different way. Whereas if, if you move it into finance, if finance is the arbiter and the truth teller about the financial metrics, good, bad, or indifferent, then you should also be reporting on the company’s other metrics. So if, if sales pipeline looks a little light, they’re not gonna reinvent what a you know, what a lead or a prospect is or whatever to make it. I mean, if you just, and regardless of who owns ’em, I guess it is that define, you know, what the metrics are and lock ’em in and don’t have them changing because then you have apple and orange comparisons over time, and that causes its own problems.
But thinking about how important it is to define those metrics and then have them reported consistently and and, and how finance can use them in, in other ways. So whenever I would come into a company new CFO, it’s, I’m gonna take, I’m gonna take your reporting and your reporting people and bring them under me, and here’s why. And it’s, and you know, I I think it becomes the, some is greater than the individual parts because when you have, you know, first off, you’re all singing from the same sheet of music, but secondly, now you’ve torn down those data silos and you can use them in your, in your modeling and, and, and measurements and everything. So, great, great points on that.
Christian Wattig:
And, and you know, what’s interesting about that, what I’ve found is that it’s not, not only a, a technology challenge. You know, sometimes the bigger challenge with getting there is the, a mindset change that needs to happen with people because in the traditional world, you know, where, where things were siloed and marketing owned their marketing metrics, sales owned sales metric product on product metrics, that also made it so that people got used to that and leaders got used to that. And they are now, some of them are concerned about removing those silos and giving finance access to the data, because then in some sense, they’re also giving up a bit of power because they give up the power of interpretation and of being able to point to an issue, but then not necessarily sharing that issue with the, with the leadership team of the company.
But, you know, figuring it out on trying to figure it out on your own, but it’s not the most effective way to run a company. Know, ideally, everybody works together, puts the heads together when there are issues and people who aren’t as close to the business. Like you’re when you’re in fp a or in finance, oftentimes we can have a unique perspective on things and can actually help you address those issues. But in order to get there, the leaders in the different departments have to trust you that you’re not using the numbers against them, you know that you’re not using them to cancel their favorite project or to take money away from their experiment that they’re running. And so the relationship aspect is super, super important and basically showing people that you can do more than just cut budgets and update forecasts, you know, that you can actually be a strategic partner and help them reach their goals.
Glenn Hopper:
Yeah, I mean, there was historically the, the whole view of of finance was the CFNo, like the CFO is just gonna shoot everything down. Oh, we’re not budgeted for that. And I think the idea of business partnering, and it is, it’s an evolution and I think we’re all seeing it, and especially people who’ve been around the business for a long time, just the difference in the, the whole concept of business partnering didn’t exist before. But now the idea that you have embedded FP&A people and in some companies you have embedded data scientists in, you know, each operational group and working together all towards, I think that’s the evolution. And I’m wondering, so we could talk all day about the technologies and tools that people use, but I’m wondering, and you mentioned that the soft skills, and I think these soft skills are gonna stay important as we offload more and more to AI.
And, you know, whatever type of automation and whatever type of AI that is, but what, what do you recommend to people? And, and this is the, we’ve had this question for years as it was, you know, it was digital transformation we’ve been talking about for 30 years, and it’s turns out that it’s, it never ends. It’s sort of just the evolution of the business, but from a, just a soft skills, from a change management perspective. And, and if you’re, especially if you’re trying to lead from within finance, how do you advise people to move from this to, to elevate themselves, to move from data focus, to story, to strategy, and then to be, be, help bring others along to where they really are creating value for the company?
Christian Wattig:
You mentioned tools and tools do play a big role there because they, you, a lot of company, a lot of finance managers, FP&A managers I I talked to told me that, yeah, a hundred percent agree with you. We need to be more strategy focused. We need to learn more about the broader business. We need to talk to our business partners more. But we don’t, just don’t have the time, you know, we, we, we spend so much time in creating our month end reporting and our management decks and our variance analysis and forecast updates that there is, maybe there may be a half a week, a few days left in the month until we have to start the, the process all over again. And that’s where I’m a big proponent of FP&A tools, you know, for companies to look at what is out there.
And a lot of tools came on the market in the last five years for every segment of the market you’re in. I would highly encourage people, even if they feel like they are too busy to, to, to implement a new tool, especially then, you know, to prioritize that, look at what’s out there. Because what these tools can do is they can automate your reporting in one click. They can update collecting input, they can automate collecting inputs for forecasts or make that very easy because people can directly enter the data into the cloud rather than you having to consolidate lots of Excel spreadsheets. And they also make it easy to keep version control and to manage all that. And that then frees up the time for you to go and do more business partnering, because then once you have the time, the next step is to build that understanding of the business because you can’t make those connections without the understanding. And one of the best ways to do that is just to talk, to spend more time with their business partners, to join some of the operational metrics that they’re already having, and to ask them a lot of questions around what keeps them up at night, what are the goals and how can you possibly help them?
Glenn Hopper:
You know, it’s funny, as we’re having this conversation, I feel like this is the kind of conversation that would happen in the teacher’s lounge at a <laugh>, you know, <laugh> at a, at a university in, in between classes and everything. And it’s, I I think we could go down this road and, and indefinitely, but I do, because you’re out there so much and you are teaching about this and you’re interacting with businesses and with the students and everything. I really want to get your take before we let you go on you know, kind of what you’re seeing now and where we’re headed in the near term. And so I would say I, there’s a couple of ways to look at this. One is just key insights or trends you’ve seen in finance in general this year, in, in recently, but also because everybody’s talking about it.
And as you know, I’m, I’m very focused on this. Are you seeing yet any practical use cases for generative AI and or something that has been out there maybe for the larger companies and some people have been using it, is just traditional AI as, as we referenced earlier, machine learning. I’m wondering what you’re seeing in the interactions that you’re having and what your sort of expectation is around the technology in general, generative AI and if maybe generative ai, and because we’re talking about it so much, if it’s not opening up more finance teams to use machine learning traditional AI at this point.
Christian Wattig:
Yeah, yeah. So I’ll, I’ll answer the question. So I think there were two questions, one about where’s FP&A going, and then the other one about ai. And so in terms of where fp a going, I think that it’s transitioning from FP&A being seen as a publisher of reports and forecasts, two being seen as a strategic partner to the business who can do more than that, who could, who can actually help leaders make better decisions. So a lot of CEOs, a lot of department heads and, and and COOs are seeing that change and are expecting that FP&Ais doing more, you know, it’s doing more than just the, the basic reports. And as a result of that, people have to figure out how to devote more time to deeper analysis and business partnering. And that’s where modern tools come in, because that’s where they, that’s what frees them up the time.
As I, as I have mentioned, and specifically, there are three areas in terms of tools that where, where I see the trend going in fp a one is about F automation. So automating your, your reporting, your forecasting or your forecast input collection. The other one is machine learning has been around for a long time, and it’s a way for FP&A teams to not necessarily automate the forecast process, but have an additional way to do the forecasting that doesn’t rely on human input as much, that isn’t prone to human biases as much. It’s prone to biases that are in the data that you’re feed feeding the model with. But combining a machine learning model with a more subjective approach, like driver-based forecasting can significantly increase your, your forecast accuracy. And so I’m seeing a trend there because these tools become easier and easier to use.
You don’t need to be a data scientist anymore to implement a machine learning forecast. Also, partially because you don’t really have to know how it works in the inside. Even some data scientists don’t know why some of these algorithms come up with their, with their outputs. So that’s the second one. And the third one is generative ai, although I really do think that that’s the, at the beginning of their, of their journey. And when I, when I talk to finance professionals about how they’re using generative AI most tell me that they use it to help them with Excel. You know, if they have a, a challenge, they have data that’s messy, they then go to chat chi, PT or a Gemini or others and explain the problem they have in Excel and say, Hey, can you help me with a, with a formula a way, speed up this step by step what to do?
And for that, it’s fantastic. I do think that these tools will become more and more important, but for that, I think it’s really where we should look at is these manufacturers of FP&A tools. Because if you just take the, the vanilla generative AI tool, it’s not really met built to be able to give you a forecast or they help you with a deep analysis, you know, it can make things up, it can hallucinate. And so there are guardrails that have to be put in place and specific tailoring that has to be done. And I know that a lot of companies are working on that, and I’m really, really curious to see what the next five to seven years hold in that space.
Glenn Hopper:
Yeah, and I always you know, for, ’cause I, I, I deal a lot with SMB space you know, say under, under 50 million, maybe under a a hundred million. And as, as you get to the higher end of that, there are some you know, maybe there’s additional resources, but if you’re under $50 million or even smaller than that in revenue, you just, you’re not gonna have an in-house team. You’re not gonna have the PhDs, you’re not gonna have data scientists, you’re not gonna have machine learning engineers, you’re, you’re just not gonna be able to develop generative AI in any meaningful way that’s significant to your company. So to your point, I do think that the, the SaaS providers, the software that we’re using now, we’re gonna start seeing them integrated in and they’re gonna put all the guardrails around it, and they’re gonna you know, help make it easier for everyone to use.
But to think that companies themselves, unless you’re at the, you know, at enterprise level, we’re not gonna see them developing their own their own AI tools. It’s just, it’s, it’s cost prohibitive and the expertise in, in there to it. But I do, you know, it’s obviously the, it’s gonna change a, a, a lot of industries and we’ll, we’ll see, you know, there’s varying degrees of optimism and pessimism around it. But I guess in this environment, and as you are speaking with so many students, whether they’re early career, mid-career, just looking for a refresh or whatever, if they’re coming to you during office hours and saying, okay, I got, you know, I did my, I got a CPA or I, I got this level of education and this is where my focus is now, how can I future proof my career? What do I need to focus on for success so that I’m ready for what happens in the industry over the next five to 10 years? How are you advising them?
Christian Wattig:
Yeah, yeah. I can start maybe by what advise people not to do. So, you know, sometimes people ask me, oh, you know, which programming language should I learn to succeed in fp and a? Should I learn Python? Should I learn sql? And I tell them, don’t waste your time on that because these AI tools and even what we have today, make it so that for basic fp and a tasks, you don’t need to learn sql. You can ask the bot to help you write the query and then do it yourself. You basically, you can transition from just in case learning to just in time learning. You know, that’s where these chatbots really, really excel. But more broadly, what people should focus on in FP&A really is, I mean, fp a is very broad, right? There’s so many different areas you need to, you need to understand, and I’m boiling it down to six fundamental skills that people need to focus on.
It’s, it’s planning, which is you know, annual budgeting, annual planning. It has to do with with managing a process and the project. Then there’s forecasting and specifically look into what are different forecast techniques. So there are there’s zero based forecasting, driver based forecasting, time series analysis, other statistical approaches. And then the third one is analysis and analysis. And my, how I define analysis is taking raw data and turning it into insights, right? So doing the business driver tree analysis I mentioned earlier, other ways to really get to what the root cause is and looking behind the numbers and what the stories, the numbers can tell you. And there’s financial modeling. So even though we have all these great tools, you still often, even if you have the best tools, you sometimes there’s no way around opening a spreadsheet and starting to do modeling and building that from scratch.
So there you need to be able to not just understand, you know, all the Excel formulas you may need, but also building a model that’s optimized for fast duration. Because the, the best financial model is useless if someone asks you a question in a meeting and it takes you two hours to update it and run the sensitivity. That’s the technical aspect. But then there’s business partnering, you know, which we talked about today, the whole interpersonal aspect of building relationships, influencing people, holding them accountable, challenging them. And then lastly there is storytelling and reporting. So how do we take all the insights from analysis, what I learned from our business partners, and put that together in a comprehensive way that is deep, but still easy to understand by the decision makers who need to take what you’re telling them and, and putting it into action. So that’s how I would look at skill development in, in FP&A.
Glenn Hopper:
Perfect. Perfect. Love it. So I, there’s, I, I have like 10 other questions I wanted to ask you, but I <laugh>, I think the producers are gonna beat me up if I keep going. So, we’ll, we’ll try to to wrap it up here. And obviously we’d love to have you back anytime and I think this great, great insights. And I guess before we let you go, how for our listeners, if they want to connect with you and learn more about your work with the Wharton School and fp and a prep, how, how can people get in touch with you?
Christian Wattig:
Yeah, so for my work with the Wharton School, simply go to Google and Google Wharton FP&A certificate, and then download the brochure. That’s where you can really learn about what the program includes. And other than that, I share a weekly newsletter. It’s completely free. It’s where I share some of my best tips. And you can sign up to that fpaprep.com. So fpa prep.com/newsletter. Great.
Glenn Hopper:
Christian, as always, great to catch up with you and and thank you again for being on the show.
Christian Wattig:
Thanks so much, Glenn. I really appreciate it.
