Mergers and Acquisitions Consulting

Christina Homburg, a New York-based finance executive, originally from Germany, and educated in England, with over a decade of international experience, specializing in commercial and corporate finance in fast-paced global settings, including Fortune 500 companies, and start-ups. As US Regional CFO at Marley Spoon, a global e-commerce company, she guided the $250m US business to EBIT profitability in two years. Now, as Global Head of M&A, Christina efficiently navigates complex acquisitions in the US, and EU markets.

Through this article, Christina highlights the evolving role of finance teams, particularly FP&A, in the face of modern business challenges. He emphasizes the need for finance teams to transition from traditional spreadsheet-focused roles to more generative, business partnership-oriented roles.

As a finance professional, you have likely engaged in multiple discussions about AI, technology, automation, and the evolving role of the CFO. However, less attention is often given to how these changes impact traditional finance teams, particularly FP&A, in the face of modern business challenges.

“The future of FP&A lies in its ability to provide holistic, data-driven insights that balance financial performance with non-financial data, and long-term business health, moving from reporting a story to driving the narrative.”

As CFOs transition into more generative roles as change agents, and strategic visionaries, this shift cascades down to finance teams. The traditional focus on spreadsheets, and numbers is expanding to encompass broader business partnership, and change management within a highly complex business environment.

Finance teams now face a dichotomy within business. On one side, there's a slowdown driven by macroeconomic uncertainty, budget cuts, and resource constraints. On the other, there's an urgent push for expansion, ecosystem growth, and rapid technological innovation at pace. This tension, combined with a deluge of data from various sources, has made budgeting, forecasting, and strategic planning increasingly complex. FP&A teams must navigate this data-rich landscape whilst extending their scope beyond traditional analytics to drive change across multiple departments.

This evolution also brings to light several key issues: data debt from complex, and voluminous information sources, process debt as teams struggle to focus on decision-making rather than repetitive tasks, and resource debt in finding talent equipped for today's needs, such as change management and data-driven storytelling. So, what can finance teams do in the face of so much complexity?

My experience as Head of Finance US at a global e-commerce company exemplifies this evolution and provides some good learnings for finance teams to consider. Like most companies, we were faced with significant challenges from COVID-19, macroeconomic shocks, inflation, and changing customer behavior, and as such were tasked with increasing our contribution margin by over 300 basis points. This substantial goal required innovative approaches with limited resources, under an extremely tight timeline.

Throughout this project we learnt several things. Firstly, we learned that collaborative working was key. Cross-functional cooperation led by FP&A teams, from ideation through execution, including AB testing, proved essential. We also learnt that alignment on ways of working, and a shared language across teams was key, particularly between finance, and digital. And we learnt that our FP&A team worked most effectively when they moved out of their PL silos, and worked collectively on the big picture, including non-financial data, combined with focusing on their areas of financial specialties. As such, we introduced a new way of working, a Project Management Office (PMO) governance structure to manage this complex project, providing clear frameworks, and resource allocation. This structure was crucial given the additional workload, and short timeline for results, as well as supporting the FP&A team to focus more on business partnership.

Throughout this process, we also discovered opportunities beyond our traditional P&L analysis. Firstly FP&A teams needed to consider customer-centric metrics such as Net Promoter Score (NPS), and willingness to purchase (WTP) when evaluating pricing and product changes to name a few. We also found that customer, and cohort health, reflected in Lifetime Value (LTV), became our company's north star, encompassing metrics like basket size, margin, cost per acquisition, and cohort behavior to govern success of initiatives, and measure company health. This was a big change as traditionally margin was the key focus of FP&A, and finance, however we recognized that this was metric was no longer broad enough.

Looking forward, and taking some of these learnings, finance teams need structures that foster closer relationships with other business units, including cross-functional ownership, and rotation of finance resources across departments. This approach can develop a holistic understanding of business issues, and enhance collaborative working. Key to this is clear alignment on ways of working across the business, and focusing on outcomes first, and foremost rather than just procedures, or processes.

Additionally, the skills, and experience needed for successful finance teams, particularly FP&A, must evolve. CFOs need to build teams that are not only curious, adaptable, and analytically strong with solid finance knowledge, but also capable of working in very different ways, such as learning SQL for report automation or developing project management skills to manage complex projects. This is particularly relevant given traditional finance certification curriculums have not changed significantly in decades, and as such do not reflect the changing business environment.

Drawing on lessons from my company, as well as common practices used in high tech companies, there are several disruptive approaches to hiring, and upskilling talent for the evolving business landscape that could be considered. One major initiative seen in high tech firms, and my own company, involves transitioning financial models to automated reporting systems, leveraging Business Intelligence (BI), and data science teams. This shift not only improves efficiency, but also requires a new set of skills from FP&A professionals. High tech companies have sighted investing in teaching analysts SQL as one disruptive approach, empowering them to directly query, and manipulate large datasets. Industry trends also show finance teams increasingly seeking candidates with data visualization skills, programming knowledge, and experience with cloud-based analytics platforms. Going a step further, some companies are even exploring non-traditional talent pools, such as hiring data scientists, or statisticians into FP&A roles to bring fresh perspectives and advanced analytical capabilities. This underlines the shift in focus around creating multidisciplinary teams that can blend financial acumen with technological proficiency to drive more insightful, and forward-looking financial analysis.

In summary, by embracing these changes and considering new, and creative methodologies, finance teams can evolve alongside CFOs, becoming integral partners in driving business strategy, and innovation. The future of FP&A lies in its ability to provide holistic, data-driven insights that balance financial performance with non-financial data, and long-term business health, moving from reporting a story to driving the narrative.

Organizational alignment is bringing the organization's overall success vision and how its executives and other stakeholders contribute to achieving those objectives in harmony (Sousa et al., 2014). A clear and aligned business model emphasizes the importance of teamwork and clear communication. Most people in any business are aware of the short- and long-term company strategy, procedures, and goals when there is organizational alignment. Aligning organizational strategy and structure may aid in focusing resources on important goals. This high level of organizational cohesion is achievable with careful planning, open communication, and thoughtful management. Businesses usually use it to achieve results that are urgently needed, but it can also be focused on longer-term corporate objectives. This paper explains the reasons why there needs to be an alignment of the organizational values, purposes, goals, objectives, and strategy, how an understanding of environmental issues, for instance, unchangeable structure, government regulations, and limits of personnel and finance have an impact in making strategy and finally address how making a strategy can perhaps be a unifying process building community, identity and the organizational commitment in the organization.

Once management teams, as well as business functions, are successfully tuned to a single frequency, they come together to generate a potent force of motivated, dutiful individuals that can produce considerable improvements in organizational performance. According to research published by McKinsey & Company found that B2B companies who employ organizational alignment can enjoy substantially faster increases in revenue and profit. (McKinsey, 2023) When there is no organizational alignment, the enterprise architecture may become disorderly and useless. Operational challenges might force teams and departments to work alone, which is ineffective and unproductive, even though long-term objectives are obvious and apparent.

For instance, the business may want to boost sales by a certain amount in the next quarter. The goal has been stated, opinion leaders have endorsed it, and team leaders are informed of their contribution. Without systematic alignment, however, many corporate functions and workers could devise a redundant or ineffective strategy with alternative outcomes. The production department may experience hardship and discomfort because of the sales department's decision-making process. This could also affect the service division's capacity to meet client needs and expectations. Therefore, alignment is essential in today's fast-paced business world (Sousa et al., 2014). Alignment within a company also minimizes room for error. Additionally, it promotes a culture in which team members are required to comprehend, assess, and participate in initiatives, successes, and everyone's needs. Without organizational alignment, companies would risk wasting a lot of time and money on pointless meetings, misunderstandings, and other things.

"An organization's managers must comprehend the environment in which they work. This environment includes the factors within the company and those outside the company. These are the micro and macro environmental factors."

A business strategy refers to an organizational plan that helps a business develop and implement strategic goals designed to attain its objectives. A clear understanding of environmental issues, including government regulations, personnel and finance limits, and unchangeable structures, is crucial in developing a business strategy (Edwards, 2014). The environment is the collection of external factors and circumstances that can affect any organization. Every business decision, like increasing prices or launching a marketing campaign, affects the environment. For example, in the case of government regulations, a business must consider the prevailing government regulations to understand what strategy they need to develop for the business. For example, a change of environmental regulations by the government will mean that a business needs to develop a strategy that would correspond to the environmental regulations that would have been set by the government (Edwards, 2014). In addition, the organization's personnel and finance limits will determine the projects that the business intends to outline its strategy for the financial year.

An organization's managers must comprehend the environment in which they work. This environment includes the factors within the company and those outside the company. These are the micro and macro environmental factors (Burgelman, 2020). These factors have an impact on the making of strategy in the organization. There are several causes for this. First, the environment provides a company's resources to generate its goods and services. Second, a company's surroundings may present both possibilities and challenges. Opportunities are events and trends that present opportunities to increase the company's performance.

On the other hand, threats are trends that could negatively impact an organization's performance. Third, the environment influences the numerous strategic decisions leaders must make to lead their companies to success (Edwards, 2014). For example, an organization's goals are frequently severely constrained by the environment. When a downturn or many new rivals enter the market, it may be challenging for a company to achieve its goal of increasing annual sales.

Making a strategy can be a unifying process, building a community, identity, and organizational commitment. Without a plan, you are essentially operating in the dark. Although you know there is a community somewhere, you need help comprehending, directing, or assessing its success. You may optimize the positive effects of your community by developing a well-thought-out strategy that will benefit both the community and your company. Making a strategy helps a company understand what the community needs, which will help address the unique issues the community is facing. In addition, developing a strategy within the organization helps the business to clear objectives that make the business distinct from other businesses. With an established strategy, the business will be more geared toward attaining the objectives set out in its strategic plan (Gallego, 2018).