The finance department is increasingly relied on to provide strategic advice, or to be a bean sprouter, as opposed to just a bean counter, as I like to say. This is made possible, in part, due to the “big picture” views and trends shared by Financial Planning & Analysis (FP&A) departments. I recently spoke with Paul Cullen, Managing Director of FP&A at Southwest Airlines about the integral role his team plays in Southwest’s strategy and success.
This interview has been edited and condensed.
Question: You’ve been Managing Director of FP&A at Southwest for the past two years. In your experience, what are the top three competencies needed for today's FP&A professional to succeed?
Answer: It’s difficult to only list three top competencies, but if pushed, I'd go with the following:
The ability to partner, collaborate and appropriately challenge the business
An intellectual curiosity that results in a deep understanding of what drives operational and financial performance
An informed perspective that balances near-term performance and long-term success
One of the key objectives of FP&A professionals is to empower their internal customers through exceptional support and guidance. I believe that individuals with these three competencies are well qualified to play this critical support role.
Question: FP&A professionals are in a unique position to influence operations, value creation and business performance. How do you work with the CFO and other members of the C-suite to strategically leverage your insights and improve the organization?
Answer: I couldn't agree more - FP&A sits in a privileged seat. Through our relationships across the business, the plans we help them develop and our independent forecasts, we're in a unique position to inform our CFO and the rest of Southwest Airlines' leadership team.
There's a great emphasis on team success at Southwest Airlines, and while we report to the CFO, we know that FP&A only succeeds when our internal customers and our peer support departments (technology, supply chain, people, etc) are successful. From our advantaged position, we share our insights immediately and simultaneously with our CFO and the larger business. Where practical and possible, we leverage our routine planning, budgeting and management reporting activities to communicate these insights.
Question: There's a clear tradeoff between structuring the FP&A team as a centralized model (more cost effective, better standardization, etc.) vs. a decentralized model (smaller teams are closer to or within the business divisions). How is your team structured and what factors did you consider when making this decision?
Answer: From a FP&A team structure standpoint, we're fortunate to have the best of both worlds. We have a centralized model, but most of Southwest's FP&A team is embedded in the departments they support, with solid line accountability into FP&A and our CFO.
The embedded finance resources are mapped to our three key business areas (operations, commercial and enterprise), and serve as trusted finance business partners. They frequently attend their respective internal customers' staff meetings and help support business decisions. They keep other finance functions informed (accounting, tax, treasury, etc.) and they maintain independent forecasts that are informed by their internal customers' plans and actions.
In addition, we have two FP&A teams that don't map to the business; these two teams are charged with aggregating, understanding and challenging company-wide performance and trends. Along with driving traditional FP&A processes such as our annual operating plan, budgeting, mid/long-term forecasting, business cases valuation and capital planning, these centralized groups are also responsible for activities such as industry and economic analysis, profitability/optimization assessments and other cross-functional analyses.
In my opinion, this hybrid structure does a nice job of balancing and aligning the needs of both finance and the business. I'd like to take credit for how FP&A is structured at Southwest, but my predecessors implemented this strong model about 15 years ago, and I benefit every day from their foresight.
Question: Transactional accounting functions have been a target of outsourcing for many years. Is there value in business process outsourcing (BPO) for certain FP&A functions? What are the potential risks?
Answer: FP&A means a lot of different things to different people, so that complicates this question. With regards to Southwest's FP&A organization, I can't think of any current functions that are obvious candidates for outsourcing. While we're not perfect, we strive to be efficient, we have a proven bias to automate and we’re constantly tweaking our FP&A organization to ensure that our work and activities are aligned to where we can drive value.
Question: Which technology trends (e.g. big data, predictive analytics, etc.) have the greatest potential to impact the FP&A function and the role your team plays in providing strategic counsel?
Answer: I don't know that big data or predictive analytics are game changers by themselves. That said, I firmly believe that FP&A professionals need to leverage advancements in big data and data science to influence how we support the business. It's well documented that simply providing data doesn't drive value; our focus is on simplifying data so that it can be understood and then translating it into actionable insights. To achieve this, we have a robust planning tool, along with some complementary analytics and visualization tools. These tools, coupled with the competencies described above, can position the FP&A team to help drive success.