Organizational agility requires modern planning tools and a growth mindset

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The volatility of recent years has forced many finance leaders to consider upgrading their capabilities rapidly, especially when it comes to enterprise planning. In a September 2022 survey conducted by Harvard Business Review (HBR) and sponsored by Workday, almost 60% of business leaders planned to increase investment in enterprise planning tools over the next 12 months. 80% said they intended to increase their use of advanced planning tools that incorporate artificial intelligence and machine learning.

To this end, planning and forecasting must fundamentally evolve. In order to support decision-making, forecasting and planning must be based on business-driver methodology. This, in turn, requires connecting operational and financial data in new ways, and unlocks the potential of AI and machine learning to help inform decision-making.

In my conversations with other CFOs, we’ve shared the pressures of needing to run multiple scenarios and assess the financial implications of different decisions, often on a daily basis. This level of agility requires adopting agile planning processes and modern tools, yet many teams are unable to deliver against the demands of boards and management teams for better insight and guidance. Case in point — more than 60% of HBR respondents say they still rely on legacy tools to consolidate and roll up data, with the actual scenario modeling still done in Excel.

I joined Workday in 2014 as director of financial planning and analysis (FP&A), during a time of hyper-growth, when the company was experiencing a CAGR of 40+% annually. In 2018, we implemented Workday Adaptive Planning, a more flexible tool that enabled us to push decision-making out to the edges of the business and embrace continuous planning and forecasting.

What we learned during that process and our move to continuous company-wide planning is that teams need modern planning tools that are highly-automated, intuitive and easy to use; they need to engage with data and lines of business in new ways; and, they must embrace a growth mindset to find those opportunities to lead in an increasingly competitive environment for talent and profits.

Modern planning tools

The HBR survey confirmed what my FP&A team and I hear almost daily from Workday customers and prospects — organizations have very clear ideas about what capabilities they need in modern planning tools. At the top of the list are tools that automate as much of the planning and forecasting processes as possible (60%), followed by tools that are better integrated with systems of record (55%), and are more intelligent and predictive (52%).

Dallas-based Team Car Care is one such organization that knew exactly what it wanted from an automated planning solution, with intelligent automation and ease of use being among the top requirements. With almost 500 Jiffy Lube Service Centers across the United States, Team Car Care needed an intuitive tool that non-technical District Managers could use to easily input sales data for forecasts and plans. Workday Adaptive Planning was selected, along with Workday Financial Management and Human Capital Management solutions, so that collaborators across company operations can make decisions based on the latest information.

For Matt Castonguay, SVP Finance at Team Car Care, the difference between its legacy planning system and Workday Adaptive Planning has been dramatic. He noted recently: 

The old system was more like a database. It wasn't predictive, it wasn't really a place where you could build forecasts out, have driver-based forecasts based on machine learning models, or be able to collaborate and have continuous forecasting with the field like we have with Workday Adaptive Planning.”

With the new platform, Team Car Care experts began experimenting with ways to use machine learning — a form of artificial intelligence that allows software applications to 'learn' how to predict future outcomes using historical data — without relying on additional programming. The company is using Workday’s Intelligent Forecasting tool with embedded machine learning to forecast how many customers will stop by individual Jiffy Lube stores at various times during the day, then feed that customer count into the company’s sales and workforce plans. Machine learning will also help Team Car Care forecast how many of each of 500 products it will need to have in stock at each store, to automate replenishment.

Engage with data in new ways

Thanks to advances in data extraction and visualization, finance teams feel a new freedom to access data and manipulate it in new ways. At Workday, Finance owns the financial data model and data governance. That enables us to combine financial, human capital, operational, and third-party data in new ways in the format that we want it, versus waiting for assistance from IT. Even more importantly, owning the financial data model changes the relationship between Finance and IT away from being a support model to become co-innovation partners.

We boost confidence in the data at Workday by using our intelligent data foundation as the source of data for company-wide planning, so that Finance and the lines of business never have to argue over the numbers, because they are all the same. As a result, there is complete fidelity between the financial plan rolled up under corporate finance with the model used in sales planning by our sales leaders; and for Finance and HR to forecast attrition, guide talent investments, and reconcile headcount.

Having one planning platform for workforce, financial and sales planning with Adaptive Planning and using a single finance-owned data hub increases confidence and accountability between what is actually being rolled out versus what is being planned in the corporate finance model. This is critical today, given market volatility, rising inflation, and fluctuating consumer demand.

Managing market and supply chain volatility and improving working capital forecasts were at the heart of why Alcoa adopted Workday Adaptive Planning. The Pittsburgh, Pennsylvania-based manufacturer of bauxite and other materials needed a single source of truth for inventory valuations and forecasting working capital more effectively.

Standardizing on Workday Adaptive Planning has enabled Alcoa to consolidate global demand in one system, analyze actuals versus forecast data, and generate new scenarios to course-correct much faster. Planning and forecasting cycle times have been reduced by 50% and the time it takes to run what-if scenarios has been lowered from 4 days to 1.5 days, enabling the team to better assess the impact of unpredictability in key market segments on production and working capital requirements.

At Workday, we are working to mitigate the impact of market volatility on earnings by improving how we forecast Annual Recurring Revenue (ARR), the metric that determines the health of any SaaS business. We use a shared forecasting model that incorporates our sales and product teams’ views of planned investments, then takes historical trends based on three-year historical averages of key drivers, and combines those with product inputs, sales inputs and financial inputs to get a multi-dimensional view of ARR by product, region, segment, industry, and more.

Embrace a growth mindset

At Workday, we also understand that processes aren’t static, but are actually living things that can be continuously optimized in response to market changes or management strategies. That necessitates a mindset shift as well to one that prioritizes continuous learning and innovation.

We are constantly looking for ways to streamline and automate processes end-to-end, versus operating in silos, so that we have more time to focus on strategic business partnering. In addition to hiring people who embrace change and have an innovation mindset, we are teaching our finance teams to be more effective project managers, to be able to oversee their automation and finance innovation projects from start to finish.

A great example of an innovation project owned by our vice president of Tax at Workday is around tax provisioning. We have a bold vision to automate the integrated tax lifecycle, from tax modeling, provisioning and transfer pricing, to compliance. Under her guidance, we replaced an Excel tax model with Workday Adaptive Planning to: 1) enable integrations with our Business Finance forecasts and Workday actuals, 2) automate legal entity transfer pricing, and 3) set the foundation for future tax models such as non-GAAP effective tax rate and scenario planning. Using this new tax provisioning solution has already saved us two days of manual work over the past two quarters alone.

TexMex restaurant chain Chuy’s is a great example of a company that has successfully managed the transition to agile planning, to help weather the uncertainties of the past several years and capitalize on new growth opportunities. The chain, with 90+ restaurants across 17 US states, used Workday Adaptive Planning to perform scenario planning around cash needs throughout the pandemic and model operating results. With forecasting flexibility, the company was able to understand and project trends in times of uncertainty and exclude specific time periods from forecasting if data wasn’t relevant or predictive of future operational performance.

Using these tools to guide performance, Chuy’s was able to increase the overall restaurant level operating margin significantly ahead of its peers in 2021. Today, the chain is looking to expand restaurant locations using a unique real estate planning prototype model so the firm can use historical data to see how similar restaurants have performed in similar locations. FP&A has also been able to communicate plans and forecasts more effectively with business partners and management using the OfficeConnect feature in Adaptive Planning to create high-quality reports, board books, and presentations with Microsoft Office applications.

Managing the transition

Moving to modern planning tools and managing change effectively requires new skills, updated processes, and a different culture. This is definitely not a one-time change that entails rolling out new planning technology, upskilling staff and then moving onto the next project. Continuous planning, by its nature, is iterative and evolving — it has to be agile and capable of continuing to adapt as requirements change.

For Finance teams, there will be closer collaboration and interaction with stakeholders across the business as they are brought directly into the planning process; they will also need to learn new technical skills to support a planning platform. More broadly, organizations need to undertake a cultural and process shift to make planning something that is continuous and part of the DNA of the business.

To get started, we recommend that CFOs prioritize data quality and consistency, steering the development of data governance and data operating model decisions as part of a larger transition to enterprise planning. CFOs are well positioned to do this and bring data management to the top of the corporate agenda. They must also invest in an agile, tech-enabled data backbone with a common data layer and the finance staff needed to ensure that it’s high-quality data.

Here are some recommendations we’ve learned through our own experiences and those of the 6,100+ Adaptive Planning customers that we support:

• Seek executive buy-in and support before you kick off the evaluation process and ensure that there is a willingness to learn and embrace change among key staff.
• Select tools that offer consumer-grade user experience that are easy to learn and use, and flexible enough to support additions and enhancements.
• Carry out formal project management measures around the process change.
• Prioritize cross-functional collaboration and create a sense of trust that Finance has earned the right to manage other people’s data.
• Over-communicate, to ensure that everyone understands the goals and benefits of the change project.
• Partner closely with IT to unlock future potential to build on the success of your pilot program.

At Workday, we believe that doing nothing is no longer the safe choice. The pandemic and digital acceleration changed everything. If you haven’t already, now is the time to get started with modern enterprise planning, not only to weather current uncertainty but also position your organization for growth coming out of the downturn.