At Digital Realty, the FP&A team wants to help its business leaders “complete the story” by supplying data that brings greater context to decision-making. We spoke with Glenn Snyder, Vice President, Corporate FP&A, at Digital Realty about the company’s push to help business leaders tell the whole story.
(This interview was originally released on Episode 554. The following transcript has been edited.)
CFOTL: You’ve been helping to lead FP&A three years now at Digital Realty. What are some of the milestones that you hope to achieve or that have been achieved already by your team?
Snyder: When I first started, the goal was really to build out a corporate FP&A team. One of the big focuses was to be able to analyze and report the most accurate and impactful data in order to influence decision-making. This is really the core focus of any FP&A team, and I think that we’ve really been able to do that. We’ve developed a lot of great thought partnerships with our business leaders and really been able to integrate finance into the decision-making process. We can measure this by seeing the business leaders at our firm come to us so that we can opine on and vet their data and ideas before they actually get presented to the executive for a final decision.
CFOTL: Is there one particular data set or metric that the FP&A team has especially brought to the attention of the organization at large?
Snyder: What we have really done is add a new dimension to this data by bringing to it additional discipline and transparency to make sure that business leaders really understand not only the drivers of what is behind the data, but also what the data means to the company. We really started having conversations around financial data and about the impact of various business lines on our revenues, our expenses, our core FFO—which is of course “funds from operations,” a term that we use in the REIT industry.
CFOTL: The phrase “partnering with the business” is something that we hear a lot of finance professionals tell us that they want to achieve, but what does it mean for your FP&A team? How do you achieve this?
Snyder: It starts by building trust. This is the most important thing. You build trust by being a good partner and providing information on time and accurately. This could be through reporting or just by answering ad hoc questions as they come up. But then, if you really want to get to that thought partnership stage, it’s about being proactive. It’s about thinking about the business and interacting with the business leaders in such a way that you are asking good questions, probing for things, coming up with new ideas to show that FP&A isn’t just about, “Hey, here’s your budget variance analysis and here’s how you’re doing against your budget.” The conversation should be more around “Let’s talk about where you are today, where you’re trying to go, and how we can help you to get there, “ because finance—and FP&A in particular—is in a unique spot where we have a certain discipline, but we also have this understanding of the financial data and what it’s going to take to be successful. At the end of the day, if you’re trying to grow your business, you’re going to have to tie it back to the financials. What does growing the business mean? It’s greater revenue. It could be greater market share. Whatever it happens to be requires investment, which is going to be on the expense side. You might be analyzing it based on a return on investment. FP&A needs to be proactive to really build this thinking with the business leader and make an impact.
CFOTL: Is there a particular part of the business that FP&A has influenced over the past 12 months? Can you give us an example?
Snyder: Sure. We have a couple of different aspects to FP&A here: We have our property side and we have our corporate side, which I manage. Where we’ve made our biggest impact is on expense management and looking at identifying economies of scale in the business. One of the things to keep in mind is that Digital Realty is a growth company, and, as we are building and growing, we are looking at adding more people in areas. For instance, when we build a new building, we have to have people to go in and man those buildings. What happens is that you keep identifying points where you can become more efficient at what you’re doing, so each time you add something on the top line for revenue, you don’t have to add as much on the expense side. That’s really the main impact that we’ve had over the past couple of years—to really look at how we can become more efficient at what we’re doing so that we can return better results for our shareholders.
CFOTL: Regarding expense management, were there new approaches that were used to make those numbers more visible across the organization? Maybe you made them more available to more employees or different managers than before?
Snyder: When I first joined, this was one of the things that I was asked to build out as part of our corporate FP&A team. We were doing reports at an executive level. The executives were responsible for managing their own teams, but there wasn’t anything being done at lower levels for the people who were actually working in the individual properties or managing an individual cost center or managing projects. What we did was to push the data down to them. We started creating reports on a monthly basis so that people could understand the data down to the GL account level. Then we didn’t have to worry about business leaders working directly with accounting, who are fantastic at what they do but kind of speak in what I like to call “accounting-ese.” When they start talking about accruals and things, sometimes business leaders don’t know what they’re talking about. FP&A sits in between the two. We are working as that translator, and we really get to help drive that additional understanding into what’s behind the numbers, what they mean. This has really helped business managers to manage their businesses in a much better way and be much more accountable to their own budget.
CFOTL: When you say “expenses,” travel seems to always be top-of-mind, but what else would you be helping to make more visible?
Snyder: Travel is usually the most discretionary expense item that you can have, but the biggest expense item is typically compensation. HR is the one that runs compensation. They’ll be identifying where people should be compensated, but we have a hand in that, too. Throughout my entire career, whether at Digital Realty or other firms, HR and FP&A have always been great partners. This very often means helping to answer questions such as: “Wouldn’t we be better off hiring a senior manager?” “What’s the cost for that?” “Should the hire be made in San Francisco, or New York, or Atlanta, or a less expensive market?”
CFOTL: You mentioned that HR and FP&A are great partners, but are there other business functions that are more challenging for FP&A to partner with? Maybe sales?
Snyder: I would actually say that it’s not about the function, it’s about the people. It can be a personality issue sometimes. I’ve been involved in cases where HR has been very difficult for FP&A to work with … where they say, “No, we don’t want to expose certain compensation data because this is what we control.” They kind of put up walls. I’ve also worked closely with sales here at Digital Realty, where, for example, a former sales leader was incredibly open with the FP&A function. We were fantastic partners on the sales side and still are. It’s not necessarily about a function having an issue. It’s more about the leader’s approach.
Typically, executives will fall into one of two buckets. One bucket says, “I want FP&A at the table with me when I’m making my decision. They’re a valuable strategic partner.” You are in with them from the beginning, and they’re open to your ideas. Another one says, “I don’t want finance to know what’s going on. I want to manage my business the way I want to manage it, and I’m only going to show what I need to show to finance.” You may find that in every line of business. It really just comes down to the leader’s personality, and certainly FP&A will have a better relationship with those people who are open to working with us. The challenge comes when people put up these walls, because then sometimes, when you run into this, you’ve just got to say, “You know what? I get it. You don’t want to show us this. But we really have to have this data.” These are things that you just have to work through, but I would say that across all lines of business, we have fantastic partners at Digital Realty.
CFOTL: What are the priorities for you as an FP&A leader over the next 12 months?
Snyder: It’s really just to do a better job. Today, we have driver data and metrics that allow us to say “Here’s what’s going on in the business” and we also have financial data, but it’s about connecting the two and making sure that we’re working under similar definitions and telling the right stories. At the end of the day, we want to be able to tell a story. Our financial data doesn’t drive itself. There are always underlying factors. For example, you could say, “Well, your commissions are over budget.” But the fact could be that the commissions expense is going to be over budget because sales are up—so we should also show that revenues are higher. This could be because you had a particular promotion or something else happened—maybe you landed a large client, for example.
It’s really going and explaining the full picture of what’s going on and not just the one aspect of the budget that you may be talking about in a particular report. Over the next year, one of the things that my team is going to be focused on is really looking at what those business drivers are—how we could incorporate them better into our reporting and supply a more complete story. Because when you put a complete story together, not only do you impact the business, but also you’re going to have a much greater impact on the overall decision-making process by helping the company to make the best and most informed decisions that it can.