Hello Reader 👋

Last week I was back in Amsterdam, running a workshop for the Netherlands teams of Roche. Honestly, at this point I should just get an apartment there 😄.

There was a point that came in the discussion that I've heard since I started working in FP&A (actually, even before that): how far do we actually go in taking a position?

The "classic" finance doctrine says we present the data and let the business find its own root cause and next step. And in a way, that's not entirely wrong (it must come from the good old "segregation of duties").

But I pushed back on it. We still work with people, not AI, and working with people means showing goodwill by doing part of the job ourselves.

So this week, I want to talk about the risk every FP&A professional has to take: building hypotheses instead of just sharing the numbers.

So take a coffee, sit down and read FP&A Stories just like 16k other readers

This week in FP&A Stories

👩‍💼 1 habit for thinking like a consultant

👩‍💼 1 habit for thinking like a consultant

The knowledge that never makes it into the data

In my experience, most of the interesting knowledge about a company will never show up in a report. It lives in people's minds and is never officially formalised into a document or data.

There's actually a name for this. The philosopher Michael Polanyi studied how experts, chemists, doctors, craftsmen, make reliable judgments they can't fully explain. He summed it up in one line: we know more than we can tell.

That's exactly what happens in FP&A. Your best analysts sense when a forecast feels wrong before the variance analysis proves it. That instinct isn't a shortcut around the data. It's a form of knowledge the data was never built to hold.

If you only ever wait for the numbers to confirm what you already sense, you're wasting the one asset that makes you valuable in the room.

"Can you explain that variance?"

I spent years in audit before I moved into FP&A, and one habit has stayed with me since. When you go and see your (internal) clients and simply ask "can you explain that variance?", the reaction is generally adverse.

You're signaling that you didn't do your part of the job.

People read that question one way: he didn't prepare, so why should I?

Coming with a hypothesis already formed, even a wrong one, changes the entire dynamic.

Now you're not asking someone to do your job for you. You're inviting them to correct you, which is a much easier thing for most people to do than to explain something from scratch.

That's the goodwill I mentioned earlier. It costs you nothing but preparation, and it buys you respect.

The professionalism of not knowing yet

There is a problem with that approach: it requires us to go do the contrary that we've been taught since we started working in finance.

Normally, we should distrust anything that isn't backed by data and now we're being asked to take positions before the data fully confirms them.

Let me just put more salt in that: you don't have to formulate a final answer. There's a real risk in FP&A of jumping too fast on a conclusion and presenting it like it's fully confirmed.

Just think of the acid-testing you'll get and you'll know that you have to be on your guard.

Holding a position and holding it with the right amount of humility are two different skills: there is a moment for hypotheses and a moment for information/insight

Opinion, assertion, hypothesis

We use three very different things as if they were one, and that creates some confusion:

Opinion: sounds like "I think that…". Honest, but that's for when you already reached the trust level required to be asked for your opinion. Only comes when you're already seen as the company's consultant.
Assertion: states something as settled fact, whether or not it actually is. This is where the risk from the previous section is, because an assertion that turns out wrong costs you the trust you're looking for.
Hypothesis: anticipatory thinking. What happens if this is true. What's the cost of inaction if it isn't addressed. What's the next step either way.

This is exactly what the top consulting firms want their consultants to build. Instead of gathering every possible data point before saying anything, they form a hypothesis early and go find what would prove or disprove it.

Two things follow from that:

It's faster. You're not waiting for a complete picture before you engage.
It forces consequence-thinking. You're reasoning about what happens next before you've even confirmed the cause.

Of course, it comes with its challenges: confirmation bias. If you like your hypothesis so much that you're not open to accepting what the data (or contextual information from your business partners) shows you, you will twist the reality.

Believe me, if you start doing that with enough humility, you start being called for the important meetings, to help before a business case reaches the level of the ExCo and simply as advisor.

Final Thought

In Amsterdam, the discussion on who has the responsibility to justify the variance took some time because not everyone agreed.

But it told me something. Most finance professionals have been trained their whole career to avoid exactly the thing that would make them more valuable.

Taking a position isn't a loss of rigor. It's a form of respect for the people sitting across from you.

Hit reply and tell me about a moment you held back a hypothesis you were actually confident about. What happened, and what would you do differently now? I read every message and reply to all of them.

That's a wrap for this week

See you next week!

P.S.

After 17 years in FP&A, Consulting and Leadership, I’ve coached and trained finance teams across industries, from consulting and manufacturing to tech, media, and global logistics.
Through The Finance Circle, I’ve had the chance to work with teams from companies like Ralph Lauren, Deloitte, Roche, Holcim, CMA CGM, Bauer Media, Indeed, Volvo, AbbVie, NATO, and many others.

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