Creativity in Financial Modeling: Why is It Important & How Can You Unlock It?

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In a game of word association, “finance” might be followed by many things – “spreadsheets”, “profit”, “investment”, “efficiency”. It’s fair to say that “creativity” wouldn’t be a common response.

But it should be. Consider the Oxford English Dictionary definition of creativity:

“The use of imagination or original ideas to create something; inventiveness.”

Why should that be any less applicable to FP&A than to traditional bastions of creativity like marketing and product development? Without creativity, all you’re doing is running the same numbers in the same way, inevitably producing similar results. 

Unfortunately, creativity is currently lacking from the majority of corporate finance teams. In a Robert Half survey, just a third of CFOs said they believe their team-members are “very innovative”. The majority of respondents said their staff are mostly adept at innovating, but stressed that there is room for improvement.

Naturally, as a finance chief, you’ve got plenty on your plate already. Worrying about whether your team are creative enough can seem like a low priority, particularly as creativity is such an abstract concept. But there are real advantages to be gained from promoting a more creative, innovative approach. Read on to learn about the benefits and how you can unlock them.

The value of creativity in the world of FP&A

Four in five executives surveyed by Forrester agreed that the most creative companies enjoy a range of business benefits, including greater revenue growth and enlarged market share.

And that’s not all. Creative workplaces are often happy workplaces. In the same Forrester study, 69% of more creative companies said they had won awards and gained national recognition for being a “best place to work”. Just 27% of less creative organizations reported receiving similar accolades. 

In fact, creativity seems to have a positive impact on everything from results to staff development and retention. Research from Gallup discovered that people who work in a creative environment report higher levels of personal, team and organizational performance, and are also less likely to look for another job.

6 techniques to promote creativity within your team

Clearly, the benefits of encouraging a creative approach within your team are numerous and wide-ranging. But how do you actually do it?

There’s no golden bullet for promoting creativity. An organization doesn’t simply become creative overnight; a gradual approach is required, and you’ll almost certainly experience setbacks along the way. But there are techniques you can use to encourage creative, innovative thinking within your team.

  1. Streamline processes to eradicate bureaucracy

Bureaucracy is notoriously one of the biggest barriers to creative working. In fact, almost a quarter of CFOs surveyed by Robert Half cited too much red tape as the main obstacle to driving innovation within their organization. Just as irritatingly, it can also crush workplace morale and spark frustration over the length of time required to complete simple tasks.

As CFO, you should be constantly searching for ways to streamline commonly accepted processes, and challenging your team to do the same. Consider holding regular “Kill a Stupid Rule” sessions, which give your staff an opportunity to eradicate archaic or overly complex systems of working.

  1. Make creative hiring decisions

Fresh thinking can be a major help when it comes to challenging preconceived workplace notions and driving creativity. That means approaching recruitment in a more creative manner, rather than simply making like-for-like replacements and hiring people from similar backgrounds. 

Strive for diversity in as many areas as possible, from age and gender to ethnicity and past experience. And look beyond traditional degrees – BBAs and MBAs – when searching for newly graduated talent. Diverse teams are less susceptible to “groupthink”, and better able to identify new solutions and ideas.

  1. Set clear expectations and parameters

Counterintuitive as it may seem, clearly defined boundaries are more likely to promote creativity than a “free for all” attitude. Think of it like this: if someone asks you to say the first thing that comes into your head, it’s not that easy. Far simpler to add your thoughts to a conversation that’s already happening. 

Try using the following methods to set parameters around creativity:

  • Establish goals and KPIs at the start of the project so that everyone is clear about what’s expected of them
  • Define a schedule of meetings, including opportunities for progress reports
  • Allocate a set budget and timeframe for creative projects
  • Assign specific roles to minimize inter-team friction
  1. Build a culture that encourages innovative thinking

For creativity to take off within your team, it should touch on as many aspects of the job as possible. We’ve already discussed taking a more creative approach to recruitment, but this alone isn’t enough. 

Staff must feel empowered to take calculated risks and suggest innovative solutions to challenges within your department, or the wider organization. Creativity should be factored into your development initiatives, from individual scorecards to team-wide training sessions. And success stories should be celebrated. Creative thinking isn’t always easy, so when it pays off, those responsible deserve to be rewarded for their efforts.

  1. Don’t be afraid to fail

Following on from the previous point, it’s important to recognize that creativity can be difficult. Even the most successful creative organizations have a track record littered with failures. It’s almost impossible to innovate if you’re afraid of missing targets or making the wrong decisions.

Grasping this point can be a real challenge to finance teams. In the world of FP&A, results are absolute. Projects that don’t meet minimum targets are easily dismissed as inefficient or a waste of time. But this isn’t necessarily the case where creativity is concerned; failures can often produce unexpected benefits down the line, helping you to find new ways of working and identify gaps in existing knowledge, skills or processes.

  1. Choose finance tools that enable creative working

Even if you’ve taken each of the above steps, you’ll find it difficult to foster a truly creative environment if the tools at your team’s disposal aren’t up to the task.

Excel – still the budgeting and planning tool of choice for 63% of US companies – is the perfect software to promote innovation at an individual level, offering FP&As complete freedom to model creatively. But if you’ve got more than a handful of people on your team, Excel simply can’t cope; its lack of scalability is infamous, typically resulting in the creation of dozens of near-identical spreadsheets with slightly different sets of numbers. 

For many companies, the answer is a Big Vendor CPM solution. Highly scalable, they ensure that strategic decisions are informed by a single set of figures – one version of the truth, as it were. However, they do little to enable creativity, forcing FP&As to work within the confines of a restrictive platform.

Fortunately, there is another way. With Agile Financial Modeling, your modelers enjoy the freedom of their beloved spreadsheets without having to overcome scalability issues. Essentially, we’ve taken standard desktop Excel – the platform that FP&As love – and supercharged it with the power of the Cloud. We believe it’s the perfect tool to promote creativity within finance teams.

Ready to see what Agile Financial Modeling looks like? We’re happy to show you. Request your free custom demo today.

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