Sabra, a leading hummus manufacturer, faced challenges in financial discipline as its rapid growth slowed. The company's lack of stringent financial oversight led to a decline in earnings growth, prompting the need for a robust financial planning & analysis (FP&A) function to support decision-making and international expansion efforts. This case study explores how Brad Frankel, former Senior Director of FP&A and Supply Chain, organized his FP&A function to become a team of business advisors.

The AFP FP&A Case Study series is designed to help you build up key FP&A capabilities and skills by sharing examples of how leading practitioners have tackled challenges in their work and the lessons learned.

Insight: The interrelation among team structure, roles and hiring the right people can lead to FP&A’s success in becoming advisors to the business.

Background

Sabra is among the largest hummus manufacturers in the U.S., with revenue ranging from approximately $300-$400 million at the time of this case study. Sales primarily occurred in the US, with additional business in Canada, Mexico, Europe and Australia. The company was established in 2007 as a joint venture between PepsiCo and Strauss.

Sabra experienced significant growth over a five-year period, achieving a double-digit compound annual growth rate (CAGR) from 2007 to 2012.

Frankel has a background in strategy consulting at Mars & Co. He joined Sabra in 2013 to develop the strategy function. He transitioned into corporate finance roles, including sales finance, brand finance and supply chain finance, eventually leading FP&A.

Challenge

During the years when Sabra was growing rapidly, there wasn't an immediate need for strict financial discipline because the better-than-expected revenue performance consistently masked mistakes and allowed the company to hit its budget and targets. The strong growth led to a situation where any approval process or financial oversight was perceived as a hindrance to progress, leading to financial decisions being made outside the purview of the finance department.

However, business growth moderated. While it was still strong, in mid to high single digits, the lack of financial discipline became evident in decreasing earnings growth. Additionally, the company reached a size where there was a larger financial impact for the joint venture owners, who began to pay closer attention. A large investment in international expansion required monitoring and a financial representative at the headquarters.

There was an FP&A team, but “the company had never asked them to really drive performance. The role was consolidation and reporting,” said Frankel. Change was due.

Approach

A new CFO joined the company, and Frankel transitioned from a strategy role to lead a revamped FP&A function. “We did not have a formal transformation project plan; there was no charter. The CFO put me in the seat and said, ‘This is what I expect,’” he said.

What the CFO expected was for FP&A to provide CFO-level questions, analysis and advice at all levels of the business. To do this, FP&A needed to be organized as a business partner to drive performance by thoroughly understanding operations and the profit and loss (P&L) statement and embedding financial acumen. This required changes in processes, moving away from complex spreadsheets and reorganizing talent and interaction with the business.

Accounting versus FP&A

Frankel began with an organizational redesign “to firmly establish a separation of duties to make sure that FP&A tasks were done in FP&A; accounting tasks were done in accounting; sales finance tasks were done in sales finance,” he said.

In growing companies, it is often assumed that any “numbers” role can be performed by individuals skilled with numbers. However, significant differences exist between accounting and finance. Accounting focuses on detailed accuracy, verifying numbers, explaining assumptions and ensuring precision. FP&A involves dealing with uncertainty, aligning with strategy and focusing on larger financial outcomes.

Separating and clarifying duties is important to prevent conflicts of interest. Individuals responsible for booking journal entries should not also manage monthly results, as this could allow them to alter figures that are used for performance evaluations, such as by adjusting reserve amounts or recording expenses in different reporting periods. "We had to change people's roles and modify their access to the ledger to ensure the work was appropriately allocated," said Frankel.

Team structure

The new FP&A team operated using a hub-and-spoke model. The central FP&A team, consisting of four members, including Frankel, supported the CFO and CEO and also managed the international regions.

In the spokes, two people were assigned to marketing finance, two to sales finance, and one to supply chain finance. “The teams being ingrained with the business teams is really what makes the magic happen between finance and the business,” said Frankel.

These teams allocated about two-thirds of their time supporting business partners and one-third collaborating with the CFO organization to align assumptions and investments and ensure the accuracy of consolidated financials. “Looking back, eight or nine people in FP&A for a company of this size may have been a bit too many. At later and larger companies, we were efficient with smaller staff,” said Frankel.

When it comes to job titles, Frankel said, “I always try to design my organization with career pathing in mind." This is to demonstrate potential growth opportunities, which may include identifying the next job or a lateral move, considering various levels. Ensuring there is a clear progression (for example, from analyst to senior analyst, associate manager to manager, or similar positions) is important so people don’t feel like their careers are stuck and look to leave your company.

Relationship with IT

Frankel described FP&A’s relationship with IT as “super critical.” He held regular meetings with the CIO to align strategy, execution and bandwidth for projects, ensuring the prioritization of finance projects within the overall product portfolio. “It is hard to imagine being successful in my role without a strong partnership here,” he said.

Collaboration with IT began with ensuring data integrity. Clearly defining the individual or group responsible for master data management was essential, as inaccurate data within the enterprise resource planning (ERP) system would complicate subsequent tasks.

From there, Frankel developed a financial roadmap to articulate the vision of his desired destination and progressed along that path incrementally with IT. For example, he built out reporting one dashboard at a time and made sure IT had visibility into larger efforts on the horizon. “It is important to recognize that they [IT] have a million things on their plate, so I have found it is good to get into a cycle of continuous improvements,” he said.

Where should the budget for the finance efforts be allocated? Frankel advised that it should be under IT's control. "They will be responsible for the expenditures, employ most of their personnel's time and hire consultants," he said. This approach centralizes the management of financial and human resources within IT, thereby reducing conflicts among departments and promoting alignment and organization.

Hiring the team

“I focus on hiring individuals who are collaborative, adaptable and capable of building strong relationships across the organization,” said Frankel. “These qualities contribute to creating a finance organization that drives value and fosters teamwork.”

Adopting a business partnering perspective requires individuals who are personable, sociable and empathetic listeners. These individuals earn trust as team members and provide valuable insights. They must possess the ability to assert their perspectives effectively without being overly accommodating. And they should have both a growth mindset and growth potential. Frankel asks himself, “Can I envision them in a leadership role in the future?”

Frankel has two ways of looking for technical skills during the interview process. “I usually give a simple Excel test,” he said. “It takes a maximum of half an hour.” The test is to see if they can structure a model, use intermediate functions, think through fixed and variable costs and read a P&L.

“I've been burned when I meet someone, and they've got all the technical requirements on paper, and they interview well, but then they really struggle to build a model and work with Excel at the level we need,” he said.

Frankel often asks candidates a pivotal question: “What are the key success factors for your company to achieve success, who are your competitors and how do you outperform them?” This inquiry reveals whether they possess strategic insights about their role and understand their company beyond merely handling financial tasks.

Outcome

Frankel’s team established stringent processes that enhanced financial discipline within the company, established oversight of expenditures, instituted a business case for capex purchases, put new EPM tools in place for planning and reporting, developed a trade spend investment process to evaluate incremental funding and ROI for promotions, led a stock keeping unit and customer profitability initiative and led a cross-functional waste initiative that saved over $2 million. This all required a cultural shift led by the finance team, enabled by their collaborative relationship with business units.

Sabra hit growth challenges following its initial success and expansion; efforts in innovation were largely unsuccessful, compounded by manufacturing issues that significantly affected sales. The company reduced its size and staffing, but FP&A was regarded as one of the top-performing teams within the company, so it did not eliminate any FP&A positions.

Frankel transitioned to a role in strategy and then business development within Sabra; he eventually left the company to lead the FP&A function at another organization, and later became Chief Financial Officer at another company.

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