The Recession’s Positive Impact on Planning

Finance

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It seems that business magazine editors sense that some of the recession-driven changes to traditional planning approaches (e.g., moving to rolling forecasts, implementing scenario planning, and even ditching the budget in some cases) may be here to stay.

In case you missed these articles or have yet to see them, here are some highlights of these trend discussions.

Trend 1: 2008-2009 were a watershed years. Why? Because the painful economic conditions sparked by the global financial meltdown forced a significant number of management teams to run their companies without budgets. Even in cases where they were doing so in a de facto way, the light bulbs went on: Hey, this makes a lot of sense, regardless of market conditions.

Trend 2: More rolling forecasts. More and more North American companies are adopting rolling forecasts. These forecasts, when done well, contain a smaller set of high-level details rather than thousands of individual line items. This makes a lot of sense, because one of the biggest problems with traditional budgets is the amount of detail organizations try to jam into them. The only thing more detail provides is greater opportunity to be wrong, more variances to explain, and, as a result, less time to ficus on the really important drivers of your business.

Trend 3: Scenario planning increases. My team is currently finalizing an interesting scenario case study, which I’ll share next month: The subject company, a financial services firm, was able to avoid layoffs during the past 2 years (something I doubt almost any other financial services company can say), largely due to the strength of its scenario planning capabilities. That company is not alone in this regard; more business leaders are beginning to understand that since we can’t predict the future, we should be prepared for the future – actually for many different futures – before they arrive.

I’ll share more on scenario planning here shortly … so, well, be prepared.

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