Planning is a relay race: here’s how to get ahead of the competition

“Connected Planning” is a term that has come to prominence in recent years, but as a philosophy it’s nothing new. James McKinsey’s 1922 breakthrough book ‘Budgetary Control’ effectively set out the connected planning roadmap used today. It focused on learnings for the future rather than simply reviewing the past and placed great importance on allowing managers to take control of their future business. All organizations try to join up their planning activity, and the role of connected planning is to manage this process and make these links as seamless as possible. I’ve come to see planning as a relay race with multiple handoffs – working as a team and smooth exchanges are vital to success. But problems surface when businesses use siloed systems which slow down this process and cause a breakdown in communication.

When implemented properly at both a technological and an organizational level, connected planning provides an intuitive map of how decisions ripple through an entire organization. Streamlining this process can lead to significant competitive advantages. Of course, each business and sector will face its own challenges. On one hand, consider a fintech startup that’s moving and developing at pace. It almost needs to reinvent its planning process at every new cycle. On the other hand, think of some of the world’s largest companies where planning processes are more firmly entrenched. The sheer scale of their operations and the swathes of data and activity streams involved can make it very difficult to implement this intelligence.

I’d like to address the practical steps that businesses of all shapes and sizes can take, to build a workable framework. So, here are my top tips for how every business, big and small, can succeed in connected planning:

Get to the spine of the planning process

Connected planning can seem complex in the beginning. From inception to completion there will be many moving parts along the way. Like the relay, every section of the process is important. However, trying to do everything at once may cloud your view of the real backbone running through the process. Working out the path of least resistance will be critical. A great place to start is to ask yourself: What are my business objectives? Some will prioritise revenue management, for example, while others will look at workforce planning. Start from your ultimate goals and work backward to find out what really drives the process.

Think big, but make it manageable

You’re only going to realise the full potential of connected planning if you have that vision in the first place. Set a roadmap for how you’re going to get there in manageable steps, otherwise you will overwhelm yourself. Don’t try to do it all at once. Begin by focusing on the smaller challenges which would release the greatest immediate benefit and start there. Continually build, test and adjust as you go and progressively integrate connected planning into your business.

Put the tech into perspective

Technology is a wonderful tool, and is for the most part the reason why connected planning has become a reality. But technology on its own isn’t the answer: it’s only as good as the craftsman wielding it. Connected planning is all about the interaction between people and teams, without user buy-in and understanding, it simply won’t work. Focus on the people and the overarching governance of the process. Without proper care and attention, it will lie dormant and fail to deliver value.

Never stop improving

Planning isn’t a static process, with a simple beginning and end. If you’re starting out from a disjointed and siloed process, be prepared to go through some level of trial and error initially. It will take time and multiple iterations to get right. The important thing here is to keep an eye out for where you can make improvements.

Connected planning is about achieving Olympic level smoothness through the baton changes. But the benefits of planning really come to life once the race is over and leaders can take a step back, analyse the results and find out which part of the process made all the difference. Relish that winning feeling, but learn how to improve and replicate it over and over again.

12 Hints & Tips on Using Anaplan for Management Information (MI)

Read our round-up of best practice Hints and Tips for preparing and presenting Management Information.

1) Deliver the basics at the front of the pack/series of dashboards

Whilst there can be a temptation to run away with a variety of information, there should always be a place for core management schedules at the forefront of the MI.  A P&L showing (1) ‘Actual vs PYr/Bud’ for the month and YTD, and (2) ‘Forecast vs PYr/Bud’ for the full year must be front and centre with no over complication.  Management have spent their career with these types of reports coming across their desk, so have muscle memory in consuming the messages.

2) Draw out the ‘what’s changed?’ message

A monthly pack needs to highlight new news.  There is clearly a place for replaying those things which are already known, but not at the expense of hiding new developments.  For instance, if a particular cost line is known to be running above budget for the YTD, and the reason for this is understood, then there isn’t necessarily merit in continuing to focus narrative on this issue if this means that other, more recent trends are lost.

3) Capture and present the data which allows the causes to be understood

The MI needs to help identify the upstream cause of performance and often this involves collecting data which is not in the finance systems.  In other cases, it may simply require correlated metrics to be presented together.  Ultimately, the aim is to understand – for instance – not just that a cost is above budget, but instead if it is due to a greater consumption than anticipated or more of a unit cost issue, or if it is driven by increased business volumes, or a timing consideration etc.  Having users tag/categorise variances can support this sort of analysis.

4) Don’t overcomplicate the charting

Simple charts can strongly amplify a message, particularly in drawing out trends which are less apparent in the data.  On the flip side, overly complex charts can be a distraction, and as such, we recommend sticking to simple standard charts. A simple test should always be ‘can the user tell what the chart is trying to present to them if they look at it for less than ten seconds?’

5) Focus on the forward implications

The core financials will give a view of ‘what has happened’, and there is clear merit in understanding that position.  However, the real benefit of the MI should be to understand what that means for future performance, year-end out turn etc.  Some of this will be driven by primary forecasting activity where the business is actively reviewing assumptions, buying into a forecast etc.  Additionally, it can be supported by simple modeling, using techniques such as run rate projections.

6) Exploit the modeling and data capture abilities of Anaplan

Taking GL data, aggregating it and presenting it only gets you so far.  Usually there is an opportunity to enhance the data by using the modeling/calculation capabilities.  This may be by processing recharges and/or allocations, by mapping data to produce alternative roll-ups and views or by managing exchange rates so that the impact of currency movements on variances is clear.  Invariably, this needs not only the calculation engine, but also user inputs to control the calculation behaviours.

7) Include specific reference/content to forecast accuracy

In the spirit of continual improvement, and ever better forecasting and predictability, an MI pack should include a view on forecast accuracy.  This needn’t be ‘naming and shaming’, but should be granular enough to understand which areas of the forecast are more or less accurate.  This can be particularly important when dealing with driver-based forecasting, as it can help understand where the forecast approach needs recalibration, alternative drivers identified etc.

8) Place emphasis on the trends

The strongest message in MI is often in the trends, and simple line and bar charting of these is highly effective.  In particular, using techniques such as rolling 12-month averages allows a focus on the underlying trend rather than the monthly fluctuations.  Sharp turns in direction in a forecast rolling average can be suspicious.

9) Maintain a rolling view

Notwithstanding that there is always a need for a YTD/FY view, we recommend that there is also content to capture a rolling view.  This can often just be ensuring that a ‘last 12 months’ / ‘next 12 months’ view is available.

10) Keep the commentary insightful

Too often commentary can just be a repeat in words of what the data shows, i.e. ‘costs for the YTD are £0.2mn above budget’, which does not add much value.  Commentary should focus instead on the why as well as what can done about it? Commentary should have that ‘call-to-action’ feeling to it.

11) Select the appropriate delivery mechanism

Broadly speaking, there are three options for delivering reports to users, namely (1) direct access through Anaplan, (2) preparation of traditional Excel/PowerPoint based packs, and (3) integration with a Business Intelligence tool. It may be that some of the user community uses Anaplan to ‘self-serve’ access to data as well as navigate around this data etc.  However, when it comes to senior management/executive reporting, PowerPoint often remains the most effective delivery mechanism.  The implication of this is that there will still be effort within Finance to prepare these packs.  However, the upside should be in ensuring that Anaplan does the heavy lifting on preparing the data, without too much Excel manipulation and manual steps.

12) When building MI, step back from the detail

A project team building dashboards and reports can often get very close to the detail.  In doing so, complex dashboards can be created whereby every element is very well thought out and understood, but by people who have lived and breathed the content.  Stepping back and thinking ‘will the end user know the purpose of each component?’ is important to avoid the trap.

Budgeting 3.0: New Technology? Don’t sleepwalk into recreating the same old process – it’s time to create a new one!

Budgeting is budgeting, right?  A critical component of managing business performance, but invariably one where everyone breathes a sigh of relief once complete. “Phew! That’s that done for another year!  OK, well, maybe for another nine months as it takes three months to complete it each time.”  It’s a process which is annual, homogenous across the organization, time-consuming and dare I say, a distraction from the day job.

But is there really much that can or should be done to revitalise the process?  Organizations already have a range of different methods they can deploy to make it work for them.  They can choose zero-based or incremental, top-down or bottom-up and maybe even throw in some drivers.

Now, I’m not here to debate the relative merits of these concepts.  In fact part of my take on the subject is that these methods all invariably manifest themselves in the same type of process anyway.  Instead, I’m curious about whether people are really making the most of the technology they have at their disposal.  This is all prompted by the number of times I’ve seen people sleep-walking into recreating an old process in a new tool, under the illusion that it will all suddenly come good.

If you’re going to rethink elements of the process, then a good place to start is with clarity on what that process needs to achieve.  Ultimately it is there to set the baseline on which resources the organization wants to deploy over the near future, who has responsibility for these resources and what the organization hopes to achieve with them.  With that in mind, here are a couple of good process characteristics:

  • Robust: Not the most exciting of characteristics, but vital that the process delivers a result which is robust, comprehensive and trusted.
  • Agile: The process has to align with what the business needs out of it.  These demands can change over time or vary across the business, so the process needs to bend to fit accordingly.
  •  Owned: How you get to the answer can be as important as the answer itself.  If people are going to manage their element of performance within a budget, then they need to feel the ownership which comes from having created the budget in the first place.
  •  Tangible: Knowing, for example, that Cost Centre A is budgeting to spend £100k against Account Y, doesn’t give much insight.  Instead, the budget needs to capture exactly what that money is going to be spent on so that informed trade-offs can be made.
  • Integrated: The various pieces of the jigsaw really need to come together in a joined up effort.  Revenue/Margin, Staff Costs, Overheads, Capex, Project Budgets etc are all inter-related so can’t be developed in isolation.

Turning to how technology can help deliver on these characteristics, let’s first recap on the tools.  Without getting into a nostalgic review of what’s come and gone over the years, the recent story is actually quite straightforward.  There were the budgeting/forecasting tools of the early noughties, which one by one, were absorbed into mega-vendors and then put into stasis.  More recently an array of cloud-based technologies has been brought to market, each with their own value proposition. And then there is the ever-present Excel spreadsheet.  I’ve seen all of these deliver a similar process.  And I’ve lost count of the times I’ve come across the scenario where at face value the organization has a budgeting/forecasting tool, but in reality it is the place where the results get captured, once the offline working has been complete.

Amongst this mix of technologies, I don’t need to hide my affinity to Anaplan, which is a full modeling and connected planning platform in which many different data intensive processes can be realised, including budgeting, which is just one of them.  When it comes to budgeting though, Anaplan really can unlock new options for the process.  Here are some examples:

  • Keep it rolling: Doing a bottom up budget and then revisiting things during the year with a rolling forecast, isn’t a new idea.  But I like to turn it on its head, using Anaplan to deliver a rolling forecast into the hands of the business, which at the right time, gets baselined and used as an ‘envelope’ for the budget.
  • Cut to fit: Having a single homogenous approach to all elements of the cost base isn’t going to work.  Instead the process and the method should be tailored to each area of spend.  This isn’t just about more detail for bigger costs. Instead Anaplan enables different approaches for costs depending on whether the costs are centralised or federated, whether they are discretionary or committed, or whether they serve to ‘run-the-business’ or ‘grow-the-business’.
  • Understand consumption: Budgets are typically developed from the perspective of the area of the business where the resource sits; the ‘supply-side’.  A true understanding of the budget comes from understanding what is consuming the resources (projects, activities etc); the ‘demand-side’.  The most elegant approach is where an understanding of the consumption can tie back to business volumetrics which in turn can form the drivers of a rolling forecast.
  • Dust-off and go: The reality is that if you want a tangible budget where the consumption is understood, then things are going to have to get pretty detailed in parts.  You’ll be looking at line itemisation of some costs.  But this doesn’t have to be painful if you avoid starting afresh each time.  Building an Anaplan model which retains the catalogue of budget lines from one year to the next will help to achieve this.  It’s not about presenting to a cost centre manager, a view of ‘you budgeted for £50k in x last year’, but instead ‘you identified last year that your cost centre does these things and therefore needs these resources.’

I could identify more and more examples of new ways of working the process in Anaplan, but the point is probably made.  I should also suggest that it doesn’t have to be a case of ripping up and throwing away the current process.  There will be good practices which need to be retained, and perhaps also a phased introduction of new ideas rather than a big bang.

In conclusion, the next time you find yourself thinking ‘I would be great if we could do things differently, but there isn’t much room to move,’ then think again.  Likewise, if the thinking is ‘We’re going to buy and implement some new technology but not really revisit the underlying process,’ then again, challenge that notion!