Budgeting, Forecasting, and Planning In Uncertain Times

Budgeting, planning and forecasting are critical management tasks that not only impact the future success of an organization, but can threaten its very survival if done badly. Yet in spite of their importance, the speed and complexity of today’s business environment has caused a rapid decrease in the planning time horizon. As a consequence, the traditional planning processes have become unsuitable for most organization’s needs. In this book, students will find new, original insights, including: 7 planning models that every organization needs to plan and manage performance 6 ways in which performance can be viewed A planning framework based on best management practices that can cope with an unpredictable business environment The application of technology to planning and latest developments in systems Results of the survey conducted for the book on the state of planning in organizations

Table of Contents:
INTRODUCTION 1 SECTION 1: BACKGROUND TO THE PLANNING FRAMEWORK 5 1 PLANNING FUNDAMENTALS 7 What is Planning? 7 Components of Planning 8 Planning in Today’s Business Environment 10 The Increasing Speed of Business and Globalisation 10 The Increasing Complexity of Business 11 The Decreasing Planning Time Horizon 11 Planning Challenges 12 Dissatisfaction With the Planning Process 12 Issues With the Planning Culture 13 Need for a Holistic Approach 13 Need for Better Planning Technologies 13 Planning Principles 13 Principle 1: Planning Connects Inputs and Outputs and is Therefore Directly Related to Organisational Activities 14 Principle 2: Planning is About Maintaining a Shared Understanding of the Economics of a Business 14 Principle 3: Planning is About Shifting Focus From the Past and Onto the Future 15 Principle 4: Planning is About Aligning Budgets With Strategy to Achieve Corporate Objectives 16 Principle 5: Planning is a Continuous Process 16 Principle 6: Planning is a Learning Process 17 Objectives of the Planning Framework 17 2 PLANNING METHODS AND METHODOLOGIES 21 Planning: Who, What, When, and How 21 Planning Within a Sole Trader 21 Planning as a Small Manufacturer 22 Planning as a Listed Company 23 Planning as an International Group 23 The Rise of Management Frameworks and Methodologies 24 Popular Management Methodologies 25 Budgetary Control 25 Quality Management Movement 26 Lean Management 27 Balanced Scorecard 28 Beyond Budgeting 29 Planning and Success 30 Planning Process Maturity 31 Planning Objectives 31 Planning and Forecasting Maturity Levels 33 Basic Planning 33 Financial Integration 34 Partial Integration 35 Matrix Planning 35 Dynamic Planning 36 3 PLANNING TECHNOLOGIES 39 Supporting the Decision-Making Process 39 Planning Technologies: The Spread Sheet 40 Two or Three Dimensional 41 Cell Meaning 41 Limited Business View 42 Single User 42 Lack of Workflow Capabilities 43 Planning Technologies: Multi-Dimensional Databases 43 Multi-Dimensional 44 Business Hierarchies 45 Name-Based Rules 45 Multi-User, Role-Based Security 46 Unlimited Size 46 Financial Intelligence 46 Spread Sheet Access 47 Multi-Dimensional System Issues 47 Comprehension 47 Complexity 48 Data Uniformity 48 Effort and Price 49 Modelling Tools 49 SECTION 2: BUSINESS PLANNING FRAMEWORK 53 4 BUSINESS PLANNING FRAMEWORK 55 Logical Overview of the Framework 55 Framework Components 56 Operating Activity Model (OAM) 56 Cash Funding Model (CFM) 59 Detailed History Models (DHM) 59 Target Setting Model (TSM) 61 Detailed Forecasting Model (DFM) 61 Optimise Resources Model (ORM) 61 Performance Measures Model (PMM) 62 Strategy Improvement Model (SIM) 62 Management Processes 64 Knowledge 65 Reporting From the Planning Framework 66 Case Study Overview 66 About the Case Study Organisation 66 Company Structure 67 Company Strategy 68 Versions and Other Information 68 5 OPERATIONAL ACTIVITY MODEL 69 Overview 69 Model Structure 69 Measurement Types and Relationships 70 Step 1: Define High-Level Objectives 71 Step 2: Define Core Business Processes and Assumptions 72 Step 3: Identify Core Business Process Activities 73 Step 4: Identify Support Activity Measures 79 Step 5: Define Profit and Loss and Other Financial Measures 80 Putting the Model Together 85 Measures and Attributes 85 Model Dimensions 86 Model Rules 86 Reporting From the OAM 87 Departmental Outcomes, Activity, and Resources 87 Outcome Versus Activity 89 Outcome Versus Assumptions and Resources 90 6 CASH FUNDING MODEL 91 Model Purpose 91 Defining the Model 92 Model Content 92 Additional Data Requirements Within the OAM 93 Identifying Cash Payment Profiles Within the OAM 93 Defining Payment Profiles Within the CFM 94 Other Cash Measures and Rules 95 Reporting From the CFM 97 Displaying Cash Requirements by Department 97 Evaluating Sources of Cash 99 Scenario Analysis 100 7 DETAILED HISTORY AND PERFORMANCE MEASURES MODELS 101 Reporting Past and Future Performance 101 Relevance 101 Context 102 Data Issues 103 Reporting Performance From the Planning Framework 104 Identifying DHMs 105 Case Study—DHMs 106 Sales Analysis 106 HR 107 General Expenses 108 Defining the PMM 109 PMM Content 109 PMM Business Dimensions 110 Case Study Measures for XYZ, Inc. 110 Reporting From the PMM 112 8 PREDICT AND OPTIMISE PLANNING MODELS 113 Predicting the Future 113 Target Setting Model (TSM) 115 Driver-Based Modelling 115 TSM Content for XYZ, Inc. 116 Using the TSM 120 Detailed Forecast Model (DFM) 121 Overview 121 Developing the DFM 121 Linking the DFM to the OAM 123 Optimise Resources Model (ORM) 123 Overview 123 Case Study Example 124 9 STRATEGY IMPROVEMENT MODEL 127 Responding to Change 127 Model Focus 128 Link to the OAM and CFM 129 Defining SIM Content 130 Linking SIM Content to Management Methodologies 131 Planning Capabilities 132 Communicate Goals 132 Propose and Validate Projects 133 Select and Approve Projects 133 Monitor and Forecast Projects 133 Assess Alternatives 134 10 THE PLANNING AND MONITORING PROCESS 135 Defining Processes 135 Components of a Process 135 Performance Management Processes and Tasks 137 Strategic Planning 138 Purpose 138 Tasks: Inputs, Outputs, and Sequence 138 People and Planning Models 139 Tactical Planning 140 Purpose 140 Tasks: Inputs, Outputs, and Sequence 141 People and Planning Models 141 Financial Planning 142 Purpose 142 Tasks: Inputs, Outputs, and Sequence 142 Forecasting 143 Purpose 143 Tasks: Inputs, Outputs, and Sequence 144 Management Reporting 145 Purpose 145 Tasks: Inputs, Outputs, and Sequence 145 Moving Toward Continuous Planning 145 SECTION 3: IMPLEMENTING A PLANNING FRAMEWORK 147 11 LATEST DEVELOPMENTS IN PLANNING AND ANALYTICS TECHNOLOGIES 149 Corporate Performance Management (CPM) Applications 149 The Rise of Business Analytics 150 The Next Competitive Edge 150 BI Versus Analytics Versus Decisions 151 Business Analytics, Big Data, and Decision Management 151 Predictive Business Analytics: The Next New Wave 152 Game-Changer Wave: Automated Decision-Based Management 153 Application Integration 153 Cloud-Based Applications 154 In-Memory Chip Technology 155 12 IMPLEMENTING THE PLANNING FRAMEWORK 157 Planning and the Role of the Chief Executive 157 Entrenched Beliefs Concerning Performance 157 Organisational Culture 158 The Unwritten Rules of Budgeting 158 Rewarding Bad Behaviour 159 Failure to Execute 159 Implementing Change 159 Agree on the Role of Planning 160 Model Existing Processes 160 Establish Improvement Themes 161 Plan- and Resource-Specific Change Programmes 161 Monitor Implementation 161 Use Technology to Support Change 162 Continually Develop the Planning Models Within the Framework 162 APPENDIX I: CGMA BUDGET AND PLANNING SURVEY RESULTS 165 APPENDIX II: REQUIREMENTS OF A PLANNING SYSTEM 213

About the Author :
Michael Coveney has more than 35 years of experience in the financial analytic software industry, where he specialized in helping enterprise combine “best management practices” with technology to improve the efficiency and effectiveness of their performance management processes. In recent years he has focused on conducting management workshops aimed at bringing senior executives and their management teams together around the topic of managing corporate performance and the role that technology can play. His energetic style and extensive experience has led him to become a regular speaker at many international events, a course leader with the Antwerp Management School, and the author of many articles and books including his latest Strategy to the Max published by FSN. He also has a blog (theCPMblog.com) where he discusses the last development and observations in performance management. Gary Cokins is an internationally recognized expert, speaker and author in advanced cost management and performance improvement systems. He is the founder of Analytics-Based Performance Management LLC at garycokins.com.  Gary received his BS degree in Industrial Engineering/Operations Research from Cornell University and his MBA from Northwestern University’s Kellogg School of Management. Gary began his career with Deloitte Consulting. Next with KPMG Peat Marwick, Gary was trained on ABC by Harvard Business School professors Robert S. Kaplan and Robin Cooper. Gary headed the National Cost Management Consulting Services for Electronic Data Systems (EDS)/A.T. Kearney and from 1996 to 2012 was a Principal Consultant with SAS, a global leader in business intelligence and analytics software. Gary’s thought leadership in this arena is broadly recognized and his books and articles are widely read.