A history of planning: How did we get here?
Anders Liu-Lindberg
Leading advisor to senior Finance and FP&A leaders on creating impact through business partnering | Interim | VP Finance | Business Finance
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Every organization must have a goal, a raison d’être. It is the role of Financial Planning and Analysis to express the steps towards that goal in a specific, measurable, achievable, realistic, and timely fashion, to measure success, and to apply data-driven insights to constantly refine the plan and keep the goal in sight.
In simple terms, if the aim is to reach a particular position in the market, finance helps to identify the path towards it and refines the route as the structure of the business changes over time, and the external operating environment throws up barriers and opportunities.
Planning to reach a business goal is not dissimilar to planning for a military goal. It’s hardly surprising that Sun Tzu’s Art of War lurks on many corporate bookshelves. Those who argue that military planning is purely a zero-sum game miss the underlying detail that makes the discipline relevant to corporate strategy.
Sun Tzu’s nuanced guide uses basic concepts that resonate with modern enterprises. Planning is the basis for success. A character may be interpreted as dealing with honor and showing flexibility in decision-making. A strategic leader uses the advantages they have and establishes strong alliances and partnerships. There is no place for self-deception; they understand the strengths and weaknesses of both their own enterprise and their competitors. Sun Tzu’s discussions on ‘Use of Spies’ cover the value of data, and he also emphasizes the importance of communication. The parallels with corporate planning could not be clearer.
Planning as a corporate discipline
Almost two and a half millennia after Sun Tzu laid out his guide for strategic military success, the industrial revolution brought us the concept of commercial enterprise. The first companies were registered in different countries around the mid-1800s, and with the arrival of shareholders came the need to define a goal, plan to reach it, and report on the results.
As corporate machinery evolved and expanded, so did the structure of planning, bringing us to the formal budgeting cycle that we know and, maybe, love. Business goals are broken down into steps, time horizons defined, and performance indicators for the short-, medium- and long-term are put into place. Projections and the actions needed to achieve them become the immediate strategy. A feedback cycle delivers the real-world data and compares performance to the plan, and the whole thing begins again an endless loop.
The shortcoming of traditional planning leaps from the pages of Sun Tzu. Flexibility in the face of change has become increasingly important as business environments alter at speed. The past two years alone have thrown up extraordinary challenges, and continue to do so. But what is the alternative? How can we move beyond budgeting and embrace an agile, strategic mindset?
Beyond planning (budgeting) and why it didn’t work
How can the finance function move beyond budgeting? We started this series with a controversial concept: Planning as we know it is dead. What we see from history is that planning (budgeting) is just one part of a successful strategic campaign. When plans are based on our assessment of the probabilities of events occurring, and those probabilities are subject to extreme external influences, they cannot deliver the agile response required to reach corporate goals.
The ideas that have been developed over the past few decades to take planning to the next level have had mixed success. Rolling forecasts stand out in this analysis, a concept with an agile promise that failed to live up to expectations. When finance spends more of its time in a rolling planning cycle, there are fewer resources for business partnering or value-added activity.
We’ll look in more detail at the contenders for the planning crown and the new paradigm for planning in upcoming articles. In the meantime, what has been your experience of becoming truly agile and responsive, and creating strategic value? Let us know in the comments.
This was the second article in the series "Planning as we know it is dead". You can read the previous articles in the series below.
While you await future articles why not read our latest series "FP&A Transformation Talks" below.
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You can read a lot more articles about FP&A, Business Partnering, and Finance Transformation below. It all start's with “Introducing The Finance Transformation Nine Box ”?where you set the ambition for your transformation. You should join the?Finance Business Partner Forum ,?which is part of the Business Partnering Institute's online community.
How Finance should use its seat at the table ?(the last article in a series about the "Unfair Advantage" of Finance)
The ultimate guide to decision-making for finance professionals ?(the last article in a series about the decision-making process and how Finance should impact it).
The Mindset Change Checklist For Finance Professionals ?(the last article in a series about the mindset change that finance and accounting professionals should make to become business partners)
It's Time To Decide If You Want To Be A Business Partner ?(the last article in a series about the personality traits of business partners)
All Successful Business Partners Are "Leaders" ?(the last article in the series about our new capability model)
Should We Keep Talking About Business Partnering? ?(part of a 17-article series where we deep-dive on the WHY, WHAT, and HOW of business partnering by putting it on a formula)
Everyone Can Adopt A Business Partnering Mindset ?(part of a six-article series about FP&A Business Partnering)
From Business Partner To Working Within The Business ?(part of an article series where I interview finance professionals about their careers in FP&A and Business Partnering)
Is Your Product Optimized For Value Creation? ?(part of a toolbox series where we look at what tools FP&A professionals should leverage to drive value creation)
How Business Partners Turn Analysis To Insight ?(part of case study series where I interview business partners about how they drive value creation using real cases)
Anders Liu-Lindberg ?is the co-founder and a partner at the?Business Partnering Institute ?and owner of the largest?group dedicated to Finance Business Partnering ?on LinkedIn with more than 10,000 members. I have ten years of experience as a business partner at the global transport and logistics company?Maersk . I am the co-author of the book “Create Value as a Finance Business Partner ” and a?long-time Finance Blogger ?on LinkedIn with 70,000+ followers and 150,000+ subscribers to my blog. I am also an advisory board member at?Born Capital ?where I help identify and grow the next big thing in #CFOTech.?
Helping Finance Managers of ‘busy’ SMEs improve profits | Turnaround 'busy' loss-makers | Improve profits of the already profitable | A proven step-by-step process | 90-day projects | Training & Coaching throughout |
2 年It might be interesting to learn what readers believe the difference is (if any) between "planning" and "forecasting"?
Director Wharton FP&A Certificate Program | Corporate FP&A Trainer | ex. P&G, Unilever, Squarespace | 100k Finance Audience
2 年In the words of Sun Tzu himself: "He will win who knows when to fight and when not to fight." Thanks for resurfacing this classic, I had read The Art of War many years ago and it's nice to be reminded of it again. Looking forward to the next articles!
I teach Storytelling to Finance Teams | Course Facilitator | Keynote Speaker
2 年The more I evolve in Finance, the more I have the impression that Planning is becoming an objective as such and not a tool to reach the company's objectives. The time we spend on explaining variances vs plan instead of piloting towards future is a sign of that. It's only when we look for our "raison d'être" that we can go back to help the company