Plan, Budget & Implement Well

“To me, ideas are worth nothing unless executed. They are just a multiplier. Execution is worth millions.” Steve Jobs

Happy New Financial Year!

By now, Business Plans and Budgets for the new financial year have been completed and signed off by many firms. Sadly, like calendar new year resolutions, many plans never get fully implemented; some 60-90% according to Harvard Business Review.

What Can Go Wrong

1. Historically, the Finance Department number crunchers put together the annual budget. This process is often done based on last years data with insufficient analysis and links to Business Plans and Strategies.
2. Business Plans are put together by management without adequate collaboration between finance managers, marketing, sales and operations, and made worse by insufficient customer, market and competitor analysis.
3. The business environment is subject to small and large changes - pandemics, wars, severe weather events, disruption to supply chains and staffing. These external factors necessitate continual planning and budgeting changes.
4. Plans and strategies are often weak, and biased towards conservative thinking resulting in more of the same results or worse.

Good planning and implementation requires:

• A proper understanding of both the firm and its environment.
• Cross functional input - marketing, sales, production, HR, IT finance and Executive.
• Customer centric focus on the value chain from order to beyond delivery of customer orders / projects.
• Cross functional customer centric management of plan implementation.
• Innovative and agile thinking.

CREATING BETTER VALUE

The Planning Model - includes seven key elements to consider, usually in conjunction with SWOT analysis - key goals, revenue sources, production, technology, HR, financial resources, risk management; all viewed with short and long term horizons.

1. Revenue - shortcomings and opportunities to watch for include:

• Lack of customer feedback or market research leading to forecasts based on unreliable data. Customers needs and tastes change and they may be attracted by your competitors offerings. What steps can you take to build data and importantly retain customers and win new ones?
• Too optimistic or pessimistic in your forecasts. Have you done what if sensitivity analysis?
• Leaving money on the table. Is your pricing up to date?
• Marketing - lack of, or poor marketing strategies. Have you got a marketing plan where you attract customers and build your brand?
• Are you selling the right products? Look at your Product Sales Reports.
• Are you selling to the right customers? Look at your Sales Analysis Reports.
• Sale conversion and upselling often wastes customer interest in buying. Have you reviewed your sales tactics and provided sales training to improve sales conversions?
• Product and service innovation is vital for longevity of your firm. What are your competitors doing? What opportunities present from technology, trends, pandemics, etc?

2. Resources & Capabilities - where your firm's wheels meet the road.

• In fast growth firms, production capacity is often short of market demand. Do you need capital expenditure?
• In service businesses, the balancing of people resources with the volume of work is a continual juggling act. Where there is a shortage of skilled resources, you may need to pay higher salaries and provide more benefits to attract and retain staff. This drives up your costs and reduces your planned profit targets. What to do? Consider pushing up your charge-out rates to customers.
• An often overlooked factor in firms is strategic recruitment and development of staff. Firms who have this strategy are usually successful in driving up their staff capabilities. This in turn drives up productivity, work quality, customer satisfaction, and reduced staff turnover; all of which feeds into unique competitive advantage over your competitors. (Price and differentiation strategies).
• Firms which engage in innovation and continuous quality improvement drive up their productivity, reduce product and service defects, and usually have loyal customers who see the value of buying from these firms. Have you incorporated steps to build an ongoing culture of innovation and quality? Have you standardised your workflows?

3. Technology - the magic wand of the 4th Industrial Revolution

• The steam engine and factories, the first computer age, the second computer (PC) age, the third computer (internet) age, and now the fourth computer (cloud) age. Yet, there are many firms who are still in the second computer age - relying on spreadsheets, multiple computer systems and even manual processes.
• A key driver to effective and efficient implementation of business plans and strategies is investment in current technology, married with integrated workflows which streamline business processes and provide up to date management information in Business Intelligence displays and reports. Does your firm have a good technology strategy? Keep in mind that technology generally is an enabler, rather than an end in itself.
• The ultimate goal of technology is to provide your customers with value driven products and services. Your customers' buying journeys typically involves the use of technology to interact with your firm. To reiterate, this happens at inquiry, order, receiving, consumption and post delivery feedback. Does your firm need to revise its workflows?

4. People Resources - the most valuable resource

• As noted above selection and development is a key to HR success.
• Whether on the factory floor, hospitality and retail or in offices, culture is moving towards a Trust & Inspire form of leadership rather than Command and Control. This has been driven by a mix of technology, higher levels of education, retirement of baby boomers (used to hierarchical command), rise of Gen Y & Z collaboratives, labour cost cutting (flat organisation structures) and staff shortages. Many firms are caught in this societal transformation, and are at risk of process and service failures arising from leadership and communication deficiencies.
• Implementation of business plans can be inconsistent and fail when there is a disconnect between planners and those at the customer front or in production and service delivery. Has your organisation got effective customer feedback channels?

5. Risk Management - where your firm's wheels fall off or not; close the loop

• Business Planning and strategy is about making many choices. Even with the best data, analysis and consideration, plan implementation in the real world is subject to many variables and a changing business environment; think of pandemic disruptions, war disruptions, increased costs, labour shortages, government changes and more.
• The Johari Window in management science refers to unknown unknowns to yourself or others. In planning strategies, how flexible are your plans? Do you need advice from independent knowledgeable sources?
• Good business plans allow for flexibility in implementation. For example, Covid lockdowns necessitated work from home strategies for many workers. In hospitality, restaurants pivoted to takeaway and home delivery meals.
• A SWOT Analysis often uncovers weaknesses in a firm which can be commercially harmful or even fatal. When uncovered, management must respond with urgency and clarity. An example is a firm which ventures into a new product or services where it does not have the knowhow, resources and management skills. Typically, a firm in this situation has to quickly withdraw before the firm fails due to large operating losses.
• Business and personal insurances are a must in business. Too often, firms are not adequately covered and suffer significant financial loss when disaster strikes.
• As a firm grows, risk (commercial, physical, legal and personal) management is increasingly important. Have you reviewed your risk profiles?

6. Financial Management - everything in business is financial

• Every element of business has financial implications. To the extent that Business Plans fail, there are negative financial effects.
• Marketing and sales spend requires return on investment - sales. Whether in physical or digital form, firms must continually fine tune their tactics to optimise results.
• In every business, the degree of effectiveness and efficiencies in production and service delivery work to drive profitability. In every business there is room for improvement and this is often strategies including mechanisation, labour allocation, and process flows. Often staff training and mentoring play a key part in knowledge building.
• Daily and weekly KPI's must be available for managers.
• Weekly updated cash forecasts (recommend 13 weeks) are a must to manage cash flow efficiency.

7. Goals - you never reach the finish line

• Goals in Business Plans and Budgets are usually set in monthly and annual perspectives. It is cliched and yet true - without goals, firms drift along with much wastage. Humans work better with goals
• The practicality of time perspective is daily chunks. From a financial management perspective, daily goals in production and service delivery - quantities, hours, project stages, and costs. These data points should be readily available every day for managers to help drive improvements.

Flex your Plans & Budgets - strategy is emergent

Thanks to advances in technology, education and growing knowledge bases, managers of today are able to exercise greater skillsets in managing and controlling their firms.

1. Use the latest information daily and weekly to win sales, schedule production and delivery, allocate resources and improve processes as time goes by.
2. Rather than having fixed budgets, firms should have at least quarterly reforecast versions of their budgets, and synchronise these with revised management plans and targets.
3. Opportunities to increase value delivery to customers (revenue), improve internal processes and increase firms capabilities abound and should be addressed to improve revenue.
4. Management must be agile and work with open minds and involve staff as much as possible in planning, decision making and innovation so as to grow capabilities to attend to target customers and markets.
5. Budgeting is not dead. It requires nimble thinking and importantly agile action in timely fashion to achieve better outcomes.