Planning in the real world
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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How are companies currently managing planning, particularly in such a volatile business environment as we have experienced in the last two years? We spoke to Tom Seegmiller, VP of FP&A at Vena. Vena’s Complete Planning and Analysis platform drives agile, business-wide planning, resilience, and growth, and we were keen to understand the current state of play.
How would you describe the current state of planning in companies?
“Planning is constantly evolving at this point in time,” says Tom. “It is in a state of flux. Since the pandemic hit, you have two different camps: Companies that have chosen to evolve, adapt, and understand that the environment they are operating in is different, and those that have failed to make the changes.”
Change is not easy but it pays off. It involves a constant assessment and overhauling of people, processes, and technology. “Those that have chosen to take a good hard look at their organizations and ask, how do we get ready for what the new future is going to look like, are probably even getting to the point where they're thriving compared to where they were at before,” says Tom. “Those that haven't are probably struggling at this point and failing to keep up.”
We are in a period of change in our general, political and macroeconomic environment. Inflation is raging after 20 years of stability, and the war in Ukraine is resulting in supply chain challenges. “It's not like we're exiting COVID and coming into a calm time that's downright predictable,” says Tom. “It's just change, change, change.
We maybe need to acknowledge this might be our new norm, at least for the midterm, which I would define as the next three to five years, if not permanently. Who knows what the future will hold, ultimately, but I think the last two years have told us to be prepared for change.”
Which planning methodology do you consider the best in reacting to this new era of change, and why?
“I would say agile planning, leveraging a driver-based methodology,” says Tom. “When the only constant is change, it really begs the question, do you want to be tied down to a budget that is set once per year?” There are still valid reasons to undertake the annual planning or budgeting process, for example, to set expectations with investors, board members, and executives, but as you fast forward into the year you want to act in an agile fashion and adapt to what's happening in as close to real-time as possible.
How often is practical? “That's probably quarterly updates, being realistic,” says Tom. “You don't want to have knee-jerk reactions every day or week. But you do want to monitor over a relatively short period of time, and then adapt for one of two things. Either risks that are prevailing in your business that you want to mitigate against, for example, if you're not achieving revenue targets, should you be trimming your expenses? Or alternatively, maybe there are extraordinary opportunities in the market that you weren't aware of when you planned, and it's time to capitalize on those opportunities.
This is the real reason to constantly be focusing on rolling forecasts and agile planning. That annual budget that you set at the beginning of the year becomes dated and stale. When you kick off the year, you're really being asked, what is going to happen a year from today? And there are so many elements and factors that people sometimes can't predict what's going to happen in the next hour. So why would you think you're going to be right over the course of the next year?”
Why do you think most companies still use a budget as part of their planning???
“I think you still want an anchor point and the ability to set expectations,” says Tom. “If you operate without some form of target setting, it often throws people into disarray. And so you find it's a smaller group of folks working on agile planning to capitalize on additional opportunities or help to mitigate risk, but you're still going to report against that initial plan.
So that people can see where we were able to capitalize on some opportunities, and the corresponding higher revenues, expenses, and net income that justify taking a detour from the plan, but they have that anchor point, the North Star for the year, so they know where the company is going.”
How would you say the age of the “Next Normal” and constant change has impacted how companies plan today?
“Those that have continued to adapt are running rolling forecasts, operating in an agile fashion, and are probably doing scenario planning,” says Tom. One of the benefits of doing scenario-based plans at the beginning of the year is exploring possible responses to positive or negative events. “When you're updating your rolling forecast and you see the triggers or levers or milestones that you had laid out in your scenario forecast, you already know which general direction you're going to head in.
You've vetted it with your executive team, you've stress-tested your ranges and the what-if scenarios, making it easy to adapt.” Tom estimates that there is a 50/50 mix between those that have just maintained an annual budget and those who have adapted to agile planning methodology to gain constant insights. There is a lesson to be learned. “Pre-COVID we were in an economic boom, things were chugging along nicely. Nothing seemed to be getting in our way. It's easy to become complacent in those times, but that's probably the exact timeframe where things are good, and you have enough resources, and you aren't in crisis mode, to be thinking about how best practices should be evolving here.”
If you were to build a company’s planning process/model from scratch, how would you do it?
“I actually really like this question,” says Tom. “I'd probably take all of the good things that are already happening in companies and bundle them together. When you think about the ecosystem of teams that work together - data analytics, teams, CPM functions, FP&A teams - I would bring them all under one roof.”
“Those are all teams that are inherently joined, whether you're leading the planning process, helping with operational metrics and drivers, helping to enhance data and get greater analytics, or managing the corporate performance, it doesn't really matter. You're all operating in a similar realm, so bringing it under one roof gives better and more informed planning.”
“You've gotten more cohesion amongst these processes, you're thinking about both the upstream and downstream effects of data, you've probably got more consistent leveraging of technology, generating efficiency out of the process, and you've thought about it together collectively as one team, enhancing the insights.”
“On top of that, we're very lucky at Vena to have a planning platform with Excel at its core. A lot of companies kick off planning processes and try to push new technology into the hands of folks. When I think about change management, and wanting contributors to have an extraordinary experience, I would think very carefully about not having them learn new technology and let them leverage what they know in a familiar Excel interface.”
“I'm not thinking specifically about the operations team or the FP&A team, but rather the budget owners and business owners. If you can make the process as easy as possible for them, the likelihood that they're going to want to engage increases in leaps and bounds. It’s really incumbent on us, as FP&A practitioners, to create greater buy-in and have fewer hurdles in terms of change management.”
What tips do you have for companies to make their planning process more effective?
“This is an exercise in patience. I would start out with, where is the organization going to be in five years? I try to think about our process evolution to get to where we would need to be in five years. As you shift out a year, you're still asking the same question, where should we be in five years?”
“This is a constant evolution. It can seem like a monumental task but I always try to break it out into baby steps. One little step at a time is very manageable. I love the saying. ‘you need to eat the elephant one bite at a time.’ You're not necessarily going to notice the progress on a daily basis.”
“But if you reflect back, a quarter later, or six months, a year later, you're going to see the sum of all of the little steps added up to something meaningful on your journey towards planning excellence. But of course, after five years the organization will have evolved. It's going to keep growing and scaling and morphing into something new.”
“What you're targeting is planning excellence at the time, and being ready for that next stage of evolution of the company. Be ready for it, and have the right mindset to keep pushing forward with a constant desire to evolve and improve as a team.”
Lastly, what do you think will be the next big thing in planning i.e., the use of AI or a whole new planning methodology??
“It’s probably twofold. First, leveraging of AI. A lot of work is still done in a very manual and monotonous process and a very small percentage of folks are actually leveraging AI and predictive analytics. There's a high interest level in doing so but not a lot of skill set or knowledge as to how to deploy it yet, but it’s going to come.”
“The other thing is self-service and enablement of the business. When you think about wanting to improve upon planning, things like just simple dashboarding, or leveraging Power BI to share data and insights, the greater the chance you have that when you go out and engage with those budget owners, they know what they want to do next, because they have an even better understanding of past performance and what drove them to the current outcomes.”
“The more people are in there and reviewing results, the better they understand those drivers, those metrics, and the levers that you can pull within the business to change outcomes. They're better informed to plan for the future.”
What is the ultimate watchword for planning in the ‘Next Normal?’ Adaptability in the face of constant change. “The world's changing so fast at this point, we just have to adapt and keep up with what's occurring.”
Thank you to Tom Seegmiller for giving his insights today. How have you fared in this changing environment, and what tools and processes are you putting in place to thrive and survive? Let us know below.
This was the seventh article in the series "Planning as we know it is dead". You can read the previous articles in the series below.
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Anders Liu-Lindberg?is the co-founder and a partner at the?Business Partnering Institute?and the 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 75,000+ 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.?
Retired Astt. General Manager from IDBI Bank Ltd.
2 年Love this!
Associate Director - Finance Service Delivery
2 年Being reactive is no longer an option, while being proactive helps you stay ahead of the competition. Change brings with it a certain level of risk, and it is essential to be aware of the risks and mitigate them. I had mentioned this in my post earlier on driving change.