Adapting and Planning Your Way Out of the Recession

Mark A. Smith in his Information Management Blog titled "Adapting and Planning Your Way Out of the Recession" quotes Yogi Berra’s famous observation: “It’s tough to make predictions, especially about the future,” and points out that the economic events of the past two years  made forecasts obsolete in a very short period of time.

Furthermore, Adaptive Planning’s recent poll of US financial executives is hardly reassuring and confirms the lack of overall lack of enthusiasm over the economic outlook. The poll found that just under half (46%) expect a “W-shaped” (bumping along the bottom) recovery. A pick up in job creation is not in the cards until next year or later, according to 80% of the participants and 41 percent think employment growth won’t begin until the second half or later. 

There are mixed feelings about the business outlook for individual companies – half expect growing revenues but one fourth think they will fall and almost one-third expect to see staff reductions in the second half of the year. The trends in the survey over the past 18 months reflect the mood of the North American economy: things have stopped getting worse but they’re not getting better in any kind of hurry.

The survey also pointed to a key feature driving the North American and European economies:

Planning and Budgeting - European Study

Planning and budgeting are indispensable but also time-consuming. Although companies need to be very flexible in today's dynamic business world, rigid planning and budgeting processes often inhibit flexibility. The BARC - Business Application Research Center conducted a study on how European companies approach planning and budgeting. The study looks at the planning methods, planning periods, forecast cycles, changes in the planning process, regulatory requirements and planning and budgeting software solutions that companies use. Main findings of BARC study:  Excel is the most commonly used planning tool (82 percent of the companies use Excel for planning purposes). Companies, however, rarely use just a pure Excel-based solution or a specialized planning tool. Most rely on a combination of several different solutions. Companies need an average of 42 work days to conduct planning on each single organizational level (i.e. operative, corporate and / or group). This median rate increases to 55 days in corporations with subsidiaries and drops to a mere 25 days for single companies. This shows that planning and budgeting involve a tremendous amount of time and effort. Companies that use a specialized, central planning tool spend less time on planning (25 percent less than with Excel-based systems) and have higher satisfaction levels. The average number of planning tools used per company is around three. Companies who use four or more planning tools need twice as long per organizational level (60-day average) than companies that use one or two planning tools (30-day average). Despite the increasing requirements on corporate governance, process documentation and risk assessment still play a relatively small role for companies during the planning process. 75 percent of the companies use mixed planning, a combination of a top-down and bottom-up approach. 44 percent of the companies follow "beyond budgeting" principles - mostly, however, in combination with traditional planning methods. Most companies base their planning on historical trends and rolling forecasts - mostly focusing on cash flow planning. Few companies plan more than five years in advance.  - one to two years (67 percent),  - three to five years in advance (52 percent). Planning processes are highly dynamic.  77 percent of the companies modify their plans at least once a year and 36 percent do so every six months. 66 percent of the companies make forecasts every one to three months. Data collecting, processing and analysis comprises a third of the overall planning effort. Full Article   Planning_and_Budgeting_in_European_Companies_final.pdf O2ibm

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