Planning in Tough Economic Times
It's tough to decide what's worse about the current economic climate: the actual impact on our businesses, or the sheer uncertainty.
With the turmoil in our markets and the uncertainty regarding future prospects, is this a good time to embark on strategy discussions and tinker with our business planning processes? This is the best time.
With the playing field constantly changing, and more precarious than ever, we need to be more nimble in the way we plan, so that we can be adaptive to change, while remaining steadfast to our values and vision. With so much uncertainty beyond our control, we need to increase confidence that our daily efforts and investments actually contribute to our ultimate goals.
In the best of times, one of our biggest challenges is the sense that everything is a top priority, and that we need to be all things to everyone, all the time. Each of us is working harder than ever, but the priorities are never ending, and economic uncertainty simply magnifies this effect. How can we have more certainty that our efforts are in concert, and more aligned to our vision, values and strategy?
Basic planning assumptions that many of our clients made just 12 months ago seem like no more than a bad joke today. A manufacturing client made aggressive assumptions that a key raw material price would increase by 30% in 2008; so far, the price of that raw material has actually increased 3600%. Another client tied closely to US housing starts made an equally aggressive assumption that new US housing starts would decline by 10%; in fact, housing starts were actually off by 36% in the period. Both these clients have one thing in common: they achieved their plans.
Both clients have well defined discipline in the way they plan. Their processes focus on bridging the gap between strategy and execution to create a clear line of sight between the strategy of the organization, and their day-to-day projects, tasks, and action plans. They plan on a rolling 4 quarter basis, to increase flexibility, and account for changes in their operating environment in a deliberate and timely fashion. They also challenge their assumptions every 90 days, and they set predetermined tripwires and contingency plans for their most important assumptions.
Don't get me wrong; this must not be an exercise in big process. In fact, one of our key principles is to redirect some of our clients' current planning effort to this new, more dynamic planning focus. Overall, disciplined planning should drive more results for the same or less effort, or we should spend our scarce time and resources elsewhere.