By Steve Morlidge, Business Forecasting thought leader, author of "Future Ready: How to Master Business Forecasting" and "The Little Book of Beyond Budgeting"
As we know a simple matter of spotting bias – systematic under or over forecasting – can get surprisingly tricky in practice if our actions are to be guided by scientific standards of evidence – which they need to be if we are actually going to improve matters.
Reliably identifying systematic forecast error requires that we take account of both the pattern and magnitude of bias using approaches that explicitly take account of probabilities.
How to find the needle in the haystack
Let’s assume that you have a method for reliably detecting bias in a single forecast. How can this be deployed at scale in a large company where forecast are mass produced? In these types of businesses, a single demand manager will typically be responsible for upwards of a thousand forecasts, every one of which might be reforecast on a weekly basis, any one of which might unexpectedly fail at any time if the pattern of demand suddenly changes.
Steve Morlidge is an accountant by background and has 25 years of practical experience in senior operational roles in Unilever, designing, and running performance management systems. He also spent 3 years leading a global change project in Unilever.
He is a former Chairman of the European Beyond Budgeting Round Table and now works as an independent consultant for a range of major companies, specialising in helping companies break out of traditional, top-down ‘command and control’ management practice.
He has recently published ‘Future Ready: How to Master Business Forecasting’ (John Wiley 2010), and has a PhD in Organisational Cybernetics at Hull Business School. He also cofounder of Catchbull, a supplier of forecasting performance management software.
by Michael Coveney, co-author of "Budgeting, Planning, and Forecasting in Uncertain Times"
How do you think performance is measured at the Olympics Games by the teams involved? The number of gold medals? The number of world records?
Now come back a few years to when a team is preparing for the games. How is performance going to be managed? You can be sure it won’t be in terms of the number of medals they hope to win. Instead, the focus will be on the type of training being given, the diets being prepared, the way in which equipment and facilities are being used. To ensure these activities can take place, budgets and other resources are allocated to the appropriate activities. In short, the focus is on the process of preparing the athlete and not on the outcomes they hope to achieve...
“There is a magic in graphs. The proﬁle of a curve reveals in a ﬂash a whole situation — the life history of an epidemic, a panic, or an era of prosperity. The curve informs the mind, awakens the imagination, and convinces.”
―Henry D. Hubbard
They say a picture is worth a thousand words… “Telling the story” is one of the most important tasks facing the FP&A professional, and data visualization is a powerful tool to reveal this story. Data visualisation is vital for FP&A analytics: it can help to reveal hidden trends and patterns, to filter out the noise and to generate valuable business insights....
By Neil Ainger, GTnews
The search for a “single version of the truth” and how to “make FP&A a trusted business advisory unit to the boardroom … like an internal dynamic Harvard/MIT unit” were among key trends identified by the London FP&A Board.
Present at the latest meeting of the board, which has already produced best practice guidelines on insight management techniques, job skills and data, while endorsing an FP&A Club guide to technology, were Naomi Hill, chief financial officer (CFO) at IBM UK & Ireland and Hans Gobin FP&A director at specialist pharmaceuticals group Norgine.
Other contributors to the debate on current FP&A trends were Frederik Reynaert, head of financial planning and reporting at Scotch whisky distiller William Grant & Sons and Julie Brown, director of finance at Cafcass – the UK’s children and family court advisory and support service. She was joined by public sector colleagues and heads of finance at National Health Service (NHS) units Jay Mehta and Joseph McElligott.