Planning and Forecasting

Evolving FP&A: Should the Budget be Abandoned?

By Larysa Melnychuk, Managing Director at FP&A Trends group

In a rapidly changing business environment, the traditional, out-dated budgeting mentality is being challenged more and more. Target negotiations, political games and biased planning processes cost companies a lot of money. These conventional budgeting practices are non-value adding and need to be abandoned if organisations want to stay competitive in this dynamic business environment.

While the process of moving away from a traditional budgeting mentality is painful and slow, it is happening around the globe. The question is, are we ready to abandon the traditional budget completely?

Quality of Business Forecasting: How to Find the Needle in the Haystack 

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.

Performance Measurement Vs Performance Management

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...

Pages