Plan for Business Continuity, Sustainability and Success

Analyst Viewpoint

In times of rapidly changing business conditions, organizations must adapt with agility to ensure business continuity and success. The ability to move through rapid planning, budgeting and review cycles with tools that facilitate collaborative work are of specific importance. Of course these capabilities are valuable in steady-state conditions, but they will generate additional advantages in times of stress when the organization needs to quickly adjust to unexpected events.

Integrated Business Planning (IBP) is a business-focused, technology-enabled approach for a high- participation, collaborative, action-oriented style of forecasting, planning, budgeting and reviewing built on frequent, short sprints. These sprints enable companies to plan and refine those plans at shorter intervals so the cycles can be more frequent. Higher frequency promotes accuracy because refinements are made at shorter intervals and provide agility in responding to market or competitive changes.

IBP is business-focused in that it enables business units to plan more simply, in ways that make sense for each department. Rather than estimating budget line items, managers plan the “things” that they need to achieve their business objectives, things like headcount, facilities and equipment. Data for the budget – costs and revenues – are then immediately derived from those things and the individual plans immediately roll up into a company-wide view that combines financial and operational planning data.

The ability to quickly roll department-level planning up to this higher level enables benefits as the organization refines its plans and takes action based on them. For instance, Financial Planning and Analysis (FP&A) can translate the projected headcount into budget expense line items using data supplied by human resources. This unit-times-rate method supports rapid contingency planning. Or the impact of changes in benefit costs can be seen immediately at the organization-wide or business- unit level. Or the month-by-month impact on cash flow from a change in a range of volumes can be forecast right away.

The business value of the planning process increases for business managers and executives when parallel planning of the resources needed to achieve business objectives and the budget necessary to have these resources is implemented. The budget discussion isn’t just about abstract numbers and percentages in a spreadsheet, it’s about whether the department needs specific resources such as people or equipment. With IBP it’s easy for executives to quickly drill into the numbers from multiple perspectives (such as products, sales channels or geography) to determine in detail the sources of better- and worse-than-expected performance and whether these were the result of volume, price or cost. Executives and managers are better informed about their next best steps and their financial consequences.

Dedicated software is the most effective tool for companies seeking to create and manage an IBP process featuring rapid, high-participation, business-focused planning and budgeting cycles. Spreadsheets aren’t practical for aggregating the different types of resources and costs from an entire enterprise. They don’t support high-participation planning because the process of aggregating data from multiple business units in spreadsheets is too time consuming to make short planning cycles feasible in any midsize or larger corporation.

Planning for business continuity, sustainability and success should be a priority for FP&A organizations. Leaders who want to take their organization to a higher level of effectiveness should focus on making planning and budgeting a more useful tool for the business. They can do so by utilizing software that supports this model of collaborative planning built on an action-oriented style of forecasting and budgeting via frequent, short sprints.