Building Agility Through Continuous Planning

Analyst Viewpoint

Periods of disruptive change highlight the value of faster, more agile, and more predictive planning and decision-making processes. Finance teams must be able to respond quickly to changing business conditions to provide timely, action-oriented analysis and guidance to decision makers. To accomplish this, CFOs and leadership teams must have the processes and technology to achieve this objective. They must have a continuous planning process in place and software that supports continuous planning.

Budgeting is necessary for the finance department; planning is necessary for the whole business.

Recent turbulence illustrates the value of what Ventana Research calls “continuous planning.” It’s an approach that uses technology to connect and integrate all the forward-looking activities in which companies engage, such as marketing, sales, customer, supply chain and workforce planning as well as budgeting. It’s a high-participation, collaborative, and action-oriented planning approach built on frequent, short planning sprints. Integrated planning processes enable organizations to enhance the accuracy of their plans with refinements that are made at shorter intervals, which in turn enable companies to achieve greater agility when responding to market or competitive changes. An ongoing, collaborative dialogue about achieving objectives brings together finance, line-of-business managers and executives to promote better ongoing alignment and buy-in to the planning process and the resulting plans.

Companies must strike the right balance between budgeting and planning. Although the two words often are used interchangeably, there are differences. Budgeting is necessary for the finance department; planning is necessary for the whole business. Planning is the process of creating a detailed action program to achieve business objectives. People and businesses plan in order to determine the best way to achieve their objectives, and they do this by laying out the resources and tactics needed to achieve those objectives.

A well-managed planning process sets measurable objectives and quantifies the operational and financial resources required to achieve them. By contrast, budgeting is a type of planning but it’s financially focused. Its main purpose is to impose controls that prevent a company from failing. But “not failing” isn’t the same as succeeding. Budgeting sets limits while planning seeks opportunities. Budgeting is about income statements and balance sheets while planning is about the activities that departments perform and the resources they need to perform them.

Organizations must enable budget owners to model and measure the resources that they use to achieve their business objectives beyond simple monetary value. Managers need software that allows them to outline the necessary resources to reach their goals and that can also translate those resources into budget line items that are useful to the finance organization. Because this is better aligned to how managers think about their business, it can speed up planning cycles. More frequent planning cycles promote more-informed decision making and increased organizational agility.

Planning across the enterprise (rather than in silos) produces better results. Our Business Planning benchmark research shows that integrated business planning works. There’s a strong correlation between how well a company’s planning processes work and the degree to which plans are integrated. Two-thirds of companies that have planning information directly linked across systems also have a planning process that works well or very well, compared to only 40 percent of those that copy and paste data from one system to another and just 25 percent of those that have no linkage at all. Fragmented, silo-based planning efforts stand in the way of making planning more effective.

Technology limitations prevent many companies from integrating their planning efforts. For instance, our research found that three-fourths of organizations use spreadsheets to manage their planning processes. Joining the individual detailed plans of various departments and functions into a consolidated plan using desktop spreadsheets is too time consuming to be practical. A better approach is to use dedicated business planning software that enables each business unit to plan the way that works best for them.

These software tools then connect individual processes using shared, consistent data. This can increase the business value of the time spent planning and budgeting by enabling all parts of the business to share their plans. It can substantially cut the time spent creating and updating plans while enabling senior executives to immediately see the impact of changes to individual business unit plans in a consolidated view. This allows FP&A leaders to quickly explore alternatives and contingencies. Dedicated software supports high-participation, collaborative planning and budgeting, an approach that increases accountability and accuracy.

Heads of FP&A who want to make planning and budgeting a more useful business process should use recent experiences with turbulent times to highlight the value of being better prepared to anticipate change, react faster and with greater intelligence to unexpected changes in their markets. The senior leadership team and budget owners deserve more than what they get with desktop spreadsheets.

The business case for investing in dedicated planning software starts with two major benefits to the entire enterprise: Making planning and budgeting faster and easier for line-of-business managers while providing executives with the ability to immediately understand the consequences of a range of responses to a challenge. Both are valuable in ordinary times and both enable an organization to outperform its competitors during times that require quick responses and immediate course-corrections.