There is ‘financial planning’ and then there are your ‘real plans!’
We always
marvel at the Financial Planning and Analysis (FP&A) guys when they roll
out big company budgets based on “actual numbers”. Oh joy to the world
everybody; they did it again! We now know how much we can’t spend! So, with a spring in our step thinking about what
Santa will bring us, we can just about make do with our budget allocation for
the oncoming year knowing our bosses will be expecting to see us deliver more
for less in an eternal cycle that somehow caught the catchy title of
‘productivity’.
It’s a well
documented fact that companies who are able to resource their changing
strategies will be more successful then those who are not. McKinsey & Co
asserts that a company who can reallocate resources to support its strategy will
be worth 40% more (after 15 years) then a company who does not reallocate its
resources through formal and informal means.
So, bearing the
above in mind especially when timing and funding matter, what are your new-year
planning options between festive chocolate and latte treats at your workplace?
Vision – Are you sure about where your company is going with the business
and does your vision for your department and/or team lock in with this overall
vision?
Planning Disjoints – We all love the FP&A guys; they mail us once
a month and may visit us annually if we are “lucky”. However, the less
interaction with the planning guys, the bigger risk we run of our plans not
matching their funding assumptions as part of their process.
Fundamentals – If our budget allocation from Corporate does not
match our needs, we need to raise flags on oncoming years productivity. If we
cannot fund our functional obligations, we need to kick it up for review
straight away so the senior team can review the
facts and make a judgement on the following years budget additions and/or
productivity cutbacks.
Non-Fundamentals – We are all expected to deliver more with less.
It’s a fact of life that cost matters especially when companies are in a competitive
marketplace with tight margins. If problems that could be solved with formal
funding exist but lacking any budget for them; why not bring the problem to
your team. Brainstorm with the real subject matter experts on out of the box
solutions.
Informal Projects - Be careful of projects without a scope statement,
a sponsor you don’t have “real access” to and no project budget. Informal
projects are classic honey traps with functional managers keen to learn about
project management but end up having their existing functional resources sucked
into a project that is not properly planned or resourced. If you do take on an
informal project, I suggest mapping out the needs it presents upfront and the
staffing impact it will have, which are normally the first stress points when
functional and project responsibilities clash. You can then assess the most
effective solution for the criteria at hand noting if its not feasible, it
needs to be returned to whence it came. Management buy in is critical so if
they want it, they will need to resource it.
The value proposition - When reviewing one’s function, why not see how
you are spending company resources. Could it be done in manner where greater
value can be reaped for the expenditure?
Too often, we cut costs to save money not fully understanding the value
proposition the expenditure brought to our function and the wider company.
Taking the time to physically map out our budget lines to the operational
elements with assigned benefits and risks is a worthwhile endeavour.
Risk – When planning for the operational year to come,
another good team exercise is to map out the financial risks (to company’s finances
and/or calculation thereof), operational risks (financial/non financial risks occurring
as a direct result of operations) and business risks (wider non financial risks
generally speaking) that occur. They should be mapped into categories of risk,
ranked for risk impact and probability using methods like traffic lights/Low,
medium, high/0% to 100% along with prescribed remedies (avoid risk/accept
risk/reduce risk/transfer risk). This information should illuminate foreseeable
risks as a working register of risk; giving sight to what the year will bring
in threats, opportunities, strengths and weaknesses.
When we think
in depth about our function’s short-term future, try to remember its impact on
our medium to long-term view. If you do, then a more sustainable thought process
will formulate and give rise to a more sustainable approach leaving a stronger
set of plans for the year to come. Also, when you are on top of your future,
the Eggnog in the fridge at home has to taste better! YUMMY!
So, on that happy
note, I would like to wish you all a very Happy Christmas and a prosperous new
year! May good tidings be with you and yours always! Please stay tuned for my
next blog publication in early January 2015!
Sources/Credits:
Pics;
Credits;
Terrific information - Thanks!
ReplyDeleteWishing you Happy Holidays and all the Joys of the Season!
~Ed Coumou
Thanks Ed... and many happy returns to you and yours!!...
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