quarterly rolling forecast master march 2015 -...
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This document breaches copyright if it has not been received directly from David Parmenter
How to implement
quarterly rolling
forecasting and quarterly
rolling planning– and get
it right first time
by David Parmenter
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Table of Contents
Page
1. Background ......................................................................................... 5
1.1. A burning platform .......................................................................... 5
1.2. History of annual planning ............................................................... 6
1.3. Jeremy Hope .................................................................................. 7
1.4. The myths around annual planning ................................................... 9
2. Introduction to quarterly rolling forecast process ................................... 13
2.1. What is a quarterly rolling forecast process? ..................................... 13
2.2. The process quarter by quarter for June year-end organisation ........... 14
2.3. Definitions ................................................................................... 15
3. The foundation stones of a rolling forecasting process ............................ 16
3.1. Abandoning processes that do not work ........................................... 16
3.2. The QRF model should be built by in-house resources ....................... 17
3.3. Separation of targets and realistic forecasts ..................................... 17
3.4. A quarterly process using the wisdom of the crowd ........................... 19
3.5. Forecast beyond year-end (e.g., six quarters ahead) ......................... 20
3.6. Monthly targets set, a quarter ahead, by the QRF ............................. 20
3.7. A quarter-by-quarter funding mechanism ........................................ 21
3.8. The annual plan becomes a by-product of the QRF ............................ 22
3.9. Forecasting at category level rather than account code level .............. 23
3.10. The QRF should be based around the key drivers ........................... 25
3.11. A fast light touch (completed in an elapsed week) .......................... 26
3.12. Built in a planning application – not in a spreadsheet ...................... 29
3.13. Design the planning tool with four or five week months ................... 34
3.14. Invest in a comprehensive blueprint ............................................. 35
4. The features of quarterly rolling forecasting .......................................... 37
4.1. Recognise that it involves all Budget holders .................................... 37
4.2. Accurate revenue forecasting ......................................................... 37
4.3. Bolt down your strategy beforehand ................................................ 41
4.4. As much pre-work is done as possible by the forecasting team ........... 41
4.5. Hold a briefing workshop instead of issuing instructions ..................... 41
4.6. Expand your forecasting help team ................................................. 41
4.7. Enable monthly phasing for only the next 6 months .......................... 42
4.8. Establish a Forecasting committee .................................................. 42
4.9. Have one page summary for each budget holder .............................. 42
4.10. Have trend graphs for every category forecasted ........................... 42
4.11. Forecast personnel costs accurately .............................................. 45
4.12. Automate and standardize travel and accommodation costs ............. 46
4.13. Beware of the dangers of scenario planning ................................... 47
4.14. QRF roll-out 18 months not 12, 13 or 15 months ........................... 48
4.15. Complete the forecast for the next quarterly before it starts ............ 48
4.16. Reporting the QRF to the Board.................................................... 48
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4.17. The redesigned month-end report ................................................ 49
5. Lessons learnt when implementing QRF ................................................ 51
6. Selling change – the John Kotter way ................................................... 56
6.1. Leading change by John Kotter ....................................................... 56
6.2. Learn to sell by using the emotional drivers of the buyer ................... 57
6.3. The elevator speech ...................................................................... 58
6.4. Selling the need for a one day focus group workshop ........................ 59
6.5. Preparing the project sales pitch ..................................................... 59
6.6. Pre-selling to an influential member of the decision team ................... 60
6.7. Practise, practise, practise ............................................................. 60
6.8. Deliver presentation to seek project approval ................................... 60
6.9. Empower broad-based action ......................................................... 60
6.10. Ongoing communication .............................................................. 60
7. Sell the concept of rolling planning with a planning tool .......................... 61
7.1. Step 1: Securing senior management team commitment ................... 61
7.2. Step 2: Getting the green light from the influential sages .................. 62
8. Build in-house team capability ............................................................. 64
8.1. Step 3: Selection of a quarterly rolling forecasting project team ......... 64
8.2. Step 4: Project research, planning, and project team training ............. 65
8.3. Step 5: Completing your Blueprint .................................................. 66
9. Buying the right planning tool .............................................................. 67
9.1. Step 6: Commence acquisition of a planning tool .............................. 67
9.2. Step 7: Test planning tool applications & close the deal ..................... 68
10. Implementing quarterly rolling forecasting in a planning tool ................... 69
11. Build and test the model ..................................................................... 70
11.1. Step 8: Training of in-house designated experts ............................. 70
11.2. Step 9: Build the model based on the blueprint .............................. 70
11.3. Post-it reengineering a forecasting process .................................... 70
11.4. An introduction to SCRUM ........................................................... 75
11.5. Kanban Board ............................................................................ 77
11.6. Step 10: Pilot planning application on three business units .............. 78
12. Rollout use ........................................................................................ 79
12.1. Step 11: Road show of new rolling forecast process ........................ 79
12.2. Step 12: In-house experts roll out training .................................... 80
12.3. Step 13: Complete quality assurance ............................................ 80
12.4. Step 14: Commence first quarterly rolling plan run ......................... 80
12.5. Step 15: Review process and ascertain lessons learnt ..................... 81
13. Barriers to implementation .................................................................. 82
14. QRF immediate steps ......................................................................... 84
15. Writer’s biography.............................................................................. 85
Appendix one: Examples of planning tool formats .......................................... 86
Appendix two: Prospective project team members checklist ............................ 89
Appendix three: Implementing QRF regime -checklist .................................... 90
Appendix four: Performing a quarterly rolling forecast - checklist .................... 95
Appendix five: The “planner tool supplier” evaluation checklist ........................ 97
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Appendix six: Delivering bulletproof PowerPoint presentations ........................ 98
Appendix seven: The one-day focus group workshop ................................... 101
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1. Background
1.1. A burning platform
Quarterly rolling planning is a process that will revolutionize any
organization, whether public or private sector. It removes the major
problems that are associated with annual planning including:
� An annual funding regime where budget holders are encouraged to
be dysfunctional building silos and barriers to success
� The monthly budgets set in the annual plan bearing no relation to
reality
� Takes too long – often a three month period where management is
not particularly productive
� Using the annual plan as part of a bonus system.
� Costs too much – annual planning costs in time alone runs into the
millions each year for larger organizations
� Often needs to be updated during the year to reflect the dynamic
and a rapidly changing environment we work in see Exhibit 1.1.
� Is an “anti-lean” process
Exhibit 1.1 Findings from a recent study by the Aberdeen Group
This paper will explain why the QRF is the most important management
tool of this decade and why the rolling forecasts of the past are a
different beast to the 21st century QRF.
In a poll during a webcast to corporate accountants in Canada, see
Exhibit 1.2, I asked the attendees “How long does your planning take
each year? Around 80% were investing two months or more and 60%
were taking three months or more.
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Exhibit 1.2 Speed of annual planning (Source: CGA Canada webcast poll)
The only thing certain about an annual target is that it will be wrong; it
will be either too soft or too hard for the operating conditions.
The answer is to “throw away the annual budget and its associated
processes, smart organisations do not do an annual planning process
anymore”. These smart organisations have moved to using quarterly
rolling planning.
For organisations between 400-700 FTEs you will invest between $1m
to $2m for the next annual planning round which equates to $10m to
$20m in the next ten years if you do not act now. We need to radically
change the annual planning process. We have a burning platform. We
need to jump.
1.2. History of annual planning
Annual planning dates back to Charles Dickens time and possibly back to
1494 when Luca Pacioli first wrote in 1494 about double entry book
0% 5% 10% 15% 20% 25% 30% 35%
over 4 months
3-4 months
2-3 months
1-2 months
less than 1 month
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keeping. Annual planning went ballistic with the advent of mass
production typified by the Model T ford, see Exhibit 1.3.
Exhibit 1.3 The birth of management accounting
Writers like Charles Horngren in his “Cost Accounting: A Managerial
Emphasis” helped lock in what we know today as annual planning.
1.3. Jeremy Hope
Jeremy Hope was the world’s foremost thought
leader on corporate accounting issues, he sadly
passed away a few years ago. Hope had an
uncanny ability to always be at least five years
ahead of what better corporate accounting
practices should be. Hope has stated that not only
is the budget process a time consuming, costly
exercise generating little value, but it also, and
more important, is a major limiting factor on how
your organization can perform.
Here are some of his quotes that challenge the very concept of
budgeting.
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“So long as the budget dominates business planning a self -
motivated workforce is a fantasy, however many cutting -
edge techniques a company embraces.”
“The same companies that vow to respond quickly to market
shifts cling to budgeting — a process that slows the response
to market developments until it ’ s too late.”
“It’s no secret that annual budgeting processes are time
consuming, add little value, and prevent managers from
responding quickly to changes in today’s business
environment”
Hope and Fraser in their beyond budgeting booki, pointed out that the
annual budgeting process was doomed to fail. If you set an annual
target during the planning process, typically 15 or so months before the
last month of that year, you will never know if it was appropriate, given
that the particular conditions of that year will never be guessed
correctly.
Beyond Budgeting in New Zealand: A Major Road
Contracting Company
I was presenting Beyond Budgeting and key performance
indicators (KPIs) in New Zealand and was introducing myself to
the managing director of a large road contracting company. He
politely informed me that he was mainly interested in hearing
the KPI part of my presentation, as the beyond budgeting
session was of little interest as they were already doing it. In
fact, the group had never had an annual planning process. He
said if the group could predict when it was going to sunny and
when it was going to rain, annual planning would be useful.
The business encompasses concrete, transport (local and
rural), fuel distribution, and roading. The group has around
1,000 staff members and a consistent profit growth, the envy
of many larger organizations.
The growth path has been either to grow from scratch or buy
existing family companies. As the CEO says, expansion is often
driven by opportunity. It has 23 companies as well as a
number of joint ventures.
The business has different performance tables depending on
the size of operations, so the companies can compare with one
another. Each table shows the ranking of the operations within
that table with reference to some key ratios. The ratios they
monitor include:
� Return per km — revenue and cost per km
� Margin per litre
� Delivery cost per litre
� Concrete cost per cubic meter
� Cubic meter delivered by pay hour
Monthly reports are short and based on major cost categories
(not at detail account code level). They do not waste time
showing a consolidated result each month; this is done at year
-end only.
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There is much delegation to the other offices, which manage
staff levels within given limits, set staff salaries, and choose
which suppliers to use (providing there is not a national
contract in place).
There is an in-depth case study on Svenska Handelsbanken and Bulmer
cider in the electronic media that supports this paper.
1.4. The myths around annual planning
There are many reasons why
your annual planning in your
organization is not working.
One main factor is a lack of
understanding of the myths
surrounding annual planning.
Just like six centuries ago we
are blind to the realities that
are there to see on closer
observation. We have for
centuries blindly applied old
thinking to how we measure, monitor and improve performance.
Myth 1: There is a need to set annual targets
It is a myth that we know what good performance will look like before
the year starts and, thus, it is a myth that we can set relevant annual
targets. In reality, as former CEO of General Electric, Jack Welch says,
“it leads to constraining initiative, stifling creative thought processes and
promotes mediocrity rather than giant leaps in performance”. All forms
of annual target are doomed to failure. Far too often management spend
months arguing about what is a realistic target, when the only sure thing
is that it will be wrong. It will be either too soft or too hard.
I am a follower of Jeremy Hope’s work. He and his co-author Robin
Fraser were the first writers to clearly articulate that a fixed annual
performance contract was doomed to fail. Far too frequently
organizations end up paying incentives to management when, in fact,
they have lost market share. In other words, rising sales did not keep up
with the growth rate in the marketplace. As Hope and Fraser point out,
not setting an annual target beforehand is not a problem as long as staff
members are given regular updates about how they are progressing
against their peers and the rest of the market. Hope argues that if you
do not know how hard you have to work to get a maximum bonus, you
will work as hard as you can.
Just like a high jumper in the Olympics in order to win they have to
jump the highest. Having a predetermined height set in their minds will
only limit their performance.
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Myth 2: We only need to forecast out to the current year-end
Typically corporate accountants have reforecast the year-end numbers
every month. This is flawed on a number of counts. Firstly, why should
one bad month, one good month translate into a change of year-end
position. We gain and lose major customers, key products rise and
wane; this is the life cycle we have witnessed many times. Secondly, the
forecast is a top-top forecast with little input and no buy-in from the
budget holders. Thirdly, two months before year-end management
appear to ignore the oncoming year. Fourthly management and the
Board know whatever number you have told them is wrong. You will
change it next month!
Myth 3: We could set monthly targets from the annual plan
As accountants we like things to balance and our work to be neat and
tidy. Thus it appeared logical to break the annual plan down into twelve
monthly breaks before the year had started. We could have been more
flexible. Instead we created a reporting yardstick that undermined our
value to the organisation. Every month we make management, all
around the organisation, write variance analysis which I could do just as
well from my office in New Zealand. “It is a timing difference” “We were
not expecting this to happen”, “The market conditions have changed
radically since the plan” etc.
Myth 4: Giving budget holders an annual entitlement made sense
Doing an annual plan is daft enough but to compound it with asking
budget holders what they want and then, after many arguments, giving
them an ‘annual entitlement’ to funding is the worse form of
management we have ever presided over.
The nine year old’s birthday cake
A clever parent says to Johnny, “Here is the first slice, if you
finish that slice, and are not going green around the gills and
want more, I will give you a second slice”. Instead, what we
do in the annual planning process is divide the cake up and
portion all of it to the budget holders. Like nine year olds,
budget holders lick the edges of their cake so even if they do
not need all of it nobody else can have it. Why not, like the
clever parent, give the manager what they need for the first
three months, and then say “What do you need for the next
three months?” and so on. Each time we can apportion the
amount that is appropriate for the conditions at that time.
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Myth 5: We need to budget at account code level
What made accountants ever conceive that we needed to set targets at
account code level? It was done by our forefathers so we duly followed
in the well trodden steps. It makes no sense.
Having budgets at account code level has encouraged budget holders to
allocate expenditure to an account that that has room for it, thus at a
single stroke undermining the purpose of the G/L which is to account for
costs and revenue in the right areas.
Do you need a target or budget at account code level if you have good
trend analysis captured in the reporting tool? I think not. We need to
apply Pareto’s 80/20 rule and establish a category heading which
includes a number of G/L codes.
Myth 6 An annual plan needs to takes months to complete
The annual planning process is not adding value, instead it is
undermining an efficient allocation of resources, encouraging
dysfunctional budget holder behaviour, negating the value of monthly
variance reporting and consuming huge amounts of time from the
Board, senior management team, budget holders, their assistants and of
course the finance team.
When was the last time you were thanked for the annual planning
process? At best you have a situation where budget holders have been
antagonized, at worst, budget holders who now flatly refuse to co-
operate!
Like a laboratory rat we go down the same pathway each year to find
there is no cheese, no passing ‘Go’ and collecting £200, just mayhem.
The annual planning process may have worked for Julius Caesar but
certainly not for us.
The nightmare of three to four months arguing over resource allocation
when nobody knows the answer, the endless cut-back rounds, and the
game playing, the spend–it or lose-it-mentality is not befitting the 21st
century.
Myth 7: We had to use Julius Caesar’s calendar
Julius Caesar gave us the calendar we use today. It is not a good
business tool because it has divided up the year in uneven periods. With
the weekdays and number of weekend days, in any given month, being
different to the next month it is no wonder forecasting and reporting is
unnecessarily compromised.
Even if we are stuck, in the short term with reporting results on calendar
months we can and should base our forecasting models around a 4,4,5
quarter e.g. there are two four week months and one five week month
in a quarter. The model would them smooth back the numbers to the
correct working days for monthly targets.
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Myth 8: The annual plan will be quicker this year
Each year I was involved in the annual planning process I thought I had
discovered the secret to cut months out of the process. I even had
budget holders on my side saying, “Yes we agree that four months is
ridiculous and we will cooperate.” As you all know the next annual plan
will be as worse as the last one because once the annual planning
process has begun budget holders commence their political gesturing. It
is just like Pavlov and his dogs.
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3. The foundation stones of a rolling forecasting
process
There are a number of QRF foundation stones that need to be laid down
and never undermined. You need to ensure all the construction of the
QRF model is undertaken upon the following foundation stones:
1. Abandoning processes that do not work
2. The QRF model should be built by in-house resources
3. Separation of targets from realistic forecasts
4. A quarterly process using the wisdom of the crowd
5. Forecast beyond year-end (e.g., six quarters ahead)
6. The monthly targets are set, a quarter ahead, from the QRF
7. A quarter-by-quarter funding mechanism
8. The annual plan becomes a by-product of the QRF
9. Forecasting at category level rather than account code level
10.The QRF should be based around the main events / key drivers
11.A fast light touch (completed in an elapsed week)
12.Built in a planning application – not in a spreadsheet
13.Design the planning tool with months that consist of four or five
weeks
14.Invest in a comprehensive blueprint
3.1. Abandoning processes that do not work
Management guru Peter Drucker frequently used the word
‘abandonment’. I think it is one of the top ten gifts Drucker gave us. He
said
“the first step in a growth policy is not to decide where and how
to grow. It is to decide what to abandon. In order to grow, a
business must have a systematic policy to get rid of the
outgrown, the obsolete, and the unproductive.”
He frequently said that abandonment is the key to innovation. He also
put it another way: “Don’t tell me what you’re doing, tell me what
you’ve stopped doing.”
In planning many of the processes are carried out, year-in year-out
because they were done last year. When staff question why do we do
this the answer being “There must be a reason”.
All the previous givens with regards forecasting need now to be
challenged and all the inefficient processes thrown out. Here is a list, by
no means complete of what needs to be abandoned:
Using Excel Forecasting in Excel, just because we
are good at it
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At account code level forecasting in detail, at account code
level and to the dollar
Only forecasting to year-end Only forecasting to the current year-
end as if next year did not exist
An annual entitlement Giving budget holders an annual
entitlement, they have not got a clue
as what the next year is really going
to be, nor do we in Finance
Forcing numbers Forcing the annual plan to be the
same number that the Board want to
see - we have just lied!
A three month process A three month process when it can be
done in two weeks – both will be
wrong. You may as well be wrong
quickly!
Setting the monthly targets Setting the monthly targets from the
annual plan - since we cannot see
into the future this breakdown of the
annual plan has always been a stupid
activity
Written instructions Annual plan written instructions –
nobody reads them and if they say
they have don’t believe them.
3.2. The QRF model should be built by in-house resources
The project team must always design the model themselves. You need
to use the planning tool consultants more as advisors and trainers and
make sure you drive the mouse. The planning tools are relatively simple
to use providing the in-house staff have attended in-depth training.
If the model is built by the consultants, not only will the project cost
more money, you have the added risk of bringing someone who may not
fully understand your business, and who will endeavour to build you a
better annual planning model, the very thing you need to migrate away
from!
The in-house team has a better chance of designing a model that fits
your industry and your decision-making processes than an external
consultant. Consultants, with the best will in the world, cannot help but
design a model based on their prior experiences, which may be adrift of
techniques described in this white paper.
In other words it’s just like learning to drive a car, the team will need a
series of lessons and hopefully practise first on “quiet country roads”
(pilot the model) before they drive on the motorway (unleash the model
to all budget holders).
3.3. Separation of targets and realistic forecasts
Generating realistic forecasts rather than forecasts the board or senior
management want to achieve is vital. We need to get this foundation
stone agreed with the Board.
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Dialogue with the board
You can say to the board, “Setting a stretch target is desirable but
you must accept that we might not be able to achieve this. We
understand that the bonuses might well be pegged against the goal
and we are not trying to lower the threshold to get the bonus, but
merely informing you of the performance gap so you can think
strategically about how we are to close the gap up.”
The board might want a 20 percent growth in net profit, yet
management might see that only 10 percent is achievable with existing
capacity constraints. The board then must make strategic decisions to
manage the shortfall. However, if the forecasting team reports what the
board wants to hear, they are simply hiding the truth. Exhibit 3.5 shows
what happens if the team reports what the board wants. Only in the final
quarter does the real situation become clear, a year-end performance
below expectations. In this example, the annual plan, which was
prepared in March for the new year that starts in July, is forced to match
the stretch target and subsequent forecasts in June, September and
December to keep up this charade. In reality, the truth was always a
shortfall, as the dark line in Exhibit 3.1 illustrates.
Exhibit 3.1: Hiding the performance gap
The fudged forecast
Mr Forecasting : "I have just updated the forecasts : the
forecast EBIT this month is $1.2m"
CEO: "Our budget shows EBIT of $2.0m: go away and review
the forecasts but make sure they show an EBIT of at least
$2m".
Mr Forecasting: " But when we did the budget we didn't
realise that we would have production problems and that the
domestic markets would suffer so much from the economic
downturn"
CEO: "Don't argue with me: review these forecasts as
instructed.... or else"
The end result might be that the forecast gets "fudged" to say
$1.5m or $1.6m.
0
50
100
150
200
Mar X
X
Jun X
X
Sep X
X
Dec X
X
Mar X
X
$ms Performance Gap for Year Ending 30/6XX
Annual plan target
Annual plan reforecast
The truth
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3.4. A quarterly process using the wisdom of the crowd
A planning tool model should be designed with a view to involving
budget holders in updates four times a year. The goal is for them to buy
into the targets that they will report against and accept the new funding
level. Monthly forecasting is too costly and the benefits not worth the
effort. There will be too many oscillations in the forecast as shown in
Exhibit 3.2.
To achieve a bottom-up process, all budget holders should be able to
enter their data. Training and adequate support from forecasters is
needed and you should have sufficient licenses to enable budget holders
to enter data during the 2-3 day window for data entry.
In addition, I recommend extending the help offered by in-house
advisors to include some outside contractors who can support more
remote locations, or offer them remote virtual one-on-one training with
virtual meeting technologies.
Exhibit 3.2: quarterly re-forecasting
Many forecasts have little input and no buy-in from the budget holders.
Companies have, in order to save money, centralized data input within
the finance function. I call these forecasts “a top-top forecast,” whereby
the finance team talks amongst themselves and with senior
management but believes they do not have time to involve budget
holders. Such a centralized approach can slow down the forecasting
process, limits the budget holders’ buy-in to the planning tool and does
not take advantage of collective knowledge.
James Surowiecki wrote that “a large group of people are often smarter
than the smartest people in them.” Hence the term “wisdom of the
crowd was born”ii. In other words, a group’s aggregated answers to
questions that involve quantity estimation have generally been found to
be as good as, and often better than, the answer given by any of the
individuals in the group. Involving a “crowd” in planning and forecasting
can have a major positive impact on the process because:
Reforecasts of June year-end result
0
150
300
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
$ms
Monthly reforecast quarterly forecasts
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� A great deal of trend information is being noted by those at the
workplace, such as unsold products that are piling up, products that
are being returned and customer comments.
� Groups are less motivated to forecast what management wants to
see.
� A small group of forecasters can only process a tiny fraction of the
information available whereas a crowd can take in an almost
unlimited “harvest of data.”
� Experts tend to have a bias of optimism, especially if they are
looking at sales from inside the company rather than from the
customer perspective. A very interesting paper has been written
about this called “Delusions of Success—How Optimism Undermines
Executives’ Decisions.”iii
3.5. Forecast beyond year-end (e.g., six quarters ahead)
Typically corporate accountants have reforecast only to year-end. Two
months before year-end management appear to ignore the oncoming
year. A foundation stone of a QRF process is forecasting for a rolling
period that passes through the year-end barrier. There are various
options as to how far forward you go, these include:
� Forecasts always two years ahead –this is particularly relevant
where the business is very seasonal and much activity happens in
the last quarter
� Forecast six quarters ahead
� Variations such as four or five quarters ahead
I advocate the six quarter ahead (18-month) rolling forecast regime, as
it has some substantial benefits that include:
� you see the full next year half way through the current year, e.g. the
third quarter forecast can set the goal posts for next year’s annual
plan
� the QRF is consistent each time it is performed, as opposed to
organisations who always look ahead for two financial years (the
QRFs will vary between 15 to 24 months)
� your annual plan is never set from a cold start as you have seen the
whole financial year in the previous quarter’s reforecast.
3.6. Monthly targets set, a quarter ahead, by the QRF
I use a sporting analogy to explain the folly of the monthly budget,
Exhibit 3.3. The annual plan is the establishment of goal posts at the
end of the pitch, the budget process is where we set 12 X 10 metre lines
to report against, see diagram. The problem is that the 10 metre lines
(the monthly budgets) are wrong as soon as the year has started. When
there is stoppage, a player fanning injury on cue, management come on
the pitch and ask “Why are you here you should have been over there?”
The reply from the team is “The ball is over here” and this report back
on progress is of the same use as our monthly variance commentary, in
other words useless.
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4. The features of quarterly rolling forecasting
There are a number of better practices in quarterly rolling forecasting (QRF) and
these are set out below.
4.1. Recognise that it involves all Budget holders
A quarterly rolling planning process needs to involve all budget holders (BHs)
entering in their numbers directly into the planning tool application. To achieve
BH participation in the model there will need to be a roll out of training in the
application and attendance will need to be made compulsory by the CEO.
In addition some budget holders will need support every quarter to enter in their
forecast. This assistance needs to be achieved without extending the tight
deadline. To achieve this please read the later section on “expanding the
support team”.
Most forecasting models, built in excel, tend to have restricted consultation with
BHs as they have been built by an Excel guru who may well have had a skewed
view of the business operations.
4.2. Accurate revenue forecasting
With over 200 products and 2,000 customers how do you reasonably obtain an
accurate sales forecast? The answer lies by:
• applying Pareto’s 80/20 rule to the sales forecasting process.
• using the wisdom of the crowd
• decoupling sales performance payments from fixed annual performance
targets
• remembering to tell the Board what sales are likely to be made rather than
what they want to hear
Applying Pareto’s 80/20 rule to the sales forecasting process
Sales need to be forecast by major customer and major products. The rest of
the customers and rest of the products should be put into meaningful groups and
modelled based on the historic relationship to the major customers buying
patterns. See Exhibit 4.1 for a suggested format.
Many organisations liaise with customers to get demand forecasts only to find
them as error prone as the ones done in-house. The reason is that you have
asked the wrong people.
One participant told me that they decided to contact their major
customers to help with demand forecasting. Naturally, they were
holding discussions with the major customers’ HQ staff. On reflection
they found it better but still error prone so they went back “How come
these forecasts you supplied are so error prone”. “If you want
accurate numbers you needed to speak to the procurement managers
for our projects” was the reply. “Can we speak to them?” “Of course,
here are the contact details of the people you need to meet around
the country” With that a series of meetings were held around the
country. They found that these managers could provide very accurate
information and were even prepared to provide it in an electronic
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friendly format. The sales forecast accuracy increased seven fold due
to focusing on getting the demand right for the main customers.
It is always best to approximate the size of the forest rather than count the trees
and recant the analogy of counting the trees, see previous section, to the
forecasting team to ensure you stay in the “helicopter” for the revenue forecast.
Major lessons learnt include:
Major customers You can forecast revenue more accurately by delving
into your main customers’ future demand patterns by
asking them “who should we speak to in order to get
a better understanding of your likely demand for our
products in the next 3 months and subsequent five
quarters.” Forecast the major products line-by-line. You would not identify a product if the revenue was
less than 5% of total sales in the year. Using
analytics then forecast the minor product purchases
in relevant groupings.
The other customers Forecast all non major customers by first looking at
their demand for the major products using analytics
to forecast their demand. As with major customers
use analytics to forecast the minor product purchases
in relevant groupings.
Products with recall risk Identify in the forecast all products with a significant
recall risk so you can quickly identify these and the
impact should a recall occur.
Branches Important to forecast through the major customers
to the organisation. One branch may be assigned the
responsibility to link to the customer and complete
the forecast for all relevant branches.
See Exhibit 4.1 for a suggested format for forecasting sales by major customer
and major products.
Using the wisdom of the crowd
The theory of “the wisdom of the crowd”, as discussed in the previous foundation
stones section, was tested by Best Buy, a leading US consumer electronics
retailer with these results:
� Gift card business revenue forecasts made by experts were 95 percent
accurate and the wisdom the crowd revenue forecasts were 99.5 percent
accurate.
� Holiday season sales revenue forecasts made by experts were 93 percent
accurate and the crowd’s revenue forecasts were 99.9% accurate.
As a result, at Best Buy the forecasts are now prepared by asking selected
“sages” in the business to provide an anonymous forecast directly into a system.
They are provided with some basic trend information with the incentive of the
recognition and a prize if their forecast is the nearest to the actual figure.x
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Exhibit 4.1 Suggested Sales Forecast Model
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In another example, an internet gambling organization had picked the winner in
each one of the US Senate elections. The favourite in each state was a direct
reflection of all the bets placed and a perfect representation of collective wisdom
of the crowd.
Convincing experts to adopt collective wisdom
Resistance from “experts” is likely when you suggest using the wisdom of
the crowd in place of their forecast. To convince them, you can take a page
from Best Buy’s book. Suggest two forecasts: theirs and one by selected
sages from around your business. Ask the sages, to forecast sales for the
whole organization based on what they are seeing in their areas. You can
tell them, “We have prepared some historic data for you and limited the
forecast to some key lines and the rest is summarized in groups. Please
place your forecast in the system. If your forecast turns out to be the most
accurate you will win a weekend for two at xxx resort.”
Each quarter, you then disclose the experts’ forecast versus actual and the
wisdom of the crowd versus actual. I predict that the experts will want to
duck for cover after a couple of forecasts highlight their inaccuracies. They
will ask, even plead, “Please put our forecast in with the wisdom of the
crowd.”
The wisdom of the crowd has implications on the design of the planning tool. You
can expect to accommodate possibly 20 versions of the revenue forecast and
then average them. This, however, should not be a problem because you are not
forecasting revenue by each line and by each branch.
Decoupling sales performance payments from fixed annual performance targets
To pay sales staff on a predetermined annual sales target has been broken since
commerce began. It is flawed logic and will only work when you can see into the
future and get it right. I would suggest that if this was so you would already be
retired in a tax haven with a super yacht and crew awaiting you next excursion.
It is far better to:
� design a relative measures process where sales staff are compared against
their peers with similar sized sales patches (have different league tables)
� compare regularly to your competitor’s performance so any loss in market
share is seen as inferior performance regardless as to whether sales are
higher than last year ( you will need to use test proxies for this )
� provide regular feedback to sales staff as to their progress, just like the
high jumper who knows how far off they are from leading the high jump
competition.
� skim off super profits as these will be needed in future years to pay
commissions and were not earned anyway as the phone just kept on
ringing. Visit my website.for a performance related pay paper.
If we do not decouple sales performance payments from fixed annual
performance targets you will have a fair degree of politics at play during and
after the annual planning process. You will have:
� endless arguments about how high to set the bar
� once set it is best for the sales team to keep on saying they can make it
rather than attract unnecessary heat for the executive
� month-end revenue figures will be manipulated as next month’s revenue is
pilfered to meet this month’s target
Tell the Board what sales are likely to be made rather than what they want to
hear
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This foundation stone needs to be put in place in order to avoid inflated sales
forecasts. There is nothing wrong in having a big hairy audacious goal, doubling
revenue in the next three years, provided forecasts are not forced to make it
look like it is a reality.
4.3. Bolt down your strategy beforehand
Leading organisations always have a strategic workshop out of town for the
senior management team and their direct reports. The session is to look
forward. Normally Board members will be involved as their strategic vision is a
valuable asset. These retreats are run by an experienced external facilitator.
The key strategic assumptions are thus set before the annual planning round
starts, also the Board can set out what they are expecting to see.
4.4. As much pre-work is done as possible by the forecasting team
There is much pre-work that can be performed to reduce the effort in the five
day window. I have prepared a checklist in Appendix four. Here is an extract of
some of the work to be performed:
� Automate any additional expense categories you can e.g. where trend
analysis is as good or better than a budget holder’s estimate
� Complete payroll details and pre-populated all budget holders schedules
� Obtain up to date demand forecasts from key customers where possible
� Organise additional support to the forecasting team so that one-to one
support can be provided to all BHs (using local accounting firms - their
staff would have to attend the workshop)
� Establish schedule of who is to provide who with one-to-one support
during the forecast.
4.5. Hold a briefing workshop instead of issuing instructions
Never, I mean never, issue budget instructions for you already know instructions
are never read. Follow the lesson of a leading accounting team who always hold
a briefing workshop that is compulsory to attend. With technology today you can
also hold the workshop simultaneously as a webcast so budget holders in remote
locations can attend albeit electronically.
Hold a workshop on budget preparation covering the way to completely use the
planning tool, explaining why they do not need to forecast monthly numbers,
only quarterly, the 3 day window to use the planning tool, the daily update to the
CEO, the fact that late returns will be career limiting, stressing that the more
material categories should have much more detail and why you have automated
some of the categories, the help they will receive etc.
4.6. Expand your forecasting help team
Many budget holders will need one-to-one support. Yet I have said we are to do
this all in three working days. We thus need to expand the support team. There
are some suggestions:
� get all qualified accountants involved, even those not working in the finance
team e.g. this involves the CFO too
� ask the auditors to loan some audit seniors who will forever thank you for
being involved in an interesting task
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� A planning tool independent from the general ledger provider might be a cheaper
and better option.
9.2. Step 7: Test planning tool applications & close the deal
After you have reduced the number of planning tool providers to the best three
applications, request from the providers that they demonstrate how their application
can operate with your organization’s key drivers. Agree to pay 2-3 days of
consultancy fees to each provider and evaluate results. Paying the fees enables you to
retain copies of the work. In reality, the providers will be putting in much more than
2-3 days of effort.
Getting the selection panel to see the presentations
Nothing is more frustrating to a planning tool provider, who has worked hard on the
proposal, than not to be given the courtesy of a fair hearing. Frequently, in proposal
situations, one party is on the inside track, usually someone who might have already
completed an assignment for the client. However, you should listen to the other
proposals for the following reasons:
� You can gain insight into how the model can work.
� A particular planning tool might not have a good local support provider, and this
should be counted against them.
� If the presentation is very complex, you might be dealing with a bunch of “rocket
scientists,” as I call them, who see complexity in everything. This view is the last
thing you need with a planning tool application.
� The ability of the planning tool provider to understand the foundation stones of
the desired planning system is a key criterion.
Making the final selection
Everyone has their own ways of making the final selection and hence I leave this in
your capable hands. To assist you, I have set out in Appendix five a checklist you can
use when evaluating the short-listed planning tool providers.
In the Balance case study they undertook the following tasks
• Having selected developers complete the blueprint with their solution
• Gain demonstration of solution
• Negotiate the pricing terms
• Close deal subject to Board approval
• Gain Board approval for capital spend supported by comprehensive business case
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10. Implementing quarterly rolling forecasting in a planning tool
Whilst all implementations will be unique they should have many common features just like a fingerprint. This section
provides the reader with some useful templates.
This implementation plan, see Exhibit 10.1, should help those about to start an implementation. One key feature is the
time-frame. A rolling forecast implementation is I believe a five to six month process if you do not own an appropriate
planning tool.
Exhibit 10.1: the proposed steps to implement rolling forecasting in a planning tool
Note: timings for an organisation over 500 FTE
The QRF implementation checklist, see Appendix three, is an evolving tool, and should be a useful checklist helping
ensure that while you are juggling the balls you do not drop the ones that matter.
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8
Project 1/2 months pre 1st 2nd 1st 2nd 1st 2nd 1st 2nd 1st 2nd 1st 2nd 1st 2nd 1st 2nd
8 Training of in-house designated experts on the new application
9 Build new model using in-house teams with external advice
10 Pilot planning tool on two business units
11 Roadshow of new rolling forecast process
12 Roll out training of PT (using in-house experts)
13 Complete QA processes on the forecasting model in the PT
14 Commence first quarterly rolling plan run
15 Review process and ascertain lessons learnt
Build and
test model
Rollout
use
Sell concept, build in-house
team, planning tool
acquisition
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11. Build and test the model
Having bought a planning tool it is now time to build the model based on the
blueprint. The testing will be comprehensive on three business units. The three
tasks are set out in Exhibit 11.1 below.
Exhibit 11.1: the proposed steps to implement rolling forecasting in a planning
tool
11.1. Step 8: Training of in-house designated experts
Select at least four in-house staff to become experts on the forecasting system
(do not forget the CFO). Over time you will find these staff will be head hunted
so always maintain this level of in-house competence. Not only will this save you
money in the long run you will have the system you need.
Many programmers working for application providers are not familiar with
quarterly rolling planning. They will build you a better annual planning tool,
which is not what you will need.
In the Balance case study they undertook the following tasks
• Ensure dedicated business resource appointed to team
• Conduct initial training to ensure familiarization with solution toolset
• Ensure business project manager appointed and developer appoints a
project manager
11.2. Step 9: Build the model based on the blueprint
Build the model using the foundation stones and features discussed in earlier
sections. The team should be knowledgeable in the lean (agile) techniques
including:
• Post-it re-engineering
• Scrum meetings
• Kanban boards
11.3. Post-it reengineering a forecasting process
This can be a complex and expensive task or a relatively easy one, the choice is
yours. Many organisations start off by bringing in consultants to process map the
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8
Project 1/2 months pre 1st 2nd 1st 2nd 1st 2nd 1st 2nd 1st 2nd 1st 2nd 1st 2nd 1st 2nd
8 Training of in-house designated experts on the new application
9 Build new model based on the blueprint
10 Pilot planning tool on three business units
11 Roadshow of new rolling forecast process
12 Roll out training of planning tool using in-house experts
13 Complete QA processes on the forecasting model in the PT
14 Commence first quarterly rolling plan run
15 Review process and ascertain lessons learnt
Build and
test model
Sell concept, build in-house
team, planning tool
acquisition
Rollout
use
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existing procedures. This is a futile exercise as why spend a lot of money
documenting a process you are about to radically alter and when it is done only
the consultants will understand the resulting data-flow diagrams!
The answer is to “Post-it” re-engineer your month-end procedures in a workshop;
see Exhibit 11.2 below for an outline of the workshop in Appendix 7. This
workshop is also provided electronically to you.
Exhibit 11.2: Agenda for a Post-it re-engineering workshop
Re-engineering forecasting and planning
Agenda for workshop
Date and Time: ____________
Location:
Location: xxxxxxxxxxxx
Date and Time: xxxxxx
Suggested attendees: Budget committee, selection of business unit heads,
all management accountants, and a selection of budget holders involved in
forecasting.
Attendees after this workshop will be able to:
• discuss and explain to management why Xxxxxxx should adopt QRP
• use better practices to streamline current forecasting bottlenecks
• describe better practice forecasting and planning routines
• recall all agreements made at the workshop (these will be documented)
Pre work: Teams to document forecasting procedures on post-it stickers.
One procedure per post-it. Each team to have a different colour post-it.
See attached “post-it re-engineering instructions
Some tips on running a ‘post-it’ re-engineering session
Stage 1 Invitation
Having set the date, get the CEO on board and ask them to send out the invites.
The finance team needs to send out instructions, a week or so prior to the
workshop, outlining how each team is to prepare their post-it stickers, see Exhibit
11.3.
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Exhibit 11.3: Post-it re-engineering instructions to be sent out to attendees a
week prior to the workshop
You have been asked to attend a workshop on re-engineering the forecasting
processes. In order to do this we need you to prepare a list of all the processes
you undertake as a team.
This process is quite simple, all it requires is:
� Each team to list all their processes on to the “Post-it” stickers allocated to
them prior to the workshop and document each process with a whiteboard
marker pen as set out in the example below. It is important that these
stickers can be read from 4 to 5 metres.
Day-5
Finalise Sales Forecast
� One procedure/process per Post-it (please note, every Excel is a process)
� State when it is done—time scale is week 1 commence planning, week 13 or
so finalise plan.
Set up a schedule to ensure all the main teams have a unique colour of post-it
sticker, see Exhibit 11.4.
Exhibit 11.4: Allocation of post-it stickers so every team has a unique colour
Budget holders Yellow
Payroll Green
Budgeting & Forecasting team in Finance Red
Sales Forecast Purple
Budget Committee Blue
G/L & Reporting team in Finance Light yellow
CAPEX Pink
Production team etc
Board etc
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Stage 2 Standing up around the whiteboard
Assemble everyone to go through the agenda items starting off with a
introduction to best practice. When you get to the stage in the agenda for the
Post-it re-engineering you ask a representative of each team to place the “Post-
its” in time order under column headings Day - 2, Day - 1, Day+1, Day+2, and
so forth using a white board. When all the post-its are on the board it will look
like Exhibit 11.5.
Then remove all desks, near the whiteboard, and ask all the staff present to
come to the whiteboard, standing in semi circles, hopefully with the “height
challenged” staff at the front. The standing-up is critical as it brings everybody in
sight of the stickers and, more importantly, as the meeting progresses ensures
swifter and swifter agreement as nobody will enjoy standing for over 2 hours.
Exhibit 11.5: Post-it re-engineering on a white board
Stage 3 Missing processes
Then you ask “What is still missing from the list?” There will always be a
forgotten process. I probe until at least two additional processes are put on the
board and I ask each person in turn to acknowledge that they are in agreement
that the whiteboard represents all the processes.
Stage 4 Removal of duplication
I then ask “What processes have two stickers when there should only be one?”
(we want to remove any duplication). These stickers are removed, see Exhibit
11.6.
Stage 5 Abandonment
We then ask “What processes do we not need to do anymore and therefore
should abandon?” There is often a pause here as staff look bewildered. Why
would we do something that was not required they all are thinking. At this stage
I talk about Peter Drucker, the great management thinker’s abandonment
philosophy, discussed in section one of this paper.
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Exhibit 11.6: Abandoning processes by removing the “post-it” stickers
I recommend that you buy a dozen movie vouchers before the workshop so you
can give one to every attendee who points out a process that can be removed as
it is not necessary (the process was done because it was done last month)—each
procedure that is removed is like finding gold because it means less work, fewer
steps. After the first movie ticket handout you will notice a greater focus from
the attendees!
I will spend up to two hours to ensure all the superfluous processes are removed.
Stage 6 Rescheduling activities
Reorganize the key processes and bottlenecks based on better practice (e.g., the
foundation stones and features of QRF) and now reschedule tasks that can be
done earlier. You will find it hard to justify an annual planning process longer
than two weeks.
With each rescheduling of a process it is important to seek consensus. Invariably
some members of the team will believe the world will end if the cut-off is moved
earlier. I simply question the logic and allow a dissenting group to have their
objections noted. I then move the sticker to where the majority have agreed,
see Exhibit 11.7.
After 45 minutes of standing these disagreements will recede due to peer
pressure.
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Exhibit 11.7: Moving the bottlenecks to the earliest time they can be completed
Stage 7 Spreading the load
Look at Week-1 steps as you may have too many. Move the non time critical
ones between Week-2 and Week+1 to better spread the workload.
Document the “post-it” stickers on a spreadsheet. This is the only record you
need. Any person, who for health reasons, cannot stand, can be assigned this
documentation process.
You will find it hard to justify a rolling forecast taking longer than any day +5!
You can review a YouTube video of me demonstrating a ‘post-it re-
engineering exercise on www.quickmonthendreporting.com.
11.4. An introduction to SCRUM
This is a technique that was developed to radically reduce the time it took to
write new software applications. It recognized that teams in very intense work
periods do not always function properly.
Scrum (an Agile technique) – started off as a rethink of project management by
Jeff Sutherland, a fighter pilot in Vietnam. He saw that combat fighter planes
and big projects had a lot in common. They had to avoid being shot down. He
noticed that large projects were:
� typically late with lots of pressure and no fun
� run even later as more resources were applied to help speed them up.
Typically the new staff were “tripping over each other” and having long
dysfunctional meetings, going nowhere quickly
� frequented with duplication of effort
� often over planned only to find the “game had changed”
� constantly hitting a road block which the team members frequently were
unable to surmount as they did not have the skills or internal respect
within the organisation.
Sutherland had a challenge to produce a new product in six months. He
discovered:
� a 1986 HBR study "The New Product Development Game" by Hirotaka
Takeuchi and Ikujiro Nonaka that noted best teams looked like sports
teams, all linked together, overcoming obstacles with intensity
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� discovered a company called Borland who thrived on - communication
saturation - a daily meeting
� developed SCRUM and was successful.
The features of SCRUM are best illustrated in Exhibit 11.8
Exhibit 11.8: How SCRUM works
Instead of over planning one needs to have a clear vision of what you are after.
With this shared vision you take a small chunk of work, saying, ”If we deliver this
feature we will progress the project. We thus do not need a massive project
schedule befitting an Apollo space programme”.
The key is that this chunk is about two weeks of effort and is an isolated
standalone part of the project that can be signed off by the customer as “yes that
is what I want”. This chunk is called a sprint.
Each day the team’s members delivering the sprint meet in a stand-up meeting.
They are asked to talk about:
� What they did yesterday?
� What are they doing today?
� What are your road blocks which are barriers to progress?
Their debrief is to take no more than a minute or so and some teams even have
a dumb bell to be held out with the rule you can only talk as long as you can hold
it up. The team leader, renamed the “scrum master” notes all the road blocks
and immediately sets about removing them with an appropriate phone call or
walkabout “Pat, please will you make time this morning to see my corporate
accountant?. I understand Sam has being trying, for the last few days, to meet
you. This is now holding up the year-end and the CEO and auditors will soon be
on mine and your back shortly if we cannot resolve the issue today”.
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At the end of the session the group end the session touching fists, a homage to
the source of this technique.
This scrum does many things, it replaces loads of emails, as the team members
get to know what has been done and going to be done and by whom. It makes
everyone accountable. There is no place for a cruiser.
Visit Jeff Sutherland’s YouTube presentation to understand more details. The
following presentations will help you to understand more about this great
technique.
11.5. Kanban Board
Here we need to adopt visual control techniques which are part of the lean or
agile movement.
Creating a kanban board to visually manage an implementation is a great way to
increase your overall effectiveness and efficiency. Kanban is also a great way to
instil a sense of accomplishment among a team. Let's take a look at why this is.
A kanban board is a visual process and project management tool that helps
teams organize and manage their work. Kanban boards allow teams to visualize
their work and understand what is going on at a glance. Using note cards or
sticky notes to represent work items, you can show any sized body of work such
as a project (involving numerous tasks) or a task (usually involving only one
person). Different colours are for different staff, or work groups. Lanes can be
used to represent backlog, doing, or done as shown in Exhibit 11.9.
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Exhibit 11.9: Kanban board used to help staff manage daily workflow
Kanban boards visually show the work in progress. This way, everyone is kept in
the loop. It is particularly powerful when staff hold daily SCRUM meetings which
are stand–up 15 minute meetings first thing each morning.
Kanban boards work well for any type of work. It's so flexible that you can start
with whatever process you already have.
The Kanban method uses a pull system. Instead of trying to do 10 things at once,
manage your personal tasks by "pulling" in new work only when you are done
with the current work.
Kanban boards show a team's accomplishments. Have you ever had a hard time
explaining to your boss what you're working on because you have so many things
on your "to-do" list that you don't know where to begin? By showing him your
Kanban, he will instantly see all of your work and understand your workflow.
11.6. Step 10: Pilot planning application on three business units
Pilot the planning application on three business units (BUs) as advised by Peter
Drucker. Drucker pointed out one pilot will never be enough as all the employees
will point out that the pilot was not representative. Two is better but why not
three. The greatest management thinker of all time is seldom wrong.
These need to be carefully selected. You want BUs who have a good relationship
with the team, the BU leader is on the focus group committee and is therefore
supportive of the project, and a BU who has used technology well in the past.
It is important to fine tune the PT based on this run before the rollout to all other
business units.
In the Balance case study they undertook the following tasks
• Carefully select pilot business units – they must be supportive to the
solution and have had been involved in the scoping phase
• Change management has a significant role in this phase – communications
and business solution
• Use business developer to support pilot not external developer
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12. Rollout use
Having built the model based on the blueprint and thoroughly tested it in three
business units it is now time for the rollout. The five tasks in the rollout are set
out in Exhibit 12.1 below.
Exhibit 12.1: the proposed steps to implement rolling forecasting in a planning
tool
12.1. Step 11: Road show of new rolling forecast process
The PT team will prepare a road show presentation with the help of a PR expert
and then test the presentation in front of the PR expert and some of the focus
group members. The road show will be delivered by members of the SMT
supported by the project team. For larger organisations there may be two or
three travelling road shows travelling at the same time.
After the road show there will be a workshop so that budget holders learn how to
calculate costs at category levels instead of at account code level. The areas
where detail is required will be explained e.g. personnel costs, revenue by key
customers etc.
It is important that you test all the workshop exercises so they create the
anticipated learning experience with the budget holders.
As the road shows are presented make improvements based on feedback forms
which have been given out at each presentation. Ensure you are making
significant changes rather than simply minor ones. Avoid the temptation to make
cosmetic changes as the audience will not benefit from these and it will require
expensive reprinting of handout material.
It is important to explain that budget holders are to give realistic forecasts rather
than what they think management wants to hear.
In the Balance case study they undertook the following tasks
• No surprises – communications in advance emphasizing the why as well as
to the what
• Outline the long term requirements of forecasting emphasizing the benefits
to the users and to the business
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8
Project 1/2 months pre 1st 2nd 1st 2nd 1st 2nd 1st 2nd 1st 2nd 1st 2nd 1st 2nd 1st 2nd
8 Training of in-house designated experts on the new application
9 Build new model based on the blueprint
10 Pilot planning tool on three business units
11 Roadshow of new rolling forecast process
12 Roll out training of planning tool using in-house experts
13 Complete QA processes on the forecasting model in the PT
14 Commence first quarterly rolling plan run
15 Review process and ascertain lessons learnt
Build and
test model
Sell concept, build in-house
team, planning tool
acquisition
Rollout
use
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Appendix six: Delivering bulletproof PowerPoint presentations
This is a skill you need to adopt before you can be an effective manager. So it is best to
start now. I will assume that you have attended a presentation skills course, a
prerequisite to bulletproof PowerPoint presentations. The speed of delivery, voice levels,
using silence, and getting the audience to participate are all techniques that you need to
be familiar with and comfortable using.
There are at least 25 rules for a good PowerPoint presentation:
Prepare a paper to
go with the
presentation
� Always prepare a paper for the audience covering
detailed numbers and so forth so that you do not
have to show detail in the slides.
� Understand that the PowerPoint slide is not meant
to be a document; if you have more than 35 words
per slide, you are creating a report, not a
presentation. Each point should be relatively
cryptic and be understood only by those who have
attended your presentation.
Presentation planning � Last-minute slide presentations are a career-
limiting activity. You would not hang your dirty
washing in front of a hundred people, so why
would you want to show your audience sloppy
slides? Only say “yes” to a presentation if you have
the time, resources, and enthusiasm to do the job
properly.
� Create time so that you can be in a “thinking
space” (e.g., work at home, go to the library, etc.).
� Map the subject area out in a mind map and then
do a mind dump on Post-It stickers covering all the
points, diagrams, pictures you want to cover.
Have one sticker for each point. Then you place
your stickers where they fit best. Using stickers
makes it easy to re-organize them. This will lead
to a better presentation.
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� Presentation
content
� At least 10 to 20% of your slides should be high-
quality photographs, some of which will not even
require a caption.
� A picture can replace many words; to understand
this point you need to read Presentation Zen:
Simple Ideas on Presentation Design and Delivery
by Garr Reynolds,xiv and Slide:ology: The Art and
Science of Creating Great Presentations by Nancy
Duarte. xv
� Understand what is considered good use of colour,
photographs, and the “rule of thirds.”
� For key points, do not go less than 30-pt-size font.
As Nancy Duarte says, “Look at the slides in the
slide sorter view at 66% size. If you can read it on
your computer, it is a good chance your audience
can read it on the screen.”
� Limit animation; it is far better that the audience is
able to read all the points on the slide quickly
rather than holding them back.
� Use Guy Kawasaki’s “10/20/30 rule.” A sales-pitch
PowerPoint presentation should have ten slides,
last no more than 20 minutes, and contain no font
smaller than 30 pt.
� Be aware of being too cute and clever with your
slides. The move to creating a lot of whitespace is
all very well, provided your labels on the diagram
do not have to be very small.
� Never show numbers to a decimal place nor to the
dollar if the number is greater than 10,000. If sales
are $9,668,943.22, surely it is better to say,
“approx. $10 million” or “$9.6 million.” The precise
number can be in the written document if it is
deemed worthwhile.
� Never use clipart; it sends shivers down the spine
of the audience and you may lose them before you
have a chance to present.
� Use technology � Where possible, if you are going to present on a
regular basis, make sure you have a Tablet PC,
which gives you the ability to draw when you are
making points. This makes the presentation more
interesting, no matter how bad you are at drawing.
� Have a simple remote mouse so that you can move
the slides along independently of your computer.
� Practise, practise,
practise
� Practice your delivery. The shorter the
presentation, the more you need to practice. For
my father’s eulogy, I must have read it through 20
to 30 times. Each time breaking down at a different
point, I even had my brother as a backup in case I
was unable to deliver it. He sat in fear throughout
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the whole service. However, on the day, all the
practice paid off and I was able to deliver a worthy
eulogy—one that has been commented on by many
as the best they had ever heard. The point I am
making is that the best speech I have ever
delivered is the one I prepared the most for.
� Presentation itself � Bring theatrics into your presentation. Be active as
a presenter, walking up the aisle so that those in
the back see you close up, vary your voice, get
down on one knee to emphasize an important
point; have a bit of fun and your audience will, too.
Very few things are unacceptable as a presenter.
� Always tell stories to relate to the audience,
bringing in humour that is relevant to them. A
good presenter should be able to find plenty of
humour in the subject without having to resort to
telling jokes. No doubt, some of the audience have
heard the jokes and would rather hear them from a
professional comedian.
� Make sure your opening words grab the audience’s
attention.
� Understand Stephen Few’s work on dashboard
design if you are using graphs.
� Always remember the audience does not know the
whole content of your speech, particularly if you
keep the details off the slides; if you do leave some
point out, don’t worry about it—they don’t know or
would not realize the error.
� If there has been some issue relating to
transportation, technology, and so forth that has
delayed the start, avoid starting off with an
apology. You can refer to this later on. Your first
five minutes is the most important for the whole
presentation and must therefore be strictly on the
topic matter.
� Greet as many members of the audience as you
can before the presentation, as it will help calm
your nerves, and it will also give you the
opportunity to clarify their knowledge and ask for
their participation such as at question time. The
other benefit is that it confirms that nobody in the
audience would rather be doing your role, so why
should you be nervous?
� If you are delivering a workshop at the end shake
hands with as many of the audience as possible by
positioning yourself by the door when the audience
leaves. This develops further rapport between
presenter and audience.
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Appendix seven: The one-day focus group workshop
Location: xxxxxxxxxxxx
Date and Time: xxxxxx
Suggested attendees: Budget committee, selection of business unit heads, all
management accountants, and a selection of budget holders involved in forecasting.
Attendees after this workshop will be able to:
• discuss and explain to management why Xxxxxxx should adopt QRP
• use better practices to streamline current forecasting bottlenecks
• describe better practice forecasting and planning routines
• recall all agreements made at the workshop (these will be documented)
Pre work: Teams to document forecasting procedures on post-it stickers. One
procedure per post-it. Each team to have a different colour post-it. See attached
“post-it re-engineering instructions
Requirements: event secretary, lap tops x2, data show, white boards x2
8.30 am Welcome by CFO, a summary of progress to date at Xxxxxxx,
an outline of the issues and establishing the outcome for the
workshop.
8.40 Setting the scene - why clever organizations are not involved in
the annual planning cycle—a review of better practices among
public and private sector organizations. Topics covered include:
• Why annual planning is flawed and the rise of the Beyond
Budgeting movement
• Foundation stones of quarterly rolling forecasting and planning
• Benefits of QRP to the Board, SMT, finance team, and budget
holders
• Better practice stories
• Current performance gap between Xxxxxxx and better practice
• Some of the building blocks are already in place at Xxxxxxx
• Some better practice features within Xxxxxxx’s forecasting
process
• How the annual plan drops out of the bottom-up quarterly
rolling forecasting regime
• Impact of assigning funds on a quarter-by-quarter basis
• Impact on monthly reporting
• How each subsequent forecast works
• Involvement of SMT in a forecasting process
9.40 Workshop 1: Analyzing the current pitfalls of Xxxxxxx’s
forecasting. Separate teams look at the key pitfalls and how
they can be overcome.
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10.15 Morning break.
10.30 Workshop 2: Mechanics of a rolling forecasting. Workshop
where separate teams look at the key components:
• Who should be involved in a bottom-up forecasting process
• Potential pitfalls
• Reporting needs
• When can it be implemented
• Training requirements
• What cost categories should be forecast (higher than G/L
account code)
• Project structure
11.00 Workshop 2: Workshop on “post-it” re-engineering of
the Annual Planning process. During the workshop we
analyze the bottlenecks of the forecasting process. In this
workshop we use “post-its” to schedule the steps (e.g., yellow-
budget holder activities, red-forecasting team activities, blue-
Budget Committee activities during the forecast).
12.15 Lunch at venue.
12.45 Feedback from work groups on both workshops and action plan
agreed (document deadline date and who is responsible).
Individuals will be encouraged to take responsibility for
implementing the steps.
1.15 The team prepares a short presentation of the key steps they
are committed to making.
2.00 The team presents reports to an invited audience on what
changes they would like to implement and when. They can also
raise any issues they still have.
Suggested audience: all those who attended the setting
the scene morning session
2.30 Wrap up of workshop
i Jeremy Hope and Robin Fraser, Beyond Budgeting: How Managers Can Break Free from
the Annual Performance Trap Harvard Business Press, 2003
ii Surowiecki, James. The Wisdom of the Crowds. Anchor, 2005.
iii Lovallo, Dan and Kahneman, Daniel “Delusions of Success –How Optimism Undermines
Executives’ Decisions” Harvard Business Review, July 2003
iv Jeremy Hope Reinventing the CFO: How Financial Managers Can Transform Their Roles
and Add Greater Value, Harvard Business School Press, 2006
v David Magee “How Toyota Became #1 – Leadership Lessons From The World’s Greatest
Car Company” Penguin Group 2007
vi Jeremy Hope Reinventing the CFO: How Financial Managers Can Transform Their Roles
and Add Greater Value, Harvard Business School Press, 2006
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vii Jeremy Hope Reinventing the CFO: How Financial Managers Can Transform Their Roles
and Add Greater Value, Harvard Business School Press, 2006
viii Rickard Warnelid, “Reducing the Risk in Excel Risk Modelling,” CompAct, January 2011
ix Parmenter, David “Quick month-end reporting, by day three or less” White paper,
www.DavidParmenter.com, 2014 x Michael J. Mauboussin, Think Twice: Harnessing the Power of Counter intuition. Harvard
Business Review Press, 2012
xi David Parmenter. How to implement a forecasting and planning tool– and get it right
first time , Whitepaper, www.davidparmenter.com, 2014 xii John Kotter Leading Change, Harvard Business Review Press; 2012
xiii Hamel, Gary, with Bill Breen, “The Future of Management” Harvard Business Press,
2007 xiv Garr Reynolds, Presentation Zen: Simple Ideas on Presentation Design and Delivery,
New Riders, 2008. xv Nancy Duarte, Slide:ology: The Art and Science of Creating Great Presentations,
O’Riley, 2008.