And, unsurprisingly, if you approach things correctly, they don’t need them.
Some things go as planned. Some things go better than expected – ask Leicester City or John Daly (http://www.bbc.co.uk/sport/36151505). Some things go horribly, horribly wrong – ask a banker.
If I could say, with certainty, that one thing or another will definitely, absolutely, incontrovertibly happen, I’d be richer than I am now. Definitely.
However, I can’t, and I’m not much of a gambling man. There are lots and lots of ways to get it wrong, but only one to get it right. Lots of variables, with a range of possibilities within each.
So why do businesses, hospitals, governments etc. go through regular, sometimes frequent, often ‘rigorous’, exercises to get to the ‘right’ answer.
- How much will you sell?
- What number will come through the door?
- How much will we have to borrow/lend?
No sooner than the financial year has started, everyone begins their “Can you provide new forecasts? Oh, and, by the way, you need to increase sales /cut costs / increase output by x%, because we didn’t really like your first answer”.
We all appreciate that budgets and forecasts are necessary, so that we can adjust expectations, make contingencies and refine our plans. However, my ability to forecast things today, has not improved a great deal since yesterday. So, I was wrong yesterday and chances are, I’ll be at least as wrong today. So stop trying to hit the bullseye, blindfold, in a coal cellar at midnight.
Rules for the day.
- Be comfortable with uncertainty
You will be wrong. Your boss will be wrong. Their boss will be wrong. Let’s all get over it.
- Articulate your assumptions – clearly.
Write them down, make sure they’re understandable, get your peers to challenge them, pull them apart. Argue about them, until you reach some agreement. You will have a better set of assumptions.
- Stop rearranging the deckchairs
Which factors really affect your final forecast? I’m sure there will be lots that have a marginal effect, but which are the key ones? Concentrate on those.
- What levers can you pull?
How much can you affect the key factors? If there’s nothing that you can to affect a key factor, then make an assumption on its range of values and move on.
- Crunch the numbers
Plan those scenarios! This should be the easy bit – the first steps are you get paid for. Your intellectual capacity, knowledge and experience, not your ability to work a spreadsheet. Find a good tool that enables you to plan various scenarios collaboratively, without driving you mad or forgetting what you’ve done.
- Best case, worst case, best guess
Try to reach a manageable set of conclusions. Too many possible futures will confuse people and will not help. Identify the extremes (so the risks are recognised) but focus on solutions that are most likely, given your assumptions.
- Share your learning
It’s not meant to be competitive – knowledge shared is knowledge gained. Your team planning will improve, as your understanding of the real dynamics of your environment improve.
- Be brave, but not defensive.
Your forecasts may not be welcome, but if they’re based on valid assumptions and a logical flow, then you can support them. If you’re the one receiving the forecasts, don’t challenge the numbers, challenge the assumptions. Just because you don’t like the numbers, doesn’t mean that they’re wrong.
- And recycle.
You will be asked to do it again. And again. And, probably, again. It is, and should be, a continual process, not an annual event. So, be prepared to check, revisit and revise your assumptions and the ensuing numbers. Keep records of your scenario planning, so you can compare the evolution and refinement of your thoughts. Compare reality with your assumptions, so you’re better at it next time.
So, three main lessons.
- You will get it wrong – that’s fine, it will help you get it less wrong in future.
- You’re paid for your assumptions, driven by your knowledge and experience, not for the forecasts that come out as a result
- Planning tools should help, not hinder you and your colleagues. Look for something, flexible, easy, and collaborative with a good reporting suite. Unsurprisingly, I’d suggest Meisterplan. It really is very good.