Finance Support of Business Planning

Using simplicity to cope with complexity

In response to an increasingly complex world, many companies are trying to make their planning processes as simple as possible. In fact, with more and more companies moving toward more frequent and more rapid “resets” of their plans throughout the year, streamlining and structuring your planning process is a practical requirement.
Key Takeaways
  • The most effective annual plans are the ones that support business teams’ efforts to move the business forward, not take them away from it.

  • Making it easier for all the stakeholders to be involved in reviewing and refreshing a business plan on a regular basis ensures it becomes truly actionable while remaining firmly focused on the future of the company.

  • Finance’s role leans toward helping the business managers maintain forward focus and handle the complexity of their business environment.

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The reason for this, says Howard Fowler, SVP and CFO at the transportation staffing company TransForce, Inc., is because, “You want your business managers thinking about the business, not the Excel spreadsheet.” The most effective annual plans are the ones that support business teams’ efforts to move the business forward, not take them away from it.

An important role for finance is helping the business managers maintain that focus. In the end, it comes down to what you can do to help your managers better handle the complexity of their business environment.
It can be as simple as setting up the planning spreadsheets your company uses in a way that looks rational to the business user. So, for example, Fowler says, “I like to use one color for data entry cells and another color and write protection for calculations that they don’t need to change.” His goal is to make the process as straightforward as possible for those who spend most of their time doing something else—running the business.
The same kind of reasoning underlies the value that GE managers get from the company’s new planning process. As Bob McCarrick, Chief Commercial Officer, Lending for GE Capital, Corporate Finance, puts it: “We used to produce notebooks full of numbers. But managers want to see less on paper and have more conversation—a real dialog about the business”—not just about the budget. Now, says McCarrick, the plans for GE’s different businesses all have fewer pages, but those are “more substantive pages that get to the big issues, like risks and opportunities, and strategy.”
The new planning documents are much richer in narrative, McCarrick points out, using “plain English” to explain what happened, why it happened, and what the business will do next. “The managers now get more narrative, do it more frequently, and get it in shorter form,” he says. McCarrick adds that “the data is then used to back up the story that you know”—it doesn’t become the whole story in itself.
Greg Cameron, CFO of GE Capital, Americas, also acknowledges, “Post-crisis, we’ve gotten a lot better with documenting our plans.” And that’s good, he says: “There’s nothing worse than going back three years and trying to capture exactly what you were thinking by piecing together the plan based on emails or PowerPoint presentations you might have saved. Now, you’ve got a well-written document that lays out clearly: here’s the basis of the plan, here are the underlying assumptions, here’s the management overlay on how we thought about those, here are the new products we’re going to launch, here is the financial benefit, and ultimately, here are the decisions that we need to make.” One real benefit of the new process, says Cameron, is that, once all the information is organized and laid out in this fashion, “anybody could follow it.”
Ed Morgan, the CFO of the Oregon dealership Guaranty RV Inc., makes a similar point. “We use the budget as a rallying point,” he says, “to have a discussion about the business.” It’s no longer just a target that you either hit or miss, but a jumping-off point that “forces you to analyze your business,” according to Morgan.
That can be a big part of the value that finance brings to the table, notes Steve Torres, COO and CFO of the full-service IT infrastructure solutions provider Vology, Inc. Finance’s main job as owner of the planning process, as Torres puts it, is to “help the operating departments connect the dots financially.”
TransForce’s Fowler notes that, in his experience, “the best way to do it is if you have an analyst imbedded with the business unit. That person works with the operating manager to help prepare [the forecast], so the analyst is somebody who has a good understanding of the operating flow and the metrics, of how things work. They can talk to their operating folks, and the operating folks, in turn, have a good understanding of how the financial piece comes together.”
In the end, by making it easier for all the stakeholders to be involved in reviewing and refreshing the plan on a regular basis, you can ensure the plan becomes truly actionable while remaining firmly focused on the future of the company. The ideal, says Paul Lehmann, CFO of Overhead Door, Inc., is to “develop a plan that has a certain amount of stretch but also has a reasonable achievability factor.”
And the more your business teams across all key functions can be involved in building the annual plan and making it reflect the business realities they confront every day, the closer you can come to achieving that ideal balance of vision with execution for the upcoming year.
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