Is the value of doing 2 and 3 year plans and 6 Qtr. Rolling forecasts to help the CFO to stay out of jail or is it more about providing a mechanism to manage the business?.

easyIn our Business Performance Executive Forum recently, someone commented in response to a question put about the politics of budgeting and its value. This was based on a CFO Magazine survey that had 2/3 of readers saying their planning process was driven more by Politics than by Strategy as asked by business author Lawrence Serven, and President at XLerant, Inc 

Christo Nei Technical Sales Manager at IBM Sydney, Australia, said  The traditional budget for the sake of budgeting, without the capability to really understand and analyse why we budget is pretty much a political process, however when a budget process is driver based and linked to strategic initiatives and outcomes; it becomes more effective. In the fast changing business world that we live it is the companies with a budget and rolling forecast that really outperform. Budget as a benchmark, but the rolling forecast as the currently reality to aim for.

He went on to talk about what is needed being rolling 6 quarter, reviewed once a week

In my view and with some experience on this too, doing a forecast to bring it all back on track is equally critical step.  Mr Nei as a business man focused on selling, knows well that is all about doing the numbers. He would also know what it means not to.

CFO’s and accountants however, often lose sight of all this and can lean a lot from business people. Doing all the detail over and over again does not work for them so once done they just want to want to see what is changing and /or getting out of control as they add to the pipeline.

As a best practice experience with me and many other we now find works very well in large businesses and global corporations. Maintain a practical view is important on how to do Plan and budgets then the 6 Qtr operational forecasts. What many see a heaven forbid basis, a good CFO will embrace using the budget as the forecast then plug the variance as it moves forward to maintain the same annual outcomes and deal with just the major exceptions. This in turn means the CFO takes shared responsibility for the result. which is his job anyway. AND to stay out of jail and put the monkey back where it did the damage the CFO must also then take the proactive step to review the plugs with his CEO and operations teams on say day 2 of the reporting month and reject any that need more attention. (E.g. more than certain acceptable % variance) That then becomes a very transparent and prudent financial control process to allow them all to decide what demands attention and/or needs be answered. It also moves attention from the politics of just defending the plan against corporate /investor scrutiny to a more business management mindset too.

At the operational level then doing weekly or even daily reviews of actual numbers against the forecast is then very easy to do and focus on a part of the cycle management. This as we all know is so important to maintain the momentum and business rhythm to ensure the objectives are met.

Sorting out the trivial variance ebbs and flows to only focus on what needs crucial attention to get the answers is the aim. Doing this is more about operational value than an accountant numbers game. with this sort of process in place action also comes very fast to look at the detail on the delinquent areas. Conversely high performers who don’t cover them up,

at the CEO /CFO level a practical approach to make this work and keep the business on track to have this reviewed like this is to add in this process so you have the answer to the budget performance issues with corrective action included in the forecasts before month reporting is closed on day3. That is just so easy to do.

With 3 year plans and 6 quarter operational rolling forecasts with daily /weekly reporting then the next 12 month operational budgets becomes just another forecast (once it spans the next full year) and work the same. One day budgeting is then a very real option and the politics of budgeting can be managed to deal with more strategic issues and the longer term aims. That is just so easy to do and I have found it works well.

What is you experience?

In organizations, does having a Business Driver Matrix bind outcomes based thinking and help plan and control resources that deliver them?

imageRecently, I was fortunate to join some senior people from diverse sectors for a strategic planning workshop. This session was sponsored by ZAP Technology and one of the aims of the session was to decide what drives a business and the bases of measures of performance that may be applied.

The outcomes of these types of sessions typically differ in detail, but the fundamental activity motivators have on common thread. That is they are hierarchically driven by internal  supply chains activity which are each in turn externally influenced.

In our session a constraint was to link core business process in hierarchical internal supply order and assigning one internal and external driver to each. While client processes may haven more than one supply activity only one external diver would apply. With these constraints interesting leveling discussion pursued. The resulting matrix and how we got there I have found since leads to good debate so now I want to share a some of this.

For example in a product based business, new product development may rank very high in the delivery process that drives revenue generating activity. Whereas a category retail business may have advertising ranked much higher. In a service business alliances may be a very strong influence so marketing and sales campaigns may be the primary enabler.

But when we boil it all down we asked what really generates the business revenue? The combination of enablers in the delivery process will help but our session discussion resolved that it was driven by the outcomes of the planning activity.

To understand this more, the full planning process which most organization take seriously, is ultimately about determining direction, and levels of activity needed to achieve the organization strategic objectives This will also including adequate return to satisfy the investor.

What this does in practical terms is set up and agree goals and incentives to employ and motivate the sales force who then goes out to get the business. This in turn determines and drives delivery process objectives and defines the level resources required to met them in a then more detail resource allocation and budgeting process.

Now back to our session as we extended this thinking through the value chain in our typical business generation and delivery processes As we stepped through it we came up with a matrix of internal performance based measures attached to each process and linked to one external influencers that nay constrain or propel the business.

The following table shows what we came up with as a result after several brainstorming and filtering sessions. Without even considering what industry, the session produced range of external influences that typically drive any business.  The table here has some types of sensible measure criteria that distilled out this into this simplified list from the group inputs.

This was the outcome:

External Driver Basis of Measure
Investors Asset Performance
Product New Business
Consumer Capture / Retention
Presence Market share
Supplier Competitive Reliability
Competitor Competitive Capability
Alliances Growth & Risk
Standards Compliance Disclosure

We discussed this further we noted that For a high volume business retailer, presence and market share are important. In Hotels and Hostility the driver may be alliances with agents in the travel and tourism industry. A specialist or niche business should rank high their measure of competitive capability to ensure they can maintain advantage they may have in this class of business.  Whereas a financial services business selling life insurance may have alliances with banks to bundle insurance with their lending offerings.

It was interesting when I repeated the exercise my self with another group later. this was a more detail outcome that gave a similar but different answer. I will post it here as a reference too.

Driver Basis of Measure
Asset Risk based return on investment
Capability Market share on channel product
  Market share
  Quality of Process integration and Outcomes
  Sales force capability effectiveness
  Process effectiveness
  Strategy objectives achievement
  Quality of data Integration
  Process outcomes quality
  Process efficiency
  Business Process Efficiency
Investment Return On Investment
Leadership Market Share Growth & Asset Risk
Leads New Business Lead conversion
Product Unit cost
  New Product Cycle Replacement
Profit Expense contribution
  Supply chain effectiveness
  Audit & compliance costs
  Contribution recovery
Retention churn rate
Revenue Item value for sales Unit /channel
  Business Generated
  Customer Growth
  Delivery timeliness
  Customer Retention
  Business Growth
Unit cost Supplier benchmark

I found this quite useful to springboard ideas to get myself on the understanding page of what drives related process activity in terms of the supply chain relationships inside a business. I hope it is useful for you too.

Customers need a strong criteria set that is relevant to evaluate Data warehouse/Business Intelligence vendor proposals from common ground

imageOne thing I believe often missing when considering vendors proposals, is how they address or show how they want to be  involved in elements of the exploitation phase, e.g. inclusion of warranty period and provision of help desk support for user support and an ongoing maintenance and review programs which is typically after the project goes live.

Even though many companies may elect not to use this, it shows the vendor is confidence and committed to ensuring the project is successful and gives customers great comfort on risk from attrition and change.

In Information Management Newsletters I subscribe to , on November 9, 2010 Kumar Ramamurthy posted these 20 Questions to Ask When Choosing a DW/BI Vendor Partner  For the record I have posted it here and refer you to the original.  It as an excellent article.

I have summarized here what he says to look for in vendor proposals

  1. How well a vendor has understood the business problem and the value they bring.
  2. Requirements are separated into source system , data integration and BI layer
  3. Requirements provided have been well-dissected
  4. Shows depth of the vendor experience in executing turnkey DW/BI projects
  5. The team is led by a DW/BI-certified project manager/lead
  6. Black box estimates, show dependencies to realistically limit surprises.
  7. Vendor plan shows measures of productivity gains and efficiencies
  8. Vendor shows component parts of the bid, and who owns the IP rights
  9. Quality and performance metrics capturing included and inferred during project lifecycle
  10. .Rollback mechanism or running a parallel system been considered as part of estimates
  11. Has well-balanced test automation and automated test data creation process
  12.   Has knowledge transfer plan to customer’s for DW/BI team
  13. “Code freeze” time is mandated in proposal to push changes to production systems
  14.   Power users have guidelines to develop reports or query the data and functionality
  15.   Vendor has mechanisms to point out the code that contributes to SLA  lapses
  16.   Project estimate in project phases to allow de-scope nicely, or adding functionality
  17.   Project dissected for the chance to bring some phases of the project in-house,
  18.   Risk/reward clause Inclusions indicates vendor is very confident of executing it well.
  19.   Relevant proofs of concept cited that have been showcased and shown as well tested
  20.   Show what elements in the proposed solution are unique differentiators

Included in his post he makes a very good point that the handoff includes a well-documented solution cookbook, run book and a meeting to pass the details on to people who will continue to support the system and functionality developed.

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Thailand Syndrome. Apparently, it is not fatal, but it is highly contagious and is spreading fast to the rest of the world.

imagePaul Snowdon is a expatriate living in Thailand. He is also a journalist and freelance reporter who uses his skill to get in the face of people there as he reports on  local issues that he sees need to be reported.

He is published weekly in local syndicate updates. Paul just sent me his weekly publication which I am compelled to share in its entirety. The highly contagious syndrome he cites is not something that is not confined just to Thailand.

When you see his report on the symptoms you may see similar symptoms in people at home. It will certainly make you sit up and take notice about how to get inoculated before it spreads to you and your family.

I also recommend if you have an interest in the Asia region if our subscribe to Paul’s updates it will do you no harm to be up to date with his highly informative and often challenging editorials on things that matter.  Click here to join his list

Here is his story also subtitled, Thailand Syndrome – Have you got it?



A Week in Review: October 30 – November 5, 2010

The test results came back last week, and it seems that we are suffering from a rare affliction – so rare in fact that it has been dubbed ‘Thailand Syndrome’. Find out what the symptoms are here…

The first symptom is a tendency to wait until something goes wrong and then react to it rather than be proactive and try to prevent problems from happening in the first place.

It was announced last week that the government was set to spend 20 billion baht on flood relief after the south of Thailand took its turn to be inundated by devastating floods following similar havoc in the north, northeast and central regions the week before.

Just as the 100 million baht spent on compensating red shirt protesters would have been better spent on alleviating poverty, so the 20 billion spent on flood relief could have been used more effectively on flood prevention or even enforcing existing laws designed to protect society.

The second system is an overwhelming desire to place personal interests before anything else, often resulting in a complete disregard for the laws of the land.

Following the revelation that many of the floods were exacerbated by the land encroachment of greedy developers, it was revealed last week that a businessman had encroached on forest reserve land to expand a golf course in Korat – the province most severely affected by devastating floods caused by land encroachment.

While the media made a point of announcing that the businessman had close ties to Phuea Thai, he is just the latest in a long list of selfish individuals from all sides of the political spectrum who rape the country for their own personal benefit.

This second symptom is by no means confined to the upper echelons of our society, however. It is an infection that has spread pervasively from the very top to the very bottom.

Last week also saw the tragic deaths of 8 people – including 2 children – with another 8 seriously injured after a van plunged from an elevated expressway and burst into flames. The driver was found to have broken several laws, including speeding, reckless driving, illegally operating a passenger vehicle, overloading, and illegally converting a van to run on gas.

The third symptom of Thailand Syndrome is the uncontrollable urge to attack the people who expose illegal activities rather than admitting guilt or defending one’s actions.

Following the release of video footage allegedly showing Constitution Court judges colluding to cover up fraudulent activities, Jarun Pukditanakul, a Constitution Court judge, said that it had been agreed by all of the court’s judges during a meeting on Monday that they would not issue a statement to refute the video, but would instead file a complaint asking police to take legal action against whoever is responsible for its release.

So there you have it – Thailand Syndrome. Apparently, it is not fatal, although it is highly contagious.

Paul Snowdon – November 6, 2010

Original post is at

Some serious fun on why is 7 an important number?

imageA friend, Lynda Verran, on her face book wall recently added the following sequence of lucky numbers, namely 7 68 33 34. “These came from my daily fortune cookie!”, She said.

Being a numbers man I wondered why seven is so often a feature on lucky numbers lists. Oddly in business when doing a five-year plan we only look back 2 years so in total our span covers seven years

Considering Lynda’s fortune further my next thought was seven may be considered lucky by people who have passed the personality test, which is business is a must.

To pass, as we all know, we just have to reach the age of seven when our personality and who we are is considered complete. From then this same anthropological theory says we continue to develop and mature in seven-year cycles until we die. Retailer and others predicating market change tend to refurbish their stores every seven years to stay in sync and reset the next seven-year consumer loyalty habit.

Curiously seven it is also the natural number between six & eight which compiles as 68 which is oddly the next number on Lynda’s list. This in turn averages to seven and when six & eight is added it becomes fourteen to marks the next stage of our growth, being our sexual development. And when all this is added together it makes twenty-one, being the age our official adulthood is said to begin and when we are free to make our own luck.

The other numbers too I found also related to seven. The last for example is 34, which when decomposed and added back together as digits also equals seven. And when you add 33 and 34 and add 10 amazingly it also comes to a pair of sevens, being 77.

So it seems Lynda’s numbers are significant and may also be truly lucky, but as you can see finding the luck can take a bit of effort and you may have to add a bit of your own ingenuity, as does doing life itself and doing business.

To find out what others thought I researched a bit more and got this.

Here are Seven more sevens:
? Pythagoreans called it the perfect number, 3 and 4, the triangle and the square, the perfect figures.
? Seven ancient planets – the sun was the greatest planet of the ancient seven and next to the sun, the moon, changing in all its splendour every seventh day. Seven visible planets and luminaries (Sun, Moon, Mercury, Venus, Mars, Jupiter and Saturn).
? Books …The Seven Pillars of Wisdom by T E Lawrence, Enid Blyton’s Secret Seven series … Stephen Covey’s Seven Habits of Highly Effective People … Reiki and the Seven Chakras …
? Seven Deadly Sins.
? The Trumpton fire brigade. (Pugh, Pugh, Barney, Magrew, Cuthburt, Dibble and Grub)
? Seven Seas
? In Chinese culture, the seventh day of the first moon of the lunar year is known as Human’s Day to be celebrated as the universal birthday of all human beings.

My source for this was: Why is the number "7" considered a "lucky" number? I am sure you can add a whole lot more including “the seven wonders of the world” and of course one of the all time favorite movies, “The Magnificent Seven”. plus we now have Windows 7.

One of the favorite TV shows when I was a kid when TV was new was 77 Sunset Strip.  That ran from 1958–1964 The lead characters in this popular private detective show were Stu Bailey played by Efrem Zimbalist Jr.and Jeff Spencer played by Roger Smith.  Kookie,  another character, a parking valet constantly combed his Elvis styled hair-cur as his signature behavior . It annoyed me when the the girls all screened adornment when he did it. Kookie was played by Edd Byrnes His oddly spelt character name (yes it was spelt with a “K”) meant his fortune was no less assured by a huge female fan club.  Also working with him was Jacqueline Beer, who had been miss France of 1954, so it did him no harm. I note that if you pick the middle numbers being 95 and allocate the sum of then equally you also get seven.