Traditional Planning and Forecasting is Broken

Paul Hoch

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September 4th, 2014


We’re kicking off a blogging series all about driver-based planning, in which you’ll learn how to implement a driver-based planning process from the top-down. Driver-based planning works by identifying and measuring only the key drivers of the business, and helps companies stay competitive is through informed decisions and agile business practices.

But before we delve into the implementation process, first let’s talk about what’s broken with traditional planning and forecasting. According to CFO Research Services, Over 70 percent of CFOs indicated that they do not have adequate visibility into the operational drivers of their business. There are many factors that can contribute to this, but based on our work at TopDown Consulting, general aspects of the planning process that contributed to a “broken” process are, 1) companies measure too much, 2) Planning takes too long.

Measuring too much: When it comes to EPM planning, companies have traditionally taken a “more is better” approach. With tighter budgets and competition between departments for budget allocation, it’s easy to go down the path of providing too much information, on the premise that you can’t manage what you can’t measure. But the reality is planning is guessing — and if you ask someone for 500 guesses, they are going to be less accurate per guess than if they focus on a few well thought-out predictions and use averages for the things they can’t control. When you have too many details to keep track of, you end up wasting time on gathering and validating (and then revalidating) the data.

Planning takes too long: Traditional planning is both time-consuming and expensive. The typical planning process takes place annually and lasts three to six months, making the plan outdated by the time it’s finalized. How can you possibly adapt and change in a market that adjusts by the hour if your planning process takes half a year to complete?

One of our clients, Steve Beers of Hubbell, Inc., once told us that the level of precision in those grinding it up from the bottom each month was no more or less accurate as those working up the forecast on the back of a napkin To quote:

“With the driver-based rules that TopDown helped us build, we get the best of both worlds.  Users can now submit a full Income Statement and Balance Sheet each month by only changing a few assumptions.”

In my next post, we’ll discuss how to implement a driver-based planning model. By identifying key performance indicators (KPIs), you can more effectively manage your planning and forecasting processes by focusing on what truly matters and drives business forward. Stay tuned…


Paul Hoch

About Paul Hoch

Paul Hoch has over 18 years of EPM and Hyperion experience, specializing in Essbase and Planning. He has successfully completed large-scale EPM implementations for clients in industries ranging from retail to government and financial services to health care. Paul has served as solution architect and team lead for implementations and he has developed and delivered advanced team training. He also blogs and presents regularly on EPM topics, including Essbase, Planning, Hybrid Cloud implementations, PBCS, EPBCS, Smart View, Calc Manager, migrating to the cloud, and more.

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