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The objective of Rolling Forecasts/Continuous Planning is to make planning more
than a "once a year, one time" event; which can turn a plan into
quickly forgotten and irrelevant credenza-ware. There is wide variability
around exactly how this approach has been implemented. Some companies employ a
rolling four quarter or six quarter forecast, which simply means that each
quarter the company projects four or six quarters ahead. Others companies
finalize an annual plan, then review it on a monthly basis and re-project the
balance of the year expected results (while sticking to a more traditional
calendar for planning the upcoming year).
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Encourages managers to think about planning as
an ongoing process, rather than a static event.
Opportunity to provide more "real time" response to rapidly changing
environment.
In theory, the annual planning process is eliminated. The projection for next
year is simply the first rolling forecast that looks at all four quarters of
the following year.
Planning is not necessarily dictated by the calendar, but can be triggered by
important changes. |
Garbage in garbage out. Asking for information
more frequently does not necessarily mean that information will be well
developed or useful.
Changing templates doesn't necessarily change attitudes. If planning isn't
taken seriously today, new quarterly templates won't - on their own - change
that.
Many dot com companies embraced "continuous planning"; but found that
perpetually changing direction and hyper responsiveness created confusion, a
lack of focus and priorities, and an inability to achieve goals.
Marketing driven companies often need to build their marketing plans (i.e.,
advertising and promotion campaigns) on an annual basis, and a partial view -
as you will get with a rolling four or six quarter forecast - into the
following year lacks meaning and context.
Potential to undermine commitment to key plan targets. Constantly changing
assumptions and the financial implications of those assumptions tends to
invalidate targets, along with the commitment to achieve them.
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Can this work for my company?
If a company completes an annual plan, then locks it away until the end of the
year to see how they did, clearly that's a waste of time. If that describes
your company, we suggest that you institute a process in which the organization
reviews actual results against the plan, say on a quarterly or even monthly
basis, and then adjusts the balance of year forecast to take into account any
significant changes. This alone will save your plan from becoming
credenza-ware, will greatly improve results, and falls into the lose definition
of rolling forecast/continuous planning.
If your company is already doing this (producing an annual plan, reviewing it
on a quarterly or monthly basis and updating the balance of year forecast
accordingly) and are considering implementing the more text book version of
Rolling Forecasts/Continuous Planning, you've got a few things to consider. The
first is how often you want to produce a forecast and for what period of time.
For instance, a Rolling Four Quarter Forecast means that at the end of each
quarter, a company projects four quarters out (regardless of whether any of
those quarters fit into the current calendar year or the following year). From
that definition, you can guess at what a six quarter or eight quarter rolling
forecast consists of. A Continuous Planning process implies that a company is
"continuously" planning - assessing and updating its plans based on
any important changes. In the textbook definition of continuous planning, the
planning calendar is thrown away, and their are no defined planning periods.
We recommend considering implementing rolling four or six quarter forecasts
under certain circumstances (see below) but generally avoid the textbook
version of continuous planning. While we believe that managers need to
constantly be assessing their business and the implications of important
changes; good managers will do this anyway, they don't have to be told.
Official, scheduled plan updates or forecasts just formalizes this process;
takes a snapshot if you will, and ensures coordination and communication. From
a practical, real world perspective, if you throw away the planning calendar
and announce that the company will "continually plan" you'll be left
with whatever managers are doing today between official plan updates (be that
good or bad).
You may want to consider implementing rolling four or six quarter forecasts if
your company meets this criteria:
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There is little need for coordination between functions.
Each area is somewhat "self contained". |
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Marketing is NOT a driver. |
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You're in a stable business; economic models can be back
tested and prove highly reliable. |
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Planning is taken seriously today, not just a fill in the
numbers exercise. |
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There is little to be gained from taking a more broad
based, strategic view of the business. |
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