Managing Businesses from Home

Decentralised planning and being prepared for everything

We’re reading in reports from the IFO Institute for Economic Research and hearing from the federal government that Germany is heading towards a sharp recession and that economic stimulus plans and bail-out packages are in the pipeline. Yet there’s no telling in what form or to what extent the economy is to be shored up. It’s clear, however, that the situation calls for a far-sighted approach to business management. A plan that takes the latest assumptions into account is what’s needed – even if some of those assumptions are being redefined from one week to the next.

Planning in the time of corona

The corona crisis has thrown every budget for 2020 into disarray while at the same time banishing much of the workforce to work from home. The underlying conditions of working life, the market and the legal environment have changed substantially and are still in a state of flux.

Every new decree and every local, national or international decision that affects one’s own market – an easing of restrictions or a bail-out package, for instance – will need to be included in the new plan. This involves forecasting the consequences that the changed market conditions may have, such as a fall in sales or the loss of business segments.

Scenarios: covering all eventualities

The great uncertainty and the transient nature of current developments make it necessary to plan for multiple scenarios. The divisional managers indicate, for instance, what measures, what expenditure and what income they would estimate in each of the different scenarios. This allows not just the average case to be simulated, but also the best and worst cases, and, at present, even the “worst worst case” of imminent insolvency. In this form, the plan gives the management a sense of direction and enables investors to assess the state of the business and its prospects for the future.

Target-actual comparisons: a reality check

To keep the plan realistic, target-actual comparisons are also necessary. Any variances must be looked at straight away where possible: what if the shops open but the customers fail to return in the expected numbers? What if infection rates start to rise again and the easing of restrictions is reversed? What if corporations set up new supply chains that are more local and order larger quantities than expected?

As soon as an assumption has been disproved by reality, the plans must be adjusted. Planning frequency, which was always high anyway, is therefore increasing considerably in the corona crisis.

From planning to reporting

In addition, many businesses across the economy – from major corporations to freelancers – are having to prove their ability to continue as a going concern. They need to produce auditable documentation of their pre-corona business outlook along with convincing business plans in order to raise funds for resuming operations. In these cases, as well as the high planning standards required, the documentation must include a set of reports which, like the scenario planning, must be easy to understand.

Success with decentralised planning

With the shift to working from home, the use of online conferencing platforms such as Microsoft Teams and Zoom has increased in leaps and bounds. But planning in the volatile corona environment calls for more efficient means of remote collaboration.

Company-wide planning and reporting solutions with web access, a self-service approach and collaboration features make it possible for all those involved to model new developments in the various planning scenarios with hardly any delay, even when working from home. These include:

  • a common database in the on-site data centre or the cloud
  • decentralised online planning of the measures and assumptions for scenario planning
  • direct commenting on the adjustments to every scenario, from the best case to the worst case
  • automatic merging of the input values
  • consideration of interdependencies in, for instance, the profit calculation
  • real-time inclusion of current data in management reports

Those who have plans don’t need guarantees

In the corona crisis, businesses are facing six major challenges:

  1. high planning frequencies
  2. constantly changing circumstances
  3. a narrow timeframe for planning new scenarios
  4. coordination made complicated by decentralisation and working from home
  5. having to keep revisions and measures transparent
  6. fast and comprehensive reporting for external and internal purposes

The efficient organisation of decentralised planning speeds up and shortens planning cycles and makes for more up-to-date and accurate data. Businesses can adjust plans at very short notice, even in times of unforeseen restrictions on outdoor activities.

While there are still no guarantees, planning with scenarios and variance analyses will put businesses in a considerably better starting position for next time.