No Gazing into the Crystal Ball

Ten success factors for planning and budgeting

In October and November every year, planning for the year ahead begins in earnest. The aim is to describe the future as precisely as possible, for which gazing into the proverbial crystal ball will not be of much use. Instead, what is called for are clear figures, objectives and measures. Doesn’t that sound like complex and fiddly work? Not necessarily. The idea that a plan will get steadily better as more information and decimal places are included often produces the opposite effect, the set of figures becoming so complicated that it ends up incomprehensible and opaque.

Maximum control

 “Focus, focus, focus – that’s how to reduce the effort and increase the effectiveness of planning,” is Dr Peter Schentler’s creed. Based on the main processes of the International Group of Controlling’s Controlling Process Model, the planning expert and principal of the management consulting firm Horvárth & Partners in Vienna has defined ten success factors for making planning and budgeting simpler and more effective at the same time:

  1. Define a planning process and bring it to life. Who shall do what, and by when?
  2. Observe the principles of modern budgeting.
  3. Follow the principle of simplicity: “coarsen” your budgeting.
  4. Rely on the principle of flexibility with relative targets, rolling forecasts etc.
  5. Follow the principle of the integration of planning, budgeting and forecasting.
  6. Use digitisation to drive innovation, with predictive forecasts, for example.
  7. Observe best practices in the planning process.
  8. Observe best practices in the forecasting process.
  9. Use driver models for setting targets.
  10. Use simulations and scenarios with reference to a base case.

With few resources

Those who take these ten success factors as guidelines can reduce the complexity of their planning and improve its quality. “Maximum control can thus be achieved with few resources,” Dr Schentler says. These approaches also ensure greater agility – and the more agile a business, the faster it will be able to respond to changing circumstances. After all, things often turn out quite differently from how they were planned. And that, too, should always be planned for.