As one mysterious foreigner said at Patriarch’s Ponds, “in order to manage, you need to have an accurate plan for at least some decent period.” And you can’t argue with that. Even though for Bulgakov’s heroes this idea develops in the most dramatic way, in the real world it reflects very clearly a constructive approach to business. To run your business, whether it’s a small family business or a huge holding, you need to be able to plan.
What all this is for
Planning involves an iterative process of collecting planning data from all departments and bringing them together. It is necessary to understand how each unit should work in order to achieve performance targets. These can be both financial and non-financial indicators: sales, profit, revenue, number of customers, etc.
Without making a detailed plan, it is impossible to understand whether the company will show certain results. If the units have collected data that says that it is impossible to achieve the desired indicators, then, with related numbers, it is possible to determine adjustments that will achieve the goal.
Who in the company is responsible for planning
Ultimately, the CEO is responsible for the process, the plan is approved by the board of directors, but all divisions, their managers and key employees are involved in this work. They are responsible for their directions. This is done in order to collect the most detailed and realistic plan, which takes into account the relationships of all structures and management of the company.
Strategic planning
Recently, not only in our country, but also around the world, the operational plan has turned into a tool to help make quick decisions in the face of constant uncertainty. At the same time, the strategic planning horizon has significantly decreased: earlier enterprises made plans for 20 or more years, but now – as a rule, for no more than three years.
A strategic plan is about building strategic initiatives and planning the company’s activities over a long horizon in order to understand what it should achieve, what is the future. Often, large corporations have long investment projects. The launch of a new product takes more than a year, overhaul of equipment, for example, also usually takes a very significant time, therefore, in order to understand what this means from the point of view of the activities of the entire company, it is necessary to form a plan for several years to come, taking into account such long-term initiatives.
Strategically, the degree of uncertainty is quite high. Planning in detail, going to a very low granularity of data, in this case is extremely problematic, because it is not known exactly what, in what quantity and in what month will be done. Therefore, it is done more with a “large cell” approach, that is, items, indicators, and other analysts are enlarged.
Annual and operational plans
The annual plan or budget, most often it is called that, is the plan that is being built for the year ahead. In fact, it decomposes those goals that were fixed in the strategic plan in order to establish more accurately the specific indicators of each unit next year. There is already a breakdown by months, by divisions, perhaps even in more detail – by customers, products, and staff units.
Operational plan, sometimes called forecast, adjustment, terminology can be different. In fact, this is a refinement of the plan, which was put up for the whole year, but for an even smaller horizon. Relatively speaking, we are clarifying what we are doing next month or quarter. Some enterprises even go down to a week to understand whether the goal set within the budget will be achieved.
Where to start?
The most important thing to start with is to determine what performance indicators we want to monitor and, accordingly, plan and track.
To create a plan, you need to build a model of related data in such a way as to ensure that all important and significant indicators are obtained. It is necessary to ensure the comparability of this model with actual accounting – so that you can quickly receive information about the implementation of plans. Design collection processes including procedures, roles and responsibilities of participants.
Having built a model of indicators, then we need to understand what so-called analytics we want to look at. We prioritize, for example, the regions of our presence or sales channels, products, activities. The company determines that it wants to look at and what to see in numbers in order to do something about it further.
Actually, this is a huge block of methodological tasks, on its basis enterprises have a management chart of accounts, a set of analytics, according to which plans are built and controlled.
Automated planning system selection
Having decided on the approach, we need to choose the tools with which we will carry out planning. In the modern world, with its widespread digitalization, planning processes can be largely automated.
Each company has a choice of what to use when building plans. The first option is to do everything in Excel or similar office applications. The second option is to introduce a specialized finished product from the market. The third is to create an exclusive customized system for your tasks.
Excel is a tool that is understandable for all financiers, it is quickly configured, but this program has a lot of disadvantages. Users are forced to check a huge number of files, watch the consistency – you can discuss it for a long time. In short, Excel is not recommended for medium and large businesses as a tool for collecting plans related to each other and agreed upon.
Which is better: a box or a customized solution?
The second option is a specialized system. At the moment, there are a lot of high-quality import-independent boxed solutions on this topic in Russia. The choice here is determined by the following criteria: the size and scope of the customer company, its current IT landscape, the availability of vendor support for the product, the availability of specialists on the market for this product, the availability of confirmed successful examples of its implementation at comparable enterprises.
The third option is custom software development for your tasks based on, for example, open source technologies. The plus is that you can make a system that fully meets the requirements of your company, taking into account all processes and specifics of activities. There is no need to adapt to any restrictions that may be imposed in vendor products.
Which is preferable? There are a lot of specific nuances on which the choice depends. You need to analyze the characteristics of finished products, and understand the nature of your own IT landscape, as well as the specifics of industry activities and planning in it. The volume of tasks and the number of employees are important. Finally, money and timing! Custom development, of course, requires more time, effort and money. However, the result may be different. Here the question of expediency already arises.
Large companies that are engaged in digitalization at the strategic level have recently increasingly chosen customized solutions. This trend especially intensified three years ago, when foreign developers and suppliers of software products left Russia.
Speed and quality
Based on the experience of our company, I note that the main effect of the implementation is the speed of forming plans and thereby obtaining grounds for making management decisions. This is certainly a competitive advantage in today’s dynamic world. At the same time, the quality of data increases significantly.
The cost of providing a data collection process is also reduced. There is an opportunity for scenario modeling – companies can, instead of one version of the budget, which they heroically made in Excel for several months, collect in a specialized system, immediately process and analyze several options for the development of the situation: a pessimistic scenario, an optimistic scenario.
There is only one conclusion – without planning, a business cannot exist. Therefore, any company deals with this in as much detail as possible – this is already determined by its specifics and approach. In order to ensure this and at the same time not to spend a huge amount of resources, you need to use modern digital tools. Thus, the introduction of a specialized planning system, of course, creates the basis for the stability and reliability of business processes, the company’s competitiveness in the market.
By Julia Zakharova, Director of EPM and ESG of the Digital Economy League