Scenario planning and annual budgets

7 01 2010

Did you make a annual budget for 2010?

Bet it wasn’t easy.

Did you think about all the different scenarios that might happen in 2010, and incorporate those variables into several budgets, or was your final product one single annual budget?

I am not a fan of annual budgets unless they are tied into Scenario Planning.

I believe that they are a necessary exercise that helps in anticipating what revenue and resources a company might require in the coming year.  But I truly dislike those who compare real results with a static budget created 6 months or a year prior.

Businesses cannot perform  “as planned” in rapidly changing environments.  Budgets can serve as guides for spending and investment if properly assembled, taking into account internal and external factors of influence.

I am almost sure your budget made in October or November needs to be redone (if you want it to reflect real results) in order to reflect the massive changes that have already occurred in the economy and business environment.

In chaotic times, when uncertainty is the only sure thing, the traditional budget process can be a waste of time for the people making them, and for those “using” them if scenario planning is not taking place.

When the environment is subject to so many significant changes that will affect our suppliers, costs, customers consumption, international competition, etc., it is wiser to make several budget scenarios.

These scenarios will contemplate and plan for possible (or impossible) significant changes in the business environment, and help the organization to quickly take advantage of the situation when and if they occur.

What if oil prices plummet, or skyrocket?

What if inflation takes off, or recession gets worse?

What if there is a massive terrorist attack?

What if there is an economic collapse in Asia?

What if our number one supplier closes their doors?

What if the automobile and construction industries fall deeper into a slump?

What if the USA puts huge import duties on imported products?

It’s not about guessing what will happen (traditional budget).

It’s all about preparing to what MIGHT happen (budget scenarios).

How many scenarios should a company create?   As many as possible in order to analyze the strategic impact on the entire supply chain, cost structure and customers buying patterns.  It’s having a battle plan A, B, C, and D.

This budget scenario exercise is an ongoing process that involves risk assessment, prediction of economic consequences to potential or real events, and should involve the entire management team.  Depending on the actual environment and conditions this assessment might take place several times a year.

The identification of risk areas that will have significant effect on revenue or costs,  and the  acceptance that things will continue to change, will enable your organization to thrive and survive during turbulent times.

Links

How to do Scenario Planning

Scenario Planning

The Secret of Successful Scenario Planning

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No shortcuts to being a great leader

27 11 2007

There are no shortcuts to effective sustained leadership.

It is not easy to be a leader, or to maintain a position of leadership.

There is no book, movie, seminar or short course that will turn one into a leader.

We can learn about certain elements of leadership that we may or may not possess, and incorporate these ideas into our lives and behavior.

But leadership is not about what information we possess, our good intentions, or a business title and corner office.

It’s all about what we show to others.

It’s about what we do.

Day to day actions.

Sustained leadership success comes from; listening, attention to detail, implementing ideas, perseverance in the face of adversity, willingness to embrace innovation, training and mentoring others, planning and risk identification, and the most important factor of all, providing a living example to others.

A true leader provides a model to others.

Leaders will consistently provide examples of; honesty, integrity, ethics, dignity, passion, diligence, capacity to learn, and unwillingness to be defeated.

A true leader will also provide examples of how to lose, how to accept defeat and move on, because leaders are not always winners

Leadership is not a 9 to 5 job, it’s a way of life.

Related Links

Leadership lesson – A Message to Garcia

Leadership, do you want the job, or just the title and benefits?

What defines an exceptional leader

Improve your leadership profile





Get the mission statement off your website

24 11 2007

Do you read the corporate mission and vision statements on websites or in corporate promotional material?

I don’t.

In fact, I find them to be insincere, ambiguous and completely useless to the customer, and most of the time useless to the company itself.

So why do many corporate websites include them?

Does someone in the sales and marketing department believe that customers find this information important or believable?

Objectives, goals, mission and vision are important in an organization.  They define where we are going, and help in making decisions about how to get there.

You don’t need a mission or vision statement to be successful.You will need to make certain everyone in the company knows where they are going and are focused and motivated on getting there.

Customers will see the results.

You don’t have to tell them what you are trying to do.






Top 10 reasons for poor customer service and their solutions

13 11 2007

Customer service, the interaction between the client and the supplier is an integral part of the purchasing and user experience, and as such, is the key to continued success in business.

What are the reasons for poor customer service?

Top 10 Reasons for poor customer service and their solution

1.    People are not trained.  When an organization does not spend the time to fully train their people the consequence is poor service.

Solution:  Dedicate resources (time and money) for training and reinforcement.   Employees should be fully informed about company goals, the products and services.  Emphasis and training should be focused upon the importance of listening and responding to the customer’s requests.  People can only do the job if they are given the right tools and objectives.  It costs money to train people.  It will cost more if you decide not to train them.

2.    People don’t care.  Selecting the correct personality is crucial for your business success.  Apathetic or self centered personality types have no place in a business that requires customer contact.

Solution:  Focus the selection and evaluation process to identify personalities that do not fit the required profile.  Get the wrong people out immediately, it also sends a clear message to everyone.

3.    Sabotage.  Angry or frustrated employees can actively work to sabotage and try to destroy the company.

Solution:  Keep honest and open communications with employees.  Informally and formally review performance, goals, objectives and feelings to stop potential problems before they reach the customers.  Get these people out of the front lines immediately.

4.    Employees don’t believe in the company, product or service.  If the image, marketing and promotion of the company is quite different from the reality, workers will not be able to sustain a positive attitude in the face of problems they know exist.

Solution:  Be honest.  Work closely with customer service, marketing and quality control to identify real problems and fix them.  Don’t let  marketing advertise over problems, solve them.

5.    Personal problems reflected in work.  When an employee’s personal life is in crisis or out of control, they may exercise control, aggression and negativism toward customers in an attempt to put some part of their life in order.

Solution:  Clear communications with employees:  If their personal life is affecting work performance, talk about it.  Time off, access to counseling or just listening may prevent more serious problems.

6.    Burnt out.  Too much negative, too many complaints can lower a person’s level of commitment and move their positive and helpful attitude to an apathetic one.

Solution:  Constant communication helps to identify who is burning out and why.  Get customer service people together to talk of success and how to deal with the frustrations.  Provide recognition or incentives for excellence in dealing with problems.

7.    Not providing the correct solutions to customers, lack of empowerment.    There is nothing worse than dealing with an employee who listens to a problem, then shrugs and says they have to ask someone else in the company to intervene and provide a solution.

Solution:  Give the people on the front lines the authority, power, tools and ability to solve problems.

8.    Don’t see the benefits – don’t understand their role in the company. 

Solution:  Employees project an image of the company.  They are the company.  They should be reminded of their importance and value to the customer and to the company.  Incentives, recognition, training and constant reinforcement are important.

9.    Apathetic from hearing the same problems over and over.  A fundamental role of the customer service division is to provide constant feedback on how customers view the company, the products and the service.  If this feedback is not analyzed and acted upon by upper management a feeling of apathy and frustration is created.

Solution:  Set up a model and procedure for the accumulation, analysis and implementation of solutions for the problems identified by customer service.

10.    Incentives/salary not tied to results.

Solution:  If you insist that the company depends upon people, and that people are the key to success, implement compensation packages, evaluations and incentives that support and reinforce this.

Related Links 

Are you listening to what the customer needs?

Broken Promises

Give this away

Don’t find a solution, find a way to make it better





Are you listening to what the customer needs?

9 09 2007

I have been involved in a series of meetings with business owners regarding problems in their companies. 

Declining sales and market share due to international competitors, inability to compete or a decline in the entire industry sector are some of the reasons mentioned.

Solutions that were discussed and debated including cutting costs of raw materials, increasing worker efficiency, lowering logistics costs, streamlining the administration and related costs, government intervention and protection, outsourcing and even forming alliances with the international competitors.

What struck me as incredibly odd was that not once were the customer’s needs mentioned.

Not once did anyone mention creating new ideas, products or services for the customer.

There was no discussion of investing in new technology because “things are difficult now”.

There was never a comparison made between the marketing and promotion, branding or image of the competitors versus the company’s marketing, promotion, branding and image.  Why not? 

Every comment or observation focused on lowering production and logistics costs to the customer, never on increasing the benefits to the customer.

All that mattered is “how can I sell at a lower price”.

That’s right.  The entire future of these companies, and in some cases entire industries are focused on how make their products for less.  How to beat the Chinese, Indonesia or Brazil or whatever developing country has access to cheaper raw materials or labor. 

Common sense tells us this is not a viable, long -term solution.

Each of these companies has stated in their publicity, website and in their mission statements that their focus is on the customer and on customer service.  Why aren’t the customer’s needs and future needs part of the search for solutions when sales are declining?

If the customer really truly cares only about price, your product is a commodity. 

If the customer only cares about price, they don’t care about your company’s service, advertising and promotion, attitude or participation in their business.

If you really think that the low price will guarantee the sale, cut out the customer or technical service.  Take away financing.  Take away delivery and logistics.  Forget environmental and worker protection.  Reduce your inventories.   Standardize your prices and order sizes.   Cut down on sales and promotion. 

Call me when your sales skyrocket and the money pours in. 

I suppose it’s normal when sales fall, to attack costs, and costs are a fundamental element in being competitive in certain goods and services.

It is not the only element.  It may not even be the most important one for your customer. 

It probably is the easiest area to change quickly, and requires no investment.  People like easy solutions that don’t require investment. 

The relationship with your customer, the ability to meet their needs with your product or service and allow them to make a profit is what makes business click.

How well do you know your customer? 

What problems are they facing?

Is your contribution to their product important, significant or fundamental in their success?

Do they see you as simply a supplier of a commodity or an integral part of their supply chain and future?

Have you explored how you can work with them to make them more competitive?

Once this has been accomplished, bring the results to the boardroom and start the discussion of how to aid declining sales and deteriorating margin.

Don’t stop with the easy solutions.

Look for the difficult solutions, the ones that require compromise and long-term commitment.

Look for solutions that require investment of resources; time, money, and ideas. 

These are the solutions that the competitor focused on cost is not interested in. 

These are the solutions that will provide confidence and mutual opportunities for growth.





The 3 Y’s – help for difficult decisions

29 06 2007

An organization’s management and leadership team is responsible for making timely decisions, supplying and applying resources when required, in order to efficiently reach known or perceived goals and objectives.

In order to make these decisions; research, information and analysis of the pertinent information is required.

Here is where management bogs down or leadership can make serious misjudgements.

  • Poor incomplete analysis or lack of the critical information required to assess the risks, obtain the required resources or understand the probable benefits.
  • Lack of understanding of the changes or resources that the decision will provoke.
  • Making the decision too early, or too late.

A quick and useful trick is to apply the “3 Y’s” to assist when faced with a difficult decision.

The “3 Y’s”

  • Why Me?
  • Why Now?
  • Why Not?

The First Why – Why Me?

  • Who is requesting that I make the decision? Why?
  • Is this in my area of responsibility? Why?
  • Is this my area of expertise, do I know what I’m doing? Why?
  • Do I have enough key information to make the decision? Why?
  • Can I obtain more information, in how much time and at what cost? Why?
  • Do I understand the analysis of the data and the conclusions? Why?

The Second Why – Why Now?

  • Does this need to be done or decided now? Why?
  • Is it in response to an emergency, part of “normal” operations or a change in strategy and objectives? Why?
  • Who depends upon this decision or is affected by it? Why?
  • Should the involved parties be informed of how the decision will affect them? Why?

The Third Why – Why Not?

  • What happens if I don’t make the decision? Why?
  • Are there other options, solutions, or alternatives? Why?
  • Do I think this is the best solution or decision available? Why?
  • Do I fully understand the short term and long term effects on resources, customers, work systems, goals and objectives that this decision will provoke? Why?
  • Who are the internal or external “experts”, what is their recommendation? Why?
  • How far am I putting the organization at risk with this decision? Why?
  • Are there metrics to measure or contingency plans in place in case this does not go as planned? Why?

By reacting and making difficult decisions without reflecting on the WHY we miss identifying the real problems and issues.

We miss solutions and strategies.

We miss opportunities to unify and support the organization.

We find ourselves responding to symptoms and not solving or responding to the core issues.

Related Links

Can’t make a decision

9 steps to better decisions





New is a requirement

20 06 2007

We are creatures of habit.

We enjoy and feel comfortable with a routine.

We create routines in our personal and professional lives constantly.

We wake up around the same time, go to work at an appointed hour, drink coffee at a scheduled time.

We tend to focus and concentrate on our specific career area, and in doing so are excluding influences and relationships that matter.

New and different influences and relationships that can dramatically change the way we work, feel and create.

Even our free time is scheduled and programmed.

We read the same papers, watch the same programs, go out at the same time, and surround ourselves with the same people and experiences.

In order to maintain interest and excitement in our professional and personal lives we need to learn, experience or add something New.

Turn the microscopic view of our lives into a telescopic view and look for the New relationships and New elements of influence.

We can’t change, innovate, modify, evolve and grow if we don’t have access to New.

New ideas.

New learning.

New skills.

New methods.

New relationships.

New challenges.

New does not seep into us by accident, it requires active participation on our part.

We must seek it out, experiment, and take chances.

Find it, analyze it, embrace it or reject it.

New does not always make us happy, in fact it can create conflicts and anxiety which ultimately lead to better definition of what we want, or what we are doing.

We can find New in books, magazines, web logs, articles, especially if they are unrelated to our current business.

New can be found by taking a different route to work, shopping in a different area, eating different foods or in different spaces.

New can be found in any person whom we haven’t had a conversation with.

We have to make the conscious decision to break our routines and seek out New.

When was the last time you encountered something New?

When will be the next time?

What can we do today to find New?

When creating our weekly agenda, keeping in mind that we must dedicate time to actively seeking experiences and information that are outside of our comfort zones and areas of expertise.

Find something New today.

Start a list, when you find something New write it down.

Encourage the people around us to discover and share something New.

Watch how New begins to change your life and decisions, enthusiasm and attitude.

Related Links

5 ways to promote creative thinking and idea generation

Does your company like new ideas

Individuality and chaos in the workplace