Scenario planning and annual budgets

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

Who’s to blame?

Don’t blame the world.

Don’t blame the boss.

Don’t blame your co workers.

Don’t blame the customer.

It’s all about our ability or inability to convince them.

It’s all about sales.

Our ability to “sell” the proposal, to “sell” our achievements, to “sell” our value,  to “sell our enthusiasm”, to “sell” our ideas.

If we find ourselves blaming others, it is time to change your plan, change your arguments, attitudes or presentation.

It’s our responsibility, not theirs.

Find a way to convince your audience, co workers, boss or clients, to make them enthusiastic or to understand.

If the customer wants red, and you want to sell blue, find the way to convince them that blue really IS better.

Or find those customers who want and need blue.

Or change what you are doing and sell red.

It’s not about the others inability to understand.

Stop making it their fault.

It’s all about our ability to provide the information, arguments and ideas that allow them to understand.

Stop pointing fingers and assigning blame.

It’s all about us.

It will never work

When trying to change behaviors, habits, routines or goals in a company on of the first difficulties faced is the opposition from co-workers, employees and team members.

“It won’t work”.

“Completely wrong”.

“They don’t understand the problem, this is crazy”.

Ï’m not going to waste my time on this, it’s stupid”.

They might be right.  It might be stupid, crazy, it won’t work…but it is never a waste of time.

Change, applying new and disruptive methods to operations and problem solving, is always a gamble, and always generates resistance, and many times will not solve the problem.

People say they want change, but only change that has no cost or discomfort associated with it.

Changes will always..always.. always…stimulate new ideas, and get people talking, and more importantly thinking about the problem, the solutions or the process.

This new dialogue, about what is the real problem, about what is a better solution, is what we are after.

Creating and implementing new ideas, creating chaos in some cases, forces people to move out of a “comfort” zone.

Don’t be afraid to hear “it won’t work”, that may be exactly what the team needs to respond.

Your reply should be “OK, what is a better solution?”  Do not focus on defending the idea, get the conversation going how best to solve the problem, or define the problem.

No shortcuts to being a great leader

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

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

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