For many it is about to be the beginning of a new financial year and hopefully they will have plans in place looking forward, but how many of those plans really look forward? You see, plans based on past experience are no longer effective.
When I was but a boy accountant, many years ago, just after the earth had cooled and the dinosaurs had died out there was a method of planning known as incremental budgeting. This is a posh way of saying, take last year actuals and add a bit. It was developed in more stable times but many organisations and individuals still use this approach. If I am taking on a new employee, basing my decision on the past experience I have or others have of that person falls into a similar category, as does judging a company, or supplier or customer. The advantages of using the past to plan are as follows:
- It is easy.
- It is quick.
- You are unlikely to get the blame if something goes wrong as you based everything on known past experience.
There is, however one slight problem which gets overlooked. Namely – IT IS RUBBISH and always was.
For a long time now we have lived in times of change. The speed of change and the level of uncertainty we are experiencing is greater than ever. The past really is no guide to the future. Businesses that were amazing last year may well be bankrupt just a few months later. Businesses that have struggled for years may suddenly come into their own with the introduction of a new product, service or team. People who you would previously cross the street to avoid suddenly come good and that “leader” you looked up to gets found out and falls from grace. The perfect example here is Steven Bartlett. He changed from shoplifting in his late teens to becoming a multi millionaire in his late twenties and now has one of the most listened to podcasts in the world. People who would have slammed the door in his face just a short time ago now queue up to get to shake is hand. The past is no effective guide to the future. The same is true of companies. At one point Nokia was the leading mobile phone company in the world by a huge margin. Almost overnight this was destroyed by Apple and others. The past is no effective guide to the future.
The lesson from all this is that if you are making effective plans do the following:
- Don’t base them on the past, start with a blank piece of paper and a crystal ball.
- Accept that they will need constant change and updating. Not to reflect what has happened but what is about to happen.
- Constantly look forward, review and change. Plans need updating at least every quarter and probably every month.
- Remember that a plan is a means to help you effectively achieve your ultimate objective. The destination should not change, but the route may have to.
If you want help with effective planning for your organisation then please Contact