by Malcolm Simister
In the ‘new normal’ under Covid-19 and beyond, annual business planning and budgeting is almost impossible, even for those businesses that have done well out of lockdowns.
As with other things, such as more remote working, moving supply chains away from China and a growing awareness of climate change, Covid-19 has accelerated trends that were already apparent.
For many years now, very few companies have been able to budget accurately, let alone plan three to five years ahead with any certainty.
The current situation is extreme, but significant and unexpected disruption to business is now normal, just think geo-politics (Brexit, Donald Trump and the Chinese Communist Party), the environment (species extinction as well as climate change and other concerns too), technology (too many to list) and so on. And rarely does unexpected change have the decency to coincide with your annual planning and budgeting cycle.
How can businesses survive and thrive in such circumstances? An annual planning and budgeting cycle certainly hasn’t cut the mustard for some time; plans and even strategies need to be much more flexible and be reviewed and, if necessary, amended whenever necessary. I’m not suggesting chaos or that companies jump at shadows but recognition that things ain’t what they used to be.
It’s essential that companies have a clear purpose so they can assess whether their strategies and plans are still appropriate for achieving it in light of changing circumstances. Regular (say, quarterly and whenever else necessary) formal reviews of strategies and plans are necessary and any resulting changes to them made. The processes for that must be quick and efficient but not cursory. The reviews and changes must be slick but robust and controlled to ensure that Corporate governance is properly maintained.
A key aspect of all this is benchmarking performance against other comparable businesses, not necessarily competitors, to reveal outperformance deserving of bonuses or underperformance indicating where improvement is required. Continuous improvement is encouraged.
This approach makes business purpose, strategies and plans live and breathe rather than gather dust on the shelf and gives incentives to managers to seek improvements continually.
Different times require different approaches. Being responsive and flexible is crucial. It’s said, ‘Never waste a crisis.’ Don’t waste this one!