January 2015 - Carlson Management Consulting

ASK ETHAN: Sharpen Your Market Focus with Long-Term Planning

January 27, 2015/0 Comments/in Podcasts /by Dave Phillips

What does long term planning mean to your finance team? Join us as Ethan Carlson, CEO of Carlson Management Consulting, once more tackles our questions to supply you with answers and a new mindset designed to help empower your finance organization to look ahead.

Listen and subscribe to the Podcast on iTunes.

Transcript Highlights:

The following is an edited abstract from CFO Thought Leader’s “Ask Ethan” podcast featuring Ethan Carlson, CEO, Carlson Management Consulting, and Jack Sweeney, cohost of CFO Thought Leader.

CFOTL While frontline teams these days need to be responding quickly to changing events and opportunities, how does this impact the mind-set of organizations when it comes to long-term planning?

Ethan Well, from my perspective, having a long-range forecast or a long-range plan — something of greater than 3 years, say 3, 5, 7 years — is really a key component of the overall planning and forecasting process. It’s crucial to ensuring that the strategic alignment with your budget is maintained for a number of reasons. We see that having this in place allows organizations to have a thought process that’s focused not just on the immediate year’s results. In doing so, it allows the participants in the budgeting process or the planning process to take a step back and look at what the market looks like, what the macro trends are that they’re dealing with, and really be a little more thoughtful and strategic in the projections that they put in for what they want to accomplish.

It also allows people to — well, I don’t want to say take more risks — but to put ideas out there and to separate themselves a little bit from the process. Personally, I find that one of the big challenges in the annual budgeting process is that there’s a lot of gaming the system or sandbagging where a business owner won’t put forward their best projection because they know that hitting it is how they get paid their bonuses. So dealing or doing away with this is a great thing in that, often, these longer-range plans are not seen to have this same correlation, so people can often be much more transparent and can put stretch goals in place, which is really how organizations will evolve and improve.

I can think of one business leader I worked with for a number of years with whom we had to go through a 5-year projection as part of the beginning part of our budget process. Whenever we were doing our annual plan, he had more tricks up his sleeve — such as taking ways to hide backlog and things of that nature — so that he would always hit his annual budget and get his bonus. But when it came to the strategic plan, he was very thoughtful and did the market research and all that, so it was a very different process. So I think that this allows people to be more strategic but also to be more transparent on what’s possible in their business.

CFOTL Can you give us a sense of how organizations are modifying their approaches when it comes to long-term planning?

Ethan I think that the biggest thing that’s changing is the frequency and pace with which organizations are looking at longer-term projections. When I worked at GE a number of years back, we always had a long-range projection, but it was an annual exercise. I think that today this is happening much more frequently.

The pace of business that we’re dealing with, even in the last few years, has changed radically to where over the course of a week, or days even, a company’s outlook can change dramatically. Strategic events in the world or in their market can change and the long-term plan needs to be constantly reevaluated. What we’ve seen as much as anything is that the frequency of the model and the use of it is increasing. As a result, organizations are looking for ways to make this long-range projection easier and more accessible and more real-time.

Carlson February Events: Let’s Meet Up!

January 22, 2015/0 Comments/in News and Events /by Dave Phillips

We have a great February lined up! In partnership with Adaptive Insights, the leading cloud-based corporate performance management solution provider, we’ll be hosting “Lessons over Lunch” seminars in Detroit and Indianapolis. While the events are oriented towards finance leaders at manufacturing businesses, we will cover areas of interest for all finance professionals.

Kevin O’Brien, Vice President CMC

Topics presented by Kevin O’Brien, Carlson Vice President of Central Region, will include:

• Emerging finance trends for manufacturing
• Key performance metrics and advanced analytics
• Automating FP&A processes to save time and money
• Driving better and faster business decisions

Join us to find out how leading organizations, such as ThyssenKrupp Crankshaft, Yamaha, Bridgestone and Toyota, have transformed their businesses with cloud-based CPM solutions – quickly, easily, and affordably.

As an added benefit, you may be able to earn 2 CPE credits! Here are links to the event registration pages:

Detroit: Feb 11th from 11:30 AM – 2:30 PM at the Westin Southfield Detriot. Register here.

Indianapolis: Feb 12th from 11:30 AM – 2:30 PM at the JW Marriott Indianapolis. Register here.

Once again, you do not need to be working in manufacturing finance to attend. All are welcome! Please let us know if you have any questions about either event. If you have any colleagues or friends that you think would also be interesting in attending, feel free to share this post. We hope that you can join us on the 11th and 12th!

Advancing an Organizational Rhythm with a Rolling Review Process

January 20, 2015/0 Comments/in Podcasts /by Dave Phillips

Is a monthly review process part of your organizational rhythm? Join us as Ethan Carlson, CEO of Carlson Management Consulting, once more tackles our questions to supply you with answers and a new mindset designed to help empower your finance organization to look ahead.

Listen and subscribe to the Podcast on iTunes.

Transcript Highlights:

The following is an edited abstract from CFO Thought Leader’s “Ask Ethan” podcast featuring Ethan Carlson, CEO, Carlson Management Consulting, and Jack Sweeney, cohost of CFO Thought Leader.

CFOTL The last time you joined us, we discussed why and how certain organizations are more successful than others when it comes to realizing the benefits of a rolling forecast. How can organizations measure their success? How can they chart their progress?

Ethan Well, I think that the most important thing is that as you’re moving into rolling forecasting and creating more projections, you have to make sure that you’ve got a regular check-in. If you only keep generating projections and you don’t check how you’re doing against them, there’s no way to inform your models or how you’re coming up with your forecast, tracking real results and improving them. We think that it’s very important to have a regular rhythm where you’re projecting, or rather reviewing, those projections, I should say, at least monthly. And you should be making sure that these review processes include not only financial results, but also all of the drivers and key performance indicators in your budget and forecast models.

Rolling Forecasts: A Wish List Item Becomes a “Must Have”

January 14, 2015/0 Comments/in Podcasts /by Dave Phillips

Is your rolling forecast delivering all of what it promised? Join us as Ethan Carlson, CEO of Carlson Management Consulting, once more tackles our questions to supply you with answers and a new mindset designed to help empower your finance organization to look ahead.

Listen and subscribe to the Podcast on iTunes.

Transcript Highlights:

Rolling Forecasts: A Wish List Item Becomes a “Must Have”

The following is an edited abstract from CFO Thought Leader’s “Ask Ethan” podcast featuring Ethan Carlson, CEO, Carlson Management Consulting, and Jack Sweeney, cohost of CFO Thought Leader.

CFOTL So often, companies just don’t know where they stand today when it comes to forecasting. They’re asking themselves, “Are we falling behind? Have our competitors already figured out how to make forecasting a competitive advantage?” And yet I suspect that some companies would tell us that it’s not even a primary concern yet.

Ethan Carlson Well, I think it has to be. I think that we talked a bit last week about the pace of business decision-making and how fast things are happening now. I think that if you’re not doing a rolling forecast or changing the way you think about your projections and using this to your advantage, you’re really missing an opportunity to capture key information and make better decisions. If you go back historically and look at how organizations have thought about forecasting or budgeting, you’ll find that it was an annual exercise or done maybe every 6 months. The reality is that those are very arbitrary time frames. There are recent studies concerning forecasts and budgeting, and they’ve revealed that organizations using annual budgets find that they’re obsolete within the first two quarters.

And what happens at this point if you’re comparing yourself against information that’s not relevant? I can think of one example when I was back in a formal organization of mine. We locked in our budget in mid-December. We kind of closed for a week at Christmas and came back on January 2. Meanwhile, there’d been a major shift on one of our significant deals and our budget was completely obsolete. We had to redo the whole thing. It was a painful 2-week period for me and my team and really the whole management team. We had to kind of go through, reassess where we could, see how we needed to adjust, but we had to do it just the same. I think that we probably set a record there with a within-days-obsolete budget, but I think that a lot of organizations have experienced this, and if you’re not adjusting, your entire profit for your variance analysis is rendered relatively meaningless.

CFOTL So what are some of the primary reasons an organization may have to resist adopting a rolling forecast?

Ethan Carlson I think that the number one reason companies resist this today is the time that they think it’s going to take and the time it would take if they just took their current process and started doing it every month and extending the projections out an additional month so that they were always doing 12 months of projections. When we survey companies and ask how long they spend doing their annual projections, the numbers are quite staggering. A large number of companies spend 3 to 6 months putting these projections together. You obviously can’t do this every month. But if you come up with a more efficient, driver-based process that focuses on the key elements that impact the financial results and create a more streamlined process, you’re able to do this rolling forecasting more efficiently

Aligning Strategy and Forecasting

January 8, 2015/0 Comments/in Podcasts /by Dave Phillips

Why do so many organizations struggle to achieve an optimal alignment between strategy and forecasting? Join us as Ethan Carlson, CEO of Carlson Management Consulting, kicks off ASK ETHAN, our weekly podcast designed to supply answers to your most daunting questions as we explore the strategies and best practices that are now empowering finance to drive change.

Listen and subscribe to the Podcast on iTunes.

Transcript Highlights:

A New Year’s Resolution: It’s Time to Align Strategy & Forecasting

The following is an edited abstract from CFO Thought Leader’s “Ask Ethan” podcast featuring Ethan Carlson, CEO, Carlson Management Consulting, and Jack Sweeney, co-host of CFO Thought Leader.

CFOTL A number of our CFO guests have stated recently that aligning strategy and forecasting is top-of-mind for 2025. Why do you think this is?

Ethan Carlson Well, first off, we’re just entering the New Year, and most people have finished their annual budgeting cycles. This is not a topic that anyone particularly enjoys unless you are in finance. I think that Jack Welsh has the famous quote around budgeting being one of the most inefficient processes at most companies, and it’s really true. It’s amazing how many companies have a disconnect between what those three or four key strategic objectives are for the new year and how they are running their budget process. There is often no alignment between the two. What needs to happen is that everyone inside an organization should understand how their actions, their budgets, and their financial resources impact strategy.

CFOTL Please help us supply a reality check to finance leaders out there who would tell us, “Strategy and forecasting is already aligned. No problem. We’ve already done it.” What would be some criteria to help them determine whether this is so?

Ethan Carlson For me, I think that there are maybe two things that I would look at when first engaging with any customer or in any organization in which I’ve worked.

Your first benchmark is how many people are participating in your process around generating a forecast or generating a budget. If the answer is a handful, it’s probably not correctly aligned. You need to have an inclusive process that is bringing more people into the process. These are people who are actually making the decisions on a day-to-day basis on how the company really runs.

If they’re not involved, you don’t have this alignment. So I don’t know that there’s a firm number that’s right, but look at your organization and say, “Well, are there a significant number of key decision-makers and key drivers participating in our forecasting process?” And the answer to that has to be yes, if you’ve got this working.

The second thing would be to now take one of these people who are participating in the process and take any incremental spend that they’re making and say, “All right, explain how this relates to our strategic objectives.”

If there are any net new head count, any new capital purchase, or any financial objectives within your numbers, you should be able to say, “Well, that change in this line item is related to this activity, which is part of our tactics, which are going to line up to achieve the strategic results we’re looking for.” So, if you have that inclusive process and can have that linkage between the spend and the desired outcome, this is what you’re looking for.