What drives satisfaction in Planning and Forecasting processes?

I have the privilege of meeting FP&A practitioners from a wide variety of companies across the US and Canada each year, through the many conferences that I present at. About a year and half ago, we started conducting a survey to better understand the practices and perceptions around Performance Management of the conference attendees.

The process has been a learning one for us. At first, the results were mixed: on average, FP&A respondents told us that satisfaction levels were near “average” (just over 2 on a 4 point scale). This led to some early conclusions that we are not getting enough “bang for our buck” out of the investments made in FP&A.

We continued to add respondents to the survey, and the group is now large enough to begin drawing some very interesting insights.

As we should expect, averages can of course be misleading. The data actually breaks down to show that there are two distinct groups: satisfied planners and unsatisfied planners. Our focus has shifted to seeing what the factors are that distinguish the satisfied group from the other.

Our first observation is that budget longevity is longer in the satisfied group; budgets generally deteriorate in usefulness over the fiscal year – but the usefulness of budgets is much longer in the satisfied group than in the other. This leads to two possible conclusions in a classic chicken/egg discussion: Are FP&A teams more satisfied when their budgets last longer, or does greater satisfaction with budget processes leads to better longevity? I believe that, when we look at the other factors identified, the latter is the case. Let’s explore further…

One distinguishing factor is the level of detail used in budgets. The satisfied group reported that budgets are developed at a higher level of detail (we asked about level of expense line item detail, level of cost center detail, and level of revenue detail). This aligns with what we often find anecdotally: lower level of detail decreases organizational satisfaction, increases the time required to complete the budget, and sometimes produces less accuracy because it forces a micro-level planning process which is by nature more conservative.

We also found that budget cycle times are inversely correlated with satisfaction; the more satisfied organizations “get ‘er done” more quickly than others. This drives satisfaction in two ways: first, it reduces the load on the organization and allows them to get back to running the business; and second, the shorter cycle means that it can start later in the year, thus providing a more realistic starting point for the budget projections.

There are many other findings to share. I’ll be writing more on this in future blogs, and providing a white paper shortly that provides the detailed results.

This research is also featured on the Performance Management Edge video series (#5).