Many organizations are embracing Agile concepts for project implementation, where cycle times are short and iteration is embraced as a tool to ensure that results meet goals. How can planners adopt Agile as part of their forecasting processes?
Fortunately, two established tools in the planning arsenal are well positioned to assist when used together. The balanced scorecard (BSC) and continuous planning (CP) are both enterprise planning approaches that embrace the idea of a "living document" rather than a static, unchanging plan that only grows less relevant as rapid market changes roll on.
But for many enterprises, using the balanced scorecard or continuous forecast separately isn't enough and could leave gaps in financial planning and budgeting. To explain the way the two approaches can work in tandem, here is a guide to the various strengths and weaknesses of the two approaches.
"Utilizing simply a balanced scorecard or continuous forecast separately isn't enough."
Marching Orders, Fed by Sought-After Results
Already in extensive use as a strategic planning and management system in business, government, and nonprofit organizations worldwide, the BSC is designed to align business activities with organizational goals. As a set of measures designed to give top managers a fast but comprehensive view of the business, it takes certain generalized goals from disparate – yet interconnected - areas, such as the customer perspective, the internal perspective, innovation, and profitability, and zeroes in on the most important measures. Already over 50 percent of large US firms have adopted the BSC, as well as more than half of the major companies in Europe and Asia, with use growing in those areas as well as in the Middle East and Africa, according to research by Gartner Group.
Through the BSC, an enterprise sets targets and measures results against those targets, essentially acting as a form of "marching orders" rather than an inflexible set plan. These "orders" provide the performance measures as well as the actions needed to achieve the desired metrics, and thus guide the sought-after results generated from continuous planning. In turn, CP provides regular and timely feedback — in greatly reduced cycle time — to the BSC relative to target achievement.
In this way, the two strategies have a symbiotic relationship: the BSC provides input to CP, showing how the impact of changes in one area of the business impacts other areas. An example might include how comprehensive employee training improves employee retention and customer service, which in turn results in higher levels of customer satisfaction, which translates to improved customer retention and finally to increased sales.
The BSC allows for the more complete and accurate construction of a forecast through CP. A business has solid daily metrics by which its success can be accurately measured. Working together, the two approaches allow for analysis of how changes in one part of the business affect downstream operations — vital to keeping an enterprise agile enough to accommodate changing market conditions.