Short-term planning is an essential but often neglected capability. Organisations concentrate on meticulous planning for the next year, 36 months or even longer, but when a crisis like the global pandemic strikes, their planners often cannot suddenly adjust to providing accurate what-if scenarios covering the next three weeks.
They lack the tools or fast access to timely data to give the boardroom detailed insights and projections outlining how the business can get through the evolving crisis and maximise any new opportunities.
Analytics is a must-have for rapid scenario modelling
The Covid-19 lockdown has presented some of the toughest challenge’s businesses have had to face in decades. In the space of a few weeks, 800,000 businesses have put 23 per cent of the UK workforce on furlough. Companies had to adapt fast to the provisions of the government’s Coronavirus Job Retention Scheme and then again when the scheme was extended to October. The provisions of this scheme are vitally important to the survival of these businesses and their ability to take advantage of new opportunities. In addition, millions of employees are now working from home, self-isolating or looking after relatives. All these are factors having a major impact on how an organisation operates and plans its workforce requirements.
This is where organisations that use agile workforce and financial planning and analytics platforms are at a huge advantage. When a major event occurs such as the Covid-19 lockdown, instead of requiring a hugely complex set of new calculations that take many days or weeks to finalise, these analytics solutions can quickly adapt and produce a range of different scenarios, providing all the necessary detail for businesses to make informed decisions and plans.
From using predictive capabilities to plan for the next 12 month or five-year cycle, they have been able to telescope their horizons to mere weeks ahead. Sandboxing systems built into analytics platforms offer the power to create different positive or negative scenarios very rapidly. Companies with the foresight to acquire these capabilities have been able to address the challenges of lockdown, and then adapt their plans almost instantly as furlough rules and market conditions change.
Fuelled by automated, accurate, clean data
Analytics platforms have the advantage of being fuelled by automated data collection and collation. Nobody has to ring round asking for new sets of figures when major unexpected events occur. Automation ensures accuracy and most importantly, hugely greater confidence in outputs.
As Covid-19 lockdown measures were announced, companies using planning analytics were able to plan in detail who to furlough and how to restructure the workforce according to various parameters, taking into account salaries, commissions, bonuses, share schemes and so on. The consequences of furloughing individuals are all fully played out, so that, for instance, business-critical staff are retained full-time, while others already seeking to move to part-time work, have their request accommodated.
Cashflow is king
Providing a 360-degree set of scenarios, financial planning and analytics are vital in helping build a complete picture. They feed important data into the scenarios, such as how debtors and creditors could behave with lengthening payment cycles, the impact of that behaviour on the organisation, and how it might have to adapt as the entire supply chain and customer base is affected. This, in turn, feeds into scenarios about whether to delay bonus payments, or whether to defer new expenditure on what had been considered a key project. And if, for instance, the government introduces new measures around the payment of National Insurance or business rates, these can be quickly fed into the modelling.
Each scenario demonstrates the impact on cashflow, which is uppermost in minds when a sudden crisis erupts. Each projection demonstrates the financial impact of restructuring the workforce in a short timescale, with the aim of allowing the business to continue with minimal disruption, loss of capacity or quality of output.
Boosting performance whatever the economic weather
The agility enjoyed by organisations using workforce and financial planning and analytics has given them significant advantages. Even before the coronavirus pandemic, businesses employing workforce and financial planning and analytics were reaping the rewards. Research by IBM found that organisations deploying workforce analytics systems are 66 per cent more likely to increase HR performance efficiency without increasing headcount.
Businesses still relying on spreadsheets, however, remain at a huge disadvantage. It is impossible to run multiple scenarios quickly and have confidence they provide a full and accurate picture. Different teams always collect and use data for their spreadsheets in different ways. Analytics solutions, by contrast, automate the inputs on a vast scale to a common standard. And unfortunately, we know that nearly nine-out-of-ten spreadsheets contain errors. Unfortunately, this approach continues to be used in many organisations despite these well-known problems. A survey of 500 finance and technology professionals last year found 23 per cent said their company’s traditional reliance on manual spreadsheets meant they had none of the benefits of analytics technology.
This is disappointing. Companies should have grasped by now that they must use their data more effectively for both long-term and short-term planning. This must be a business-wide, multi-dimensional approach with automated data inputs from across the organisation so that the knock-on effects of one set of decisions is seen to play out across all functions and departments. Siloed data and departmental defensiveness have to go. Data has to come from all corners of the business including sales, procurement, supply chain, back-office, marketing, IT and HR. It must flow consistently and be accurate, which is only achievable through automation.
Embracing an approach that identifies and responds to changes as they happen in the moment, is necessary for success at all times, not just unprecedented events. As consultants McKinsey pointed out in The five trademarks of agile organisations, companies need “rapid learning and fast decision cycles which are enabled by technology”. By technology, the authors mean the smart use of data analytics to model scenarios and plan for all eventualities.
But when an event as potentially crushing as a global pandemic strikes, organisations that have truly agile analytics platforms can be confident they have the full 360-degree view of threats and opportunities and can run accurate scenarios very rapidly. There can be no better platform for short-term planning and critical decision-making. These capabilities put the organisation in a far better position to ride out the storm and recover fast when economic conditions improve.
Mark White, Finance Performance Specialist, MHR