Given what’s happened with the sales results, the plan-as-you-go planning process indicates in this example that systems sales are going badly, but there are other sales that can make up the problem.
Do you change the plan? That’s where the management comes in. Get the people together and talk about it. Why are systems sales so much less than plan? Were the assumptions wrong? Was the plan too optimistic? Has something happened — new competition, for example, or new technology, or something else — to change the situation as it was planned.
What about the people? Here’s where you have to manage expectations and follow up. Do you have metrics on sales presentations, leads, close rates? Have the people been performing, but just not getting the sales? Was your pipeline assumption wrong?
For this example, let’s say we decide to adjust the sales forecast to absorb some changed assumptions. The next illustration shows the new sales forecast, after adjustments.
The illustration shows the revised plan in the April and May columns, even before they happen, to reflect the changes shown in the January-March period. Why would we work with an obsolete plan when the situation has changed.
Does this blow the plan vs. actual comparisons for future months? Not if you make the changes correctly, with everybody on the team being aware of them. You just keep moving your plan forward in time, revising for future months.
In the end, it’s not a game. So what if you change the scoring in the middle. The point is managing the company better. Since the company knew systems sales would be down, it has planned on it and made a revised forecast in the actuals area. The same revision affects projected profits, balance sheet, and — most important — cash.
Tim Berry is the founder and chairman of Palo Alto Software and Bplans.com. Follow him on Twitter @Timberry.
