Traditional Forecasting: From Pitfalls to Improvements

avoid-pitfalls

 

Steve Player’s white paper “Managing Through Change: The Power of Rolling Forecasts” highlights a lot of important factors to note about traditional budgeting and forecasting rules and modernizing them to fit your business and generate cash. Traditional forecasting rules definitely improve your business processes, but improvements can always be made. There are many general approaches that are taken involving forecasting. Forecasts are used to predict what may happen in the future–a way to determine whether or not a pre-determined target will be met.

 

Player identifies some pitfalls to avoid as well as ways to leverage success, a list of do’s and dont’s.

Don’t:

  • Forecast to the wall
    • “The most common pitfall occurs when a company forecasts to the end-of-period. Instead of being a discussion about organizational direction and the risks and potential opportunities in getting there, the conversation quickly turns to one of performance evaluation and a revalidation of whether managers agree to earnings commitments. The conversation cannot be about the future if the future ends when the period ends.”
  • Confuse Forecast with Target
    • “Targets are aspirations or goals converted into quantified targets. Forecasts highlight a company’s direction.”
  • Insist on Forecast Accuracy in an Unpredictable world
    • The business environment today is chaotic and unpredictable. We can’t control the future. It’s more beneficial to focus on how to quickly react to change, not on how to control the change.
  • Forecast with Spreadsheets
    • This leads to excessive time wasted, and creates too much inefficiency. There are tools out there that can simplify these processes greatly.

Do:

  • Use today’s tools to visualize results
    • Today’s reporting tools allow for visually appealing, easy to understand, graphical analysis. This is dynamic and beneficial.
  • Focus on critical drivers, avoid excessive details
    • “The more detail an organization pumps into its plans, the more variances it needs to calculate and explain. Leading companies focus on the critical drivers that determine whether they will be successful.”
  • Match your forecasts with your ability to see
    • “One of the key benefits of adopting rolling forecasts is that management can focus on understanding the degrees to which they control the future, as well as the external events that force them to react.”
  • Use different time horizons for different decisions, but integrate systems
    • “Operational functions are engaged in short-term sales and operations planning to make sure current orders can be fulfilled in a timely manner.”
  • Move to advanced planning approaches
    • Continually planning has even replaced annual budgeting processes for more advanced firms.

 

 

 

Top 5 Bad Excuses for Resisting Legal Project Management

Clients are constantly calling for better efficiency and cost-effective delivery of legal services.01_homeSlide So why would any legal firm turn down an offer for legal project management, “a rapidly-maturing discipline that is the proximate consequence of the enormous pressures in-house legal leaders now face to trim budgets, choke back rampant costs and long-entrenched inefficiencies, and, particularly, keep a tight leash on outside legal spend.” ?

According to Pam Woldlow, there is no reason, and here are her Top 5 Bad Excuses for turning down Legal Project management:

1. My clients don’t want or need LPM: 

“While all clients may not understand LPM nomenclature, they all want what LPM delivers: better project scoping, better planning and budgeting, better communication and collaboration, and tighter monitoring and control of budgets and costs. Why else would we be seeing such a dramatic increase in RFPs, demands for hard budgets and serious movement towards more cost-effective alternative fee arrangements?”

2. If we are efficient, we won’t make as much money. (And the corollary: if we are efficient, we won’t be able to meet our annual hours requirement). 

“Clients notice which lawyers are careful stewards of their money and which ones deliver great services and great value. They also notice the lawyers who dawdle, churn, reinvent the wheel, communicate poorly, and manage matters indifferently…Efficient lawyers are sought after; inefficient lawyers face tough sledding.”

3. I’ve practice the way I do for decades, and I’m not going to change now. 

” This increasingly obsolete perspective ignores the inevitable collaboration needed by firms that have expanded exponentially, dispersed geographically, and have engagements  involving ever more cross-office participation. The fact that the Single Leader Approach no longer works – and that it does nothing to effectively disseminate accumulated knowledge — is not keeping lawyers threatened by change from insisting that it remains the one true service delivery path.”

4. All my matters are unique, and LPM imposes a bunch of lockstep protocols that will standardize all legal work and devalue my legal judgement. 

“The astronomical growth of Legal Process Outsourcing and other alternative legal delivery vehicles clearly demonstrates that in fact law is a lot more commoditized than most law firm lawyers prefer to think.”

5. LPM is all about monitoring and metrics, and my mamma didn’t raise me to be a math major. Also, LPM will impose a whole new learning curve and add a ton of additional work to my already overburdened schedule. 

“Law is not about clean room manufacturing protocols; it’s about the nuanced affairs and interactions of human beings. Fear not: lawyers will continue to be indispensable. LPM, while it may make productive use of templates and technologies, is fundamentally a matter of common sense and collaborative communication, consistently applied. It sharpens up legal processes, not legal content.”

Woldow concludes her article by making sure her readers know that from all of those she’s spoken to and all of the research she’s done, those who have mastered LPM tools say that “LPM eases their burdens rather than increases them.”