The saying “He who fails to plan, plans to fail” is often quoted to emphasize the importance of planning. However, exceptionally rapid global, social, geopolitical, and market changes have turned the planning process into solving equations with too many unknowns. While it was common for organizations to have five-year or even ten-year plans about twenty years ago, reflecting the belief that the future is easily predictable within a relatively narrow range of variations, the corona crisis and deglobalization have led to an uncertain environment becoming the ‘new normal’.
How can one even plan in such circumstances? Which variables to start with, should multiple scenarios be developed? Can and should small companies plan? We sought answers to these and many other questions from a number of experts in the field and also explored what typical planning looks like in Croatian companies.
It is not carved in stone
– The planning process and content depend on the size of the company and the industry in which it operates. For example, a manufacturing company needs to have sales, production, procurement, payroll, financing plans, etc. All individual plans are consolidated into a central plan, which manifests itself in the form of projections of financial statements – income statements, balance sheets, and cash flows. All departments in the company should be involved in the planning process in the context of providing input from their area of work. Usually, the finance or controlling department coordinates the entire process, consolidates individual plans, and reports to management and other stakeholders on the results of the plan and its realization, explained Mario Kurtović, an independent credit analyst, adding that recently there has been a noticeable trend among large companies to apply rolling forecasts, i.e., revising the plan at certain intervals, usually quarterly.
– In this way, the results achieved up to that point are reflected, but new information and changes that are expected are incorporated into new projections, which has become extremely important in today’s VUCA context (V – volatility, U – uncertainty, C – complexity, A – ambiguity), Kurtović explained.
That a business plan is not a document carved in stone but a living document designed to be revised and changed in accordance with the development of the business and market conditions is also considered by Dražen Oreščanin, co-founder and partner at Poslovna inteligencija, where plans are revised two or three times a year and expectations are adjusted, along with standard monthly monitoring of achieved results and their comparison with the previously set plan.
– We always plan cautiously and carefully, considering the global situation and especially the markets that are most important to us. The experience from the 2008 crisis taught us that we must have enough cash to meet obligations on time and to timely notice disruptions that will reflect on our results. Therefore, when preparing the annual plan, we take into account already contracted jobs plus those we believe we can count on, and we do not include uncertain ones, as we do not want to enter into ‘if it goes, it goes’ situations, Oreščanin noted.
The 2008 crisis also taught caution to Božidar Ledinka, owner of Galko, who says that after that crisis he stopped planning multi-year.
