Change Your Forecasting Process to Relieve Unnecessary Pressure and Drive Momentum
September 24, 2020
4 minute read – Following are just a few practices that many leaders have found to be invaluable for their forecasting process.
Prepare your Board that you won’t “get it right”. As you begin budgeting and forecasting, now is a good time to let your Board know that there will be a range of possible outcomes, or paths, for them to discuss, versus only focusing on one projected outcome. Ultimately, you will gravitate to a base path. However, preparing the Board for multiple outcomes allows future conversations to revolve around the external forces and opportunities that are coming into play and affecting where you are in the range of outcomes.
Leadership teams and boards have placed high value on this mindset shift, as it relieves the unrealistic expectation to “get it right”. This helps leadership to take a much more strategic approach to the budgeting and forecasting process.
Roll up your sleeves as a senior leadership team and use this as an opportunity to strengthen your strategic outcomes and focus. Getting the team together to discuss and debate the various options for connecting your strategy with your financial performance is an absolute must. It is so powerful for everyone to participate at the same time. While initially it may seem like a huge resource investment, the results far exceed the typical, and often siloed, approach of asking everyone to submit their numbers and having the conversations one department at a time.
Also, modeling technology is fast enough today to enable the team to see financial impacts as they are discussing and debating the allocation of financial and human resources. The result is faster agreement on strategic priorities, and longer lasting recall as to why they are the priorities. This helps people remain focused on strategic implementation throughout the year, rather than underground or pet projects getting undue attention.
Break it down into bite-sized pieces. For example, this can be very helpful in setting loan targets. In addition to, or instead of, communicating in the millions of dollars of loan growth required, break it down into the rough number of new loans needed by category. These smaller bite-sized pieces help people feel like meeting the targets is much more doable. From there you can also help visualize how much your pull-through rate needs to increase and the additional applications you need to receive to help reach your targets.
Don’t let the COVID blues take over. Depending on the day or even the hour, the COVID blues can enter the picture. While it is important to evaluate risks, it is equally important to remain positive and create new opportunities. Spending activity may be lower, but people are still spending.
Look at other businesses that have soared in this environment. They often represent consumer sentiment, think Peloton. Isn’t Peloton just a stationary bike? Look at how they continuously evolve, and they were doing this pre-COVID when open gyms were plentiful.
Financial institutions can do the same thing. Take what you learn from growing sectors and how they have responded, and imagine what your organization can do to create your own opportunities. Some CEOs are strongly encouraging their teams to experiment more with repackaging and remessaging of their products and services. This can be a lower cost endeavor that may result in increased revenue and value to the consumer. A question is: Are you committed enough to include a pilot program in your forecast?
These are just a few of the many practices leaders can use to manage expectations and keep momentum to drive results.