Forecast Based Planning

The articles on forecast based planning prescribed in the course opened my eyes to the various shortcomings of such a methodology. On numerous occasions in the past, I had always relied on forecasts such as trend analysis and regression models to arrive at solutions for the future. The thought of questioning such a method never occurred to me as it was something which I always believed to be reliable.

The article titled “Forecasting- Myths and Reality” elaborated on how forecasting can be unreliable and pointed out its shortcomings. Given the various uncertainties associated with the future, any forecast can hardly be termed reliable. These uncertainties include the effect of people in the system whose behavior is random and based on instinct. Trying to predict human behavior is a futile exercise and since most plans made by organizations involve some level of human contact (internal or external), plans based on forecasting methods must be taken with a pinch of salt.

Inspite of the above stated shortcomings of forecast based planning, it is important to note that forecasting cannot be completely done away with. Hence, it is important to work within the constraints of such a method. The first step in developing a forecast should be in understanding the problem at hand and clearly defining it.

Having defined the problem, the time frame of planning should be considered. The forecasts can be segregated into various time frames – short term, medium term and long term. Such a breakup of the future period into different phases makes sense as different time periods have different requirements and needs. Taking these variables into considerations, a suitable tool to forecast must be selected. These steps, I believe, will help an organization use forecast based planning in a more structured manner and reduce the occurrence of error. However, success will depend on a lot more factors such as taking educated risks, being able to recognize patterns and ensuring effective action is taken in anticipation of these uncertainties.

Size of firm- an additional variable

Another perspective which I developed during the course of the discussion was that the size of the firm in question is also an important variable. As firms get larger, the number of products and markets served, the level of technological sophistication required and the complex economic systems involved often exceed the rationality and grasp of a manager. Large size firms will have greater uncertainty when it comes to predicting the future as there are many more factors which affect it – both internal and external. This additional factor of size of firm was ignored in the articles.

Such an in depth understanding into the forecast based planning methodology coupled with its limitations also went on to help me better appreciate the Scenario based approach to planning. The scenario based approach tries to tackle the drawbacks of forecast based planning as stated above and I personally believe that it is a more holistic approach to planning.

Strategic Planning Tool – The Goal Grid

The strategic planning tools such as Interpretive Structural Modelling (ISM) and SNAC that were discussed in class got me curious and led me to delve into other such planning tools prevalent in the industry. During the course of my study into alternate planning tools, one particular tool caught my attention- The Goal Grid.

Goal Grid

What struck me most about this method was its simplicity. Unlike other planning tools which would require consultants to make a detailed presentation to explain the procedure to the management, this method can easily be implemented without any elaborate training requirements.

The Goal Grid is a 2x2 matrix which is formed from four fundamental questions which help generate the grid:

1. What do you want that you don’t have? (Achieve)

2. What do you want that you already have? (Preserve)

3. What don’t you have that you don’t want? (Avoid)

4. What do you have now that you don’t want? (Eliminate)

Analysis using Goal Grid

The Goal Grid is a bottom-up approach which starts by segregating the goals into Achieve, Preserve, Avoid, and Eliminate.

Typically, in a process to implement Goal Grid, the participants first generate their grids individually. Then all the participants get together and engage into a dialogue aided by computers and recording devices. Flip charts and other technical tools can be used to further facilitate the process. The end of the discussion usually results in a consolidated grid.

Once the grid is populated on all its quadrants, a general idea of the over-riding goals can be ascertained. For example pollution can be placed in the Eliminate category and increasing product penetration can be placed in the Achieve section.

The Grid then helps organize the goals into “What they have” and “What they want.”

Uses

Being a simplistic process to implement, the Goal Grid can be used to kick start the process of Strategic Planning. It can help initiate a dialogue between all the stakeholders involved. It gives a platform for employees of the organization to voice their opinions on the goals they foresee for the company.

It also provides a way of managing and controlling conflicting goals and objectives within an organization. Being a simple two dimensional grid, it becomes easy for employees to observe and understand what the organization is attempting to communicate to them.

Drawbacks of the Goal Grid

Ironically, I believe the drawback of this tool lies in its simplicity. Managers today believe in hiring expensive consultants who provide complex frameworks for analysis, as they believe that the more complex the tool-the more effective it is.

I also believe that there could be a large scope for ambiguity. For example, if worded alternately, an “Eliminate” can be placed into an “Achieve.” Take the problem of pollution, it can either be placed in the Eliminate category or can be worded as ‘Improve surrounding environment’ and be placed in the Achieve category.

Taking an overall view of the planning tools and putting it in perspective with other tools such as ISM and SNAC, I believe that this is a simple yet highly effective tool to develop goal clarity. I also find it highly practical and believe such a simplistic tool can be used to even plan our own personal goals in life.

References

1. Nickols, Fred & Ledgerwood, Ray (2006). The Goals Grid as a Tool for Strategic Planning. Consulting to Management – C2M, 17(1), 36-38.

2. Nickols, Fred & Ledgerwood, Ray (2004). The Goals Grid. Consulting to Management – C2M, 15(4), 35-37.

3. Russell Ackoff (1981). On the Use of Models in Corporate Planning. Strategic Management Journal, Vol. 2, 353-359.