Page 85 - Performance Leadership

74 • Part II Operational and Analytical Dimensions

the organization is being perceived and what is expected of the organ-
ization. Structurally thinking about the consequences of these changes
demonstrates that the organization doesn’t close its eyes to the envi-
ronment. Just as with people who act effectively within their environment,
external perception influences self-perception.

Rolling Forecasts

The management process with the greatest impact in most organiza-
tions is the budget. It is also the most rigid process, leading to signifi-
cant frustration. Budgeting processes are expensive, take a long time,
are often based on negotiation and power; but they fail to optimize the
use of corporate resources. As a result, many budgeting processes lead
to dysfunctional behaviors, such as gaming and measure fixation. Bud-
geting is often structured as the donut model. Every year a new budget
cycle is started. Discontinuities, during the year, may lead to a new
forecast, but they do not change the budget. When it is time for the
final variance analysis, chances are that the new situation cannot really
be compared with the old situation, and all games begin again.
Many organizations are already adopting rolling forecasts. A rolling
forecast is typically a monthly or quarterly process that evaluates the
last period and updates the forecast for the next periods—four or five
quarters, or twelve to fifteen months.
In the beginning of the first quarter of the year, the fourth quarter is
evaluated and based on what is learned, the forecast for the first to the
fourth quarter is updated, and becomes the new target. In that first
quarter of the year, there should be some progress toward the forecast;
and in the beginning of the second quarter, based on the feedback, the
forecast is updated again. This updating process never stops regardless
of which period of the year it is. The artificial event of a new year does
not affect the process.
However, for public companies a new quarter or a new year still has
a significant business impact. Perhaps during the last month of a quar-
ter, there is even a weekly rolling forecast and during the last week of
the quarter perhaps even a daily process. Moreover, the concept of a
rolling forecast doesn’t prescribe it should be a periodic process to start
with. Periodic attention makes sense to keep the right focus on the