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Why Most Product Launches Fail

Flaw 1: The company can’t support fast growth.

The Lesson: Have a plan to ramp up quickly if the product takes off.

Mosquito Magnet:
In 2000 we worked with American Biophysics on the launch of its Mosquito Magnet, which uses carbon dioxide to lure mosquitoes into a trap. The timing was perfect: The West Nile virus scare had elevated mosquitoes from irritating nuisances to life-threatening disease carriers. Mosquito Magnet quickly became one of the top-selling products in the Frontgate catalog and at Home Depot. But American Biophysics proved more adept at killing mosquitoes than at running a fast-growing consumer products company. When it expanded manufacturing from its low-volume Rhode Island facility to a mass-production plant in China, quality dropped. Consumers became angry, and a product that was saving lives almost went off the market.

Flaw 2: The product falls short of claims and gets bashed.

The Lesson: Delay your launch until the product is really ready.

Microsoft Windows Vista:
In 2007, when Microsoft launched Windows Vista, the media and the public had high expectations. So did the company, which allotted $500 million for marketing and predicted that 50% of users would run the premium edition within two years. But the software had so many compatibility and performance problems that even Microsoft’s most loyal customers revolted. Vista flopped, and Apple lampooned it in an ad campaign (“I’m a Mac”), causing many consumers to believe that Vista had even more problems than it did.

Flaw 3: The new item exists in “product limbo.”

The Lesson: Test the product to make sure its differences will sway buyers.

Coca-Cola C2:
For its biggest launch since Diet Coke, Coca-Cola identified a new market: 20- to 40-year-old men who liked the taste of Coke (but not its calories and carbs) and liked the no-calorie aspect of Diet Coke (but not its taste or feminine image). C2, which had half the calories and carbs and all the taste of original Coke, was introduced in 2004 with a $50 million advertising campaign. However, the budget couldn’t overcome the fact that C2’s benefits weren’t distinctive enough. Men rejected the hybrid drink; they wanted full flavor with no calories or carbs, not half the calories and carbs. And the low-carb trend turned out to be short-lived. Why didn’t these issues come up before the launch? Sometimes market research is skewed by asking the wrong questions or rendered useless by failing to look objectively at the results. New products can take on a life of their own within an organization, becoming so hyped that there’s no turning back. Coca-Cola’s management ultimately
deemed C2 a failure.

Flaw 4: The product defines a new category and requires substantial consumer education—but doesn’t get it.

The Lesson: If consumers can’t quickly grasp how to use your product, it’s toast.

In 2004 P&G launched a scent “player” that looked like a CD player and emitted scents (contained on $5.99 discs with names like “Relaxing in the Hammock”) every 30 minutes. The company hired the singer Shania Twain for its launch commercials. This confused consumers, many of whom thought the device involved both music and scents, and the ambiguity caused Scentstories to fail. When a product is truly revolutionary, celebrity spokespeople may do more harm than good. A strong educational campaign may be a better way to go. The product’s features provide the messages to build brand voice, aided by research and development teams, outside experts, and consumers who’ve tested and love the product.

Flaw 5: The product is revolutionary, but there’s no market for it.

The Lesson: Don’t gloss over the basic questions “Who will buy this and at what price?”

Segway:
The buzz spiraled out of control when news of a secret new product code-named Ginger and created by the renowned inventor Dean Kamen leaked to the press nearly 12 months before the product’s release. Kamen, it was said, was coming up with nothing less than an alternative to the automobile. When investors and the public learned that the invention was actually a technologically advanced motorized scooter, they were dumbfounded. Ads showing riders who looked like circus performers perching on weird-looking chariots didn’t help, nor did the price tag—$5,000. Instead of selling 10,000 machines a week, as Kamen had predicted, the Segway sold about 24,000 in its first five years. Now it sells for far less to police forces, urban tour guides, and warehouse companies, not the general public. If there was ever a product to disprove the axiom “If you build it, they will come,”
it’s the Segway.


Diringkas dari:
Why Most Product Launches Fail (Joan Schneider and Julie Hall)
Harvard Business Review (April, 2011)




Analisis PEARLS: Ukuran Tingkat Kesehatan Koperasi Kredit (Credit Union)

PEARLS merupakan alat monitoring yang dinamis yang secara terus-menerus akan disesuaikan oleh World Council of Credit Unions (WOCCU) untuk memenuhi kebutuhan Credit Union. Dari sudut pandang manfaat, PEARLS adalah sistem pemantauan tingkat kesehatan Credit Union yang terdiri dari 41 indikator  keuangan kuantitatif. Tiap-tiap indikator mengacu pada prinsip kehati-hatian. Semua indikator diarahkan untuk saling berhubungan dan dapat digunakan sebagai dasar analisis yang cepat, mudah, akurat dan lengkap terhadap kekuatan dan kelemahan keuangan Credit Union. Semua rasio keuangan PEARLS dapat disarikan ke dalam satu halaman informasi.

Beberapa fungsi PEARLS antara lain.

  1. Alat pantau yang dapat membandingkan antar koperasi.
  2. Alat ukur standar kinerja usaha koperasi.
  3. Suatu sarana manajemen
  4. Evaluasi stabilisasi keuangan koperasi.
  5. Merupakan alat manajemen kehati-hatian sebelum merugikan.
  6. Alat untuk mengetahui kelemahan yang perlu diperbaiki.
  7. Merupakan seperangkat rasio/indikator keuangan yang membantu standarisasi.
  8. Secara jelas mendemonstrasikan dimana masalah tersebut berada
  9. Alat yang dapat digunakan untuk membandingkan dan merangking Credit Union dengan berbagai cara, antara lain Kelompok Credit Union, Wilayah Geografi, dan/atau Nasional

Secara khusus, masing-masing komponen PEARLS ditunjukkan pada bagian berikut.

P =      Protection (Perlindungan)

  1. Cadangan Risiko Pinjaman merupakan sumber utama perlindungan. Dana Cadangan Umum dipakai sebagai usaha terakhir.
  2. Tingkat kelalaian kredit berhubungan langsung dengan cadangan risiko pinjaman.
  3. Tiap 3 bulan semua kredit lalai di atas 12 bulan dihapus-bukukan (charge-off).
  4. Pengembalian kredit yang telah dicharge-off dipakai untuk menambah cadangan risiko pinjaman..

E =      Effective Financial Structure (Struktur Keuangan Efektif)

  1. Struktur keuangan merupakan variabel yang sangat penting yang akan mempengaruhi pertumbuhan, tingkat keuntungan, dan efisiensi.
  2. Struktur keuangan secara konstan berubah dan harus dikelola secara cermat, khususnya pada kondisi pertumbuhan yang cepat.
  3. Pola kebijakan harus diterapkan secara ketat.

A =      Asets Quality (Kualitas Aset)

  1. Kualitas aset merupakan variabel utama yang mempengaruhi keuntungan Credit Union.
  2. Tingkat kelalaian kredit harus dihitung dengan tepat dan ditagih dengan tekun.
  3. Simpanan saham, simpanan non-saham, atau hutang tidak boleh dipakai untuk membayar aset yang tidak menghasilkan..

R =      Rates of Return and Costs (Tingkat Pendapatan dan Biaya)

  1. Pendapatan dan biaya berpengaruh langsung pada tingkat pertumbuhan credit union.
  2. SHU terbagi dianggap sebagai biaya berbunga dan pengurangan laba bersih.
  3. Penyisihan Penghapusan Piutang dianggap sebagai bagian biaya operasional.

L =      Liquidity (Dana Likuid)

  1. Kecukupan likuiditas diperlukan untuk menanggulangi penarikan permintaan anggota.
  2. Pemeliharaan tingkat likuiditas memerlukan biaya sehingga perlu ditekan seminimal mungkin.
  3. Induk dan Pusat Koperasi perlu mengatur dan mengelola sistem likuiditas ini.

S =       Signs of Growth (Tanda-tanda Pertumbuhan)

  1. Pertumbuhan mempengaruhi struktur keuangan koperasi sehingga harus dipantau dengan cermat.
  2. Pertumbuhan total aset adalah indikator sangat penting karena mempengaruhi rasio PEARLS lain.
  3. Informasi ekonomi makro dapat dipakai sebagai acuan tingkat pertumbuhan.

Sumber:

http://puskopditbag.org/wp-content/uploads/2014/06/ANALISIS-PEARLS.ppt

http://tentangcreditunion.blogspot.co.id/2012/08/analisis-pearls.html

 

 




“How to Improve Your Finance Skills (Even if You Hate Number)”

Harvard Business Review (March 31, 2017)

By Rebeeca Knight

If you’re not a numbers person, finance is daunting. But having a grasp of terms like EBITDA and net present value are important no matter where you sit on the org chart. How can you boost your financial acumen? How do you decide which concepts are most important to understand to your work and your understanding of the business? And who’s in the best position to offer advice?

 What the Experts Say

Even if you don’t need to know a lot about finance to do your day-to-day job, the more conversant you are on the subject, the better off you’ll be, according to Richard Ruback, a professor at Harvard Business School and the coauthor of the HBR Guide to Buying a Small Business. “If you can speak the language of money, you will be more successful,” he says. After all, if you’re trying to sell a product or strategy, you need to be able to demonstrate that it is both practical and high margin. “The decision-makers will want to see a simple model that shows revenue, costs, overhead, and cash flow,” he says. “They need to see why it’s a good idea.” Joe Knight, a partner and senior consultant at the Business Literacy Institute and the coauthor of Financial Intelligence, says that an absence of financial savvy is “career-limiting.” If you’re unable to contribute to a discussion on the company’s performance, you’re unlikely to advance. “You are not going to be involved in running projects unless you understand the financials,” he says. Here are some strategies to improve your financial intelligence.

 Overcome your fears

Stop avoiding finance because you’re afraid of numbers. It’s not rocket science, says Ruback. Think of it this way, “Finance is the way businesses keep score. It’s like counting balls and strikes in baseball,” but instead you’re “measuring progress through financial performance,” he says. “It’s not that complicated.” Besides, the math is easier than you might think, says Knight. “Finance and accounting are very simple. It’s mostly addition and subtraction and occasionally some multiplication and division,” he says. “There’s no magic.”

 Learn the lingo

There may not be any magic to finance, but there is a fair amount of jargon. Fortunately, there are many ways to learn the terminology, says Knight. You “just need to take initiative,” he says. If your company offers internal finance training, take advantage of it. If it doesn’t, consider enrolling in an online or community college class. Of course, there are also myriad books and reference guides on the topic. The most important concepts to grasp are “how to measure profitability, EBITDA, operating income, revenue, and operating expenses,” he says. A finance textbook or reference guide is a good investment; but “Google works too,” he says.

 Tackle the balance sheet

Next, says Knight, you need to immerse yourself in your organization’s income statements. “Take an interest in the balance sheet and then do the due diligence to understand it,” he says. The best way to learn, says Ruback, is to “reproduce the numbers” either electronically or on a sheet of paper and then “group them into categories so you can start to see how much your company spends and where it makes money,” he says. Convert the numbers to percentages so you more easily visualize the breakdown of revenue and expenditures. “You want to see the big picture.”

 Focus on key metrics

Boosting your financial expertise requires figuring out the metrics by which your company measures success. Your goal is to develop a deep understanding of the precise “link between profit and loss” and how that affects your organization’s performance over time, says Knight. That metric is often expressed in the form of a ratio. “There are four ratios common in every company: profitability, leverage, liquidity, and operational efficiency,” he says. And every organization has “two or three ratios within” those groups that are considered its primary measures of performance, in addition to “industry-specific ratios.” Paying closer attention to your company’s balance sheet and “listening to your company’s quarterly earnings calls” is helpful in getting a handle on these metrics. “They’re not hard to calculate. It just takes effort,” he says.

 Play with numbers

Once you have a solid understanding of the balance sheet and what drives your company’s growth, try “experimenting and playing with the numbers” by going through a “series of ‘what if?’ scenarios,” says Ruback. For instance, What if prices were lower? What if revenue was higher? What if costs go down or up? “You’re not managing specific business decisions, you’re trying to understand and internalize how the models work” and the assumptions they make. That way, when you do need to “tabulate the consequence of a particular decision,” such as, whether or not to launch a new product or shut down a factory, you have the tools to do so. “People think budgets are static. But in most instances, you run the models to figure out what’s important and how much room there is for error.”

 Find a financial mentor

Connecting with a “senior financial or operations manager” who can “teach you,” and “answer your questions one-on-one” is another way to get better at finance, says Knight. “It’s a very natural way to learn,” he adds. Ruback agrees. “Mentors are always helpful for someone who is not good with numbers,” he says. This person can both help explain concepts and serve as a sounding board for any financial decisions you need to make. Ruback suggests asking your colleague “to try to replicate” your projections and models when needed. “It sharpens your focus,” he says. “You find that Jane made certain assumptions, while you made others. One is not right and the other is not wrong, but [the differences] help you figure out what’s reasonable.”

 Make it personal

Still lacking motivation? Make improving your financial skills, says Knight. “Every time you are paid, your organization makes less profit. So you need to think about what you can do to help the company remain profitable or be more so.” The goal is to develop an understanding of how your day-to-day actions help your employer to “drive revenue or mitigate costs,” he says. “Think of yourself as a miniature profit and loss statement: How do you add value?” This can be a useful exercise, but don’t let it consume you, says Ruback. After all, it’s easier to determine your impact on the bottom line if you’re in sales, but it’s not as straightforward if you’re in, say, HR. “Integrate your role with the contributions of others,” he says, “and focus on the problems you can control, not the ones you can’t.”




Strategic Capabilities as A Competitive Priorities

Literatur tentang strategi operasi dan strategi manufaktur mendefinisikan competitive priorities sebagai kemampuan strategis yang dapat membantu perusahaan untuk menciptakan, mengembangkan dan mempertahankan keunggulan kompetitif yang dikaitkan dengan tuntutan pasar di mana perusahaan bersaing. Sebagian ahli menawarkan enam aspek yang dapat dijadikan sebagai kriteria pengukuran competitive priorities, yaitu quality, cost, delivery, flexibility, customer focus dan know-how.  Namun demikian, terdapat kesepakatan umum bahwa competitive priorities terdiri dari unsur-unsur flexibility, cost, quality, dan delivery.

  • Flexibility diartikan sebagai kemampuan untuk menanggapi secara efektif kondisi lingkungan yang selalu berubah dan hal ini diperlukan pada saat menghadapi ketidakpastian. Di dalam konteks operations management, flexibility tersebut mencakup berbagai hal antara lain, product flexibility (the ability to add or substitute easily new parts), volume flexibility (the ability of a manufacturing system to vary total production volume economically), mix flexibility (the ability of a firm to produce different combinations of products economically and effectively), machine flexibility (the ability of a machine to perform different types of operation without requiring a prohibitive effort in switching from one to another), labour flexibility (the ability of the workforce to perform a broad range of manufacturing tasks economically and effectively), market flexibility (the ability to adapt to a changing market environment easily), process flexibility (the ability of a manufacturing system to process a given set of components with different processes, operations sequence and materials), new product flexibility (the ability of a manufacturing system to introduce and manufacture new parts and products), dan expansion flexibility (the ability to increase capacity and capability easily when needed).
  • Quality merupakan senjata persaingan di marketplace. Hal ini dilakukan dengan membuat produk atau mendelivery jasa yang memenuhi atau melebihi kebutuhan dan harapan pelanggan. Kualitas dapat didefinisikan berdasarkan berbagai perspektif. Defenisi awal menyatakan bahwa kualitas adalah “fitness for use”. Definisi lain berbunyi kualitas adalah “excellence, value, conformance to specifications and meeting or exceeding customers’ expectations”. Dengan demikian, dapat disimpulkan bahwa perspektif pelanggan terhadap kualitas merupakan titik fokus semua definisi kualitas. Garvin menawarkan 8 dimensi kualitas, yaitu performance, features, reliability, conformance, durability, serviceability, aesthetics, dan perceived quality.
  • Cost: Michael E. Porter berpendapat bahwa keunggulan bersaing dapat dicapai dengan mengimplementasikan 3 jenis strategi generik, yaitu cost leadership, differentiation, dan focus. Dua strategi yang pertama bergerak pada semua market segment, sementara strategi yang terakhir diarahkan untuk target market yang lebih sempit. Pada saat perusahaan bersaing dengan margin yang rendah, strategi prioritas adalah cost leadership. Implementasinya adalah dengan melakukan pengawasan yang intensif terhadap karyawan, pengendalian biaya yang ketat, pelaporan yang rutin dan rinci, dan tanggung jawab yang terstruktur dan jelas.
  • Delivery. Konsep delivery merupakan konsep kapabilitas yang berkaitan dengan isu waktu dan mencakup panjangnya lini produksi di dalam perusahaan, waktu yang dibutuhkan untuk melakukan penghantaran produk dan jasa ke pelanggan, kecepatan untuk melakukan pengembangan produk, dan kecepatan perusahaan untuk melakukan improvement atas produk dan jasa. Secara singkat, persoalan delivery adalah konsep on-time delivery, faster delivery, dan new product/service development speed.



Corporate Social Responsibility (CSR)

 

Menurut Guidance Standard on Social Responsibility, ISO 26000:2010, Corporate Social Responsibility (CSR) adalah “…….. the responsibility of an organization for the impacts of its decisions and activities on society and the environment”. (http://accsr.com.au/what-is-csr/). Tanggung jawab tersebut dilakukan melalui praktik perilaku etis dan transparan yang berkaitan dengan (1) kontribusi terhadap pembangunan berkelanjutan, termasuk di bidang kesehatan dan kesejahteraan masyarakat; (2) memperhatikan harapan-harapan dari pemangku kepentingan (stakeholders); (3) Taat hukum dan konsisten dengan norma-norma perilaku internasional; dan (4) terintegrasi ke dalam praktik organisasi dan pihak-pihak yang berkaitan dengan organisasi. CSR yang dijalankan oleh organisasi seharusnya tidak hanya didasarkan atas satu pijakan dasar, yaitu corporate value, dengan proksinya adalah financial performance. Pijakan pada financial performance tidak mencukupi untuk menjamin perusahaan tumbuh secara berkelanjutan. Lebih lanjut, pijakan dasar tersebut juga melebar pada pijakan sosial dan pijakan lingkungan. Keberlanjutan perusahaan hanya akan terjamin apabila, perusahaan memperhatikan dimensi sosial dan lingkungan hidup.

Sementara itu, pada awalnya The European Commission mendefinisikan CSR sebagai “a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis”. Istilah voluntary basis merujuk pada personal charity. Memang pada dasarnya, selama sekian lama, CSR berkaitan erat kegiatan perusahaan di dalam memberikan pendanaan berbentuk donasi, baik untuk persoalan sosial maupun untuk persoalan lingkungan. Di dalam konteks ini, charity biasanya dikaitkan dengan strategi bisnis perusahaan. Namun demikian, pengertian CSR kemudian berkembang lebih luas. Pertama, compliance. Implementasi CSR di dalam business operations hendaknya dijalankan dengan mengacu pada code of conduct, etika bisnis, dan hukum yang menaunginya, antara lain misalnya persoalan kesehatan dan keselamatan kerja dan pencemaran lingkungan. Pengertian kedua jauh melampaui konsep dasarnya, dan ini berkaitan dengan kontribusi bisnis terhadap pembangunan sosial dan ekonomi, dan memberikan dampak positif bagi masyarakat dan lingkungan.

Dengan mengacu kepada perkembangan seperti ini, The European Commission kemudian meredefinisikan ulang CSR sebagai “ the responsibility of enterprises for their impacts on society”. To fully meet their corporate social responsibility, enterprises should have in place a process to integrate social, environmental, ethical, human rights and consumer concerns into their business operations and core strategy in close collaboration with their stakeholders, with the aim of (1) maximising the creation of shared value for their owners/shareholders and for their other stakeholders and society at large; and (2) identifying, preventing and mitigating their possible adverse impacts.

(http://juicecsr.eu/wpcontent/uploads/2014/04/Sociability_The_benefits_of_Strategic_CSR.pdf)

Dalam prinsip CSR, penekanan yang signifikan diberikan pada kepentingan  pemangku kepentingan perusahaan. Pemangku kepentingan adalah pihak-pihak yang berkepentingan dengan eksistensi perusahaan. Pihak-pihak tersebut antara lain adalah karyawan, konsumen, pemasok, masyarakat, lingkungan sekitar, dan pemerintah sebagai regulator. Perusahaan diharuskan memperhatikan kepentingan pemangku kepentingan dalam menciptakan nilai tambah dari produk dan jasa bagi pemangku kepentingan, dan memelihara kesinambungan nilai tambah yang diciptakannya.

Persepsi dan realitas kinerja organisasi terhadap corporate social responsibility akan tercermin pada (https://www.iso.org/obp/ui/#iso:std:iso:26000:ed-1:v1:en);

  • its competitive advantage;
  • its reputation;
  • its ability to attract and retain workers or members, customers, clients or users;
  • the maintenance of employees’ morale, commitment and productivity;
  • the view of investors,owners, donors, sponsors and the financial community; and
  • its relationship with companies, governments, the media, suppliers, peers, customers and the community in which it operates.

Untuk itu, program CSR yang dijalankan oleh perusahaan terdiri dari tujuh pilar, yaitu: (1)  Pendidikan (education); (2) Kesehatan (health); (3) Kebudayaan dan keadaban (culture of civility); (4) Kemitraan (partnership); (5) Layanan umum (public service obligation); (6)  Lingkungan (environment); dan (7) Bantuan kemanusiaan dan bencana alam (disaster and rescue). Dengan memperhatikan ketujuh pilar tersebut, kiranya jelas bahwa program CSR bervariasi mulai dari bantuan pendanaan, bantuan kesejahteraan, bantuan hibah, dan bantuan bencana alam.




Why It’s Time to Say Goodbye to Traditional Budgeting

By: Ken Wolf

What the Research Says
General Electric Chairman Jack Welch doesn’t think much of budgets.  In his best-selling book, Winning, he calls the budgeting process, “the most ineffective practice in management.  It sucks the energy, time, fun and big dreams out of an organization…In fact when companies win, in most cases it is despite their budgets, not because of them.”CEOs in Europe have long shared Mr. Welch’s distaste for traditional budgeting. That’s why the rolling forecast and other methods of continuous planning have replaced the traditional budget at many European companies.  Now that trend is slowly making its way across the pond, as more and more American-based companies realize that a more adaptive planning approach is the best way to set their future course.The Beyond Budgeting Round Table (BBRT) has spent countless hours examining the performance management models of many large organizations and produced dozens of case studies.   Its conclusion: the culture of budgeting is the single greatest barrier to change.  The average corporation spends four months and 20-30% of senior executives’ and financial managers’ time on the budget (with some organizations taking six to nine months).  In 2003, the Hackett Group found that the average billion-dollar company spent as many as 25,000 person-days per billion dollars of revenue putting together the annual budget.

“Budgets, once meaningful control instruments, have become (in today’s dynamic information/knowledge economy and global buyer’s markets) a danger for lasting enterprise success,” says Steve Player, director, BBRT North America.  “They prevent fast and flexible adaptation to the market so that full potential is not realized.  They often promote mistrust, deception and endanger the external corporate transparency demanded today.”

Specific Problems with Budgets
There are three primary problems with traditional budgeting: 

1. It takes a long time, costs too much, and consumes too many corporate resources.  For some companies, the process can take as long as six to eight months.  Many companies on a calendar fiscal year start the budgeting process in the summer and won’t end until November, December or, in some cases, after the budget period has actually started.  Most budgets are very detailed and require the input and back and forth negotiation of many people throughout the organization, which only adds to the amount of corporate resources consumed by traditional budgeting. Moreover, often, internal politics come into play and become more important than the customer—with managers and employees self-occupied as a result.

2. It’s fixed and inflexible, and can quickly become irrelevant.  The traditional budget starts top down and then becomes a detailed bottom up building process to meet fixed goals set by management—whether realistic or not.  Once the budget is locked down, game over—no more changes.  The economy may change, industry or market conditions may change, something specific within the business may change.  Regulations may roil the playing field.  New entrants or competition may emerge.  There may be new concepts, new partnerships, new innovations, or other internal factors with financial repercussions.  There are so many things that can (and perhaps should) change, and yet the budget only looks at things as they were back when it was created.

A survey of planning, budgeting, and forecasting practices by APQC and the BBRT found that 55% of respondents felt that the assumptions used in their budgets were so different than actual results that the budgets were useless within the first six months of the year.  Player, the lead researcher in the study, noted that this trend is increasing as market conditions become more volatile due to the accelerating speed of business.

3. Most companies tie executive and employee compensation directly to performance against the budget.  When this happens, the goal for the employee becomes “How can I minimize performance expectations?”  And, the easiest way to control that is to negotiate an overly achievable budget benchmark, so that hitting the goal is easily reached.  If you’re managing a cost center responsible for spending, you will likely try to maximize as much as possible the size of the budget spend, because it will give you the most resources to spend regardless of whether these resources are necessary.  And, if you come in at what you really think you’re going to spend, you’ll look good, which will impact you positively from an incentive standpoint.  Conversely, if you’re a in a revenue producing center, you’re likely going to lowball the budget, so when you exceed it you’ll look good.  But, you’ll just barely exceed it so you have plenty of room to do well the next year.  Otherwise, management will increase your budget for next year!

So, what happens is that the budget, the very mantle on which the company stands, actually turns into an internal negotiation with management, a gamesmanship of sorts, where rather than developing a budget that realistically reflects a view of where the company is going, ends up being something largely fictitious and arbitrary.

The Remedy: Rolling Forecasts
If the traditional budget has flaws, what should be done?  The rolling forecast is a logical adaptation of the fixed budget or forecast—largely addressing the issues raised above with the traditional planning process.

The rolling forecast is a solid first step toward adaptive performance management.  To better understand the rolling forecast, picture the 15th century explorer traveling the ocean in pursuit of the New World.  He may have maps and charts at his disposal, but what if he has to change course due to unplanned circumstances such as bad weather, sickness or even the occasional pirate ship attack?  Without some kind of tool that can help him navigate these unexpected deviations from plan and reset course, our captain may very well end up in Belize rather than Boston.

A rolling forecast can be defined as a projection into the future, partly based on past performance, that is routinely updated to incorporate input and information reflecting changing market, industry and/or business conditions.  It is not meant to be a fixed target, but rather a best current prediction as to the organization’s financial and operational performance over a certain time horizon.  That time horizon can be 12, 18, 24 or any number of months or quarters ahead from today.  It “rolls,” because as time moves forward, so does the time horizon of the forecast, unlike a traditional budget cycle that ends at a fixed point in time.  Ideally, you don’t want to look too far into the future or it tends to become too hazy, unrealistic and unpredictable, but you also don’t want to keep the time horizon too short or you’re not seeing the full impact of your decisions.

Rolling forecasts are typically updated on an ongoing basis, rather than quarterly or semi-annually.  This means that they are more accurate and require less time to update than a traditional budget/fixed forecast planning model.  Unlike traditional budgeting, where you basically start all over and have to redefine the whole process and marshal the resources annually (and have to contend with ongoing negotiations), rolling forecast, involves only minor tweaking as you continually update on a short-term basis.  This saves time and resources.

Rolling forecasts solve the third problem outlined above, tying executive and employee compensation directly to performance against the budget, by instead focusing on outperforming the competition and achieving high performing results.  For example, a company can use key industry metrics to measure its performance against the top players in its industry, resulting in higher bonuses for executives if the company outpaces its competition.  Or, try publicizing peer performance of a sales organization—and see how hard those salespeople work to remain “A” players and come out on top.

Responding to Change
European countries, as earlier indicated, have pioneered the notion of moving away from the traditional budgeting approach.  The climate, of course, is different there—one generally marked by an open and less regulated market.  In the U.S. we tend to have a shorter term mentality resulting from the influence of Wall Street, which places an undue emphasis on quarterly earnings and its effect on stock prices.  This drives companies towards traditional budgeting, which Wall Street closely monitors, leaving little room for flexibility.

As a result, many companies have been resistant to change.  As with any trend, there will be a tipping point.  In the last couple of years we have seen a willingness by clients to get their toes wet when it comes to rolling forecasts, with many slowly making the transition by establishing some kind of rolling forecast, while not yet eliminating the traditional budget.  The goal is that eventually the concept of the calendar year and the stop-and-start budget will become less and less important.

If your business uses an antiquated tool that doesn’t facilitate a rolling forecast, the transition will be an onerous one.  Managing the rolling forecast by using spreadsheets is very challenging, and most budgeting software tools are designed for fiscal year cycles.  Yet, planning tools now exist that offer flexibility and can handle the transition from the budget to the rolling forecast, or any variation thereof.

But even with the proper tools to facilitate the transition to the new system is the need for a fundamental change in an organization’s culture and management philosophy.  The change must be a C-level management decision and then be efficiently communicated down the chain.

Like any significant change, this one won’t be painless. But the return on investment will be great. People will quickly learn to love the rolling forecast if, for no other reason, that it’s not the budget.

 

About the Author(s)
Ken Wolf is president and CEO of Revelwood (www.revelwood.com), a firm that provides performance management solutions to Fortune 1000 and mid-market companies.
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Management by Objective (MBO)

Management by objective (MBO) merupakan suatu model pengelolaan organisasi yang menghendaki karyawan dan manajemen berkolaborasi untuk membuat, menetapkan, dan menyetujui tujuan organisasi (organizational objectives).  Implementasi MBO adalah untuk meningkatkan produktivitas dan efisiensi karyawan, yang pada gilirannya akan berdampak pada corporate performance.

Model ini dikembangkan oleh Peter Drucker pada 1954 melalui bukunya yang berjudul “The Practice of Management”.  Selain itu, Drucker juga menawarkan konsep bahwa tujuan organisasi hendaknya bersifat SMART, yaitu specific, measurable, achievable, realistic and time-bound.

Menurut Drucker, implementasi MBO hendaknya melibatkan 5 (lima) langkah, yaitu

1. Establish or clarify organizational objectives in line with the company’s mission and vision.

2. Ensure that employees fully understand the objectives of the company as a whole.

3. Involve employees in determining their personal objectives to help achieve corporate goals.

4. Monitor and measure employee performance relative to the goals.

5. Evaluate progress, reward success and provide feedback.




Potensi Indonesia 2030: McKinsey Global Report

Salah satu materi kuliah umum asuransi dari Presdir & CEO BCALife (Ibu Christine Setyabudhi) di Perbanas Institute, 7 Desember 2016 memaparkan white paper yang dilakukan oleh McKinsey Global Report Institute, yaitu bahwa pada 2030, Indonesia memiliki masyarakat kelas menengah (sebagai pendorong pertumbuhan ekonomi) sebanyak 135 juta orang dan 113 juta tenaga trampil dan ahli yang secara kumulatif membuat Indonesia diprediksi menjadi negara dengan kekuatan ekonomi ke-7 terbesar di dunia serta menyimpan kekuatan potensi pasar konsumen sebesar US$ 1,8 triliun.

Mengacu pada hasil prediksi tersebut, banyak hal yang dapat dikembangkan di dalam rangka mengantisipasinya seperti yang dituliskan oleh MGI (McKinsey Global Institute). Silahkan klik link di bawah ini.

http://www.mckinsey.com/global-themes/asia-pacific/the-archipelago-economy

 




Change Management: Key Actions to Change Mind-sets and Behavior

Perubahan adalah suatu keniscayaan. Sesuatu yang tidak berubah seharusnya dan sepantasnya bersiap digeser dengan berbagai hal. Di dalam bahasa McKinsey, organisasi harus memberikan respon yang semakin cepat atas terjadinya sudden shifts in the marketplace atau adanya kejutan-kejutan eksternal yang salah satunya bersumber dari perubahan teknologi dan munculnya praktik dan model bisnis baru.

Di dalam konteks menghadapi dan menjalankan perubahan ini, salah satu tugas manajemen adalah mempersiapkan karyawannya. Berbagai riset yang dilakukan oleh McKinsey atau pun praktik bisnis yang dijalankan berbagai organisasi menunjukkan bahwa perubahan mindset dan perilaku karyawan di dalam mengantisipasi perubahan tergantung pada 4 (empat) hal.

Keempat hal itu terdiri dari: (1) Fostering understanding and conviction. Konsepnya terletak pada kalimat “Saya paham apa yang harus saya lakukan dan hal itu logis dilakukan”; (2) Reinforcing with formal mechanisms, yang berarti: struktur, proses, dan sistem yang ada di dalam organisasi mendukung dijalankannya perubahan yang harus saya lakukan; (3) Developing talent and skills (Karyawan sadar bahwa mereka memiliki bakat dan keterampilan yang diperlukan to behave in the new way); dan (4) Role modeling, merupakan tindakan untuk memberikan contoh, di dalam arti, perubahan perilaku dan mind sets hendaknya juga dilakukan oleh semua unsur organisasi, terutama pimpinan.

Silahkan membaca artikel lengkapnya:

http://www.mckinsey.com/business-functions/organization/our-insights/the-four-building-blocks–of-change

 




Energi Terbarukan: Kekuatan dari Matahari Pegunungan Andes

Dibayangi dengan keterbatasan dalam kepemilikan sumber energi dan didorong oleh kelimpahan dari 320 hari setahun menerima siraman energi matahari, negara-negara Amerika Latin menjadi leader di dalam pengembangan energi bersih dan terbarukan. Negara-negara ini diberikan kelimpahan di dalam penguasaan air, angin, dan matahari.

Saat ini, Chile telah berhasil mengembangkan energi dari sinar matahari yang dapat menghasilkan daya sebesar 196 MW yang bersumber dari 775.000 panel surya dan diperkirakan dapat memenuhi kebutuhan daya listrik di kota dengan jutaan penduduk.

http://www.economist.com/news/americas/21711307-power-andean-sun-latin-america-set-become-leader-alternative-energy?cid1=cust/ddnew/n/n/n/2016128n/owned/n/n/nwl/n/n/AP/8320151/email&etear=dailydispatch