Long Term Planning for Companies: Strategies, Tips
With all public companies having a 75% decline since 1965 on their return of assets, we can see that the current approaches are not working.
While most companies have until this point remained loyal to a 5-year plan, others have chosen a 3-year program.
Some daring companies have gone so far as to have no long-term plan at all and simply respond to events as they happen, minus any long term planning.
Unfortunately, the results have shown that these companies are spreading themselves too thin and even the largest of companies are realizing that the number of new programs is far more numerous than the available resources.
They also recognize that the initiatives are happening in small strides due to limited resources and responses to short-term events.
Fortunately, however, there is another process based on a very successful planning approach. It’s called zoom-in/zoom-out and CFOs, as well as other executives, should embrace it to make a strategic impact that can prepare for the long term.
Planning Approach for CFOs: Zoom-Out/Zoom-In Focus
- Zoom-Out 10 to 20 years: It helps with a long-term projection from which you can work backward to identify steps to take to reach the long-term goals.
- Zoom-In 6 to 12 months: Identify current or short-term goals that can help to achieve long term ones. Identify things to cut and ways to free up and maximize existing resources.
This is not your typical 5-year approach. Companies using this planning method believe that staying the course and looking at these two time-points is the best way and that everything will work out if they stay focused.
A theoretical exercise becomes real and sets steps for companies to work differently to build a vital path to reaching their long-term projection. The goal is to focus on the top 2 or 3 highest-impact assessments for the next 6-12 months while giving the proper amount of resources.
This method closely aligns the idea that if both long-term and short-term goals are closely aligned, the middle will fall into place.
This allows executives to have focus and to keep from spreading resources too thin for things that may not work out. It also reduces the risks of being blindsided and could radically change the market.
Common Objections to Planning Approaches
1. The future is too uncertain
This approach focuses on predictable factors to avoid uncertainty.
2. Investors only want short term results
Be persuasive in explaining that future opportunities and short-term goals aimed at attaining future earnings can be better for their stock.
3. It takes too long to receive the payback
This strategy has the potential to improve near-term economic performance and reduce short-term disruptions while giving a more unobstructed view of the future.
The zoom in zoom out process combines and amplifies the two competing goals and prepares the future while making an achievable impact in the meantime.
For more long-term planning tips, check out Forecasting: Optimizing Business Planning