Plan, Do, Check, Adjust – And Eat Ribs

As I write this post, it’s the beginning of February. One month of the new year is already behind us. How are you progressing against your 2020 plans? Are you meeting all your goals, or do you have some areas that are struggling? I’m always amazed at how easy it is to get off track from plans we made just weeks ago. The good news is that it’s not too late to get back on track, as long as you’re ready to take action.

I’ll share a story to illustrate what I mean. Recently, I was preparing a meal for a large group of people. I was cooking ribs on a wood pellet grill, which is a favorite pastime for me. I noticed that the grill wasn’t holding temperature properly, but didn’t know what was wrong. About one hour into the cook, I made the call to move the ribs to the oven. While we didn’t achieve the exact same smokey flavor, by acting early we were able to have our dinner on time. It wasn’t perfect, but it was still a great meal. If I had waited to take action, we may have resorted to PB&J sandwiches with a side dish of Cheerios.

We need to apply this same kind of logic to our budgets. When things start going off track, we can’t pretend that everything is fine, and the sooner that we act, the better the odds of having a successful outcome.

Planning

As a business leader, I used to despise the budgeting process. I would grumble about putting together an executable plan for an entire year when it’s hard to even predict the next four weeks. We all know why budgeting has a well-deserved reputation for being bureaucratic, tedious, and mechanical.

But despite the challenges of budgeting, I’ve learned to embrace it. The budget is the “Plan” of the Plan-Do-Check-Adjust (PDCA) cycle. When done well, it translates all of the planned activities in the business into financial terms. While we may have many metrics throughout the business, the budget helps us articulate our estimated financial results if the business is running reasonably well. To know if this is happening, we need to implement a way to check on our progress.

One other thing to remember: like many tools, a budget is only as good as the team that is using it. If it is a document that was prepared by accountants in isolation and it gathers dust in the company archives, it is worth next to nothing. However, a budget that is created thoughtfully, by a team of people dedicated to creating solid financial results, provides a lens for how those results can be achieved.

Checking

The end of each month, especially early in the year, should be a critical “Check” time. We get the chance to see how we’re doing against the budget. We can see if we’re getting the financial results we planned, but we can also look at the leading indicators to check if things seem okay. There are a number of assumptions that are often used to build the budget, and this is a good time to check on them. Items to examine may be whether the sales team is generating leads at the desired pace, or if operations is hiring and training with planned growth in mind, or if a new product launch will happen in time to support sales goals for the second half of the year. What do you need to know now that will affect your results later?

This is not a replacement for the measures that you will do daily and weekly. Those are still necessary to see if processes in the business are working well so that quick corrective action can be taken. The monthly financial review against the budget is the big picture check where the leadership team can say, “We did all of this stuff, and we think we should have had good financial results. How did things really turn out?”

Adjusting

After we check on the budget, it’s time to take corrective action in the areas that are struggling, especially in the first quarter. Changes made in February and March will impact the remaining 75 percent of the year. If we wait till mid-year to make corrections, it becomes very difficult to move the needle far enough to impact 2020 results.

If you find yourself in a situation where you’re off-target after just one month, it’s time to create a recovery plan that gets you back to the original goal as quickly as possible. It’s too early to give up. Acknowledge what is not working and build a correct the issues and get back on track. Use good problem-solving disciplines to get to the root cause, and don’t be satisfied with plausible answers. Keep probing and digging until you’ve exposed the truth, and then get after it.

Many times, the problem is basic and the solution is straightforward (not the same as easy). With 11 months to go in the year, there are still many ways to drive meaningful change, and lots of time to get cooking.