The Hindu Business Line : Why do plans fail?

Managers make plans all the time, and are supposed to, according to all the authorities on the subject. Yet not fulfilling plans (mainly in sales and profits) is also a perennial worry and cause for loss of sleep amongst managers. Some of this anguish over underachieved goals is just the macho manager refusing to accept reality that he is far more like a pawn in the hand of the Gods than a master of the universe.

Another reason is that managers do not always make the basic and useful distinction between planning and forecasting. Though closely allied, they are also very different. Simply put, the weather is a forecast; my taking a raincoat or umbrella or not, or wearing the right shoes is a plan. One is not under my control and the other clearly is, although I could estimate the likelihood of rain if I knew enough about the conditions.

Too easy a comparison? Wait a minute. What would you call the market share you expect to achieve for your company in 2007-08? Would you call it within the ambit of managerial control or is it entirely outside of it? The truth is of course that it is not so clear cut - while one can make all the efforts, tactical and strategic, to ensure that one gains a few percentage points (by launching new products, promotions etc) the impact on the market place is difficult to determine with any degree of accuracy. It is a multivariate situation.

Yet managers love to make pronouncements about their quarterly results; and sales people in particular feel a sense of owner's pride over their results. Despite this, when it comes to explaining negative variances from any plan, they do not hesitate to take shelter under factors beyond their control, such as the monsoon, the budget and the economic conditions.

The truth about planning is that forecasting is inherent in any budget or plan; you cannot ignore or escape it. And when plans are not achieved, managers, in all honesty, must consider at least three ways of accounting for the fact. The first is that they might not have made a realistic plan, taking whatever they knew into account. They might have expected next year's market growth to be at the same rate as it has been so far, in other words making a simple, linear projection. The second reason could be that they have assumed the external variables to be of less impact, "oh, it won't happen to our industry" type of thing. Finally, it could, of course, simply be a matter of under-performance.

The people responsible may have managed badly all round. The team responsible may have proved to be less than competent, or short of staff or de-motivated - or indeed any of a number of possible reasons why people general deliver results below their capabilities.

Nonetheless, listening to discussions of performance amongst senior managers, one could be forgiven for thinking that all the reasons are either a case of poor forecasting or just not trying hard enough.

I recall an occasion when a General Manager recommended a change in the head of marketing because month after month the sales were falling short of the numbers given at the beginning of the month.

He wanted better sales forecasting from someone used to such techniques, he said - little realising that his real problem was inadequate sales volumes -- in other words, what to do with the excess stock that he was left with at the end of each month. It seldom happened that sales exceeded the budget. The more obvious explanation that the sales force had to accept the targets given to them and to an extent were arm-twisted into doing so, never occurred to him.

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