1.
Driver Based Planning
Fabio Malagisi
The Financial Planning, Forecasting and Reporting Summit
Boston, MA
October 16th 2014

2.
A forecasting methodology that….
• Defines multiple input variables that are
aligned with key business activities as much
as possible
• Integrates variables into a dynamic model
that defines critical cause and effect
relationships
• Inputs drive automatic output

3.
Conceptual Example
Sales Forecast
Sales
Leads
Close
Rate
Backlog
Avg
Sale
Price
Mfg
Lead
Time
Customer
Visits
Market
Trends Headcount
New
Product
Launch
Plan
Sales Forecast
Traditional Driver Based Planning
 Account Focused
 Output Focused
 Static variables
 Driver/Activity Focused
 Input Focused
 Dynamic variables

4.
CompensationExpense
Headcount Offer Acceptance Negotiation Offer Interview
Direct Recruiting Skills Market
Recruiting Agency Skills Market
Base Salary Salary Approval Salary Negotiation Salary Offer
Market
Budget
Peer Comparison
Skills Assessment
Incentives/Bonus Incentive Criteria
Federal Taxes
State Taxes
Benefits
Health Selections Health Offerings
401K Selections 401K Offerings
Other Benefits
Selections
Benefit Offerings
Many Activities impact every account

5.
Sales
Price Approval Discount Request
Competition
Product Life Cycle
Negotiations Contract
Units Distribution
Manufacturing
Process
Inventory
Scheduling Order Processing
Product Offering
New Releases
Core offerings
Promotions
Sales Force
Coverage
Direct Customer
Visits
Lead Conversion Lead Generation
Environment
Customer
Dynamics
Competition
Economy
Marketing
Distribution
Manufacturing
Contracts Customer Service
Sales
R&D
Market Research
Many functions impact every account

6.
Practical Example

7.
Why use Driver Based Planning?

8.
Should we add
resources in R&D or
into the sales force?
What is our
marginal cost on
this proposal?
Should we pursue a
strategy to make our
cost structure more
variable?
Do we have the
capacity to handle our
new product launch?
What would happen
to our plan if we
lost 5% market
share?

9.
Advantages
Drives clarity of what are the key business
activities that drive results
Allows for focused resourcing of key drivers
Defines the “Dashboard” – Becomes your guide
to drive day to day operations
Dynamic models allow for real time feedback and
continuous planning
Defines key performance metrics to incentivize
Drives forward looking thinking

10.
Implementation

11.
• Use the “5 why’s” to brainstorm key activities
• Gather cross functional input
• Decide on input level variables related to activities
• Determine frequency of availability
Determine Key
activities and decide
on input level
• Test relationships and determine connections
• Define desired outcomes - Link to business goals
Determine key cause
and effect relationships
• Multiple views for multiple customers
• Set parameters to determine outliers
• Feed financial reporting systems
• Output should be as real time as possible
Determine Output
needs
• Must be flexible – don’t be afraid to tweak often
• No “One size fits all”– make it relevant for you
• Balance precision vs availability vs practicality
Build Model
• Align input variables with incentives
• Constantly test relationships
• Use for major decisions – Scenario planning toolkit
• Create your “operational dashboard” based on key
activities (Inputs)
Integrate into your
operations

12.
Final thoughts

13.
Connects operational and strategic
planning into one integrated tool

14.
GPS for your business

15.
Thank You
Fabio Malagisi
FabioMalagisi@yahoo.com
www.linkedin.com/in/fabiomalagisi/
@FabioMalagisi