In a perfect world, all of your organization's planners would have superior analytics acumen and the financial know-know to create the best plans for their department. But unlike the photo that comes with every picture frame, there's no such thing as the perfect planning family. Planners don't necessarily fall into traditional groups like Financial Planning and Analysis (FP&A) or Management. Think about your marketing and sales directors – their primary function within the organization doesn't require a finance degree but they are still expected to take on planning roles for their departments.
Non-traditional planning managers have their own special needs and thankfully, software development has come a long way in accommodating them – particularly planning software with built-in reporting and dashboard capabilities. If your planning solution supports data visualization, take advantage! By presenting your plan data in charts and graphs, you can focus planners' energy on areas where they can make the biggest impact.
The underlying problem of many budgeting and planning processes is that data is organized and optimized for machines, not people. Unless you've had some formal education in this area, reading a chart of accounts/cost centers can be overwhelming. Understanding an anatomically correct financial statement can take years. Take for instance a physician or head nurse who is tasked to create a budgetary plan for his or her department – these individuals are trained to save lives, but probably cannot create a budget to save their own lives. The way to make budgets work for these types of planners is through smart data visualizations.
An ideal way to start visualizing content is to create simple charts on a planning dashboard. Begin by prioritizing the plan data for an individual department and sorting by summary. Often times a budget will fall into the Pareto principle, where 80% of the budget is made up by a handful (20%) of the accounts. When you sort by summary, you bring the most important elements to the forefront, so planners focus on the line items that will have a big impact on the budget and divert attention from those that would have a lesser impact. In the example visualization above (click to enlarge), it's clear that salaries and incentives make up large percentages of the budget. If the planner is asked to cut costs 10%, making adjustments in those areas will have a noticeable impact. Making a switch to a lower cost telephone provider or putting a freeze on new cell phones for department personnel may help lower costs, but not significantly.
In order for data visualizations to actually help, they need to separate the signal from the noise. They need to be clear and tell a story about where planners should focus their energy. One very common chart offender is the pie chart. My rule of thumb is that a pie graph should have no more segments than a pizza pie – so 8 slices. Those 8 slices should represent the "signal." In example below, the pie chart on the left has way too many slices that distract from the more prominent elements of the plan. On the right, you'll see an improved pie chart. You'll probably notice that the main elements in the right pie chart do not total 100% (I know this will drive some readers nuts, but trust me). The 42 elements left off this pie chart are "the noise" – the accounts that indivdually make up less than 1% of the budget, and therefore are a lesser priority for our planners. That portion of the budget can be considered separately as changes there won't have a big impact.
What do you think about this idea? We've implemented planning visualizations as part of a few customers' arcplan implementations and it's getting rave reviews.
In my next post, I'll tackle how planning visualizations help non-finance professionals better understand forecasting.
arcplan Edge is our budgeting, planning and forecasting solution that includes built-in reporting and dashboards that help planners easily understand where to make adjustments to the plan throughout the year. It's designed to meet the needs of all planners, from FP&A to management to department heads. Learn more >>