Forward-looking PM
Thanks to the kind cooperation of Strategy and Finance Magazine, I got permission to publish a very good article by Anthony L. Politan on Taking PM to the Next Level on Value Based Management.net.
As Politan explains:
When you're driving, you only glance into the rear-view mirror because, if you stare too long, you just might crash. Many businesses today are spending way too much time looking in the rear-view mirror at the road they've traveled by focusing on historical PM methods. A few leading companies, however, are applying many of the basic principles and technology of historical PM methods to forward-looking PM. This new trend is scenario-based planning, and it concentration on the future rather than on what has already happened.
By generating multiple what-if scenarios using data you already have and applying PM as if the scenarios were actual situations, you can take PM to the next level. The result: You can integrate optimal what-if scenarios with traditional budgeting and planning systems to change faster than industry norms and increase your organization's competitive advantages.
Check it out...
2 Comments:
I am looking for some innovative way of teaching 'Performance Management' to students of bottom tier B-Schools.
Any idea about games, exercises and so on.
What-If scenarios are used to examine how different methods of personal spending or saving money will effect your finances in the future. For example, buying a new car may seem perfectly affordable right now, but plugging income and expenses into a what-if scenario can reveal that the auto loan payment will put you in the red several months later.
Another example of a what-if scenario is looking at how different levels of monthly contributions a tax sheltered retirement fund now will effect your spending with reduced income now, and how it will effect your spending with increased income in your retirement years.
Some examples of personal finance events used in what-if scenarios:
-different loan packages
monthly income decreases or increases
-paying off a debt early
refinancing to a loan with a lower interest rate
-college tuitions
-buying a smaller home during retirement years
-cutting down on trips to the coffee shop
-reducing transportation costs
-vacation options
-wedding options
Businesses use what-if scenarios to determine the effect different costs or investments have on profit and other financial indicators. A business may use a what-if scenario to analyze the financial effects of different pricing models, warehousing options, number of employees or raw materials options.
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