Perceived  advantages  with  rolling  forecasts

There is a common belief amongst the respondents that rolling forecasts has made employees focus more on the future than they did before. It is said that people are being forced to face the reality and the upcoming events. The rolling forecasts is therefore understood as solving

one of the problems that were in DNV GL with budgets before, mainly that the data became out-dated as the world moved too fast for the annual planning tool. Respondents explain that they could not find these answers in historic data, but that there was a need for looking forward. Rolling forecast reflects this change better as the quarterly updates makes it more suitable for a changing environment. Some respondents say that the organization now has the opportunity to be more strategic in their outlook and they refer this partly to the rolling forecasting process.

Frequent and valuable discussions

From the interviews we find that the discussions that come with the forecasting process is something the employees perceive as highly valuable. One of the employees states that the rolling forecast is a good tool, but without the discussions it does not help the financial planning process.

“It´s a good tool you can use to have that discussion, but if you don´t want to have that discussion, the tool doesn´t help.”

The quarterly forecasting process is perceived as forcing the organization into thinking about which direction the business is heading, and thus fostering valuable discussions that otherwise might have been given less priority when you are busy with daily business. By having a deadline for the financial planning process four times a year, rather than once a year as with traditional budgets, a valuable assessment of the business is taken frequently.

“To start these discussions really, cause otherwise you´re so busy on the daily business, and you always say “aah I should think about it, maybe next week.” And then suddenly something else starts burning and you focus on that one. So if you have that kind of deadline on a

quarterly basis you´re forced to deliver something so you have to make it happen. And this is an enabler to actually make the process of thinking in advance happen.”

The type of discussions taken is also considered important, where discussions regarding factors driving the key numbers are those that create confidence in the numbers discussed. By discussing drivers in the market it fosters a perception of a common understanding, and the belief that the employees have the same assumptions behind the numbers resulting from the

discussions. Discussing the numbers by themselves and if it is a good number or not, is perceived as giving little value to the process.

“And when I would say, you know we more discuss the numbers, and is it a good number or not, than the reason behind the numbers. We need to get away from that, as we keep talking about, the number, if it´s good or bad, then we will not spend enough time on what is driving the number.”

The frequency of the discussion and the fact that you need to discuss all five quarters being forecasted creates a sense of more transparency in the financial planning process in the organization. With the year-end focus that was with the traditional budgets, less concern was taken regarding the coming year. The focus was on performing well the year you are in, and employees might have been tempted to report next year´s January revenue in December, to make this year look great. However with the long-term forecasting and more frequent discussions, it makes it more difficult to make this kind of adjustment to achieve this type of short-term gains because you still have to discuss the upcoming quarter.

More market understanding makes better forecasts

Both people with financial and technical backgrounds are involved in the forecasting process.

Respondents describe the process often driven by people of financial background, making the forecasts from Regional level and up, and technicians having responsibility from Area level and down. There is no formal and structured training regarding the forecasting process in DNV GL, and employees are therefore learning by doing, getting more experienced with time Some respondents see the need for more training in order to succeed with the forecasting.

There was some formal introductory training when the rolling forecasting process was introduced, but now it is up to the employees to train the ones that are newly hired themselves. Some errors are discovered during discussions, and the feedback from these discussions can also serve for improvement and more individual practicing.

“Oh, they don´t get much training. I hate to say this. You know we don´t have any structured training for this. We did have the training in forecasting and how to go about it when we introduced it, the rolling forecast concept. Going from there, I think we are guilty, as many other companies, to you know expecting that everyone then knows, when we have

implemented it. I think the training for managers, and especially for new managers is basically on-the-job-training. And trial and error.”

Other respondents do not see the need for more training when referring to the forecasting tools. They describe the forecasting process as easy by saying it is not “rocket science”.

“Off course we have some training, none of us in Production have any kind of economy diploma or anything related to business, but with some experience and in that level we are in now, it is not rocket science.”

Respondents experience errors that they refer to as “screwboard errors”. One example of such an error is an employee that forgot Chinese holiday and forecasted full operation that period.

The respondents understand these errors as something that can and should be avoided over time. More experience and on-the-job training is understood as the solution for these kinds of mistakes.

“We made easy mistakes, for example in China they have big holidays that lasts for a week, use actually 10 days on holiday. This was not in our forecasts, and we forecasted that we would be working every day. Embarrassing going back to your manager and say that the forecast is wrong, because actually they have holidays.”

However, while there are different perceptions regarding the forecasting tools, there is a common understanding of the importance of more market understanding. More market understanding is seen as important to understand actuals and also understand implications of future actions. The belief is that the more you know, the more suited you are to be making forecasts.

Another thing the respondents agree on is that more experience will increase the accuracy and thus the value of the forecasts. Time combined with more market understanding will make employees more equipped in terms of understanding the business. This is made sense in the way that every time we forecast we get more experience about how it went. Some respondents argue that it requires that you take time to look at what you have done before, and that your work was thorough enough so that you understand and remember what you were thinking.

This experience is also understood as something that will lead to employees building a common understanding of the business and the development over time.

4.2.3 Perceived weaknesses with rolling forecasts