Recently I was presenting to a group of CEOs in the United States. One of the topics that created keen interest was the section 24 Month Rolling forecasting. One CEO in particular straightened up and took furious notes during that entire hour.

During the break that CEO approached me with a quizzical look and posed an interesting question: Nick, I tried to implement a similar rolling forecasting process with my team and it failed miserably! Now we’re right back where we started, using short-sighted, static pictures of what happened to our business in the past, instead of having a real-time view of our future. Why did it fail?

After chatting a bit, I discovered that this CEO’s team had fallen into the common and dangerous traps operational teams often encounter while switching from old school budgeting to real time 24 month rolling forecasts.

The Three Sins of the CEO

Most people are resistant to change. It’s only natural. But often in our experience, accountants and finance folks are even more resistant than the rest of the executive team. They’ve (I should use the term “we” here, because I was trained in accounting earlier in my career) been taught to follow a specific set of procedures for years. There are few deviations … stay between the lines … this is how it’s done … is the mindset.

This particular CEO’s problems stemmed from the three common problems I’ve seen hundreds of times from companies that do not extract the full benefit while converting to 24 month rolling forecasting.

If a CEO understands them, the traps are foreseeable and preventable. But they’re not foreseeable from the viewpoint of those required to implement 24MR, so as the CEO, you must manage them.

1. Delegation: The CEO delegated the entire process to the CFO.

The CFO will be an integral part of this process; however, the CFO should never be the lead person driving operational staff (such as sales people). NEVER. If s/he is, the success of the process will be at risk.

During my discussion with that CEO I asked (as I often do) the question: Who in your business is best qualified to assess the future landscape ahead of your business?

His answer was predictable: The CEO, the COO, the EVP or the sales manager. No one ever suggests that this person is the CFO!

Then I asked this CEO a more specific question: Is your CFO the best person to predict the future?

Of course not was the answer.

Then why did you delegate the responsibility of forecasting the future to the CFO? His face told the story – in an instant he realised that he had set up the process for failure right from his first decision.

2.  Focus: As the CFO directed his team to update their future forecast each month, they all thought of numbers, instead of the operations that drive those numbers.

As I discussed this issue further with this CEO, we developed the concept that the process is operational (not just numerical) and that the starting point has to be open and subjective.

The question of What information has come to light in the last 30 days that changes your view of the future? is a perfect setting for keeping the conversation operational.

He began to understand that if this conversation drops to the numerical level too quickly, then it limits the opportunity for participants to come up with elegant ideas for dealing with a changing business landscape.

3. Communication: The CFO communicated with the executive team entirely via email.

Big mistake! Email is great for conveying information. But it’s a terrible medium to use to introduce a cultural business change.

In my experience, if you want to change culture successfully – communicate face-to-face to start the change. Processes must be followed by people, and choosing the right process to solve a business challenge only delivers 50% of your success; your people must adopt it and embrace it to make it a reality.

The good news is that the key to success when implementing 24 Month Rolling is within your control – it’s in your mindset and how you ask your team use it.

If you approach 24MR as nothing more than a replacement for current budgeting processes, it is unlikely to work.

If you understand that it is a complete shift in operational culture and avoid the three sins, you have a great chance for success.