The impact of rolling forecasts on the strategic planning process : a multi-case study

Abstract

This study examines the strategic planning process at a multinational FMCG company and investigates what is the role of rolling forecasts in this process through two departments in the company. Little is known about the practical applications of rolling forecasts: how often are they prepared, what purposes are they serving, and, in this case, how to they impact the company’s strategy. At the time of the study the case company had been going through changes with the recent introduction of standard costing, making it an interesting setting to investigate. Through a qualitative analysis of interview results with financial controllers and the CFO, the use of rolling forecasts and standard costing was examined at the case company in light of their respective roles in the strategic planning process. The results of the study describe the timeline of major events that compose the strategic planning process in the case company, as well as how these events and the management control tools utilised connect to each other. It finds that rolling forecasts are present throughout the entire strategic planning process at all three time-horizons, serving not only as input to future forecasts, but also as the guidelines for target setting and adjustment, and shaping the company’s strategy itself. Additionally, it finds that in spite of the not so welcomed changes, controllers still believe the process to be successful overall, and that category idiosyncrasies do not impact the strategic planning process’ execution nor its effectiveness.

There are two main implications that must be drawn from this study. First, that the utilisation of rolling forecasts is very successful and desirable for coping with the challenges of the modern world and in flexibilising the implementation of corporate strategy. Second, the respondents in the study raise some concerns regarding the current utilisation of standard costing in the company’s reporting, indicating it may compromise the accuracy of forecasts in volatile circumstances. In context, this finding suggests that the way in which standard costing is used in the case company is not favourable to the business. Ultimately, this paper intends to contribute as a basis and encouragement for further studies in the practical application of rolling forecasts.