Presented at Business Forecasting 2014 in San Francisco, August 2014. Includes 5 best practices for making driver-based plans work and focuses on Objectives and Key Results.

1. Measure the Right Things
Financial Modeling and Driver Based Planning
Link operational drivers and key performance
indicators to financial forecasting
Ben Lamorte President
President, OKRs.com
SME Driver-Based Forecasting, Accenture

2. Today’s Speaker
Ben Lamorte, President OKRs.com
Business Activities
Customer Excellence, Adaptive Planning
VP at Alight Planning
Principal, Decision Consulting (Adobe, Kaiser)
Management Consultant, APM/CSC Healthcare
 Publications
 Co-author of driver-based planning white papers
 Introduction to Driver-Based Forecasting (Accenture eLearning course)
 Education
 MS Management Science & Engineering, Stanford University
 BS Mechanical Engineering, UC Davis

3. Who’s doing Driver-Based Planning?
Only 6% of companies with more than 100 employees
do driver-based planning
Just 10% say they react to change in business
conditions in a very coordinated fashion
37% say lack of coordination occurs frequently and is
an issue
Source: A Practical Look at Driver-Based Planning: Planning Benchmark Research

4. Where Are You on the Performance
Management Maturity Scale?
Level 1
Unaware
•Spreadsheets
•Financial
reporting risk
Level 2
Opportunistic
•Mixed bag of
applications
to support
different
processes
•Limited users
Level 3
Comprehensive
•Operational
participation
in planning
•Expanded
financial
analytics
Level 4
Enterprise
•Connected,
agile systems
•Enterprise
metric
analysis
Level 5
Transformative
•Data-driven
decision-making
culture
•Driven by
business
strategy
Tactical:
Use CPM to support more
efficient financial
processes
Strategic:
Use CPM to gain competitive
advantages
Source: Adaptive Roadshow, Assess CPM Maturity to Rate Your Performance Management, October 2012

5. Sneak Preview: Driver-Based Planning Maturity Scale
Level 1 – Disconnected Models/Chaos
Revenue forecast totally separated from expense plan.
No analysis of outputs of one department serving as inputs to another.
Level 2 – Signs of Intelligence
Revenue & expense model in 1 file; 1 or more expense item changes in real time with change to a revenue assumption.
Revenue forecast based on high level estimates or manual inputs of sales forecasts across lowest-level dimensions.
Level 3 – Basic Driver-Based Planning
Departments starting to jointly define shared drivers (e.g. marketing & sales agree on definition of a lead and customer).
Analyzing optimal level of detail in the revenue model rather than planning at lowest available level of sales forecast data.
Level 4 – Optimized Driver-Based Planning for Rapid Refresh
External data feeds directly into centralized planning model (e.g. from CRM, Payroll, GL).
Minimal manager input set focuses on materiality rather than precision. All material variable expenses connected to revenue.
Management can get answers to “what-if” questions in near real time.
Level 5 – Strategic, Integrated Driver-Based Planning
Transparency into how outputs of each department drive activities of other departments
Drivers and metrics clearly defined and documented across all business functions
Sensitivity Analysis (e.g. Tornado Diagrams) communicate impact of variation in key drivers
Financial statements may include allocations to enable P&Ls by product, business unit, etc.
Source: Adaptive Planning Blog: Why Integrated, Driver-Based Financial planning is Key to your Business. Oct 2013

6. Exercise: What describes your driver-based
planning maturity?
Level 1 – Disconnected Models/Chaos
Revenue forecast totally separated from expense plan.
No analysis of outputs of one department serving as inputs to another.
Level 2 – Signs of Intelligence
Revenue & expense model in 1 file
Revenue forecast based on high level estimates or manual inputs of sales forecasts
Level 3 – Basic Driver-Based Planning
Departments starting to jointly define shared drivers
Analyzing optimal level of detail in the revenue model rather than planning at lowest level data available
Level 4 – Optimized Driver-Based Planning for Rapid Refresh
External data feeds directly into centralized planning model (e.g. from CRM, Payroll, GL).
Minimal manager input set focuses on materiality rather than precision.
Level 5 – Strategic, Integrated Driver-Based Planning
Transparency into how outputs of each department drive activities of other departments
Drivers and metrics clearly defined and documented across all business functions

7. Driver-Based Planning – At a Glance
Driver-Based Planning is:
A best-practice approach that focuses on operational drivers and leading
indicators such as units and rates that serve as inputs that impact financial
results in a mathematical model
5 characteristics of good driver-based plans
1. Meaningful: Financial models are easily communicated, documented
2. Material: Optimal level of detail (balancing precision with materiality)
3. Vertical: managers can connect their work to corporate goals
4. Horizontal: plans connect across departments, not just corporate rollup
5. Progress: ability to make and measure progress frequently
Source: Preview from Accenture eLearning course FPM238: Introduction to Driver-Based Forecasting

8. Driver-Based Planning: 5 best practices
Process Best Practice Other Practice
1: Communicate &
document
Predictive Logic Diagram Models in spreadsheets
2: Sensitivity
Analysis
Proactive ranking impact
of key drivers
Answer questions as they
arise
3: Defining Level
of Detail
Materiality: Start at
highest level, fill in details
later
Precision: Start with lowest
level (e.g. pipeline or chart
of accounts) and build off this
data
4: Integrating
Driver Models
Drivers from each business
activity feed one another
Driver models rollup to
corporate, but are in silos
5: Strategic,
metrics-driven
culture
Objectives & Key Results
(OKRs) in centralized and
shared metrics library
Brainstorming a list of KPIs
and Drivers with managers

9. 1: Communicating & Documenting with a
Predictive Logic Diagram
Software
Licenses
Sold
Conversion
rate
# Services
Customers
Predictive logic diagram
for a software/services
business
It’s about Activities &
Rates
Hours Per
Customer
Billable
Services
Hours
Bill Rate Billable
Services
Revenues
Source: Is it Really Worth it to Replace Spreadsheets with a Planning Application.
An Insider’s Guide by Ben Lamorte, Alight Planning

10. 1: Communicating & Documenting with a
Predictive Logic Diagram, cont
Software
Licenses
Sold
Conversion
rate
# Services
Customers
Services
Staffing
Hours
Services Expenses
 Salaries
 PR taxes/ benefits
 Supplies
 Travel
 Recruitment
Training
 Etc.
Predictive logic diagram
for a software/services
business
It’s about Activities &
Rates
Hours Per
Customer
Billable
Services
Hours
Staff
Utilization
Rate
Bill Rate Billable
Services
Revenues
Hours Per
Month
Services
Staffing
Heads
Services
Profitability
Source: Is it Really Worth it to Replace Spreadsheets with a Planning Application.
An Insider’s Guide from Ben Lamorte’s SlideeShare

11. 2: Sensitivity analysis
Finds most important issues (drivers) that matter in a decision
Tornado Diagram: 1-way sensitivity analysis: examines deviation from base case by modifying
one variable at a time
Case study:
You are in charge of the long-term planning forecast at a large business school. Depending on
who you ask, the main profit driver is reported to be:
Average tuition rate per student
#students enrolled
#faculty on staff
Average faculty salaries
Questions you are asked to answer definitively:
1) Which is the most critical driver that impacts profits?
2) How accurate do you expect your forecast to be? In other words, don’t give me a point
estimate, give me a range on expected profit.

12. 2: Tornado Diagram
 Shows #students is most impactful driver, #faculty is least.
 Caveat: quick way to display impact of 1 variable at a time only

13. 3. Defining Level of Detail
Enable Managers to plan the way they think, at a level of detail that is
meaningful to them not dollar amounts in the chart of accounts that are
meaningful to finance department
This is the way managers think – help them plan like this
Key Responsibilities Business Goals
• Measuring performance
• Controlling costs
• Analyzing business trends
• Tracking initiatives
Operational
Effectiveness
Planning, Analysis, and Reporting Solutions Drive Financial Performance Management, January 2013
Not this!
Source: Adaptive Planning Roadshow 2013

14. Example: Driver-based model w/too much detail!
Precision of 1000+ static inputs may work for budgeting;
forecasting should be higher level
• Version 1: 10k line items
• Version 2: 3k line items
• Version 3: 1k?
Lessons learned over and over:
• Start plans at high level to reveal which details are missing
• Easier to add detail than to remove tons of data from a model!
Source: Is it Really Worth it to Replace Spreadsheets with a Planning Application.
An Insider’s Guide by Ben Lamorte, Alight Planning

15. 4: Integrating Driver Models
Sales
Pipeline
Forecasts
Corporate
Financial
Plan
Manu-facturing
Production
Plans
Logistics
Inbound &
Outbound
Shipments
HR
Marketing
Workforce
Planning
Lead
Generation
Source: Adaptive Planning Blog: Why Integrated, Driver-Based Financial planning is Key to your Business. Oct 2013

16. 2: Strategic, metrics-driven culture
In the absence of a clearly articulated and up-to-date
strategy or set of objectives, a KPI team must spend
significant time interviewing departmental executives
and corporate executives to understand the mission and
direction of their group before they can commence with
the actual work of defining KPIs.”
– Wayne Eckerson

17. 5: Strategic, metrics-driven culture
1. *Mission: 1-2 sentences describing team’s purpose
2. *Objectives: Names 2-5 core components of
mission to achieve in a defined timeframe
3. *Key Results: Identify 1-4 measurable results to
demonstrate achieving each objective by set date
4. Metrics: numbers with a defined unit to help
Strategic
BUT
Not Measurable
Strategic measure and communicate progress.
AND
Measurable
Source: Never Before-Disclosed Oracle Planning Techniques by Jeff Walker, former CFO of Oracle who
deployed a “Mission Objective Key Results” system to help grow Oracle from $20M to $1B by more than
doubling revenue year after year in the 1980s.

18. My OKRs for remainder of session
Objective:
Provide as much value for free as possible to improve
planning and performance management
Key Results:
1. Everyone can name 3 driver-based planning best practices
2. 5+ sign up for FREE private, 1:1 OKRs drafting session
*Source: Inspired by John Doerr Presentation to Google, 1999

19. OKRs What, Who and Why
What
OKRS = Objectives and Key Results
Best practice performance management methodology
Who
1980s: Intel and Oracle
1990s: Google begins using OKRs w/just 40 employees
2000s: 100s of companies including Twitter, LinkedIn, Sears…

20. Google on “Why OKRs”
Source: BusinessInsider.com

21. OKRs Example: Marketing Team
O: Achieve lead targets provided by sales team
KR: Deliver 100 leads in Q1, 200/Q2, 250/Q3, 300/Q4
O: Deliver quality leads cost effectively
KR: Identify best and worst marketing event by analyzing ROI of
at least 5 conferences
KR: Achieve an overall cost per lead below $65 in Q1
KR: 30% of leads convert to opportunity within 6 weeks of
creation
Notice how the “KPIs/Drivers” emerge organically as we define OKRs

22. Even AP can be Strategic Driver-Based!
22

23. 5: Strategic, metrics-driven culture, Summary
In each cost center
Identify metrics (volumes & ratios) to predict costs & revenues
# invoices
# applications products sold
# sales staff
Average price per sale
Measure Metrics
Plan to drive metrics in desired direction
Plan objectives around influencing the metrics
Use metrics in forecasting where possible
Note: forecast drivers can emerge organically with your team as you define
OKRs and create predictive logic diagrams to connect drivers to financial
forecasts
Source: Never Before-Disclosed Oracle Planning Techniques by Jeff Walker

24. Summary
Driver-Based Planning: 5 best practices
Process Best Practice Other Practice
1: Communicate &
document
Predictive Logic Diagram Models in spreadsheets
2: Sensitivity
Analysis
Proactive ranking impact
of key drivers
Answer questions as they
arise
3: Defining Level
of Detail
Materiality: Start at
highest level, fill in details
later
Precision: Start with lowest
level (e.g. pipeline or chart
of accounts) and build off this
data
4: Integrating
Driver Models
Drivers from each business
activity feed one another
Driver models rollup to
corporate, but are in silos
5: Strategic,
metrics-driven
culture
Objectives & Key Results
(OKRs) in centralized and
shared metrics library
Brainstorming a list of KPIs
and Drivers with managers

25. Feedback
Scoring performance
Objective:
Provide as much value for free as possible to improve
performance management
Key Results:
1. Everyone can name 3 driver-based planning best practices
(Score 1 if 100%; .7 if 75%, .5 if 50%, 0 otherwise)
2. 5+ sign up for FREE private, 1:1 OKRs drafting session
(Score 1 if 5+ completed, .7 if 4, .5 if 3, 0 otherwise)
*Source: Inspired by John Doerr Presentation to Google, 1999

26. LET’S DRAFT YOUR OKRS!

27. Thank You and Learn More!
Videos
• Google Ventures Startup Lab workshop on Google’s use of OKRs since 1990s for Performance Management
• Executioner’s Tale: 20 minute video by Christina Wodtke
• Small Wins (authors of the Progress Principle)
https://www.youtube.com/watch?v=FJ0rs9ZENgM&list=PLPkq59We34mujr0IYnY_rrQBx9TThnAqa
• Simon Sinek - Biology of OKRs and measurable progress on goals
Social Media
• Join Objectives and Key Results (OKRs) LinkedIn Group
• Quora has great Q&A on OKRs
Books
• High Output Management, Andy Grove
• Performance Dashboards, Wayne Eckerson
OKRs Performance Management Software Vendors
• BetterWorks
• WorkBoard
• 7Geese

28. 5: (Data used to create Tornado example)