New Zealand Companies Good On Planning

News Release, 12 May 2009

New Zealand Companies Good On Planning
But Scope To Do Better

Privately-owned New Zealand companies are up with the best in the world when it comes to business planning cycles, according to the latest Grant Thornton international survey.

The accountancy and business advisory firm’s International Business Report shows that a majority of privately-held businesses globally (49%) follow a one-to-three year planning cycle.

And in New Zealand the figure is 60%, equal with United Kingdom and second only to Denmark (64%).

However, Grant Thornton New Zealand’s business advisory services director based in Auckland, Pam Newlove, while pleased with the result, sees distinct opportunity for improvement in the New Zealand situation.

She says: “There is definitely more room for New Zealand businesses to push out the planning cycle – only a relatively small percentage scope out to between three and five years. In the South Island, the planning horizon for a full one-third is less than a year, and in the case of the North Island the comparative figure is 26%.

“While the current economic situation means that actions are needed to protect the business in the short term, a new economic environment will eventually emerge and well managed businesses with clear long-term strategies will prosper.

Short term survival and longer term revival can go hand in hand. One needs to be balanced with the other – in fixing the short term issues you have to be careful not to lose long-term vision.”

Not surprisingly, privately-owned businesses in China are the longest term planners, with 44% of them planning more than three years ahead. Short-term planning is especially common in Latin America, with 73% in Mexico, 71% in Argentina, 43% in Chile and 30% in Brazil using a planning cycle of less than 12 months – all well above the global average in this period of 21%.

Pam Newlove says Grant Thornton has several pointers for businesses wanting to plan ahead. They include:

• Stress testing the plan with different scenarios to assess the effect of different market conditions
• Analysing of worst-case scenarios (profit and loss, balance sheet and cashflow impacts)
• Developing contingency plans to enable flexibility
• Examining competitors’ strengths and thinking how to exploit their weaknesses
• Communicating the plan and connecting employee remuneration and incentives to achieve objectives.

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