Driver-based planning is a management approach. Its goal is to identify and manage what drives corporate financial success. Driver-based planning is beneficial in long tern strategic planning where revenues and costs need to be projected. Key drivers differ based on the industry and organization.
- Increased accuracy
- Creates a more visible cost base
- Focuses organizational resources
- Discovers what really matters
- Uncovers what costs are needed to facilitate growth
Recognizing key business drivers may be difficult to complete subjectively if those in the organization have different outlooks of what the key drivers for success are. Forecasting business drivers impartially by means of a mathematical model helps overcome this obstacle. Models can also be constructed using spreadsheets or with more advanced data modeling software applications.
Driver-based models don’t have to be exceedingly detailed or complicated. For models to be accurate and acted upon, those making the models must focus on key performance drivers as well as key performance metrics.