I hadn’t thought about the exact definition of “driver-based planning” until the question came up in the context of our planning benchmark research showing that only 6 percent of companies with more than 100 employees do driver-based planning. Broadly defined, the term could be applied to the use of any spreadsheet-planning model because these almost always have built-in volume-times-price formulas, which are components of driver-based plans. However, this is not what most people have in mind when they talk about driver-based planning, and that’s reflected in the low percentage of those employing the technique.
As I use the term, there are two conditions that must be met for driver-based planning. The first is that the volume-times-price amounts used in defining activities and their financial consequences remain discrete and discoverable by participants throughout the planning, analysis and review processes. The second is that there are persistent volume and price connections between plans of the various groups within a company. Typically, activities that take place in one part of an organization drive actions in another. For example, the sale of a product or service drives fulfillment activities that can be direct (shipping inventory or providing consulting hours) or indirect (administrative tasks such as scheduling or order processing).