Bank forecasts highlight the challenges of predictability

While today’s revised economic growth forecast by the Bank of England may have us thinking that we need to tighten our belts even more, it also highlights the difficulties involved in business planning, budgeting and projections.

Even though the Bank uses very similar, if not the same, complex models as the Office of Budget Responsibility (OBR) to forecast key economic indicators, the outcomes differ significantly. The OBR estimates the UK’s growth will be 2.3% in 2011, whereas the Bank predicts 3%, down 0.5% from its previous forecast.

Although a figure of less than 1% might not sound like a big variance, it will make a significant difference to the state of the economy. Inflation, unemployment, lending levels, house prices and many other key factors will all be dramatically influenced depending whose crystal ball is more accurate.

One of the biggest problems this revised forecast creates for businesses and associations is a level of uncertainty. While nothing in business can be predicted accurately, 100% of the time, most business and associations gain confidence from a stable environment where levels of ambiguity are minimal. Investment decisions are easier to make. Budget planning is simpler and the whole organisation becomes more positive about making decisions.

We must accept that associations can do little to affect the wider economy, and certainly cannot reduce any differences in growth predictions made by leading economists. However, there are a number of steps they can take to stabilise their own organisation and make things as predictable and simple as possible, giving them a degree of confidence about what the future holds.

One of the key ways of achieving this desired state is through an outsourced association management service. Employing staff directly may seem like the safest and most predictable way of running an association, but is it? What about holiday or sickness cover? This can be a particular problem where an association has a skeleton staff, meaning when one member is on holiday or off ill, service levels are significantly affected. What about poorly performing staff? As employment rights continue to swing in favour of the employee it can take a significant amount of time to re-train or replace poorly performing staff.
Outsourcing administration services removes many of these challenges. Associations should agree clear, measurable service levels with their provider. This allows standards to be easily monitored but more importantly, gives a much higher level of confidence and certainty over performance levels as well as future costs.

We believe that in times as turbulent as the ones we are currently facing, it is important to make the future as predictable as possible. So, unless your crystal ball is more accurate and reliable than the Government’s, why not give us a call to find out how we can make your association run more smoothly and confidently.