Bridging the Gap Between the Strategic Planning Processes andOperational Execution
Alan Mohl, Managing Director, Quality ConsultingCorporation, Inc.
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Alan Mohl, Managing Director, Quality ConsultingCorporation, Inc.
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Introduction
When executives from 200 worldwide companies were asked howeffectively they were meeting the financial projections set forth in theirstrategic plans, they indicated that companies on average realize only about60% of the potential financial performance their strategies promise. More thanone-third of those executives placed the figure at less than 50%.1 By closing the gap between strategy andexecution, organizations can dramatically improve their overall financial “…the budgeting process at most companies has to be the most ineffective practice in management.”
Jack Welch
performance. In examiningfurther the reasons for strategic value destruction, defects and breakdowns inplanning and execution were cited as the primary contributing factors.
When executives from 200 worldwide companies were asked howeffectively they were meeting the financial projections set forth in theirstrategic plans, they indicated that companies on average realize only about60% of the potential financial performance their strategies promise. More thanone-third of those executives placed the figure at less than 50%.1 By closing the gap between strategy andexecution, organizations can dramatically improve their overall financial “…the budgeting process at most companies has to be the most ineffective practice in management.”
Jack Welch
performance. In examiningfurther the reasons for strategic value destruction, defects and breakdowns inplanning and execution were cited as the primary contributing factors.
Itis not a new revelation that planning processes are often broken. Over theyears, companies have extended vast amounts of effort to improve their planningprocesses from both a technology and process perspective. Planning, however,remains in most organizations an area of opportunity. Jack Welch summed it upnicely in his book Winning, when he said “Not to beat around thebush, but the budgeting process at most companies has to be the mostineffective practice in management.” Empirical evidence strongly supportsWelch’s argument:
• Focus: Only 53% of surveyed companies focus on the critical strategicissues, while 71% do not clearly identify the expected results of majorinitiatives. Fewer than 60% of companies track execution of strategicinitiatives
• Linkage: 76 % state that strategic plans should drive operational plans, yet60% do not link operational plans to strategy
• Accuracy: 72% believe conventional budgeting yields unrealistic numbers.Only
53% believe budgeting is highly useful for allocating resourceswhich is the primary objective of budgeting.
• Behavior: 66% link incentive compensation to the budget/plan, but 53%believe the process encourages undesirable behavior. (Source: Data from Harvard Business Review, McKinsey Quarterly, CFO Research Services, SonaxGroup)
The fundamental reason for companies’ inability to improveplanning processes relates to their perspective on planning. Most companies donot take a holistic view of strategic and operational planning processes: theyaddress them independently and often in separate parts of the organization.While it is true that strategic and operational planning processes requiredifferent approaches, it’s paramount that they are integrated, aligned, andwell synchronized. In companies lacking an integrated planning environment,their traditional planning processes actually serve to break the connectionbetween strategy and execution, rather than bridge it. Ultimately, the planningprocess defines how an organization translates its strategy into action, andaligns resources to their strategic priorities. This document will define aholistic approach to successfully leverage planning processes to enablesustainable and successful execution of strategy.
A New Approach to PlanningProcess Improvement
Before attempting to define a new approach, it is important to understandwhy traditional strategic and operational planning processes create barriersand inhibit the resource allocation process. The barriers can be divided intothree categories: organizational, process, and information. From anorganizational perspective, strategic initiatives typically cross and involve mostbusiness areas and functions of the organization, where operational planning ofresources is typically controlled independently by business units andfunctional groups. In most companies, there is no group or function dedicatedto the comprehensive planning process. From a process perspective, strategicand operational planning are structurally different processes that must bealigned. Strategic planning looks at a longer time horizon and is aspirational,where operational planning views a shorter period of time and must be more Pragmatic,realistic, and accurate. The traditional annual aspect of operational planningand budgeting compounds the problem as resource decisions are analyzed and completedonce a year as opposed to a continuous process. From an informationperspective, fragmented and incomplete information platforms limit the abilityto access critical business information in a timely and efficient manner.Similar information challenges result in limited visibility around the keydrivers of the business. All these barriers must be addressed to bridge thestrategic and operational planning processes.
In order to begin to leverage planning to drive value and results,a new approach is required. Rather than focusing on individual planning processcapabilities that address a limited subset of the specific barriers definedabove, an organization must think holistically and provide a dedication to capability building through a focus on an integrated process supported by an enabling platform.
Holistic Approachto Planning Processes
Figure 1
• Focus: Only 53% of surveyed companies focus on the critical strategicissues, while 71% do not clearly identify the expected results of majorinitiatives. Fewer than 60% of companies track execution of strategicinitiatives
• Linkage: 76 % state that strategic plans should drive operational plans, yet60% do not link operational plans to strategy
• Accuracy: 72% believe conventional budgeting yields unrealistic numbers.Only
53% believe budgeting is highly useful for allocating resourceswhich is the primary objective of budgeting.
• Behavior: 66% link incentive compensation to the budget/plan, but 53%believe the process encourages undesirable behavior. (Source: Data from Harvard Business Review, McKinsey Quarterly, CFO Research Services, SonaxGroup)
The fundamental reason for companies’ inability to improveplanning processes relates to their perspective on planning. Most companies donot take a holistic view of strategic and operational planning processes: theyaddress them independently and often in separate parts of the organization.While it is true that strategic and operational planning processes requiredifferent approaches, it’s paramount that they are integrated, aligned, andwell synchronized. In companies lacking an integrated planning environment,their traditional planning processes actually serve to break the connectionbetween strategy and execution, rather than bridge it. Ultimately, the planningprocess defines how an organization translates its strategy into action, andaligns resources to their strategic priorities. This document will define aholistic approach to successfully leverage planning processes to enablesustainable and successful execution of strategy.
A New Approach to PlanningProcess Improvement
Before attempting to define a new approach, it is important to understandwhy traditional strategic and operational planning processes create barriersand inhibit the resource allocation process. The barriers can be divided intothree categories: organizational, process, and information. From anorganizational perspective, strategic initiatives typically cross and involve mostbusiness areas and functions of the organization, where operational planning ofresources is typically controlled independently by business units andfunctional groups. In most companies, there is no group or function dedicatedto the comprehensive planning process. From a process perspective, strategicand operational planning are structurally different processes that must bealigned. Strategic planning looks at a longer time horizon and is aspirational,where operational planning views a shorter period of time and must be more Pragmatic,realistic, and accurate. The traditional annual aspect of operational planningand budgeting compounds the problem as resource decisions are analyzed and completedonce a year as opposed to a continuous process. From an informationperspective, fragmented and incomplete information platforms limit the abilityto access critical business information in a timely and efficient manner.Similar information challenges result in limited visibility around the keydrivers of the business. All these barriers must be addressed to bridge thestrategic and operational planning processes.
In order to begin to leverage planning to drive value and results,a new approach is required. Rather than focusing on individual planning processcapabilities that address a limited subset of the specific barriers definedabove, an organization must think holistically and provide a dedication to capability building through a focus on an integrated process supported by an enabling platform.
Holistic Approachto Planning Processes
Figure 1
Core Capabilities
There are three primary categories of capabilities that fosterexecution, adaptability, and improved decision-making within an organization.These categories are visibility, leverage, and responsiveness. Put simply, acompany must be able to see opportunities and threats in the future, understandwhich actions have the potential to impact future outcomes, and execute thoseactions.
1. Visibility
There are primarily two dimensions of visibility: how far into thefuture a company can predict (time) and how clearly (accuracy). Visibility canbe compared easily to the acuity chart one is often asked to read at theiroptometrist. The letters become smaller and smaller as one progresses down thechart, much like attempting to forecast farther and farther into the future. Atsome point, the letters become so fuzzy (low accuracy) that there is simply noway to read them.
Dimensions ofVisibility
Figure 2
There are three primary categories of capabilities that fosterexecution, adaptability, and improved decision-making within an organization.These categories are visibility, leverage, and responsiveness. Put simply, acompany must be able to see opportunities and threats in the future, understandwhich actions have the potential to impact future outcomes, and execute thoseactions.
1. Visibility
There are primarily two dimensions of visibility: how far into thefuture a company can predict (time) and how clearly (accuracy). Visibility canbe compared easily to the acuity chart one is often asked to read at theiroptometrist. The letters become smaller and smaller as one progresses down thechart, much like attempting to forecast farther and farther into the future. Atsome point, the letters become so fuzzy (low accuracy) that there is simply noway to read them.
Dimensions ofVisibility
Figure 2
Aglobal consumer products company exemplified improving visibility as it soughtbetter volume and sales revenue predictions for blades and razors. Their robustdriver-based model started with historical trade flows and industryexpectations, as the basis to determine projected volume. The company thenidentified a series of inter-related drivers to develop sophisticatedalgorithms that determined how marketing and other drivers would impact futuresales. These drivers included the impact of new product introductions,competitive behavior, product performance, promotional spending, and otheractivities that promoted market share. By applying conversion rates and otherdriver–based ratios to determine how many new users would be acquired, they wereable to gain better visibility into future shipments and ultimately futurerevenue. Leveraging the driver model allowed them to increase both time andaccuracy of their revenue predictions. Another important aspect of this case studywas that this driver modeling framework was leveraged for all aspects of theirplanning—from strategic planning, to resource allocation, to their weeklyforecasting process.
2.Leverage
Leveragecan be defined as the capacity to use insight and knowledge to accuratelyidentify the key levers that drive performance. Developing leverage requires adeep understanding of the underlying business model. A great comparison toillustrate leverage is the work of sailing a boat. There are many lines to pullto catch the wind properly to accelerate or turn the craft, but one has tounderstand the sailing mechanism to know which lines to pull, when to pullthem, and with how much force to use when pulling the lines. Experiencedsailors make an art of this delicate balance to sail efficiently andeffectively. Similarly, executives that have a deep command of their businessmodels leverage information and insight to positively impact results. TorontoDominion Bank sought to focus on customer satisfaction after acquiring CanadaTrust, a bank known for its exemplary customer service. Although every bankbranch had detailed reports on customer satisfaction, and were overwhelmed withdata, they had little insight on how to improve customer service andoperations. They needed to understand which dimensions of service were leversfor customer satisfaction, and ultimately of branch profitability, so theycould focus on service dimensions that most impacted results (which lines topull and when, in the sailing analogy). TD Bank quantified customer perceptionsand satisfaction impact through a program of rigorous and systematic customersurvey and statistical analysis, which ultimately provided them anunderstanding of the impact of customer service on profitability, as well as astrong hypothesis on the relationship between specific internal processes andcustomer service. This enabled them to quantify the benefit of improving eachinternal service process, decompose each process element based on theunderlying driver model, and apply quantifiable expected results to eachprocess. In the example depicted below, two components, speed of service andcomfortable banking, are assigned a specific contribution to branchprofitability based on the driver model.2
Bank Example,Quantified Process Leverage
Figure 3
2.Leverage
Leveragecan be defined as the capacity to use insight and knowledge to accuratelyidentify the key levers that drive performance. Developing leverage requires adeep understanding of the underlying business model. A great comparison toillustrate leverage is the work of sailing a boat. There are many lines to pullto catch the wind properly to accelerate or turn the craft, but one has tounderstand the sailing mechanism to know which lines to pull, when to pullthem, and with how much force to use when pulling the lines. Experiencedsailors make an art of this delicate balance to sail efficiently andeffectively. Similarly, executives that have a deep command of their businessmodels leverage information and insight to positively impact results. TorontoDominion Bank sought to focus on customer satisfaction after acquiring CanadaTrust, a bank known for its exemplary customer service. Although every bankbranch had detailed reports on customer satisfaction, and were overwhelmed withdata, they had little insight on how to improve customer service andoperations. They needed to understand which dimensions of service were leversfor customer satisfaction, and ultimately of branch profitability, so theycould focus on service dimensions that most impacted results (which lines topull and when, in the sailing analogy). TD Bank quantified customer perceptionsand satisfaction impact through a program of rigorous and systematic customersurvey and statistical analysis, which ultimately provided them anunderstanding of the impact of customer service on profitability, as well as astrong hypothesis on the relationship between specific internal processes andcustomer service. This enabled them to quantify the benefit of improving eachinternal service process, decompose each process element based on theunderlying driver model, and apply quantifiable expected results to eachprocess. In the example depicted below, two components, speed of service andcomfortable banking, are assigned a specific contribution to branchprofitability based on the driver model.2
Bank Example,Quantified Process Leverage
Figure 3
3. Responsiveness
In addition to seeing opportunities (visibility) andunderstanding the business model (leverage), organization’s need the ability torespond and make the needed changes. Responsiveness is defined as the capacityto change direction efficiently and rapidly execute strategic and tacticalobjectives. The two components, agility and speed, combined allow organizationsto make more course corrections more often. In one study, 90% of executivesstated they could boost business performance through greater agility and speed.3 Responsiveness is often measured in terms of the strategiccycle time—how long does it take to define the strategy, develop and executethe plan, and receive feedback to revise the strategy. As depicted in Figure 4,a shorter cycle time enables more frequent refinement of the strategy andtypically results in improved performance.
Strategic CycleTime
Figure 4
In addition to seeing opportunities (visibility) andunderstanding the business model (leverage), organization’s need the ability torespond and make the needed changes. Responsiveness is defined as the capacityto change direction efficiently and rapidly execute strategic and tacticalobjectives. The two components, agility and speed, combined allow organizationsto make more course corrections more often. In one study, 90% of executivesstated they could boost business performance through greater agility and speed.3 Responsiveness is often measured in terms of the strategiccycle time—how long does it take to define the strategy, develop and executethe plan, and receive feedback to revise the strategy. As depicted in Figure 4,a shorter cycle time enables more frequent refinement of the strategy andtypically results in improved performance.
Strategic CycleTime
Figure 4
By re-designing their planning and forecasting processes, afinancial services firm was able to shorten their processes dramatically, from585 people days to 389 people days to complete one forecast cycle. The biggestbenefit, however, was not realized through the labor reduction, but ratherthrough their ability to re-allocate resources 12 times per year instead ofonly 3. This substantial improvement in strategic cycle time led to an increasein investment in key areas that yielded an 8% rise in new products andservices.4 By holistically addressing the core capabilities involved inall planning—visibility, leverage, and responsiveness—organizations are able tobetter execute and achieve the results outlined in their strategic objectives.The second component of the holistic approach is the integration of theprocesses themselves.
Integrated Process
It would be a mistake to consider strategic and operationalplanning as one process. As described previously, these processes arefundamentally different. The focus of strategic planning involves changing thebusiness vs. running the baseline business efficiently and effectively which isthe primary focus of operational planning. Strategic planning looks over alonger time horizon (future) where predictions are aspirational and directionallycorrect. Operational planning allocates resources for a shorter time framewhere the planning output is more predictive. These processes should be dealtwith separately, but should be synchronized and connected through keycomponents. It is important to first understand each process, and then discusshow they interact.
1. Strategy Management
The strategy management cycle is a specific version of theclassic ‘plan–do–check–act’ cycle as depicted below. The strategy update (ordefinition on its first iteration), defines the value gap. The best methodologyto describe how an organization creates value is through a strategy mappingprocess, which is well defined.5It is important to note that strategymapping incorporates cause and effect relationships that define the logic thatconverts intangible assets to tangible outcomes across the financial, customer,internal process, and learning and growth perspectives. Similarly inoperational planning, driver modeling leverages cause and effect relationshipsbetween operational drivers and performance outcomes. The balanced scorecardclarifies the strategy by highlighting the key strategic objectives, providesmeasures for evaluating performance results, and aspirational targets.6 The strategic action plan defines the specific initiativesrequired to close the gap between current and targeted performance. Theinitiative portfolio is a key connection to the operational plan and requires arobust initiative management process. As part of this cycle, strategic initiativesmust be categorized, funded, and tracked separately from business as usualinitiatives. Finally, strategic reviews provide insight into performanceagainst the plan and allow management to update assumptions in the strategy,thus completing the closed-loop strategic management cycle.
StrategicManagement Cycle
Figure 5
Integrated Process
It would be a mistake to consider strategic and operationalplanning as one process. As described previously, these processes arefundamentally different. The focus of strategic planning involves changing thebusiness vs. running the baseline business efficiently and effectively which isthe primary focus of operational planning. Strategic planning looks over alonger time horizon (future) where predictions are aspirational and directionallycorrect. Operational planning allocates resources for a shorter time framewhere the planning output is more predictive. These processes should be dealtwith separately, but should be synchronized and connected through keycomponents. It is important to first understand each process, and then discusshow they interact.
1. Strategy Management
The strategy management cycle is a specific version of theclassic ‘plan–do–check–act’ cycle as depicted below. The strategy update (ordefinition on its first iteration), defines the value gap. The best methodologyto describe how an organization creates value is through a strategy mappingprocess, which is well defined.5It is important to note that strategymapping incorporates cause and effect relationships that define the logic thatconverts intangible assets to tangible outcomes across the financial, customer,internal process, and learning and growth perspectives. Similarly inoperational planning, driver modeling leverages cause and effect relationshipsbetween operational drivers and performance outcomes. The balanced scorecardclarifies the strategy by highlighting the key strategic objectives, providesmeasures for evaluating performance results, and aspirational targets.6 The strategic action plan defines the specific initiativesrequired to close the gap between current and targeted performance. Theinitiative portfolio is a key connection to the operational plan and requires arobust initiative management process. As part of this cycle, strategic initiativesmust be categorized, funded, and tracked separately from business as usualinitiatives. Finally, strategic reviews provide insight into performanceagainst the plan and allow management to update assumptions in the strategy,thus completing the closed-loop strategic management cycle.
StrategicManagement Cycle
Figure 5
2. Operations Management
The operational management process begins with the determination of abaseline operating plan. It is here that many organizations fail to quantifythe full impact of the strategic action plan and incorporate the expectedoperational and financial impact of the strategic initiatives. The baselineoperating plan is constructed by using driver models that represent themathematical relationship between operating drivers and financial outcomes.These driver based models are a critical component of operational management,as the drivers are actionable, whereas outcome results typically are not. Oncethe operating and financial plan is developed, causal operational driver modelsare leveraged to provide a continual forward looking view of performance in theform of a rolling forecast. As key processes and initiatives are executed,operational dashboards and focused analytic report views provide real-timeperformance monitoring. Leveraging causal analysis around the key planningdrivers, operational reviews examine performance results determining if modelassumptions should change or operational performance execution requiresimprovement. From this analysis, tactical action plans are developed withowners and milestones. Resultant updates to the forward looking plan completethe closed-loop operational management cycle.
OperationalManagement Cycle
Figure 6
The operational management process begins with the determination of abaseline operating plan. It is here that many organizations fail to quantifythe full impact of the strategic action plan and incorporate the expectedoperational and financial impact of the strategic initiatives. The baselineoperating plan is constructed by using driver models that represent themathematical relationship between operating drivers and financial outcomes.These driver based models are a critical component of operational management,as the drivers are actionable, whereas outcome results typically are not. Oncethe operating and financial plan is developed, causal operational driver modelsare leveraged to provide a continual forward looking view of performance in theform of a rolling forecast. As key processes and initiatives are executed,operational dashboards and focused analytic report views provide real-timeperformance monitoring. Leveraging causal analysis around the key planningdrivers, operational reviews examine performance results determining if modelassumptions should change or operational performance execution requiresimprovement. From this analysis, tactical action plans are developed withowners and milestones. Resultant updates to the forward looking plan completethe closed-loop operational management cycle.
OperationalManagement Cycle
Figure 6
3. Integrated Planning Process
The integration of the strategic and operational planningcycles does not compromise the integrity of either, but rather providescontinuous and dynamic resource allocation with key process componentsoptimized and aligned. It is important to consider four key areas where theprocesses connect, as depicted in Figure 7.
1. Expenditures associated with strategic initiatives (Stratex)must be funded separately in the operational plan and tracked explicitlythroughout the planning cycle.
2. The expected performance impact of the strategic initiativesneeds to be modeled and accounted for in the operating and financial plans. Ifan initiative improves efficiency or increases sales, the operational andfinancial plan should reflect both the initiative cost and resultant financialbenefit.
3. The cause-and-effect relationships, defined both throughstrategy maps and driver based models, provide the foundation for linkingstrategy and operations throughout the entire management cycle. From planningto review to revised action, examination of the driver relationships enablescontinuous learning. These relationships are the underpinnings of the entireplanning process, and consistency in how the company thinks about the businessmodel provides a fundamental element of integration.
4. Action plans are created in both strategy and operationalreviews, which should be separate but linked in their awareness of each other.This closing of the performance loop requires a well orchestrated governancemodel that provides standardization, consistency and integration across the planningcycle.
IntegratedPlanning Model
Figure 7
The integration of the strategic and operational planningcycles does not compromise the integrity of either, but rather providescontinuous and dynamic resource allocation with key process componentsoptimized and aligned. It is important to consider four key areas where theprocesses connect, as depicted in Figure 7.
1. Expenditures associated with strategic initiatives (Stratex)must be funded separately in the operational plan and tracked explicitlythroughout the planning cycle.
2. The expected performance impact of the strategic initiativesneeds to be modeled and accounted for in the operating and financial plans. Ifan initiative improves efficiency or increases sales, the operational andfinancial plan should reflect both the initiative cost and resultant financialbenefit.
3. The cause-and-effect relationships, defined both throughstrategy maps and driver based models, provide the foundation for linkingstrategy and operations throughout the entire management cycle. From planningto review to revised action, examination of the driver relationships enablescontinuous learning. These relationships are the underpinnings of the entireplanning process, and consistency in how the company thinks about the businessmodel provides a fundamental element of integration.
4. Action plans are created in both strategy and operationalreviews, which should be separate but linked in their awareness of each other.This closing of the performance loop requires a well orchestrated governancemodel that provides standardization, consistency and integration across the planningcycle.
IntegratedPlanning Model
Figure 7
It is important to note that while each processcomponent is important, the real value is derived from the various componentsworking in tandem to increase the capabilities of the organization. The keycharacteristics of this model are as follows:
· It is holistic, encompassing all the planningprocesses.
· It is synchronized, with strategic and operationalplanning processes separate but aligned with each other.· It is focused on strategic priorities.
· It is transparent, as operational driverassumptions, initiatives, resource requirements, action plans, and expectedresults are defined explicitly.· It is continuous, with repetition of the planningand execution cycles occurring more dynamically.
· It is unbiased, since driver relationships areexplicitly defined and tested and continually improved, versus being in someone’s mind (intuition).· It is informed, leveraging the informationavailable to the organization to constantly refine understanding of the businessmodel.
Enabling Platform
The final component of the holistic approach is the supportingplatform. There are two fundamental enablers that cross all aspects of thecompany: information technology and human capital. While these are bothextensive areas with many topics for discussion independently, it is the intenthere solely to address their impact on integrated planning processes within anorganization.
1. Information Technology
Planning processes all require performance information, most ofit shared at different levels for strategic and operational planning. It iscritical that the information technology infrastructure is able to provideconsistent information and reporting at all levels. This is often difficult, asthe processes leverage different tools where data is sourced from multiplelocations. In addition, organizations often have multiple definitions for keymetrics and lack the tools and process capability to manage hierarchies andother key information elements. Data integration provides a centralized placeto facilitate the consistent application of business definitions and standardsacross the enterprise. Through data management and integration, IT is able tocreate a consistent underlying data set that supports the varied business requirementsand applications needed by the business.
As was defined in the TD Bank case study, the information mustalso be presented in a way that provides insight for analysis planning. Thisrequires IT to develop an analytic platform that supports appropriate views ofinformation, from basic consolidations and enterprise planning to data mining,trend analyses, and driver based analyses. The analytic platform also typicallysupports the input of driver assumptions and other plan data.
With consistent, accurate, timely data presented in theappropriate way, IT can enable the business to leverage its planning processesin support of successful strategic and operation execution. This is tangiblyrecognized through portals and dashboards that contain powerful analytics,interactive reporting with data visualization and exception based management,among other characteristics.
2. Human Capital
Companies that develop consistent, accessible data throughsystems find that analysts previously dedicated to the collection,reconciliation, and presentation of data become free to meaningfully contributeto the analytical process. However, these individuals often lack the skillsnecessary to fulfill their newly defined roles. One report shows that 71% ofCFOs believe that 2/3 of finance staff lack “critical thinking” skills toinflect critical decisions.7The skills of associates involved in allplanning processes must be evaluated and developed to match the changing needsof the organization as it evolves.
Summary
Planning can drive value and results, but it requires a new approach: a dedication to capability building through a focus on an integrated process supported by an enabling platform.
Planning can drive value and results, butit requires a new approach: a dedication to capability building through a focuson an integrated process supported by an enabling platform. The critical core capabilities—visibility,leverage, and responsiveness—must be developed, nurtured, and refined acrossthe enterprise. The strategic and operational management cycles, developed usingleading methodologies and practices, must be linked at key points within theprocesses, including strategic and operational initiatives, cause and effect relationshipbuilding, and through coordination of performance reviews and action planning.Finally, the organization must consider the global IT and human capital needsthat enable the integrated planning model. Through a dedication to thisholistic approach to planning processes, the potential exists to increase performanceby up to 50% for many organizations. While this planning transformation istruly an evolutionary process, potentially taking extensive time and energy,most find it is well worth the effort.
· It is holistic, encompassing all the planningprocesses.
· It is synchronized, with strategic and operationalplanning processes separate but aligned with each other.· It is focused on strategic priorities.
· It is transparent, as operational driverassumptions, initiatives, resource requirements, action plans, and expectedresults are defined explicitly.· It is continuous, with repetition of the planningand execution cycles occurring more dynamically.
· It is unbiased, since driver relationships areexplicitly defined and tested and continually improved, versus being in someone’s mind (intuition).· It is informed, leveraging the informationavailable to the organization to constantly refine understanding of the businessmodel.
Enabling Platform
The final component of the holistic approach is the supportingplatform. There are two fundamental enablers that cross all aspects of thecompany: information technology and human capital. While these are bothextensive areas with many topics for discussion independently, it is the intenthere solely to address their impact on integrated planning processes within anorganization.
1. Information Technology
Planning processes all require performance information, most ofit shared at different levels for strategic and operational planning. It iscritical that the information technology infrastructure is able to provideconsistent information and reporting at all levels. This is often difficult, asthe processes leverage different tools where data is sourced from multiplelocations. In addition, organizations often have multiple definitions for keymetrics and lack the tools and process capability to manage hierarchies andother key information elements. Data integration provides a centralized placeto facilitate the consistent application of business definitions and standardsacross the enterprise. Through data management and integration, IT is able tocreate a consistent underlying data set that supports the varied business requirementsand applications needed by the business.
As was defined in the TD Bank case study, the information mustalso be presented in a way that provides insight for analysis planning. Thisrequires IT to develop an analytic platform that supports appropriate views ofinformation, from basic consolidations and enterprise planning to data mining,trend analyses, and driver based analyses. The analytic platform also typicallysupports the input of driver assumptions and other plan data.
With consistent, accurate, timely data presented in theappropriate way, IT can enable the business to leverage its planning processesin support of successful strategic and operation execution. This is tangiblyrecognized through portals and dashboards that contain powerful analytics,interactive reporting with data visualization and exception based management,among other characteristics.
2. Human Capital
Companies that develop consistent, accessible data throughsystems find that analysts previously dedicated to the collection,reconciliation, and presentation of data become free to meaningfully contributeto the analytical process. However, these individuals often lack the skillsnecessary to fulfill their newly defined roles. One report shows that 71% ofCFOs believe that 2/3 of finance staff lack “critical thinking” skills toinflect critical decisions.7The skills of associates involved in allplanning processes must be evaluated and developed to match the changing needsof the organization as it evolves.
Summary
Planning can drive value and results, but it requires a new approach: a dedication to capability building through a focus on an integrated process supported by an enabling platform.
Planning can drive value and results, butit requires a new approach: a dedication to capability building through a focuson an integrated process supported by an enabling platform. The critical core capabilities—visibility,leverage, and responsiveness—must be developed, nurtured, and refined acrossthe enterprise. The strategic and operational management cycles, developed usingleading methodologies and practices, must be linked at key points within theprocesses, including strategic and operational initiatives, cause and effect relationshipbuilding, and through coordination of performance reviews and action planning.Finally, the organization must consider the global IT and human capital needsthat enable the integrated planning model. Through a dedication to thisholistic approach to planning processes, the potential exists to increase performanceby up to 50% for many organizations. While this planning transformation istruly an evolutionary process, potentially taking extensive time and energy,most find it is well worth the effort.
Endnotes
1 “Turning Great Strategy into Great Performance,” Harvard Business Review.
2Dennis Campbell, “Choose the Right Measures, Drive the Right Strategy”, Balanced Scorecard Report, May-June 2006 and supplemental materials.
3McKinsey Quarterly
4Adapted from Working Council for Chief Financial Officers
5Robert S. Kaplan and David P. Norton, “Strategy Maps: Converting IntangibleAssets into Tangible Outcomes”, (Harvard Business School Publishing, 2004).
6Robert S. Kaplan and David P. Norton, “The Balanced Scorecard: TranslatingStrategy Into Action”, (President and Fellows of Harvard College, 1996).
7Working Council for Chief Financial Officers
1 “Turning Great Strategy into Great Performance,” Harvard Business Review.
2Dennis Campbell, “Choose the Right Measures, Drive the Right Strategy”, Balanced Scorecard Report, May-June 2006 and supplemental materials.
3McKinsey Quarterly
4Adapted from Working Council for Chief Financial Officers
5Robert S. Kaplan and David P. Norton, “Strategy Maps: Converting IntangibleAssets into Tangible Outcomes”, (Harvard Business School Publishing, 2004).
6Robert S. Kaplan and David P. Norton, “The Balanced Scorecard: TranslatingStrategy Into Action”, (President and Fellows of Harvard College, 1996).
7Working Council for Chief Financial Officers
