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Integrated Business Planning Process

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Integrated Business Planning Process

  1. 1. Integrated Business Planning Process Presented to the Association for Progressive Communications By Charles P. Sitkin, Consultant In affiliation with Carnegie-Mellon University
  2. 2. Outline of Presentation • Evolution of Management Concerns • Strategic Planning • The Mission • Strategic Excellence Positions • Goals and Objectives • Action Plans • Operating Plan and Budget • Results Management
  3. 3. Integrated Planning Process Strategic Plan Operational Plan Results Management Mission Goals Objectives Strategies Financial Projection Analyses Key Result Areas Operational Objectives Performance Indicators Action Plans Budgets Control System Results Connective Action Reward System
  4. 4. The Evolution of Management Concerns
  5. 5. Evolution of Management Concerns
  6. 6. Strategic Planning
  7. 7. Business, Operational, Strategic? • Business Plan • Normally prepared to acquire financing • Operational Plan • Identifies specific results to be accomplished within a given time period • Budget • Expresses operational plan in financial terms • Strategic Plan • Identifies the basic concept and direction of an organization
  8. 8. Strategic Planning Process Mission Statement Regulation s and Laws Issues Strategic Excellence Position Goals Objectives Strategy Strategy Strategy Action Plans Annual Budget
  9. 9. The Mission
  10. 10. “I firmly believe that any organization in order to survive and achieve success must have a sound set of beliefs on which it premises all its policies and action…” “Next I believe that most important single factor in corporate success is faithful adherence to those beliefs…” “And, finally I believe if an organization is to meet the challenge of a changing world, it must be prepared to change everything about itself except those beliefs as it moves through corporate life.” Thomas Watson, Jr.
  11. 11. The Mission • Purpose • Values
  12. 12. Mission • Shared purposes provide FOCUS by driving strategy • Shared values provide CONTROL by guiding execution
  13. 13. Example Mission Statement Bread Machine Industry Association The mission of the BMIA is to expand and promote the long-term growth and use of all aspects of the bread machine industry for the mutual benefit of our members and consumers ___________ Freehold Actors’ Studio & Lab The mission of Freehold is to deepen the transformational power of theatre to inspire through education, experimentation and performance.
  14. 14. Strategic Excellence Positions
  15. 15. Strategic Excellence Positions Products/ Markets A Products/ Markets B Products/ Markets C Marketing R + D Production Personnel Finance
  16. 16. Strategic Excellence Positions Products/ Markets B Products/ SEP Markets A Products/ Markets C Marketing R+D Production Personnel Finance
  17. 17. Strategic Excellence Positions Strategic success means to achieve better and more stable results than the competition. Achieving that requires superior competence, or the ability to excel, in a set of distinctive capabilities which have special value to a particular part of the marketplace. Note that excellence by itself is not enough. It must be excellence in areas of strategic significance, i.e., that determine the outcome of competition in the marketplace. The strategic excellence than forms the basis for the organization to achieve better results than the competition. In this sense it is a position which the organization “occupies” from which follows strategic success.
  18. 18. Strategic Excellence Position Company SEP • Honda • Quality • Gillette • Innovation • Rolls Royce • Status/Prestige • Microsoft • Integration • APC Nodes • ?
  19. 19. SEP Example BMIA Example • Provide for the Unified Presence of the bread machine industry category in its marketplace • Provide for intra-industry communications within the bread machine industry.
  20. 20. Goals
  21. 21. Goals • Define the key areas in which to expect strategic results and what is expected. • Not measurable as stated, but contain factors that will be measurable as Objectives. • With Mission and SEPs determine what Objectives should be selected.
  22. 22. Objectives
  23. 23. Objectives • Statement of measurable results • Tied to Goals, provide the basis for operational planning and budgeting • Four general characteristics: • Starts with the word “To” • Specifies a single measurable result • Specifies a target date or time span for Completion • Must be realistic and attainable, but represents a significant challenge
  24. 24. Goal and Objectives Example Goal One Educate consumers about the benefits of bread machines, facilitate their purchase decisions, and encourage usage. Objectives 1.1 To create a media kit for a distribution to key newspapers, magazines, and the 1997 Housewares Show by January 10, 1997. 1.2 To host a New York City magazine editors event “Coming Out Party” for all new bread machine products (members only) by June 30, 1997. 1.3 To explore partnerships with like minded industry associations for the purpose of producing a jointly sponsored media campaign in 1997. 1.4 To evaluate and report on the possibility of a BMIA web page by August 31, 1997
  25. 25. Three Classes of Objectives Innovative Problem Solving Regular/Routine
  26. 26. Action Plans
  27. 27. Action Plans • Specify steps or actions required to attain an objective. • Designate who will be held accountable for seeing each step or action is completed • Define when these steps or actions will be carried out • Define resources needed to be allocated in order to carry out the required steps or actions • Define feedback mechanisms needed to monitor progress within each action step
  28. 28. Action Plan Action Steps Project Title Accountability Schedule Resources Feedback Mechanism Primary Others Start Complete Dollars Time Objective:
  29. 29. Operational Plans
  30. 30. Integrated Planning Process Strategic Plan Operational Plan Results Management Mission Goals Objectives Strategies Financial Projection Analyses Key Result Areas Operational Objectives Performance Indicators Action Plans Budgets Control System Results Connective Action Reward System
  31. 31. Comprehensive Business Planning Mission Statement Regulation s and Laws Issues Vision Goals Objectives Strategy Strategy Strategy Action Plans Annual Ops Plan & Budget
  32. 32. Operational Planning Framework Issues Analysis Key Result Areas Performance Indicators Objectives Action Plans Budgets
  33. 33. Operational Objectives • Statements of measurable results to be accomplished within the time frame of the operational plan. • Standards of performance related to financial and operating results that can be tracked on a regular basis
  34. 34. Budgeting • Determine the level of financial resources required to achieve the operational plan’s objectives • Allocate available financial resources to ensure their optimum use in achieving the plan’s objectives • Control the use of available resources to ensure the achievement of plan objectives
  35. 35. Budgeting Problems • Budgets can grow to be so complex that they become expensive, cumbersome, and even meaningless • Budget objectives may come to supersede enterprise objectives – budgets should be considered a tool, not an end in themselves. Enterprise goals should supersede business unit plans • Budgets may contribute to inefficiencies by continuing initial expenditures without proper evaluation • Budgets as a pressure device defeat their basic purpose
  36. 36. Results Management
  37. 37. Integrated Planning Process Strategic Plan Operational Plan Results Management Mission Goals Objectives Strategies Financial Projection Analyses Key Result Areas Operational Objectives Performance Indicators Action Plans Budgets Control System Results Connective Action Reward System
  38. 38. Results Management • Control Systems • Management Reports • Organizational Results • Individual Results • Corrective Action • Reward System
  39. 39. “I believe the real difference between success and failure in a corporation can vary often be traced to the question of how well the organization brings out the great energies and talents of its people. What does it do to help these people find common cause with each other? And how can it sustain this common cause and sense of direction through the many changes which take place from one generation to another…” “The basic philosophy, spirit, and drive of an organization have far more to do with its relative achievements than do technological or economic resources, organizational structure, innovation and timing. All these things weigh heavily in success. But they are, I think, transcended by how strongly the people in the organization believe in its basic precepts and faithfully they carry them out.” Thomas Watson, Jr.
  40. 40. Supporting Discussions
  41. 41. Issues Analyses
  42. 42. Steps in Operational Analysis 1. Identify Issues 2. Prioritize Issues 3. Analyze Issues 4. Summarize Issues Major Conclusions Alternative Courses of Action
  43. 43. Identify Issues • Most critical issues facing the business unit, what might be their impact • Issues likely to have greatest effect on profitability • Issues likely to have greatest effect on long-term success of the business unit • What changes have taken/will take place effecting the business units performance in the coming year • What cross-functional problems or opportunities are lilkey to have impact on the business unit’s performance • What are major impediments to conforming to your Mission
  44. 44. Analyze Issues • What is the Issue • What data/information is available (or needed) to resolve the issues • What appear to be the factors causing this to be an issue for the organization • What types of results are needed in this area.
  45. 45. Key Result Areas
  46. 46. Key Result Areas Guidelines • Those 4 to 6 major areas wherein performance is essential during the coming year • Include both financial and non-financial areas • Will no cover the entire organization—will identify the critical few areas where priority efforts should be directed • Most will require cross-functional effort • Each will be limited, generally, to 2 or 3 words and will not be measurable as stated, but will contain factors that could be measurable
  47. 47. Indicators of Performance • Measurable factors, falling logically within a given key result area, on which objectives may be set • May be hard numbers, percentages, significant achievements, or problems to be overcome • Identify what will be measured, not how much or in which direction • Represent factors that can be measured on an ongoing basis
  48. 48. Example Indicators of Performance Key Results Areas • Return/Profit • Productivity • People Development • Market Penetration Indicators of Performance • Return on Revenue Donations to Sales Ratio Net profit • $ sales per employee Unit produced/month • Percent hire Days of training/ employee • Percent of market share, Percent growth by product
  49. 49. Strategies
  50. 50. Competitive Intensity Potential Entrants Industry Competitors Rivalry among existing firms Suppliers Substitutes Bargaining power of suppliers Buyers Threat of new entrants Bargaining power of buyers Threat of substitute products or services Source: Michael Porter
  51. 51. Strategic Implementation • Direct Means • Indirect Means • Time Related Aspects
  52. 52. Direct Means • Action Plans and Project Plans • Procedures/Management Systems • Planning and Budgeting • Management Information Systems • Organizational Structure
  53. 53. Indirect Means • Communication • Symbolic Actions • Institutionalizing Actions • Fostering Innovation • Corporate Culture
  54. 54. Time Related Aspects • Research and Development • Manufacturing Life Cycle • Marketing Cycle • Economic Trends • Competition
  55. 55. Strategic Plan Outline • Executive Summary • Current Situation and Vision • Critical Issues • Mission • Strategic Excellence Positions • Goals and Objectives • Action Plans
  56. 56. Operation Plan Content • Executive Summary • Business Unit Description • Product and Services • Operational Analysis: Issues and Conclusions • Key Result Areas & Indicators of Performance • Operational Objectives • Action Plans • Budgets • Plan Implementation and Review Schedule • Appendices
  57. 57. Metrics IBP 1 – Product Review • IBP 1.1 – Monthly Status Update • IBP 1.2 – PRM Analysis & Preparation • IBP 1.3 – Conduct Product Review IBP 2 – Demand Review • IBP2.1 – Demand Data Collection & Analysis • IBP2.2 – Develop Demand Plan • IBP2.3 – Conduct Demand Review IBP4 – Supply Review • IBP3.1 – Supply Data Collection & Analysis • IBP3.2 – Develop Supply Plan • IBP3.3 – Conduct Supply Review IBP4 – Financial Appraisal • IBP4.1 – Financial Data Collection & Analysis • IBP4.2 – Analyze Past Performance • IBP4.3 – Analyze Current Performance • IBP4.4 – Cost/Benefit Issue Resolution • IBP4.5 – Budgeting & Business Planning IBP 5 – Integrated Reconciliation • IBP5.1 – Assumption Validation • IBP5.2 – Resolve Planning Conflicts • IBP5.3 – Manage Corrective Actions • IBP 5.4 – Resolve Gaps & Issues IBP6 – Management Biz Review • IBP6.1 – Holistic IBP Process Design • IBP6.2 – Conduct MBR Source: Olive Wight Americas