Tuesday, February 5, 2008

Riding the Business Planning Cycle

Business Planning is a management process that is fundamental to the success of any organization. It is the means through which direction is set, strategies are formed, targets are established, and initiatives are activated to achieve the desired change. These are the typical stage gates of an enterprise planning process. There is another very important element to the business planning cycle and this is implementation and reporting.

The planning process of an organization of a significant size (400+ people) can take approximately 6 months.

This includes setting strategic direction, establishing and / or reviewing long term targets and priorities, and then setting out one year targets and action plans, complete with resource and financial requirements to execute. At the same time, operational managers are engaged in developing plans and budgets for their areas, that support the broader organizational plans. Since inevitably the cup runneth over on the ideas vs. the dollars, management is often required to further refine the priorities.

Once all this is said and done, the business plan is written and approved by the governing body of the organization.

But that is just the end of the planning stage, and the beginning of the implemenation phase.

The first stage of implementation is communication. By the time the business plan is approved, every manager has been knee-deep in operational planning and budgeting, and can more effectively recite the cost of a set of pens than they can explain a corporate level strategy. Therefore, it is essential for management to spend some time talking about what the organization is going to achieve by year end, and how.

This is important because most organizations are measured according to the results laid out in the business plan. And even though management may have had the discussion about targets and priorities in May, it's now December, the targets may need reexplaining. For example - ROE targets - what does it take to achieve the target? What may be changing in the business environment to affect our ability to achieve this target? What drivers do we need to continue to monitor?

The next stage of implementation is the rollout to all staff. This is when management meets with their respective departments to walk through the plan with them. To assist management in explaining the step, I find that providing a business plan summary is a handy communication tool. The business plan summary summarizes a 50 page business plan in 2 - 4 pages. Better yet, every single employee has their own copy to refer to.

Following the rollout of the business plan, performance plans for the coming year need to be drafted from the CEO to everyone in the organization. In my experience, this is where the results - driven approach to business planning starts to become real for people. The key measures become a part of every manager's performance plan with the appropriate target. So, for example, if the key measures are employee satisfaction, client satisfaction and budget then these become the performance plan for each manager. By taking this approach, each and every manager is now engaged. I call this having "skin in the game."

Quarterly reporting and strategy review meetings are the final component of the implementation cycle. Each quarter, the enterprise must report on its results to its governing body. Likewise, management must take the take to review progress on the business plan, including how the initiatives are progressing, and to review progress on key targets. Management must look at its current plan against the backdrop of the external and internal environment, and be prepared to make adjustments as needed. This is also an excellent opportunity for management to increase their understanding of the big picture.

At year end, the final report is developed an submitted to the board. The year end report is the final leg in the journey of the business plan, as it lays out how successful management was in implementing the business plan. Once again, this report is an excellent source of learning - it tells management what we did well, what we learned from, what we accomplished, and helps to chart the nexts steps.

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