Developing and executing annual and strategic business plans
- Posted by J. Nirdosh Reddy
- On April 29, 2017
- BPM Concepts
There is a nice ring to the phrase ‘Strategic Business Plan’ – all three of those words are exciting. They connote thoughtful decision-making and paint a bright picture of a future of possibilities. Similarly, Annual Business Plan or Annual Operating Plan projects what the organization is intending to achieve in the coming year. The projection is, in general, positive and is meant to motivate employees to achieve great things, and at the same time, pacify Wall Street which expects companies to do better.
However, most strategic and annual business plans remain on paper without effective implementation.
This post explores why this happens and suggests a way to make business plans a reality.
The current situation
Many in top management are not happy with the way their strategies are implemented. To them, it appears that the strategies get diluted as they are communicated within the organization. Implementation is slow, incomplete or inaccurate. The results delivered by their organizations are not what they would like them to be and what they believe could be.
At the same time, middle managers are unhappy with the way the objectives for their areas of responsibility are developed. They try to do their best; work very hard and put in long hours. They often are dissatisfied with the lack of inter-departmental cooperation.
The profits achieved by most organizations are well below their intrinsic capabilities. The expectations of management remain unfulfilled.
The root causes
The major root causes for the above scenario are attributable to the systems and practices that prevail in many companies, as listed below:
- Developing business plans – Insufficient emphasis is placed on implementation during the preparation of the strategic and annual business plans; too many annual business plans are prepared by staff people who do not have the necessary knowledge about the real constraints that exist in the system and how to implement the plans
- Cascading and implementation of objectives – High level objectives are cascaded down the line using org charts. The hierarchical focus results in the creation of barriers between departments; a lot of energy is dissipated in fighting turf issues; actions taken are department-centric leading to sub-optimization of the enterprise
- Lack of role clarity – while the responsibility to achieve certain numbers are clearly assigned, the authority to make system improvements necessary to achieve the numbers is not delegated
A better way of developing and implementing business plans
A process-based approach of developing and implementing business plans removes the above root-causes. As discussed in my post on ‘Transform your enterprise’ , one of our guiding principles is ‘results come from processes’.
First, define your processes.
While developing strategic and annual business plans:
- Involve the leaders of the processes identified on your global process chart
- Identify the processes that are not meeting the expectations of customers – internal as well as external
- Listen to the concerns and difficulties of the process leaders, and identify the constraints limiting the performance
- Collectively, identify things that need to be done differently to mitigate the difficulties. Bust the silos.
- Integrate the identified actions into appropriate processes and gain agreement with respective process leaders about the timeframe of completion.
Review the implementation of these improvement projects monthly.
Communicate to all employees the status of achievement of the plans and seek their involvement.
- Implementation will be faster, since the people who need to do the work are consulted.
- There will be greater ownership of the plans.
- There will be increased pride in work.
- A better future will be created by the empowered process leaders.
The Anaar Strategy Integration Process (ASIP) provides more details on the bpm implementation methodology.
An example – cost cutting vs. cost reduction
Consider the example of cost competitiveness. In the conventional approach, the enterprise is viewed along departmental lines; the goals are divided and subdivided along departmental and sectional lines, eventually stopping at the individual level as individual objectives. The focus is on the person. Departmental budgets are established and they become sacrosanct. Everybody in the department is given an objective to reduce costs at their individual level. Employees do their best and try to achieve their annual objectives by cutting out activities not directly related to their objectives. The fact that some of these actions may be needed by other functions and that these actions or omissions may adversely impact quality and customer satisfaction in the long term is not given priority.
The costs associated with repairing and regaining deteriorated quality and customer satisfaction far outweigh the so-called savings achieved. The short-term actions resulting in short term gains, in the long run, increase the overall costs.
In the ASIP approach, there is a change in the mindset from ‘Results by decree’ to ‘Results come from processes’. On this issue of cost competitiveness, the focus is on reducing the overall cost of the entire enterprise as measured by cost per unit (till the time the product or service reaches the end user). The processes that need to be improved and the quantum of improvement required to achieve the desired results are identified; and improvements pursued. In some other processes, one may actually increase the expenditure (not reduce) in order to realize overall cost reductions.
Since the overall cost reductions are achieved by improving the systems and processes, and not through cutting corners, the benefits achieved are long lasting.
Let there be joy in work, not friction!
Optimize your company, not your department!
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