Integrated Business Planning

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Integrated Business Planning
How To Best Meet Your Mission

• Charles P. Sitkin, Consultantin affiliation with
  Carnegie-Mellon University

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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

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Integrated Planning Process
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The Evolution ofManagement Concerns
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Evolution of Management Concerns
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Strategic Planning
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Business, Operational, Strategic ?

• Business Plan Normally prepared to acquire
  financing
• Operational PlanIdentifies 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

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Strategic Planning Process
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The Mission
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• 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 actions...
• Next I believe that the 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.

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The Mission

• Purpose
• Values

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Mission

• Shared purposes provide FOCUS by driving
  strategy.
• Shared values provide CONTROL by guiding
  execution.

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Example Mission Statements
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.
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Strategic Excellence Positions
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Strategic Excellence Positions
Without focus
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Strategic Excellence Positions
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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.
• That strategic excellence then 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.

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Strategic Excellence Positions
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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.

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Goals
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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.

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Objectives
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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.

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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 distribution to key
newspapers, magazines, and the 1997 Housewares
Show by January 10, 1997. 1.3 To host a New York
City magazine editors event "Coming Out Party"
for all new bread machine products (members Only)
by June 30, 1997. 1.4 To explore partnerships
with like minded industry associations for the
purpose of producing a jointly sponsored media
campaign in 1997. 1.6 To evaluate and report on
the possibility of a BMIA web page by August 31,
1997.
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Three Classes of Objectives
Innovative
Problem Solving
Regular/Routine
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Action Plans
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Action Plans

• Specify steps or actions required to attain an
  objective.
• Designate who will be held accountable for seeing
  the 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.

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Action Plan
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Operational Plans
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Integrated Planning Process
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Comprehensive Business Planning
Strategy
Laws and Regulations
Mission
Annual Ops Plan Budget
Statement
Action
Strategy
Goals
Vision
Objectives
Plans
Strategy
Issues
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Operational Planning Framework
Performance Indicators
Key Result Areas
Issues Analysis
Action Plans
Objectives
Budgets
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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.

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Budgeting

• Determine the level of financial resources
  required to achieve the operational plans
  objectives.
• Allocate available financial resources to ensure
  their optimum use in achieving the plans
  objectives.
• Control the use of available resources to ensure
  the achievement of plan objectives.

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Budgeting Problems

• Budgets can grow to be so complex that they
  become expensive, cumbersome, and even
  meaningless
• Budget objectives may come to supersede
  enterprise objectivesbudgets 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

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Results Management
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Integrated Planning Process
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Results management

• Control Systems
• Management Reports
• Organizational results
• Individual Results
• Corrective Action
• Reward System

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• I believe the real difference between success
  and failure in a corporation can very 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.

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Supporting Discussions
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Issues Analyses
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Steps in Operational Analysis
1. Identify Issues
2. Prioritize Issues
3. Analyze Issues
4. Summarize Issues
Major ConclusionsAlternative Courses of Action
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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 likely to have impact on the business units
  performance.
• What are major impediments to conforming to your
  Mission.

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Analyze Issues

• What is the Issue.
• What data/information is available (or needed) to
  resolve the issue.
• What appear to be the factors causing this to be
  an issue for the organization.
• What types of results are needed in this area.

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Key Result Areas
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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 not cover the entire organizationwill
  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.

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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.

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Example Indicators of Performance
Key Results Areas Indicators
of Performance

• Return/ Profit
• Productivity
• People development
• Market penetration

• Return on RevenueDonations to Sales RatioNet
  profit
• sales per employeeUnits produced/month
• Percent ethnic hireDays of training/employee
• Percent of market sharePercent growth by product

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Strategies
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Competitive Intensity
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Strategic Implementation

• Direct Means
• Indirect Means
• Time Related Aspects.

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Direct Means

• Action Plans and Project Plans
• Procedures/Management Systems
• Planning and Budgeting
• Management Information Systems
• Organizational Structure.

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Indirect Means

• Communication
• Symbolic Actions
• Institutionalizing Actions
• Fostering Innovation
• Corporate Culture.

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Time Related Aspects

• Research and Development
• Manufacturing Life Cycle
• Marketing Cycle
• Economic Trends
• Competition.

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Strategic Plan Outline

• Executive Summary
• Current Situation and Vision
• Critical Issues
• Mission
• Strategic Excellence Positions
• Goals and Objectives
• Action Plans

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Operational Plan Content

• I. Executive Summary
• II. Business Unit Description
• III. Product and Services
• IV. Operational Analysis Issues and
  Conclusions
• V. Key Result Areas Indicators of
  Performance
• VI. Operational Objectives
• VII. Action Plans
• VIII. Budgets
• IX. Plan Implementation and Review Schedule
• Appendices

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