The 5th phase of S&OP maturity

This blog follows on an interesting discussion I had in the Tom Wallace S&OP group on LinkedIn. The discussion started because I didn’t necessarily agree with Tom’s statement:

Successful S&OP = better teamwork

To me it feels this formula makes some short cuts and the big assumption that better teamwork just appears because of S&OP. S&OP will definitely provide an opportunity for teams to work and talk across functions, maybe even for the very first time, but for me to have successful S&OP we need more than ‘better teamwork’; we need good or great teamwork.

S&OP is an enabler to create great teamwork, but S&OP can NOT create great teamwork by itself.  Great teamwork doesn’t follow S&OP like night follows day. S&OP needs a lot of help to get there. If your company culture is screwed up, S&OP will not change it. I keep on being surprised that very respected worldwide S&OP consultancies simply tell you to expect improved behaviours and cultural change as an output of S&OP. More conversations in S&OP meetings doesn’t mean improved behaviours or culture.

If collaboration is a measure for teamwork, let’s have a look at what drives collaboration. According to Paul Adler and others in the July 2011 Harvard Business Review, there are four key organizational efforts that drive successful collaborating:

  1.  Define and build a shared purpose: make sure people work to an overarching goal.
  2. Ethic of contribution: look beyond your current role to contribute to the business.
  3. Horizontal processes: develop processes that enable people to work together in flexible but disciplined projects. This can be an S&OP project or process.
  4. Value and reward collaborative behaviour: visibly reward the right behaviour

If we want to include collaboration (good teamwork) in our S&OP maturity model, we need to support these organizational efforts. In my 2012 article  4 of a kind – The four phases of IBP, I introduced 4 phases of IBP maturity (I will use the term S&OP in this blog). These phases are:

  1.  Integrated planning: In this phase companies start to focus on integrated planning between previously siloed functional areas. Some functions are more advanced than others. A company might have focused on state of the art finance processes and systems, but doesn’t reap the full benefits of that due to lack of integration of other functional areas in to the finance proces
  2.  Dynamic budget planning: In this phase, enough functional areas plan in an integrated way for the process to provide their input to the P&L to create a fully loaded forward projected P&L. Finance understands the ‘volume’ input and the other functional area’s understand the financial ‘value’ planning. This will provide the company visibility on how it is tracking versus the budget or annual operating plan on a monthly basis on EBIT level. For these companies there is no separate budgeting or forecasting cycle. Every month can be the budgeting cycle. Dynamic indicates that opportunity and risk scenarios across all functional areas are integrated in the financial projection.
  3.  Dynamic Strategy and capability planning: In this phase, the company has defined its strategic goals, measurements and targets and is capable to check and communicate monthly if they are on track to meet the strategy in the horizon beyond the budget. The strategic intent, which can be defined on lower levels like product segment, country or business unit level, will also guide in decision-making for decisions in the budget horizon.
  4.  Integrated vision & purpose: In this phase companies have well-defined purpose, values and an achievable BHAG with a vivid description that people can identify with and which create an emotional attachment. The company aims to integrate this with the IBP cycle to get guidance for decisions in the strategic horizon

In the integrated vision & purpose phase, people share a common goal bigger then themselves. The leadership makes a conscious effort the share and communicate visions, purpose and strategy. Employees cross silos pro-actively to solve business issues because they realize they are part of something bigger. They have the same line of sight of where the company is going and are going after it. They show ethic for contribution. Hey…they collaborate! People that are selfish (30% according to some studies) will be left alone and isolated in this phase.

There is more required than collaboration though. In every S&OP meeting we need to get the best value out of the discussion we have, we need to manage different views and conflict to get the best outcome for the business. When we walk out of the S&OP meeting we need to continue with crucial conversations. Even when we have the same purpose, vision and goals, this requires skill. These skills don’t just come automatically whilst sitting in an S&OP meeting. These skills need to be actively created. Behaviour is a competence and needs to be included in reward & recognition, recruitment and learning & development policies. Therefore I suggest adding a 5th phase being emotionally competent.

5th phase of S&OP maturity

5. Emotionally competent.

In this phase a critical mass of leaders have emotional self-awareness, self-control, actually enjoy settling disputes, provide constructive feedback, show empathy for the other silo, develop relationships outside their collaborative teams. They take an active interest in developing their employees roles, careers and overall well-being, not just provide the lip-service we all know so well.  They are looking for self-fulfillment whilst having commitment to achieve and grow people. They display emotional intelligence and limited negative and less effective styles like passive defensive and aggressive defensive.

A way to measure emotional competency is the Baron Emotional Quotient Inventory (EQ-i) or the circumplex model from Human Synergystics pictured below. The circumplex model measures constructive and effective styles versus less desirable and less effective styles. These models can be deployed in an organization to create critical mass in emotional intelligence. This will increase the likelihood to create ‘great teamwork’ and successful S&OP.

Circumplex

I’ve mentioned many times that we made great progress in S&OP over the last 30 years. We did this by focusing mostly on processes, systems & technology, KPI’s and all that good stuff. But we’re stuck in doing the same thing over and over and S&OP maturity suffers for it. I believe it is time to acknowledge behaviours and emotional intelligence as a key ingredient and maybe even the ultimate phase to get to real successful S&OP.

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