A Planning Framework in Support of a Company Vision

Preview

In our busy day to day work life, we can easily forget that the main reason why companies exist is to fulfil their purpose and vision. According to the article “Building your company’s vision” by Collins and Porras (1996), a company’s vision exists from core values, core purpose, a BHAG (big, hairy, audacious goal) and a vivid description. In principle anything a company and its employees does, needs to be in the context to achieve their purpose and vision. This article discusses a planning framework that supports the implementation of a company’s vision. It further explains the phases planning capability will need to go through and how planning can nurture and influence a company culture.

Key points

  • Using the Collins and Porras (1996) framework, the core elements to reach a company’s vision will be explained.
  • A planning vision framework will be suggested in order to support the implementation of a company’s vision through planning.
  • Five planning maturity phases will be discussed that companies need to go through as part of their lifecycle and to advance their plans further in the future.
  • It will be explained how mature planning can take a leading role in employee engagement and the nurturing of a company culture.

A vision Framework

According to Collins and Porras (1996), a company’s vision exists from core values, core purpose, a BHAG (big, hairy, audacious goal) and a vivid description.  The core purpose is the reason for being; it captures the soul of the organization. Where you can fulfill a strategy, you can’t fulfill a purpose.  Famous and energizing core purposes are for example:

  • Disney’s ‘We create happiness’
  • IKEA’s ‘To create a better everyday life for the many people’
  • 3M’s ‘To solve unsolved problems innovatively’

Core values define what the company stands for. Well defined, integrated and truly lived, purpose and values will drive company wide behaviour. Imbedded company behaviours will drive a sustainable company culture, which will last over time. Purpose and values, make up the core ideology. This ideology gives employees meaning and the feeling they are part of something bigger.

 

 

 

 

 

 

 

 

Figure 1: Articulating a vision (Collins Porras, 1996)

The BHAG is a grandiose goal somewhere 10 to 30 years in the future. A vivid description brings the grandiose goals to live and explains employees how the future state of the business will look and feel like. It might explain what they will see when they come to work in the morning; ‘our employees will be energized and have a smile on their face’. Or how employees work together; ‘we openly communicate to achieve our goals’. How they behave; ‘we listen and show respect for all opinions’, and how the industry respects the business for their values and success; ‘Our competitors will envy our customer service’. Together with the BHAG, these future descriptions should excite employees, as together they make up the envisioned future of the business.

Developing a planning vision

If we want to support a company’s vision through planning, behaviours and decisions being made in a planning cycle needs to be in the context to achieve the envisioned future. Therefor a business planning cycle and the decision making process needs to be aligned with the company’s purpose, values and behaviours.

To support a company’s vision through planning, a company firstly needs to define a planning BHAG with vivid descriptions. Examples of an aspirational planning goal or BHAG can be:

  • ‘our 6-month EBIT outlook will be within 2% error margin’,
  • ‘we will decimate our budget cycle time’
  • ‘80% of our new product developments will be successful’

These aspirations can be accompanied by vivid future planning descriptions like:

  • ‘our plans will provide visibility to anticipate issues before they eventuate’
  • ‘we enjoy settling disputes during planning meetings’
  • ‘we understand the status of our strategic plan at any time’
  • ‘we scenario plan all risks and opportunities and plan for the most profitable outcome’

These vivid descriptions can further motivate and energize the planning community when they think about their envisioned future in planning.

Secondly, the company has to define a planning purpose and values and behaviours to guide the planning community in support of reaching the company’s vision. Thirdly, a company needs to develop an organization and planning capability that is able to plan periodically in the strategic horizon, as the strategy is closest to the envisioned future.

With these three steps a company can mirror Collins and Porras’ company vision framework with a planning vision framework as we can see in figure 2. This framework will be further explained.

 

 

 

 

 

 

 

 

 

 

 

Figure 2: Planning Framework to support a company’s vision

A guiding purpose

Start-ups and young companies often start with a grandiose vision or disruptive idea to challenge the status quo in an industry or a purpose to change the world for the better. These type of companies can be very well on track to fulfill their vision without using complex planning capability. Consider an app development company that’s in the top 100 fast starting companies in Australia and in the top 5 of Australian best start-ups. Their founder argues that actively nurturing their purpose to be ‘Australia’s best workplace by 2017’ and values like ‘happiness’ and positive change’ brought them the success they have.

From planning perspective, they are in the very early stages of maturity, but day to day conversations and decisions on execution are being made with a purpose or ‘the why in mind. In these type of businesses there is a strong alignment which is a foundation to build companywide planning capability, if business complexity requires to do so. If a company integrates their ‘why’ in a planning cycle, they will have the first foundation in place to build planning capability with the envisioned future in mind.

The ‘why’ in planning

The first planning foundation – a guiding purpose – requires for companies to have well-defined and energizing purpose that employees understand. The purpose creates alignment across functions towards a common desire and creates an ethic of contribution to a higher goal. The purpose is used as a guiding light to give guidance for decision making in the immediate, short and long term horizon.

On top of, and aligned with the company purpose, a planning purpose will be defined to motivate a planning community to give their best every day. Examples can be

  • ‘To guide and engage our employees with our future.’
  • ‘To see ahead and steer the company towards our future’
  • ‘To seek continuous alignment and integration.’
  • ‘To break down silos and make the ultimate profitable plan’

An engaging purpose, gives a planning community something to reach for that goes beyond planning measurements, achievements or performance plans. It will give the planning community a solid foundation and reason to get out of bed every day. It gives them the ‘why’ of planning.

Guiding values and behaviours

Young businesses often work in a high pace, enthusiastic environments, where failure is accepted as a learning experience. In these high trust environments information flows freely. These early values and behaviours define how these companies operate. However, once the business starts growing, young employees need to develop new skills and behaviours to deal with increased complexity. They need interpersonal confidence to cross functional silo’s pro-actively, deal with conflict resolution and effectively support integrated and dynamic planning on a larger business scale.

Take the example of a young successful social enterprise in the consumer goods industry in Australia. As a social enterprise, all their profits go to good causes and people in need. They have a very strong purpose and young employees with an enormous drive and emotional connection to the why of the business. As their product portfolio and their business is growing, they have to align and integrate more and more across functions to keep innovating and stay responsive to their customers. Amongst other things, additional behavioural capability needs to be developed to effectively plan, control and execute the new business complexity.

Although they still can be true to their initial company values and behaviours, the additional supporting behaviours will develop a renewed ‘how’. If a company integrates this ‘how’ in a planning cycle, they will have the second foundation in place to build planning capability with the envisioned future in mind.

The ‘how’ in planning

In the second planning foundation – guiding values and behaviours – it is understood by the business that behaviours are a requirement to reach the envisioned future. The business will continuously work towards achieving a critical mass of leaders that have high levels of the desired behaviours. These leadership traits and behaviours will likely increase information flow, improve decision speed and quality and improve employee and corporate well-being and performance.  Employees know how they are expected to behave within the company whilst going about their day to day tasks.

Additionally, and aligned with the company’s values, planning behaviours can be defined that are required to deliver effective planning meetings, issue resolution and decision making. The company takes action to include these behavioural competences in reward & recognition, recruitment and learning & development policies and in a periodic planning cycle.

Informal feedback on meeting behaviours is given after planning meetings. Well defined planning behaviours will give the planning community clear guidance how to effectively behave in planning meetings. Figure 3 shows an example how planning behaviours were mapped with the existing company’s values in a manufacturer to support effective planning.

 

 

 

 

 

 

 

 

Figure 3: Company values and planning behaviours

The early stages of planning

When young companies mature in to large businesses, employee communication, alignment and integration becomes more complicated and less personal. Consider the CEO of an on-line wine retailer, who said; ‘if we change strategy, I call all my 50 employees together and tell them what the new strategy is’. There is a limit to the amount of people where we can have comfortable and stable relationships with. This is called Dunbar’s number and it is limited to about 150 people.

Once a company size goes beyond this number, a founding CEO will not know all his employees anymore and people, planning, operations and communication structures needs to be put in place to run the business more efficiently whilst staying connected to the purpose and vision. The more complex a business becomes, the harder it is for all employees to stay connected to the ‘why’ and ‘how’ of the business. However, the envisioned future remains the essence of the company and therefor the essence and foundation of any supporting planning capability that a company might build.

If a maturing company has the purpose and values foundations right and wants to build planning capability to continuously improve the implementation of its envisioned future, it will go through three phases which are the pillars to achieve further planning maturity:

Ad hoc planning

Every business does some form of planning, but in this phase, planning is not a common periodically recurring discipline, with the aim of improving execution and business performance. It is not defined as a core capability. Planning is done ad-hoc and decisions often made centralized. There might be some secondary planning responsibility as part of another role, but functional planning roles are not common. It can happen in start-ups, small family businesses, but also in listed companies. Take the example of two listed companies in Australia, one listen in the fresh produce and one soon to be listed in the confectionary industry. They both run their operations mostly on customer orders and hardly use other planning and forecasting than the yearly budget plan and financial outlooks.

Functional Planning

In this phase there is functional planning with the aim to improve visibility, business performance and execution. Planning roles are introduced. Functions are mostly focused on themselves and will reap benefits, but miss integrated visibility. Lack of understanding in functional inter-dependencies creates far from optimal decisions beyond the operational horizon. This phase is not uncommon and there are very profitable companies who remain comfortably in this phase, until growth and complexity of the business requires better planning capability and decision making.

Take for example a business that developed an innovative way to bake bread and contracted a major retailer with this innovation. They had some functional planning capability, but the focus was on execution, control and delivery, until the retailer wanted to grow further. Due to a lack of production capacity insights and planning they made their sole customer promises they couldn’t keep. Now even the CEO is involved in sales forecasting and production planning as he tries to save his sole customer and the business.

Integrated planning

In this phase there is a critical mass of previously silo’d functions that start to focus on integrated planning and decision making. There is a structured planning cycle through the adaption of a horizontal and tactical planning process like Sales & Operations Planning (S&OP). Functional planning roles are common and planning capability has been developed in most functional areas. There is balance between the sales and operations side of the business and integrated decisions are being made.

In this stage, some functions will be more advanced in planning than others. A CFO might have focused on state of the art finance planning and control processes and systems, but doesn’t reap the full benefits of a rolling EBIT forecast and cash flow visibility due to lack of integration with other functional areas in to the finance planning process. Many mature companies will remain in this planning phase and will not be able to take the next planning step.

The advanced stages of planning

If companies want to create visibility to assess if they are on track to meet their BHAG, they need to start planning further in the future periodically. To be able to do this they need to define planning as a core strategic capability and assign resources accordingly. They will have to go through two more planning phases. Firstly, the annual operations plan or budget needs to be integrated in a planning cycle. Secondly, the plan that comes closest to the BHAG, the longest term plan – the strategy plan – needs to be integrated in a planning cycle. These make up the last two planning phases.

Dynamic Budget Planning

In this phase, functional areas plan in an integrated way thru a rigid planning cycle and are fully integrated with the finance function in order to create a periodic rolling forecast on EBIT level. The tactical planning process like S&OP is formally supporting by an organizational structure. There is clear leadership that is held accountable for tactical planning.

The planning cycle, in combination with execution feedback, will provide the company with visibility on how it is tracking versus the budget periodically. As output from the planning cycle employees are informed about the gap to budget to create alignment around what to do to deliver the budget. The rolling forecast is fully controlled and includes innovations and opportunity and risk scenarios across the end to end value chain. In this phase, we can also expect companies to deliver periodic balance sheet and cash flow prediction. The company is likely to have a yearly strategic planning cycle in which it strategy plans to achieve their BHAG.

Dynamic Strategy Planning

In this phase, the company has a structured yearly strategy planning cycle to which all relevant stakeholders provide input. Additional to S&OP, an organizational structure like an office of strategy management (OSM) as suggested by Kaplan and Norton (2005) will support and develop the strategic planning cycle. There is clear accountability between the OSM and S&OP to deploy the strategy and manage planning cycles that integrates the strategy, strategic planning with tactical S&OP, project management and execution feedback.

Therefor the company is capable to check, control and communicate periodically if they are on track to meet the strategy in and beyond the budget horizon. The strategic intent itself will guide in decision-making for decisions within the budget horizon. Projects, capabilities and competencies to deliver the strategy are tracked for status and progress by. Sensitivity analysis around the strategic plan are managed by the OSM as input for periodic planning meetings. Priorities are change and resources re-allocated if business circumstances or assumptions change. This makes the strategy plan dynamic and responsive to business and marketplace changes.

Once a company enters this last phase, it plans and tracks periodically the budget, the strategic intent and strategic capabilities and competencies. The business has a sense if they are on track to meet their BHAG. If the outcomes of the planning cycle are clearly communicated, executives continually update strategy, business goals are better understood, and employees get a clear understanding of how their job contributes to strategy. These three planning outcomes are among the most impactful employee-engagement drivers. A mature planning cycle can therefore positively impact employee engagement. An important notion, as in 2016 only 33% of employees in the US were engaged (Gallup, 2017).

Planning with a vision in mind

When a company has developed dynamic strategy planning capability that gives sight on the BHAG, it provides support to reach its envisioned future. However, the envisioned future can only be reached when both the BHAG and desired values and behaviours are met. Therefore, to reach the envisioned future, a company has to stay true to its purpose, values and behaviours.

Staying true to the purpose

If a company stays true to the purpose in the planning cycle, they continuously remind employees why they do what they do. Unfortunately, on the journey to maturity, many businesses loose the connection to their purpose along the way. This first foundation can’t be found back anymore in the planning cycle or in the total business for that matter. The companies who stay true to their foundation, have the opportunity to support the implementation of their envisioned future.

Take for example a large multibillion dollar beverage company, that decided not to enter the very lucrative market of premium RTD’s (Ready to Drink) alcoholic beverages, because the alcohol content was too high. Although the opportunity was achievable and margins were very interesting, the alcohol content would not be in line with their core purpose of ‘bringing more sociability and wellbeing to our world’. The purpose or their why guided decision making in the strategic planning horizon. If this company is capable to develop dynamic strategy planning capability, it has the opportunity to reach it envisioned future with the support of planning.

Nurturing values and behaviours

In an advanced planning environment, the recurring tactical and strategic planning meetings will become the most important place where both middle and higher management have to align across functions to solve complex business issues and take decisions about the future. A company with an advanced planning maturity can therefor use its planning platform as a vehicle to nurture preferred behaviours and maintain the business culture.

A CEO should use executive planning meeting to set a behavioral example as well as clear expectations to his team. A CEO can set the expectation that every planning meeting in every business unit or country takes the time to reflect on agreed behaviors and provide feedback during the executive planning meeting. In this way, a CEO can utilize a planning cycle across echelons, functions, business units, and countries to drive preferred behaviors. Behaviors that, over time, become part of company culture.

The human resource department can manage formal behavioural feedback in performance reviews to recognize and reward employees. However, the planning organization has to take a leading role in informal behavioural feedback in the most important business planning meetings. They need to show leadership in facilitating behavioural feedback after every planning meeting and make this an accepted practice.

As S&OP manager, I took the initiative to facilitate open roundtable feedback with the whole leadership team after every monthly executive S&OP meeting. The first time I asked for roundtable feedback that included behaviours, less than half the leadership team responded. A year down the track, the managing director did not want to end a planning meeting before his leadership team provided open feedback. The managing director even started pausing S&OP meetings when behaviours slipped away during heated discussions.

Once this focus on nurturing values and behaviours in planning meetings is established, the planning organization supports how the company does business and how it behaves. It is then that the planning organisation can claim it’s supporting a company’s vision.

And over time, this ‘how’, will become part of the company’s DNA and will nurture an effective planning and company culture that lasts long enough to implements its envisioned future.

 

References:

Building your company’s vision, Jim Collins and Jerry l. Porras, HBR, 1996

Creating the office of strategy management, Robert S. Kaplan and David P. Norton, 2005

 

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