In this white paper, Oliver Wight business advisors, Dan Spatz and Peter Alle, explore how leaders who understand and apply consistent and clear guidance are those who are able to most effectively harness the potential of their teams to achieve the highest returns from Integrated Business Planning. As much attention as systems and data have received over the years, and even with artificial intelligence advancing to imitate human thinking power, the authors show that people remain in the driver’s seat, and leadership behaviors in the C-suite remain the strongest determinant of the value obtained from any planning and execution process.
Introduction
Oliver (Ollie) Wight, the founder of this firm, notably said: “Commitment without understanding is a liability.” This insight has no greater relevance than to the role of C-suite leadership in business planning.
Oliver Wight is the originator of Sales and Operations Planning (S&OP) and Integrated Business Planning (IBP). As we have progressed, the evolution and codification of planning processes for more than half a century, we have identified that people, behaviors, processes, and tools are the critical success factors.
Over the years, we have often seen C-Suite leaders committed to running a planning process but lacking the end-to-end understanding of what it takes to do it well. Many organizations that operate S&OP or IBP spend millions on tools to support them, but derive a minimal return on that investment. Inevitably because they focus on the mechanics and tactics of planning (the processes and tools) rather than how to extract the greatest value from it – how to produce a competitive advantage and drive results for their enterprise. “How” is a powerful word. The mere presence of planning processes does not guarantee that value is produced; it is people and their behaviors (leadership, not least among them) that make the difference. Leaders need to make choices that shape how things are done: how people in organizations interact with each other, how people utilize business processes to gain insight and drive execution, and how people structure data and information to either simplify or complicate their view of the future.
As much attention as systems and data have received over the years, and even with artificial intelligence advancing to imitate human thinking power, people remain in the driver’s seat, and leadership behaviors in the C-suite remain the strongest determinant of the value obtained from any planning and execution process. Leaders who understand and apply consistent and clear guidance will effectively harness the potential of their teams to maximize business benefits and achieve the highest returns by investing in IBP. Conversely, without effective leadership, business and planning processes become net consumers of the organization’s time, resources, and energy rather than the value generators they should be.
The Leadership Dynamics of Successful Business Planning
In companies where IBP is successfully deployed, we’ve observed the following common dynamics at the top of the organization:
C-suite leaders who recognize the value of planning believe planning can paint a picture of the future that can be trialed and tested for relevance, resources, and reasonableness:
- Relevance – in the context of market and competitive forces
- Resources – that are clearly defined and aligned within the organization
- Reasonableness – as something the business can or should be able to execute (“just because we can doesn’t mean we should”)
C-suite leaders who fully understand the type of people required to amplify the value of planning for their organization, so it simplifies and brings to life:
- The company’s vision
- Strategies and strategic initiatives
- Shareholder objectives
- Annual plans
C-suite leaders who create planning systems (people, processes, and tools) that free up time, energy, and resources for the people operating them so they can focus on higher value-added tasks instead.
“Class A” leadership – the definition of extraordinary leadership – manifests differently at various levels, roles, and steps within an IBP process. A leader’s belief in the value of planning and understanding of basic mechanics is the price of entry, but it is their understanding and modeling of leadership behaviors that drive effective planning, which is the big differentiator.
It is also important that C-suite leaders accept they are susceptible to human fallibility, just like anyone else, despite their high position in the organization. Recognizing that their goals and aspirations can be inhibited by blind spots is an example of good behavior at the top and acknowledging that they can learn about themselves through the IBP process is an advanced attribute that can generate great value for them and to the business.
The purpose of this white paper is to establish a better understanding of the role of C-suite leadership in generating business results from IBP. It aims to articulate eight key IBP-enriching leadership behaviors and distinguish between merely recognizing the importance of planning and maximizing its value by taking proactive action to improve capability in specific areas.
Leading an Enterprise through Integrated Business Planning
Let’s begin by defining Integrated Business Planning and its role. IBP is a decision-making process that connects the strategic plan to business execution and results. It aligns strategy, portfolio, demand, supply, and resulting financials through a focused and exception-driven monthly replanning process. The result is a single operating plan over a 24+ month rolling horizon (or as appropriate to cover the strategic planning horizon), to which the senior executives hold themselves and their teams accountable.
Each month, IBP asks these core questions to manage, identify, and address any gaps between the strategy and business plans.
- How are we doing?
- Do our plans meet business needs?
- Are our plans still valid?
- Do we have any gaps?
- What are we going to do?
Done well, IBP becomes the formal way the business is managed.
1. Leaders Build Trust
Of the eight key leadership behaviors critical to business success, building trust is at the top of the list. Misdirected, overly reactive, or non-principled behavior in the C-Suite prevents the establishment of trust throughout the organization. A lack of trust will fatally debilitate the achievement of an effective Integrated Business Planning process and, therefore, the consistent delivery of business results.
There are a number of key areas where trust can be built; the most important of these is committing to a plan and then delivering that plan. In other words, leaders say what they are going to do and then do what they say. For example:
- Delivering the production plan that was committed to at the Supply Review
- Bringing the costs of goods in at the latest estimate
- Completing a project on time and within budget.
- Delivering the sales plan as committed to in the Demand Review
- Delivering the financial plan as committed to the Board of Directors and the Investor Community
IBP is a mid-to-long-term planning process that focuses on a period of four to 24 months. Yet the future is unknown, so leaders must form plans based on assumptions backed by experience, industry knowledge, understanding of market dynamics, and many other factors.
Consequently, plans can never be perfect but it is how leaders react to changes in plans over time that plays a critical role in whether their people perform well in the planning process or exhibit dysfunctional behaviors.
In well-performing teams, the accountability and behavioral expectation for owners of the portfolio, demand, supply plans, and the company’s resulting financial plan is “the buck stops here.” This leads to trust in the plans because, month-over-month, the owners have worked with their teams to build and test underlying assumptions, incorporate viable opportunities, and mitigate or remove risks from the plans. In this case, when trust in the plan is challenged, leaders understand it isn’t the plan itself that is at fault.
A useful principle commonly followed by Oliver Wight clients is “bad news early is better than bad news late,” and this is a commonly followed principle among Oliver Wight clients. When leadership adopts and communicates this message, it allows teams to deliver the truth about the current situation, no matter how uncomfortable it may be, in time for corrective action to be taken. This contributes significantly to building trust within the organization because it eliminates the tendency for finger-pointing and victimization that can ultimately prevent people from engaging in the process.
Crucially, leaders must also set clear expectations for the level of preparation required for the IBP review meetings. It’s an old adage: “if you fail to prepare, you’re preparing to fail.” Thorough preparation will determine whether there can be confidence in the plans. In one instance, at the conclusion of a Management Business Review (MBR), the CEO of a consumer-packaged goods company asked, “Do we have confidence in our plans?” The answer was “yes,” because the team had worked hard to evaluate and test the assumptions underpinning the plans.
However, major gaps began to appear in the delivery of the plans, and over several months, the IBP review step owners repeatedly missed their assumptions and commitments. The CEO held a series of meetings with the Demand Review team, and it became clear that the team was not engaging properly with the process and didn’t have a clear understanding of the expectations.
Trust doesn’t mean blind faith, and when people are given multiple chances to understand but fail to improve, this most frequently points to a form of behavioral bias that must be addressed directly at the individual level.
2. Leaders Operationalize Strategy
Companies often have a comprehensive and well-thought-out strategy. However, while the leadership team takes great time, energy, and cost to prepare the strategy, in many cases, they then fail to operationalize it. In some instances, they will conduct conferences to cascade the strategy down through the organization and then assume that people will somehow implement it without any explanation of what is expected. In other cases, leaders hold the strategy so confidentially that nobody in the business is even aware of what it is.
Effective C-suite leaders are those who can articulate a vision, develop strategies and actions that support its delivery, and mobilize their teams to execute the plans and actions necessary to deliver the strategy through the IBP process. These leaders energize their teams by articulating what needs to be done and by when.
The Oliver Wight series of seven white papers, “Deploying Strategy with Integrated Business Planning”, describes how strategy can be robustly operationalized through IBP. The series introduces the concept of connecting strategy to execution, through which individual strategies and plans at the business unit and functional levels are cascaded down through the organization, ultimately resulting in a series of actions that are integrated into each of the IBP review steps, operationalizing these strategies and plans to deliver company objectives. The owners of each of the IBP review steps are typically members of the leadership team who play a critical role in bringing the strategy to life.
The monthly cycle of IBP provides a forum and cadence designed to test whether strategies are well-understood, well-executed, and remain relevant in the face of shifting markets and competitive pressures.
In the case of one Oliver Wight client, the leadership team committed to doubling its R&D investment during the five-year term of the strategic horizon. However, after just 18 months, insight and data from the Portfolio Review revealed that margins from innovation were higher than anticipated and that competitive headwinds had softened.
Consequently, the team decided to accelerate R&D investment to double in two and a half years instead of five.
This team demonstrated strategic agility and leadership by integrating strategic goals into the IBP process.They utilized data to build a business case for modifying their strategy framework, thus outpacing their competitors.
3. Leaders Envision the Future
It’s not uncommon for a company to have a future strategic destination in mind with an “any road will get us there” approach. To articulate a vision requires the ability to chart a longer-term perspective for the business, choosing the path that gets the company where it needs to be safely and securely, in the shortest and least disruptive manner possible, with the most productive use of resources. This requires an articulated roadmap with step-by-step milestones and measurable results for what needs to be achieved.
Of course, all businesses face the pressure of short-term performance expectations and volatile business environments that can distract attention from the long-term destination determined by the vision. “Deliver the current quarter, deliver the current fiscal year, answer stakeholders dissatisfied by poor performance.” These often take priority in the work of the company’s senior leaders.
Certainly, short-term delivery is important, and if a company hasn’t developed the ability to create and fulfill a short-term plan, it is unlikely to possess the ability to plan long-term. Conversely, without sufficient time allocated to future planning, leaders will overlook the decisions and resources required to introduce new competitive products and services to the marketplace. Within the context of Integrated Business Planning, this means planning across a four-to 24-month horizon, at a minimum. These plans focus on “sizing the business,” determining growth plans and trajectories, and planning for acquisitions and divestitures, capacity expansion, or rationalization.
C-suite leaders are as susceptible as anybody to the “either/or” mindset. We were once told by a CFO: “We don’t have time for IBP-type planning, it takes everything we’ve got to plan and deliver the current quarter.” This is a high-risk perspective because people tend to overestimate what they can accomplish in the coming weeks and months but underestimate what they can accomplish in the one-to-three year horizon.
This CFO resisted making an investment in IBP, and within 18 months, the firm was in an even more dire shape. It was eventually purchased by competitors and merged with the stronger firm’s operations.
Meaningful change that drives competitive advantage takes time to implement. If that change is not cultivated and managed because of short-term focus, businesses can lose the right to compete. The ability to think and execute short-term, while concurrently planning for the future, is a significant leadership capability that delivers a competitive marketplace advantage.
4. Leaders Communicate Clearly, Concisely, and Compellingly
It is a well-established principle that 70% of communication is non-verbal (i.e., body language), 23% is tonality (audible differences in voice or how words are accentuated), and only 7% is based on the words used.
Leadership involves conveying thoughts in a clear, concise, and compelling manner. This means thorough preparation, choosing words carefully, and using the full range of communication possibilities.
IBP review meetings begin with an executive summary from the review step owner (Portfolio, Demand, Supply, IR, MBR). It is a crucial element of the meeting, and its success depends on a symbiotic relationship between the process owner and the leader. Remember, the process owner is typically a member of the C-suite team, and an objective of IBP is to free them up from attending the majority of preparation meetings during the monthly review cycle.
The process leader is intimately familiar with what has changed since the previous review, including the gaps that were created and closed and how the team has performed in replanning and recommitting to an improved set of plans. The owner is dependent on the process leader’s communication skills to aggregate and elevate key trends and patterns into headlines to “tell the story” of the current cycle and the level of the team’s readiness to “run the business” through decisions to be taken in the review meeting. Preparation of the executive summary is completed several days prior to when the step owner and process leader meet to establish the tonality, messaging, and focus for its delivery so the owner can, in turn, convey their needs and those of the business clearly, concisely, and compellingly to the team during the review meeting.
The step owner’s role is to balance messaging that praises progress and constructively addresses any shortcomings, emphasizing a sense of urgency as necessary if the business and team are falling behind. Getting this right in the context of the company culture and the team’s capabilities is vital to maintaining the credibility, authority, and integrity of the process leader.
Take the case of one Oliver Wight client, when during a Management Business Review (MBR), the CMO made a compelling case for the team to pursue the plan for the following year with renewed vigor in light of market conditions and competitive pressures. Concurrently, she highlighted the good progress that had already been made in a number of key business priorities. Her remarks were clear, concise, balanced, and compelling, and they conveyed to her team the CEO’s commitment, support, and expectations. As a result, the leadership team decided to “package up” and broadcast the business case articulated by the CMO to the rest of the organization, cascading it through a video recording that outlined the rationale and imperatives for thinking longer term in the business.
5. Leaders Commit to Planning
“Plans are worthless, but planning is everything.” Dwight D. Eisenhower, 34th President of the United States
At the National Defense Executive Reserve Conference in 1957, Eisenhower referenced a quote he had heard in the army during World War II. His point was that even the best plans are not worth the paper they are written on because circumstances change, and they immediately become obsolete. However, the discipline of practicing planning and updating plans regularly to reflect changing conditions is indispensable and a vital leadership attribute and differentiator.
Effective planning requires time, commitment, thought and meticulous preparation to develop a set of assumptions, risks, and opportunities. Leaders make a commitment to planning and provide their teams with the opportunity to learn, practice, and repeat it through the monthly IBP reviews.
IBP provides the framework for leaders to bring organization and a regular cadence to updating and refreshing plans, which, over time, becomes the way the business is run. As assumptions change, plans change. As risks are identified, contingency plans are developed to address them. Opportunities are identified, evaluated, and activated. As one CEO said, “I only want to lead an IBP company.”
6. Leaders Passionately Pursue Results with Optimism
Leaders bring a passion for results and a drive to quickly identify any barriers to achieving those results. Leaders go towards problems, evaluate potential solutions, and then assign the appropriate actions to address them.
Colin Powell said, “Perpetual optimism is a force multiplier,” and leaders who bring this attribute are resilient in spirit and in action. When they encounter adversity, they persevere with optimism. They are encouragers, and they instill hope.
This is a very strong way of leading by example, and when senior leaders practice these characteristics, we typically see a trickle-down effect. People tend to emulate the leadership attributes they observe being practiced, particularly those they see as attractive and beneficial.
7. Leaders Cultivate Culture
One definition of culture is, “the way things get done around here.” We’ve often heard it said that “culture trumps strategy,” and Richard Clarke, the well-regarded business strategist, says, “A mediocre strategy executed brilliantly is often better than a brilliant strategy executed poorly.”
The IBP process and planning principles embodied within it have been so successful over time that they’ve occasionally been interpreted as a “black and white” type of implementation. Not so. At the beginning of this white paper, we referred to “how” (people get things done) multiple times.
All IBP implementations and IBP best practices must consider the organization’s culture (and whether it needs to change) if they are to take root and produce sustainable results. IBP cannot simply be imposed on an organization; implementations must be tailored and textured to reflect the values and customs of a particular group of people. We look to C-suite leaders to understand their own cultures and be change agents when cultural change is required.
For example, in one company we worked with, the new CEO recognized the overriding appreciation for collaboration among his team. However, while every meeting ended with the sharing of lots of good news, hope, and excitement, goals and plans were not materializing in business results.
While people would frequently get together to solve problems, they were not coalescing around the big issues in the business. The solution was for Oliver Wight to first establish more structured planning foundations and then address the cultural tendency for people to take on everything at once – everything was an urgent issue, and when someone was tasked with a major initiative, it was pursued with such intensity that all cross-functional collaboration was lost.
Driving this focus, accountability, and cross-functional behavior was a cultural evolution for this company.
Many practitioners of IBP are aware of the continuous improvement mindset that is also inherent in advanced planning processes. Leaders bring a continuous improvement mindset to IBP and other initiatives recognizing that perfection takes time and effort.
C-suite leaders who want to maximize their organization’s potential will embrace IBP as the continuous improvement process for evaluating, identifying gaps, and improving the company culture and performance over time. Accepting that not everything can be done at once, they deploy tools such as an “improvement glide path,” where step-by-step improvements (with owners and timing) are identified and committed to.
As IBP becomes the way a company does business, it also becomes the vehicle for the C-suite to evolve its company’s culture through a focus on behavior. Crucially, it enables another critical leadership attribute, developing others.
8. Leaders Develop Teams
No one individual has all the answers, especially in today’s complex, fast-moving and specialized business environment. Leaders dream, inspire, and ideate, but how can they be certain their own ideas are the best option?
The best C-suite leaders are those who have experienced and benefited from collaborative experiences, vs. rising through the ranks in “lone wolf” scenarios. Leaders commit to the development of their teams, and many readers of this white paper will have benefited from personal development nurtured, nourished, and encouraged by others.
Engaging people and building teams that can act collaboratively through the diversity of individual backgrounds and experiences is a hallmark of C-suite leaders. It ensures the thoughts and practices of other individuals and functions surface and get incorporated and that the very passion and purpose that elevated leaders to senior positions in the first place are not hampered by their own blind spots and knowledge gaps.
Nature or Nurture
Some leaders naturally possess all the attributes mentioned in this paper. However, more often than not, leadership attributes are learned, practiced, and repeated, and successful leaders often do the following:
- Regularly seek feedback, which can take the form of informal conversations as well as more formal 360-degree feedback regimens.
- Gather around themselves a small group of trusted advisors who help bring a broader perspective and result in better overall decisions.
- Show sufficient humility to believe that there are things that they don’t know. They are committed to lifelong learning and the development of themselves and their teams.
IBP – the ideal setting for leadership development
Each of the “planning legs” of the IBP process (see the Integrated Business Model above) culminates in a review meeting, in which participants are carefully chosen for their unique ability to contribute to decision-making that guides the whole business forward. Each planning leg and review meeting is overseen by a C-suite “owner” for every phase of the process. Likewise, there is a “process leader” who has day-to-day responsibility for planning and preparing for the monthly review. These are some of the methods we have seen as an effective means of development:
- Incorporating personal development plans into the regular routine of mid-year and year-end reviews. Personal development plans that include specific development needs and actions to address are particularly helpful.
- Establishing a “feedback culture” where candor and receptivity are valued and practiced. Everybody has blind spots and addressing them is a highly effective way to build successful teams.
- Development assignments that may include roles as an IBP leader or an IBP review step leader. These are excellent development opportunities as they bring exposure to many of the elements we have discussed.
- Cross-functional assignments. IBP brings with it a natural cross-functional orientation and mindset. Cross-functional assignments provide an opportunity to develop a broader business perspective, leading to more informed decisions and better outcomes for the company as well as the individuals involved.
- Ensure focus on the “how” as well as the “what.” Leadership development is not only about what assignment you had, but also how you approached the assignment. The people skills and the “how” become increasingly important to the team members as they move to roles with higher accountability and responsibility.
Conclusion
In this paper, we have discussed leadership attributes and behaviors that we believe are critical success factors, not just in leading Integrated Business Planning, but also in business and life in general. There are of course others that we have not explicitly called out here. If you have leadership attributes you find to be significant contributors to success, the authors would be pleased to hear from you.
Contact the authors at:
Dan Spatz
Peter Alle