Written by Crystal Lee
There was once a company on the rise, who decided to take hold of their promising future. This forward-thinking company implemented integrated business planning, and eventually, thoughtful scenario planning commenced. Everyone was on board as anticipation for growth began to rise.
And then, reality set in – all the plans were set, and the best scenarios were approved – but recognizing the uncertainty and ambition of the chosen scenarios, the executives still lacked confidence in the future.
They passed in the hallway one day after the latest demand review and asked one another seemingly in unison who is responsible for overseeing all of this, who is going to ‘make it happen’? They wondered… has the company set a grand course toward a brighter future, or simply fueled a runaway train?
This is an important moment of tension in any developing IBP process – when a cross-functional scenario has been approved but needs a driver.
Executives want to see the big picture and keep the company pointed in the right direction. Functional managers want to run the day-to-day business operations in the best way they can. With every function doing their best to protect the plan and deliver results, cross-functional scenarios that optimize for the business as a whole will often challenge certain functions to sub-optimize their piece of the pie. It’s akin to Deming’s guidance:
“to optimize for the whole, one must sub-optimize the parts.”
Consider a scenario where an organization adds inventory and re-allocates volume to protect its most strategic (but not highest margin) customer. Without proper scenario management, the commercial team may not re-allocate the demand in an attempt to maximize margin, and the Supply Chain team may resist adding inventory to protect their metrics. If both the commercial and supply chain actions fail – then the scenario as a whole fails.
I’ve seen this too often – plans designed to make the business more profitable and efficient fall short – not because the plans were bad. But because the actions needed were never carried out. Especially when a company is early in a scenario planning venture (and not yet used to business optimization and therefore, some functional sub-optimization) someone needs to oversee the plan, to make sure the cross-functional actions deliver the expected results, even if that means de-prioritizing certain functional metrics. Enter a Scenario Management Leader.
An ideal Scenario Management Leader is often an individual with an analytic skill set, who is also capable of seeing the big picture. He or she is highly respected by executives and management. This is often not a new role, but someone on the IBP team that can serve in this additional capacity. Although not a necessary background, Finance has proven to be especially fertile ground for highly qualified Scenario Management Leaders.
By assigning someone to steward the cross-functional complexities of ambitious scenarios, companies can make the plan happen and begin to see the future they envision.