Niels Van Hove

Niels is a consultant, coach and author. He has 20+ years of experience in supply-chain and business planning and is accredited in coaching skills to help companies achieve behaviours that improve business performance. 

He has published many articles on company culture, strategy and business planning and is also an author and publisher of children’s books. He is an advisory board member of the International Institute of Forecasting quarterly magazine; Foresight.

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The four phases of Integrated Business Planning

By Niels Van Hove, Supply Chain consultant, Mental Toughness coach and S&OP/IBP expert at Truebridges

Integrated Business Planning (IBP) is often seen as a natural progression from Sales and Operations Planning (S&OP), which came to life in the 80’s to align sales and operations. As S&OP found its origin in the supply chain, IBP is often biased with supply chain terminology and reasoning. It can be argued that current IBP development is still driven by a supply chain bias. With this lack of diverse thinking, IBP innovation runs the risk of being not truly ‘integrated’.

Contrary to most current defined maturity phases of IBP, one can find on the internet, we also can define IBP maturity phases from a more strategic angle. Many experts agree that IBP has a monthly check and balance with the budget and the strategic intentions of a business. Therefore, a well-executed IBP cycle will provide monthly visibility and measures progress against business objectives and strategy in the long-term horizon. Furthermore, we can say that a business strategy and the required strategic resources and capabilities have the goal to get a company closer to its vision.

According to Collins and Porras, a company vision exists from its 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. Core values define what the company stands for. A company will stick to them, even if it became a competitive disadvantage in certain situations. Well defined, integrated and truly lived, purpose and values will drive companywide behavior. Imbedded company behaviors will drive a sustainable company culture, which will last over time. A well-defined achievable BHAG with a vivid description provides employees with an envisioned future they can identify with and which creates an emotional attachment, which makes them go the extra mile.  As CEO Bob McDonald says on the emotional component and innovation at P&G; ‘People will innovate for financial gain or for competitive advantage, but this can be self-limiting, there is a need for an emotional component as well – a source of inspiration that motivates people‘.

If a company wants to track its budget and strategy and we use this vision framework and IBP as the planning process to support the business, IBP can be defined with the following maturity phases:

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 into the finance process. Some integration exists, but not across all functional area’s and there is not enough integration with finance to make a monthly financial prediction on EBIT level in the long term horizon. S&OP as most define it will be in this phase.

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 areas 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. Why EBIT level? Because I heard too many times in a boardroom the argument, when only gross profit was on the table; ‘we can’t decide on this because we don’t have EBIT a number’. We can also expect these companies to deliver monthly balance sheet and cash flow prediction. 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 into 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 of checking and communicating 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 on the budget horizon.

The company has also defined its core strategic capabilities to meet its strategy. There are many strategic capabilities possible.  Ideally, a company shouldn’t have more than a handful as if it will define more it will erode the focus on these capabilities. Some examples are:

  • Risk management: for companies that have extended and complex networks that are sensitive and dependent on changes in global and geopolitical events. For example companies with global supply chains, but also the Finance industry.
  • Innovation: for companies that in a highly competitive market can outpace their competitors based on innovation and new product development. Often seen in technology industry and CPG
  • Commodity trading: for companies that are highly influenced by commodity cycles as the commodities can be more than 80% of the COGS of their core products. For example, food & beverage companies that have crops and livestock as core raw material.
  • Demand is driven supply chain: for companies that can get the competitive advantage from driving their business from the front end of the supply chain. For example food, beverage and consumer package industry. Often in retail and consumer environment, which are promotional driven and where POS information is available,
  • Knowledge management: for companies that are highly dependent on knowledge workers and the exchange of knowledge between people and business units. Companies that have IP to integrate, sell and protect. For example Consultancies and software industry.
  • Supply exploration: for companies that have to spend high amounts of capital to find new or increase the supply of their core product. For example oil and mining industry.
  • Collaboration:  Collaborative IBP can be a separate phase for companies that see the strategic advantage in collaborating with their suppliers and customer in the longer horizon and therefore want to integrate their business plans. For companies that have the power in the supply chain through size or uniqueness of offering this will most likely not be a strategic focus.

The list can go on and on with Technology, Sustainability etc. Once a company has defined its strategic capabilities and has defined goals, measurements and targets for these capabilities, it needs plans to implement or improve these strategic capabilities. An update on status, progress, risks and mitigations for those plans will be part of the IBP cycle in this phase. Dynamic indicates that sensitivity analysis around the plans to reach the goals of the strategic capability is part of the update.

4. Integrated vision & purpose:

In this phase, companies have a 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.  A company can decide not to pursue strategic opportunities because doing so would compromise their core purpose or values. A large multi-billion dollar beverage company, for example, 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 guided decision making in the strategic horizon.

The company values and the emotional attachment will be tracked in the monthly IBP process and have actions, goals, and measurement. Executives follow progress to understand if employees believe and identify with the companies values, BHAG, and purpose and show emotional attachment. This can be done by 360 degrees feedback, engagement surveys or roundtable discussion between executives and employees. Executives also have to lead by example in behavior and actions. Their own behavior will have goals and measurements and progress is tracked,

For all phases, communication is important, although it can be argued that it’s most important when developing an emotional connection. An IBP document on the key decision, outcomes, progress and wins in the IBP cycle can be communicated to a well-defined stakeholder group in the company. This will both give the stakeholders an understanding of business performance, priorities, improvement opportunities and successes, as well as keep the engagement with the company vision, purpose, and the IBP process. Executives have to realize and appreciate that this communication document is the results of all the hard work from middle and lower management to gather all required IBP information for the executives to make decisions in the IBP meeting. This communication makes sure the IBP meeting is not seen as a ‘black hole’ which only sucks up information and doesn’t provide feedback.

Once a company masters these four phases, it tracks and plans on a monthly basis the budget, the strategic intent and strategic capabilities, the company values, and purpose and the emotional attachment of the employees. If a company then links these plans with shorter term control plans and execution, we might call it real Integrated Business Planning.

Would these four phases be IBP innovation?

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The Future of Integrated Business Planning Systems

By Niels Van Hove, Supply Chain consultant, Mental Toughness coach and S&OP/IBP expert at Truebridges

According to Wikipedia, prescriptive analysis is – after descriptive and predictive analysis -the third and final stage of business analytics. Gartner plots prescriptive analysis as the final and most difficult stage of data analytics. This article will draw an analogy with the mapping and car industry to suggest that prescriptive analysis as an opportunity to support Integrated Business Planning (IBP) and business optimization, is not a final stage, but just at the beginning of a new planning era.

Where descriptive analysis answers the question; ‘what happened and why’, predictive analysis answers the question; ‘what will happen’, prescriptive analysis will also suggest actions that benefit from the predictions and show the implication of each option. Or, as Anne Robinson, a past president of INFORMS, a society for analytics and operations research professionals tells us; “Prescriptive tells you the best way to get to where you want to be”. 

Integrated Business Planning as GPS

Companies like River Logic, model financial and operational business constraints and use prescriptive analysis to optimize a business objective. The business objective can be to maximize an asset, maximize throughput or minimize capital use and cost. Or all of the above at once. In combination with Integrated Business Planning to provide visibility and manage change in model assumptions and constraints, this creates a powerful and holistic scenario and decision making capability for executives.

Integrated Business Planning is like a GPS for a business
Robinson’s definition sounds pretty much like using a GPS system in your car. It will tell you the best way to get where you want to be. Integrated Business Planning is like a GPS for a business. IBP done well will provide a company with a valid and reliable periodic rolling forecast and strategy status. This, in turn, provides executives visibility on gaps versus budget and strategic intent, so they can steer the company to ‘where they want it to be’.

The evolution of map technology

If we take this analogy a little bit further, Integrated Business Planning and prescriptive analysis can learn from GPS and the evolution of the underlying map technology.  Only 15 years ago we still used paper maps in our car. The first commercial GPS systems were launched in the 80’s. TomTom, a Dutch mapmaker and traffic company launched their first portable GPS system in 2002. In December 2015, TomTom launched the world’s first commercially available near real-time updated map. Let’s have a look how they got there and what is next. Let’s open our minds and have a look at trends in the mapping, traffic and the car industry and see what prescriptive analysis and IBP can learn from it.

Dynamic data input

Map making and maintaining used to be an expensive exercise, where you needed to drive lots of cars around every street over and over again. TomTom made deals with tech giants like Apple and Uber to provide automated data input to their maps. Millions of iPhone users and Uber drivers continuously send information to the TomTom database, which is used for mapping, traffic and route analysis to update a standard maps almost real time.

We can easily imagine a prescriptive analytics phase where the optimization model is automatically updated with macro assumptions and constraints like GDP, consumer spend, oil prices and total market capacity. Dynamic micro assumptions like capacity, downtime, material availability can come directly from intelligent machines. This creates dynamic constraints in the optimization model.

Alerts and interventions assistance

Advanced Driver Assistant Systems (ADAS) are already capable to warn drivers for upcoming traffic jams and many middle class cars already operate with automatic break control in city traffic. Some cars like the Mercedes E-class, can take this further and automatically take over the steering wheel when a driver loses control of the car.

With dynamic data input in the optimization model, prescriptive analysis can create alerts and intervene before a certain threshold of a critical resource or constraint is reached. An asset can be almost at capacity or underused, cash can dry up, or throughput can reach unsustainable limits.

Multi-dimensional prescription

TomTom has presented a 3D map of Germany and Michigan, in support of the German and US car industry. It has 3D maps in Silicon Valley in support of US tech companies and is partnering with Bosch - a world leading German electronics provider to the car industry - to make rapid progress to 3D map other parts of the world. 3D maps provide a 360 view of the road so a car knows where important landmarks, every lane, traffic sign, building or traffic light is and includes road geometry like curves and slopes. 3D maps are required for highly automated driving (HAD) and in combination with sensors on the car for autonomous driving (AD).

Optimizing our own business with prescriptive analysis is like a 2D map. Now add to that the impact competitors, suppliers and customers have on your business within your industry. Now imagine the impact of other industries, countries, the weather and geopolitics. In our connected, interdependent global world, similar to a 3D map, we will require multidimensional network prescription and optimizing.

Prescriptive execution

Cars like the Mercedes e-class and Tesla S model already can change lanes autonomous and park the car without the driver being in the car. Audi will launch a HAD version of its flagship A8 in 2017. Elon Musk recently told analyst that Tesla is two years away from self-driving cars. Google has accumulated a millions kilometres of autonomous driving. McKinsey recently predicted that 15 percent of new cars sold in 2030, could be fully autonomous. Soon humans don’t have to touch a steering wheel.

We already know based on research that humans better not touch a short term forecast as we are riddled with bias and emotions. We already let demand sensing take over short term forecasting and replenishment decisions. It is not hard to imagine prescriptive algorithms take over tactical and strategic decisions in a distant future. This will create prescriptive execution.

Self-sustaining prescriptive algorithms

In some existing self-driving cars, the driver has to touch the steering wheel every now and then to let the car know he is still there and awake. In the future this will not be needed anymore. Cars are idle for over 90%. All this wasted capacity will once be used by intelligent systems. Every car will be connected. In cities, less people will own cars. Public ride shares and taxi bots will rule the cities and take you where you need, drop you off and go to their next ride. This requires artificial intelligence (AI) and deep machine learning.

Google’s AI team has beaten a top human player in the game of Go, a 2,500-year-old game that is exponentially more complex than chess. IBM’s self-learning machine Watson, capable of beating world chess masters and the average joe at jeopardy, is available commercially for any business. It might be a small step for an AI algorithm to not only prescribe the best solution and take the decision to implement it, but also prescribe changes to the optimization algorithm afterwards to incorporate learnings and newly detected circumstances. The prescriptive algorithm will become self-learning and self-sustaining.

Collaboration to reach the holy grail

Only 15 years ago we were using a paper map to find our way around in our car. Due to a common vision for the holy grail in the car industry – the autonomous car - map makers, tech companies, the car industry and suppliers to the car industry all joined forces. There is also urgency due to healthy competition, as the car industry itself feels threatened by the tech giants’ entry into their industry. Due to this collaboration, competition and urgency, commercially available self-driving cars will become a reality in the next five years. Who would have imagined that 15 years ago?

Prescriptive analysis and execution might just be the holy grail of integrated business planning and business optimization. Maybe the biggest learning from the mapping and car industry is what can be achieved if powerful coalitions are made to chase a holy grail.

The future of IBP and prescriptive analysis

To produce a rolling forecast and strategy status update, an IBP process periodically needs to review its plans and resources and update its underlying assumptions and business constraints. An IBP process can provide these same inputs periodically as boundaries in to a prescriptive algorithm and in return get suggested decisions for an optimized rolling forecast.

My on-line research indicates that over the last three years collaborative planning with customer and suppliers have increased, but most businesses still use IBP within the boundaries of their own company walls. And although more than half of my survey participants indicate they integrate financial planning & budgeting as a key task in their IBP process, it is likely that this is supported by slightly dis joined predictive analysis. Therefore, most companies will operate in the bottom left corner of below figure.  

In terms of understanding constraints, risks and opportunities, the future of IBP will be to plan across the whole value chain, rather than within the company walls. A final step in IBP scope will be to understand and incorporate constraints from interdependent value chains, commodities and countries to create a global view.

Progress from predictive to prescriptive analysis creates the opportunity for a business to develop a periodic optimized plan within its IBP scope. Once resources and constraint data can be dynamically input in a prescriptive algorithm, near real-time optimized plans with global constraints can be achieved. At that point, IBP can still govern the choices of data input and decisions the prescriptive algorithm makes.

This will end when artificial intelligent and self-learning systems tune the optimization algorithm and govern and change the constraints and assumptions it uses automatically. Similar to the driver in a highly autonomous driving car, who has to touch the steering wheel to let the software know he is still awake, executives might have to let the AI algorithm know they’re watching the integrated business planning decisions and numbers it produces.

We have a long way to go before we’re at that stage, but if we use our imagination, we can see how prescriptive analysis is only the start of a new IBP era.

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Company culture and an integrated FP&A cycle

By Niels Van Hove, Supply Chain consultant, Mental Toughness coach and S&OP/IBP expert at Truebridges

wowPREVIEW 

Successful execution of FP&A is inevitably linked to corporate culture. A culture based on silo mentality and lack of trust not only undermines integrated FP&A effectiveness but also reduces employee engagement and well-being. In this article, Niels van Hove argues that while effective integrated FP&A can thrive in the right company culture, the FP&A process itself can influence and shape that culture. He calls for FP&A leaders to articulate goals that include clear expectations on behaviors. Doing so will not only improve effectiveness but also enable FP&A to play an active role in improving employee attitudes and satisfaction.

Key points

  • The organizational mindset has a huge impact on integrated FP&A performance. However, certain mindsets have proven to be more effective for individual and corporate well-being and performance. Among them are positivity, a growth mindset, and mental toughness.
  • Many integrated FP&A initiatives fail, get stuck, or move slowly. It is likely that company culture and behavior are primary reasons behind this.
  • Executives can’t assume they have the right company culture to implement effective integrated FP&A. Rather, they need to clearly define their expectation for participant behaviors. Trust is paramount, and behaviors that improve trust should be prioritized by executives.
  • Culture-change efforts are most successful when fully integrated into a business initiative. The CEO is advised to use the FP&A cycle to actively display, manage, and nurture effective behaviours.

Introduction

Integrated FP&A implementations require significant change, not the least being behavioral change. And change is hard. In his groundbreaking 1996 study Leading Change, John Kotter reports that change transformation is successful in only 30 percent of companies. A McKinsey study among 3,199 CEOs in 2008 confirmed that indeed only one in three transformations succeeds (Aiken & Keller, 2009). And of the failures, 70 percent are due to culture-related issues: employee resistance to change and unsupportive management behaviors (Aiken & Keller, 2011). It is not unlikely that a lack of attention to behaviors is a major reason why integrated planning initiatives fail. But rather than seeing behaviors and company culture as obstacles to implementing and developing integrated FP&A, we should view the FP&A process as an opportunity to shape and improve company culture. Executives need to align themselves around what effective mindset and behaviors to integrate into their company culture. If they should aspire to achieve high levels of integrated FP&A maturity, the FP&A cycle can play a critical role in establishing this culture. First, executives need an understanding of what these effective mindsets and behaviors are—and need to demonstrate these behaviours themselves.

Effective Mindsets

In an extensive review of sales and operations planning literature, Tuomikangas and Kaipia (2014) list culture and leadership as one of six requirements to improve performance.  Key points here they include “the organizational mindset and practices that facilitate and advance formal planning.” In terms of individual and organizational mindset, psychology explains how some mindsets are more effective than others.

Positivity

Martin Seligman (1998) shows that individuals with a positive mindset are less depressed, live healthier, and perform better than people with a negative mindset. In one study in an insurance company, the 10% most positive salespersons sold 88% more policies than the 10% most negative sales personnel. Positivity can be influenced: one of the most significant findings in psychology in the last 20 years is that individuals can choose the way they think.

Growth

Another superior trait is the growth mindset versus the fixed mindset. Carol Dweck has shown that people with a fixed mindset believe their talent and capabilities in life are a given, and not a lot of things can be done about them. People with a growth mindset believe that every skill can be trained and feel they are the master of their destiny. Dweck’s decades of research and many experiments show two important things: first, people can be influenced to adopt a growth mindset over a fixed mindset before they take on a task; and second, individuals or groups having a growth mindset almost always outperform those who do not (Dweck, 2006).

Mental Toughness

The mindset of elite athletes is often referred to as a differentiator between winning or losing. Performance psychologist and practitioner Jim Loehr (1995) called the mindset of the winner mental toughness, a concept that has been successfully used in elite sports coaching for the last 30 years. Peter Clough identified control, commitment, challenge, and confidence as the underlying attributes of mental toughness. Research shows that mentally tough individuals are committed, proactive, open to change, physically and mentally healthier, and perform up to 25% better (Clough & Strycharczyk, 2012). In my own online research, practitioners indicate that effective integrated planning processes show more of the behaviors linked to these attributes of mental toughness (Van Hove, 2017). All these mindsets can be measured and supported in the FP&A cycle.

Effective Organisational Behaviours

There can hardly be any doubt that effective behaviors result in improved integrated planning and company performance. These behaviors include commitment, trust, top management acting as a role model, a collaborative spirit, empowerment, constructive engagement, and competence in dealing with conflict (Tuomikangas & Kaipia, 2014). Empirical evidence for effective behaviors was reported in a McKinsey survey of 189,000 people in 81 diverse organizations (Fesser, Mayol, & Srinivasan, 2015). That survey found that four leadership behaviors explain 89 percent of the variance between strong and weak organizations. These organizations differed significantly not only in terms of leadership effectiveness but also on McKinsey’s organizational health index, which measures supportiveness, strength of the results orientation, the seeking of different perspectives, and the effectiveness of problem-solving.

Four Main Constructive Behaviors

Even more significant empirical evidence is found by Robert A. Cooke and J. Clayton Lafferty (2014). Based on the survey of 1 million managers and 12,000 organizations worldwide, they conclude that there are four main constructive behaviors that support effective management across geographical boundaries: achievement, self-actualization, humanistic encouragement, and affiliation. These four behaviors not only help to better-integrated planning by improving motivation, work relationships, external adaptability, and interunit coordination but also give greater life satisfaction and well-being to the individuals who display them.

  • Achievement: People with this behavior have a tendency to set challenging yet realistic goals. They link outcomes to their efforts, not to chance. They also think ahead, plan, and explore alternatives before acting, and learn from their mistakes.
  • Self-actualization: Self-actualized people have a strong desire to learn and experience things. They are creative and at the same time realistic, with a balanced concern for people and tasks.
  • Humanistic Encouragement: Individuals with this behavior have an interest in the growth and development of others and are sensitive to others’ needs. Further, they devote an extensive amount of their energy to coaching and counseling others. They are thoughtful and considerate and provide others with support and encouragement.
  • Affiliation: People with a keen sense of affiliation have an interest in developing and sustaining good relationships with others. They share their thoughts and feelings, are friendly and cooperative, and make others feel a part of the team.

Trust Is Paramount

Although no single behavior is most effective for every business, trust seems to be a recurring and paramount theme. Trust is the first thing people seek when they meet someone new (Cuddy, 2015). A team without trust fears conflict lacks commitment, avoids accountability, and suffers from inattention to results (Lencioni, 2002). Studies have reported that trust has a direct impact on strategy execution, is one of the most important predictors of positive organizational outcomes and positively affects psychological well-being. When leaders display trust behaviors, they increase psychological safety, a shared belief where team members feel accepted and respected, and a study by Google of over 180 organizations reported that psychological safety is by far the biggest contributor to team effectiveness (Rozovsky, 2015). The latest research from neuroscientists focuses on eight measurable behaviors that most stimulate trust (Zak, 2017). Zak found that, compared to low-trust companies, people at high-trust companies report 74% less stress, 106% more energy at work, 50% higher productivity and 29% more satisfaction with their lives.

All of this shows that there are mindsets and behaviors that are superior in terms of integrated planning effectiveness, business performance, and employee well-being. Executives can use this knowledge to include behavioral change in their integrated business FP&A initiatives and would be wise to emphasize trust-building behaviors.

Combining an FP&A Cycle and Behavioral Change

If executives wish integrated FP&A to be successful and lasting while at the same time improving company culture, effective behaviors need to be embedded in their planning initiatives. As Collins & Porras (1996) note, “Embedded company behaviors will drive a sustainable company culture, which will last over time.”

Executives can’t simply assume their company has the right mindset and behaviors to implement effective and sustainable FP&A. Neither can they assume behaviors will automatically change for the better because of the implementation of integrated planning. Although the integrated business process can indeed support improved teamwork, we can’t assume this due to the complexity of individual behavioral preferences and company culture. An employee who has developed distrust or other defensive behaviors over a whole lifetime will not simply shed these behaviors when a new FP&A cycle is implemented. Similarly, a company culture of distrust, fear, or lack of psychological safety will not change without a significant cultural change effort on top of the integrated FP&A change program.

Combine Business Initiatives

There is evidence that cultural change efforts are most successful when fully integrated into a business initiative (Dewar & Kellar, 2012). This is a very important notion; it means executives can define what effective organizational mindset and behaviors they want to pursue and use the new FP&A cycle to carry some of the weight of this cultural change.

A CEO will often delegate change management for the cultural initiative to Human Resources. HR will develop a change program; define the cultural baseline, measurements, and goals; provide training or coaching; and develop internal communication about the initiative. HR could further update job descriptions, recruitment and induction policies, training and development materials, and reward and recognition schemes. However, the cultural initiative is more likely to succeed if it is integrated with another business initiative. A CEO can take a direct lead in both the FP&A and the cultural business initiative and use the FP&A cycle meetings to display, monitor, measure, improve, and nurture preferred behaviors.

In a well-established periodic FP&A process, the meetings should be the only management gathering where important future decisions will be formed about the annual operation plan, strategy, budgets and resource allocation. These decisions will sometimes be made under time pressure and stress, and it is during these moments when individuals fall back on their default behaviors, becoming defensive or aggressive.

Kotter (1995) and others argue that change is best established when executive leaders “walk the walk and talk the talk.” A CEO should use the executive meeting in the integrated FP&A cycle to set a behavioral example as well as clear expectations to his team, all the more so during stressful moments. I’ve facilitated executive meetings where the CEO would stop the meeting if emotions got out of hand. The language used in the meeting was not aligned with “show respect” or “provide constructive feedback.” Following time to reflect, the meeting would continue and, afterward, a roundtable of feedback would include comments about behaviors displayed.

An integrated FP&A cycle contains quarterly, monthly, sometimes even weekly planning meetings and includes many senior stakeholders from most business functions. The influence of the planning cycle can go across business units, countries, and even be global. A CEO can set the expectation that every FP&A meeting in every business unit or country takes the time to reflect on agreed behaviors and provide feedback during the executive meeting. In this way, a CEO can utilize the FP&A cycle across echelons, functions, business units, and countries to drive preferred behaviors— behaviors that, over time, become part of company culture.

Increase Executive Engagement

Executive engagement in an integrated FP&A cycle is critical. Done well, an FP&A cycle provides support to an organization to deploy and execute its strategy. If outcomes of the cycle are clearly communicated, executives continually update strategy and forecast, business goals are better understood, and employees get a clear understanding of how their job contributes to strategy and meeting budget requirements. These outcomes are among the most impactful employee-engagement drivers (HBR, 2013). The argument that an FP&A cycle improves strategy execution and employee engagement can be a strong case to make executives become change agents.

However, by making the FP&A cycle include a cultural change initiative, a CEO can increase the status of the program and create more executive engagement. It’s likely that HR, in turn, will show increased engagement with FP&A through its role. On top of this, when a CEO drives the right behaviors, the planning cycle over time becomes more effective and more valuable for all executives. If the behaviors include increased trust levels, additional benefits will accrue in terms of increased earnings, reduced employee stress, more energy, higher productivity and increased life satisfaction.

In my earlier Foresight article (Van Hove, 2016), I suggest that the ultimate goal of integrated planning is the generation of a plan to support an organization’s efforts to deploy and execute its strategy. With a combined FP&A and cultural initiative, we can say that integrated FP&A improves not only strategy execution but also employee engagement and psychological well-being. For all these compelling reasons, there is no excuse for an executive not to be engaged with integrated FP&A.

SUMMARY

To be most effective, integrated FP&A requires a positive, growth-oriented, mentally tough mindset as well as constructive behaviors. It is unlikely that a critical mass of effective behaviors is present in every company. Where it is not, integrated FP&A implementations also require that executives endorse behavioral change. Once FP&A reaches a certain maturity and level of integration, it can be used to support or instill appropriate behaviors in company culture. Rather than being dependent on the company culture for its implementation, an FP&A cycle offers a CEO the means to influence company culture with the result of improved employee engagement and psychological well-being.

This is an amended version of a Foresight article.

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FP&A Strategy Execution Readiness

By Niels Van Hove, Supply Chain consultant, Mental Toughness coach and S&OP/IBP expert at Truebridges

strategy Your company has a strategy. Are you confident it is ready to be deployed and executed? Most likely not, as 60%-90% of strategy implementations fail and only 14% of executives are satisfied with the execution of a strategy. This post introduces a framework to assess your company’s strategy execution readiness, in order to align leaders around how to bridge your strategy to execution gaps. I also provide a free strategy execution checklist to assess your readiness.

Before a strategy can be deployed and executed effectively, you need to have leadership alignment around execution readiness. Your leadership team has to ask themselves at least the following questions:

  1. Do we have the best possible circumstances to execute our strategy?
  2. If not, what are the gaps to effectively execute our strategy?
  3. Are we aligned around our strategy execution gaps and strengths?
  4. How and when are we going to address our gaps?

Answers to these questions will provide understanding between your leaders on how they perceive the risk profile of execution the strategy. It will give your leadership team insight if they feel ready to execute their strategy. But most important, it will create alignment on how your company can create the best possible circumstances to execute the strategy successfully.

To help executives understand their gaps to effective strategy execution, I researched 7 strategy implementation frameworks and 75 leading strategy execution articles published over the last 30 years. I looked for the most common strategy execution factors, and distilled and grouped 5 key success factors.

I developed a 40 question checklist to assess business confidence across the 5 strategy execution key success factors. If you take this survey with your leadership team, it provides you answers to powerful questions like:

  1. What are our perceived strategy execution gaps?
  2. What are our perceived strategy execution strengths?
  3. Are we aligned around strategy execution readiness?

What follows is a brief description of these 5 ultimate strategy execution success factors.

strategy alignment

Leadership Alignment:

There are collective leadership and common language around purpose, vision, behaviours, strategic capabilities, balanced scorecard and budget objectives. This supports focused decision making, resource allocation and issue resolution.

60% of organizations do not have strategic initiatives in the budget

Mindset and Behaviours

A resilient, positive and growth mindset culture, with effective behaviours and group dynamics supports alignment, integration and strategy execution. These cultures are proven to outperform negative, fearful cultures with aggressive behaviours. People & Culture get a mention in 6 from 7 researched strategy frameworks, however:

30% of managers mention cross-unit working as the greatest challenge to strategy execution

Performance and Appraisal

The strategy is cascaded to individual performance level. Objectives , rewards and consequences are clear and include the ‘What’ as well as the ‘How’ we do it. Recruitment policies are aligned with values and behaviours and there is action towards performance issues. Reward systems are mentioned in 6 out of 7 researched strategy frameworks, however:

70% of middle management and 90% of front line employees incentives is not linked to strategy

Organization Change

The organizational structure supports the strategy. There is strategic capability building, clear roles and responsibilities and continuous formal, informal and two-way strategy communication to engage employees. Organizational structure is mentioned in 7 out of 7 researched strategy frameworks, however:

In 38% of companies, managers do not inform their team about the chosen strategic direction

Integrated Planning & Monitoring

There is a strategy implementation plan. A periodic rolling forecast provides visibility in gaps to budget and supports enterprise resource re-allocation. Strategic initiatives, goals, measurements and targets are periodically monitored. Control, process, information systems and goals are mentioned in 5 out of 7 researched strategy frameworks, however:

92% of companies do not report on strategic lead performance indicators

If you and your leadership team ask yourselves the right questions around these five key strategy execution themes, you will create understanding around your strategy to execution gaps. You will start a conversation together about your strategy execution readiness. You will hold up a mirror and ask; Are we ready to execute?

You can download the Strategy Execution Survey here. Success with aligning your leadership team around strategy execution.

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Author's Articles

May 9, 2018

Many experts agree that IBP has a monthly check and balance with the budget and the strategic intentions of a business. Therefore, a well-executed IBP cycle will provide monthly visibility and measures progress against business objectives and strategy in the long-term horizon.

This article describes the four stages of Integrated Business Planning (IBP)

May 3, 2018

The future of IBP will be to plan across the whole value chain. A final step in IBP scope will be to understand and incorporate constraints to create a global view.

April 3, 2018

In this article, Niels van Hove argues that while effective integrated FP&A can thrive in the right company culture, the FP&A process itself can influence and shape that culture. He calls for FP&A leaders to articulate goals that include clear expectations on behaviors. Doing so will not only improve effectiveness but also enable FP&A to play an active role in improving employee attitudes and satisfaction.

February 22, 2018

The statistics reveal that 60%-90% of strategy implementations fail and only 14% of executives are satisfied with the execution of a strategy. This article introduces a framework to assess your company’s strategy execution readiness, in order to align leaders around how to bridge your strategy to execution gaps. It also provides a free strategy execution checklist to assess your readiness.