Recently, I have been working with several healthcare businesses, which are all struggling with the same issue. Despite having developed and implemented an Integrated Business Planning (IBP) process, they are continuing to run a separate quarterly forecast process to satisfy the needs of their ‘corporate masters’.
At the beginning of their IBP journey, these businesses embraced the concept of ‘one set of numbers’, which are derived from their IBP process, understanding that this approach enables informed decision-making, increased accuracy and thus, fulfils all corporate requirements. However, they now are finding that at the behest of the same corporate masters, an additional quarterly forecasting process is required to drive a ‘different set of numbers’.
Not only is this resulting in significant duplication of non-value adding activity and causing significant frustration, the multiple sets of numbers are fundamentally challenging the core ‘one set of numbers’ principle of IBP. In essence, IBP is relegated to merely ‘a’ business planning process, rather than the business planning process.
So, what can be done? There are two key areas that need to be managed effectively:
1. Opportunity and Vulnerability Management 2. Integrated Reconciliation
Opportunity and Vulnerability Management There can only ever been one version of the ‘truth’ and a business has to be run on this basis. By establishing a cross-organisational collaborative structure and eradicating SILOed ways of working, IBP creates the ‘one set of numbers’ and provides the ‘the truth as we know it’ used to drive the organisation. The bottom-up processes from Product, Demand and Supply must operate to this one set of numbers, defining the ‘most likely outcome’, as well as the surrounding opportunities and vulnerabilities.
Opportunities are defined as value-generating activities that are not currently included within the Most Likely Outcome. Vulnerabilities identify the assumptions/plans included within the most likely outcome that have some level of uncertainty. Combined, opportunities and vulnerabilities identify the level of uncertainty in the current ‘most likely outcome plan’ over the IBP horizon, and enable a range of alternative outcomes to be considered. Furthermore, the ‘owners’ of these opportunities and vulnerabilities identify the investment, resource and support that would be required to make them more/less likely to occur.
Integrated Reconciliation A key principle of IBP is that issues and gaps should be resolved at the lowest practicable level in the organisation; in other words, not every issue should be elevated to the leadership team to address.
The team working in the Integrated Reconciliation process, is often made up of the facilitators of the Product Management Review, Demand Review, Supply Review, Finance business partners and the IBP process leader. It receives the most likely outcome plan from each process, as well as the identified opportunities and vulnerabilities, including the activity required to make them more or less likely.
Whilst the most likely outcome remains the ‘truth as we know it’ plan, the Integrated Reconciliation team can make adjustments, realignments and come up with scenario plans based on the identified opportunities and vulnerabilities. At this point, these options are escalated to the Management Business Review, where decisions are made on:
• Actions to close any gaps identified • Actions to mitigate significant risks to the latest plans presented • Actions to position the organisation to seize any opportunities identified over and above the latest plan • The forecast to be sent to Corporate in fulfilment of the Quarterly Forecast requirements.
Benefits The value of this approach is significant:
• It ensures the business is always able to bridge between its IBP plan and the quarterly forecast sent to corporate. • It enables the required actions and investments to achieve the commitments outlined in the plan to be fully understood. • By utilising only the Integrated Reconciliation and Management Business Review to fulfil the corporate requirements, it eradicates duplication and non-value added activity from the core Product, Demand and Supply processes. • It drives efficiency and ‘one set of numbers’ back into the business. • It establishes IBP as the planning process by which the whole business is run
If this sounds familiar and you’re struggling to keep to one set of numbers in your business, I will be hosting a talk on this topic at the 2nd Annual Oliver Wight Integrated Business Planning Summit in June. Register here.