✅ Introduction to Business Planning Tuesday, 5 May 2020 3:19 PM What is Business Planning? Business planning is the process of defining a roadmap for an organisation that captures the organisation's goals and more importantly, how it plans to achieve them. Every organisation, whether private or public, has a strategy in order to successfully deliver on its purpose (the reason forits existence). These strategies are influenced by internal factors (capabilities, resources, budgets etc.) as well as external factors (environmental, economic, social, technological etc.). These factors drive the strategy and are therefore termed as Strategic Drivers. While the strategy answers the 'What?' questions, the 'How?' questions need to be answered. Using the analogy of a road-trip, the objectives are like the destination(s) or the places you want to visit on the trip, the KPIs are the mile-markers that tell you how far you've driven or how far you are from your next destination. The risks are a list of all the things that can go wrong on the trip so that you take preventative measures or in the worst case, be prepared to deal with the situation. And the outputs could be the photographs, videos, souvenirs (tangible) you take back from the trip as memories or the ability/ confidence to plan long trips in the future (capability maturity) or the ability to drive on narrow and winding mountainous roads (skill development). With just one car on the trip, things are relatively easy. But with multiple cars (some starting from multiple locations too), things get complicated and coordination is key. This is where Business Planning comes in. What makes a successful Business Plan? Every strategy can be translated into certain objectives that determine the course of investment and action. In order to determine the progress towards success on these objectives, organisations define Key Performance Indicators (KPI's). These indicators are quantifiable and help communicate the progress in an unambiguous manner.In working towards delivering on the objectives, there are bound to be uncertainties arising from unforeseen and undesirable situations. These undesired events or situations are termed as risks. Lastly, every initiative will result in some outputs or deliverables. These outputs could be tangible (products or services offered by the organisation) or intangible (capability maturity etc.). These objectives, KPI's, risks and outputsare the basic building blocks of any business plan. To reiterate, here are the four basic elements of a business plan: Objective: A goal that is Specific, Measurable, Achievable, Relevant and Time-Related. It is consistent with the policy that an organization sets for itself. It is aligned with the strategic objectives o f the organisational entities that it belongs to eg. Sectional objectives will be aligned with Branch objectives, Branch objectives with Divisional objectives etc. Key Performance Indicator: Also known as KPI in short, these are measurable values that help track progress towards the objectives. Risks: These are the undesirable effects of uncertainties on achieving objectives. Output: An output (deliverable) is a tangible product of a program, goods and services that is produced and delivered. Each output is directly related to meeting a specific division/branch/section's objective. Outputs should be: specific, measurable, attainable, relevant, and timely. The SDZ Business Planning Framework Cascading Business Plans The objectives, KPIs, risks and objectives at the highest level in the organisation are strategic in nature; hence the terms,strategic objectives, strategic KPI's etc. However, defining these at the strategic level isn't enough. Depending on their expertise and function, the various business units and departments will contribute in their own way towards the organisation's success. Therefore, everyone in the organisation needs to work in alignment towards achieving the organisations goals and so it is important that every business unit/ department has its own business plan. This cascading structure of business planning is what ensures alignment throughout the organisation. Content Hub Page 1 The cascading structure ensures that the business plans at the section level are aligned sequentially right up to the strategic objectives at the corporate level and contribute to their success. From a tactical perspective, the projects and business-as-usual activities can also be aligned with the objectives right up to the corporate level. Performance Reporting Plans are usually made top-down as we have seen previously. Performance reporting on the other hand, usually happens bottom-up. Once the plans are approved and brought into execution, the next big challenge is to monitor the progress of the activities and investments against the plan. Getting everyone in the organisation to report on their progress in a timely and consistent manner ensures that the leadership is informed about the progress and can make informed decisions where needed to keep the progress on track. Sections within a branch all contribute towards achieving the branch's objectives and KPIs. Similarly, in the next level, branches together contribute towards the division's objectives and KPIs and all the divisions put together help deliver on the strategic objectives of the corporate plan. Having a cascading plan and therefore an integrated,bottom-up reporting mechanism helps the organisation's leadership see exactly what is being done to deliver on the strategic objectives and the progress of the initiatives. The more streamlined this flow of information is (both top-down planning and bottom-up reporting), the greater the ability of an organisation to adapt to changes in the external conditions making for an agileand nimble organisation. How should business planning be done? This is a question that most people have when it comes to making business plans. Experts believe that planning is a process that should be undertaken once a year. This practice also aligns with the financial/ tax cycle as defined by law. During the planning process, it's considered good practice to involve people from different functional and operational areas within the organisation to bring in diverse perspectives to the discussion. It's not a straightforward process that can be completed in one sitting. On the contrary, it's more like a series of workshops with people coming together for group work and then going away to perform their individual analysis on issues of interest. What is the ideal duration a business plan should cover? During the annual business planning exercise, a reasonable timeframe for developing a business plan is by keeping a 3 year horizon in mind. Anything more than that involves a lot of factors that cannot be accounted for with certainty. Having said that, detailed plans are laid out for the immediate year ahead. There can be exceptions to this in certain special cases. How often should plans be reviewed? It is said 'failing to plan is planning to fail'. However, reviewing plans at regular intervals is just as important and canlead to failure if not taken seriously. Under normal circumstances, experts recommend plans be reviewed at least twice a year if not every quarter. There are a few exceptions to this though: • Mergers and demergers of organisational entities are triggers for a business plan review • Major changes to the macro conditions (unforseen external factors such as natural calamities, global social/ political/ econo mic events etc.) that have an impact on the organisation can also trigger the need for a review of the plan • In cases where the organisation deals closely with fast changing sectors eg. ICT, it is prudent to review the plan every quar ter What can undermine my business planning efforts? Some of the common traps when it comes to the planning process include: • • • • Ambiguous objective statements leading to lack of clarity regarding the objectives Confusion between objectives and outputs (deliverables) Poor KPI's and measures Initiatives ○ Too many - # of initiatives compared to time and resources available ○ Too small - incremental initiatives that do not contribute significantly ○ Too big - difficult to align the initiatives due to complexity, many factors need to come together to ensure success Random - initiatives are not aligned to the strategic objectives Content Hub Page 2 • • • • ○ Random - initiatives are not aligned to the strategic objectives Failure to prioritise initiatives Initiatives lack diversification Not revisiting strategy regularly to ensure alignment Conflicting objectives due to lack of alignment Content Hub Page 3
