By Oliver Wight EAME Partner, Anne-Marie Kilkenny, and Oliver Wight Asia-Pacific Partner, Stuart Harman
In this series on how to recognise ‘real’ Integrated Business Planning (IBP), we’ve already revealed four key characteristics of a true IBP process; ownership by the CEO, tailored to the organisation, customer-focused and designed to deploy business strategy. In Part Three, we discuss why it’s essential for Finance to be fully embedded into the IBP process, and why
Show me the money
What it is: full financial integration throughout What it isn’t: a review of volume with a ‘cash up’ at the end
A key differentiator of IBP is the integration of financial plans throughout the process, particularly in each of the five reviews of the monthly IBP cycle. Understanding the financial implications across the full horizon of the 24 – 36 month rolling IBP plan – the costs, the risks, the benefits and the margins – is an essential element of IBP. If there is misalignment of functional plans or gaps to the annual plan, strategy are identified and require corrective action, the financial impact of the recommended actions must be clearly understood and communicated to decision makers.
The active participation in IBP of the finance team safeguards the integrity of the financial projections, positioning them as key business partners in the monthly IBP reviews. As the finance team collaborates with its business partners, they contribute greater value to the organisation by helping to develop, critique and translate plans into financial terms. The resultant outcome is a company-wide focus on gap identification, gap closure and in mature processes, continuous re-planning and re-optimisation.
Mind the gap What it is: identifying gaps & making gap-closing decisions What it isn’t: debating the numbers
One of the most pervasive issues in any organisation, is an absence of ‘true knowledge’, as SILO ways of working produces different sets of contrasting numbers from various departments. Without cross-organisational collaborative structure in place, organisations fail to produce basic forecasts, let alone make strategic decisions.
IBP enables an organisation to create an aligned, cross-functional plan for the future, based upon key assumptions. These assumptions, documented and updated each month, are based on insights, which are derived from analysis of past organisational performance and also from externally focused data analytics, feeding one empirical set of numbers. These insights allow for the calibration and recalibration of assumptions to meet the overall objective of optimising the customer experience, whilst reducing the cost-to-serve.
The essence of IBP is: 1. The identification of actual or potential gaps between the latest monthly ‘whole of organisation’ plan, and the ‘committed plans’ of the organisation i.e. the annual plan 2. Seeing these gaps or risks early enough so cost-effective action can be taken to get back on track or ‘course correct’.
The Management Business Review is the final element of the IBP monthly cycle where the latest ‘whole of organisation plan is reviewed against the committed plans, and is where gaps in projected performance are identified. A key principle of IBP is that issues and gaps should be resolved at the lowest practicable level in the organisation – not every issue should be elevated to the leadership team to address. Only the major decisions, appropriate to the pay grade of the leadership team should make it to the MBR. The Integrated Reconciliation team is tasked with identifying and recommending the following actions to the leadership team for decision-making: - 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
In the fourth and final part ‘How to recognise real IBP’ series, we’ll explain how true IBP is a constantly evolving process, and how to check that your IBP process is on the right track.
This extract was based on our white paper: ‘Don’t fall Fake News: A buyers guide to Integrated Business Planning’, which you can download for free here.