3 Tools for Sustainable Cross-Functional S&OP
In my previous articles in this series, I have outlined some of the challenges and approaches to creating a strong cross-functional S&OP process based on my experiences of leading this change in a global pharmaceutical company. However, as any S&OP practitioner will tell you, the initial deployment is really only getting the organisation to the start line – the real value to the business comes from achieving a sustained and improving process. Researchers in this field typically report that 70-75% of S&OP deployments remain stuck at basic competency level or, even worse, dissipate over time to become ineffective or dysfunctional ways of working.
Some of the drivers for these results may originate from the changing dynamics and pressures of the business post-deployment but undoubtedly there are several elements that can be designed into a S&OP deployment programme which improve S&OP quality and sustainability. Here I propose 3 such tools to support sustainability and continuous improvement.
1. Empowering S&OP Teams
In my experience, empowerment is often overlooked as a tool for driving real and sustainable change, maybe because there is a feeling somehow for a leader that not staying in total control themselves is risky and it is unclear how stepping back can really deliver more than could be driven by personal intervention. The clearest and most practical framework I have seen and used for this is Blanchard’s ‘3 Keys to Empowerment’.
The real value in Blanchard’s approach is how it clarifies the way in which empowerment is a tangible and impactful change tool. In the context of S&OP, his 3 keys can be illustrated as below;
Key 1 – Share Information
Sounds simple enough. But do all your S&OP leaders and participants really understand why the business runs S&OP? Do they really understand what happens further down the line to the data they have provided and how that affects the way senior leaders make decisions for the business?
A common frustration for leaders is why their staff don’t just do the ‘right thing’ – why do they need to be corrected or re-directed to create the outputs the business needs? More often than not, a key driver for this is that the employees don’t really have access to the bigger organisational picture and this means that the ‘right thing’ is not always that clear to them. Ensuring that this question is addressed as part of S&OP deployment but also its ongoing development is critical for long-term engagement and for business outcomes.
Key 2 – Define the boundaries
This may seem counter-intuitive but to empower the team a really important step is to set out clear boundaries for their actions and responsibilities. This provides security and clarity for example on what decisions the team can make without the need to check or consult outside the team. This is an essential part of deploying S&OP and there are various tools available to help with this including RAPID (a framework created by Bain to allocate roles in a decision process). Describing clearly where and how the various decisions in the S&OP process are made also provides important context and helps the team understand the impact that their inputs drive at company level. Clearly defining the boundaries also has the added advantage of clarifying where decisions are not taken. This is especially important where a S&OP process is being implemented in place of an existing ad-hoc or relatively unstructured approach which depends more on relationships and networks than formally delegated decision rights and processes.
Key 3 – Develop the team
In Blanchard’s original framework this key focuses on developing the team in order to replace a hierarchical solution. However, in the S&OP case I believe there are several specific perspectives on how to develop the team which are very important for designing in sustainability to the team;
Investing in building trust across the team - which underpins the cross-functional collaboration required for it to operate effectively
Building awareness and understanding of the challenges of cross-functional working and how to create strong and productive working relationships across functions are a critical foundation for S&OP
On a more strategic basis, creating HR approaches that improve the organisation’s ability to select, develop and reward potential S&OP leaders is an important enabler for a sustainable process. These approaches should also include training programmes that specifically develop leaders’ ability to manage and deliver in cross-functional environments.
2. Coaching & Mentoring
Applying Blanchard’s empowerment approaches as outlined above already greatly increases the chances of sustainability compared with a deployment that focuses on the purely task/rational aspects of S&OP.
However, even supported with this clear information on the organisational purpose and value of S&OP and their role in it, there remain several challenges for the individual new to the process;
Applying the theory - Understanding what needs to be delivered according to the process playbook or specification is one thing, but being confident about how to do that requires another level of support. The process might describe, for example, the requirement for a constructive discussion between supply chain and commercial teams to create a consensus forecast. In reality, the ability to consistently deliver on this requirement is based on the individual’s capacity to use consciously choose and apply behaviours which will lead to successful outcomes. For a leader being involved in S&OP for the first time, there may be a need for very practical support for example leadership behaviours in meetings, framing questions to support decision-making and recognising cross-functional partnership.
Working cross-functionally – S&OP typically requires active contribution from the Supply Chain, Commercial and Finance functions. The goals, culture and typical personality profiles are often different across these functional boundaries and this means that specific attention is needed to support managers to understand and manage these differences positively. Again, referring to the S&OP process specification provides very little support on how to make this happen.
Communicating & Influencing – In the end, the effectiveness of a highly cross-functional, and often fast-moving, process such as S&OP rests on the quality of the transactions between its cross-functional participants. In turn, this quality is determined by the effectiveness of the communications and influencing which drives the S&OP team towards its common goals. There are various levels at which communicating and influencing can be addressed starting with basics such as establishing common language or terminology through to more advanced skills based on an underlying understanding of personality types (such as Myers-Briggs Type Indicator (MBTI) or Marston’s DISC categorisation).
My experience is that direct coaching of individual participants and teams greatly accelerates progress during the start-up phase of an S&OP initiative. However, by creating positive early experiences and equipping S&OP teams with critical skills to succeed in cross-functional teams the longer-term sustainability of the process is also improved.
3. Building Strong Links to Finance Processes
When starting out to deploy a new S&OP process or to improve an existing one, the challenge of evolving towards full Integrated Business Planning (IBP) may appear over-ambitious. However, the sustainability and priority of the S&OP process within the corporate architecture is very closely linked to the relationship between financial planning processes and S&OP.
Allowing, or even requiring, a completely separate financial planning process to run in parallel to S&OP undermines its role and priority. This inevitably raises questions for example, on what is most important – the S&OP number or the financial plan number? Once the figures generated by cross-functional S&OP decisions do not appear to be those that really matter then naturally the commitment to collaborate in following the defined S&OP process can ebb away.
In fact, a similar challenge occurs where there is any significant degree of duplication with the workings and outputs of the S&OP process. A typical example of this is where the commercial organisation maintains a separate and disconnected process which reviews and identifies performance gaps and discusses how to close them. If this is run outside S&OP or without any connection to it, two possible outcomes ensue – participants start to be frustrated with attending two similar meetings and then prioritise the one led by their functional boss, or the figures used across the two meeting structures begin to deviate and (as explored above for financial planning) the role of S&OP is undermined.
Aiming for full IBP may require a more significant effort and investment but considering how to build strong links between S&OP and financial planning processes from day 1, even if these links are manually-driven and basic, is an important step.
At the outset of a S&OP deployment or improvement programme there is an obvious shorter-term focus on getting the process up and running to deliver the business goals. However, this can lead to a risk that the transformation programme does not adequately incorporate strategies to embed and sustain the process for the longer-term.
Fortunately, these strategies can be built into a programme very readily and practically and as outlined above I believe three key tools for this are;
Empowering S&OP Teams – to build sustainable ownership and accountability not just for the operation of the process but also its continuous improvement
Coaching & Mentoring – to support individuals and teams to bring the process to life in the real world and to master the challenges presented by cross-functional working
Building Strong Links to Finance Processes – to ensure that the discipline and power of the S&OP process is used as quickly and practically as possible to feed corporate planning decision-making processes