It is now widely recognised that S&OP (or its successor IBP) is much more than a specialist supply chain process and requires a high degree of cross-functional partnership and collaboration across the organisation to deliver lasting results.
This aspect of S&OP is also recognised as being the most challenging to deliver and sustain. Whilst there is plenty of practical advice and guidance on some of the more mechanical aspects of the S&OP process (such as process design or architecture, systems or metrics), the challenge of creating and sustaining strong cross-functional partnership remains relatively unsupported for the typical practitioner.
Previous posts in my blog have suggested a number of approaches to drive cross-functional collaboration especially across supply chain, commercial and finance functions. However, in this post I focus further on the issue of sustaining and improving S&OP and the often-overlooked role of HR in supporting and enabling this.
Establishing strong cross-functional working as a key organisational capability is a fundamentally challenging activity (as evidenced by the recent Deloitte study which reported that only 21% of senior executives have confidence in the ability of their organisations to build cross-functional teams). Sustaining cross-functional partnership is even more challenging and this is where HR can play a key role in shaping the organisation environment to support this way of working. There are three key areas where HR can make a real difference;
Reward and recognition
Culture
Leadership development & support
1. Reward & Recognition
The reward and recognition approaches of most organisations are designed to fit individuals and teams operating in a functionally-siloed environment. This frequently creates tension between the members of a cross-functional team as they will be measured on different outcomes (and which, even worse, are often mutually exclusive). As these measures are replicated up and down a management line in a function, this also means that senior leader behaviours and decision-making are strongly influenced by the measures and lead to cross-functional goals being demoted in priority or overlooked completely.
For example, a situation in which the supply chain function alone is measured on inventory levels and the commercial function alone are measured on sales, inevitably skews and undermines the nature and outcome of decisions in the S&OP process.
HR has a key role to play here in facilitating the development of a framework and processes for cross-functional teams to develop and agree genuinely cross-functional goals and then for their rewards to be based on performance versus these goals. This is challenging and may require fundamental re-design of reward systems. Examples of this might be to;
Ensure that decision-making scope for leaders is directly tied to specific performance goals (eg commercial leaders with accountability for signing off a sales forecast have a performance measure for forecast accuracy or bias)
Design incentives or rewards for specific cross-functional groups which replace part of the traditional silo target-setting and reward approaches
Ensure that key functional leaders involved in cross-functional S&OP processes have shared accountability for key outcomes (eg working capital levels)
2. Culture
The ability of the organisation to effectively build and develop cross-functional collaboration is significantly influenced by various elements of the prevailing culture, including;
Values
Empowerment
Translation of corporate strategy and objectives to teams
Development paths
HR can play a highly-influential role in shaping the evolution of these elements which in turn are decisive in determining the ability of the business to create and maintain effective cross-functional partnerships.
Examples of this are outlined below;
Values
An organisational culture in which cross-functional working is clearly valued is a critical foundation for enterprise-wide S&OP/IBP.
Clearly this value also needs to be reflected in the mechanics of the organisation (such as reward and recognition systems as outlined above) but also in the actual, observable behaviours of key stakeholders.
Here the HR function can play a key role in facilitating organisation development (OD) discussion amongst senior leaders and coaching on the role modelling of key behaviours. Examples of this might include;
Senior functional leaders recognising the impact of individuals in the S&OP process from outside their function, specifically recognising the enterprise benefit of their actions
Senior functional leaders having shared accountability for cross-functional processes and practically demonstrating this through active participation and support
Empowerment
The degree of empowerment present in the organisational culture also fundamentally impacts the ability of the enterprise to execute effective cross-functional S&OP processes. An organisation which embraces empowerment will more effectively nurture ways of working in which a group of key individuals have access to key information and feel empowered to advocate and take decisions for the overall benefit of the organisation rather than specific functional silo.
Again, the HR function can be a powerful influence on encouraging and enabling OD discussions to drive towards more empowered ways of working. Such development of course offers benefits beyond S&OP/IBP, and in fact the opportunity to leverage the value of empowered S&OP can even be a catalyst or role model for increasing empowerment generally in the organisation.
Translation of corporate strategy and objectives to teams
Many organisations have established processes for cascading corporate strategy and annual objectives through its management layers to ensure that teams and individuals can align their own operational goals with those of the wider business. However, such processes almost exclusively run along functional lines with the ‘strategy house’ being a typical execution of this approach (see Figure 1 below).
Figure 1 - 'Strategy House' representation - aligning team/functional goals to the corporate vision. Courtesy of executestrategy.net
The HR function (in conjunction with the internal communications team if one exists) can be instrumental in ensuring that company-level strategies and goals are translated and aligned with cross-functional teams and partnerships rather than just silo functions. This is critical as it starts to provide opportunities to align reward and recognition systems with these cross-functional contributions to corporate goals, in addition to providing a very clear line of sight for cross-functional S&OP teams to see how their outputs contribute directly and uniquely to business success.
Development Paths
Effective and sustained collaboration in S&OP/IBP is built on a foundation of mutual understanding and trust between the members of cross-functional teams. S&OP/IBP typically requires active contribution from the Supply Chain, Commercial and Finance functions. Areas of focus, culture and typical personality profiles are often different across these functional boundaries. These differences are exacerbated as most traditional career paths tend to restrict individuals within a specific functional silo and this means that basic appreciation of the drivers, challenges and opportunities outside the ‘home’ function is often missing.
HR can help address this issue by advocating and supporting increased cross-functional experience and development as part of its talent strategy. There is a range of possibilities in this area, from basic knowledge training (eg as part of induction programmes) through to more comprehensive, formal career development routes which provide for hands-on experience across functions.
3. Leadership Development & Support
The role of the leader in S&OP/IBP in building strong cross-functional partnerships and collaboration is critical and thus the process requires leaders with the confidence and capability to lead cross-functionally at all levels. The HR function can help address this challenge in two key areas;
Leadership Development
HR can have significant impact on the sustainability of S&OP/IBP by adapting leadership development programmes with the goal to develop enterprise leaders in addition to functional leaders. Such programmes often exist in larger organisations but are normally targeted at succession for only the most senior roles in the company. Updating traditional career routes to ensure that potential leaders learn at an earlier stage to influence across functions and cultures rather than within them should be a key challenge for HR to address.
Within this overall development framework, as outlined in a previous blog post (“3 Ways Coaching & Mentoring Will Improve Your S&OP Programme”), I believe that the specific interventions of coaching and mentoring can provide key tools and provide the catalyst for rapid leadership development in this context.
Team Building Support
The initial period of forming cross-functional S&OP/IBP teams is critical – participants are looking for early indicators of the value of a new way of working, and testing the pros and cons of working as a cross-functional team. The early experiences of the team, whether positive or negative, shape both the short-term effectiveness but also longer-term sustainability of the team. For this reason, HR support to S&OP leaders is highly valuable.
Specialist OD support to leaders to build trust and collaboration in their cross-functional teams can have a major impact in this area with typical topics for focus being on setting up the team for a fast and productive start but also creating the most favourable conditions for cross-functional working to evolve and continuously improve.
Some examples of specific OD support include;
Creating a structured approach in which all team members understand their own role, others’ roles and how their partnership produces key business outcomes
Co-creating ways of working with the team members
Creating an environment of mutual contribution and a culture of recognition in the team
Summary
The demands for strong cross-functional collaboration in S&OP/IBP are now widely recognised and organisations are attempting to address the major challenges that this presents. However, much of the effort is directed to starting up such collaboration and broader attention is required to ensure its sustainability.
The HR function can lead the development of key organisational enablers for sustained S&OP/IBP but are often overlooked in this topic. Three critical contributions that can be driven by HR include:
Reward and recognition
Culture
Leadership development & support
Programmes to deploy or develop S&OP/IBP should aim to build sustainability and continuous improvement into their activities and consider HR as a key partner in these challenges.
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