The Must-Haves for Successful Integrated Business Planning (IBP) - Culture
The principles of Integrated Business Planning (IBP) have been established for over 30 years, yet the success rate for IBP deployments is still very low, with research suggesting that only 25-30% of initiatives achieve their goals.
One reason for this is that IBP is often approached as a process or systems deployment and the multi-dimensional change requirements (including capability building, mindset change and cultural factors) do not receive sufficient attention. The cultural enablers are particularly significant as IBP execution challenges many traditional ways of working.
My experiences in IBP deployments suggests 4 elements of culture are especially important in the adoption and sustainability of IBP;
Cross-Functional Working – At the core of IBP is a need for effective cross-functional collaboration. However, most organisations are structured on functional lines. These organisational boundaries are then mirrored in many aspects of the organisation such as performance metrics, reward and recognition schemes and leadership development. A minimum requirement for effective IBP is a culture which sets out cross-functional partnership not as a ‘nice-to-have’ but as a critical requirement for executing company strategy. This culture must be lived by senior executives in their own practices but also underpinned by specific development approaches. The latter can include, for example, specific programmes to reinforce the end-to-end contribution of the various functions and how delivery to the market is underpinned by partnership across functions.
In the longer-term, leadership development programmes which focus not only on functional leadership but aim to build flexible, cross-functional leadership skills at an early stage in management careers are also important. Beyond the requirement for a culture which ensures that teamworking reaches across functional boundaries, it is also crucial that the culture fundamentally supports the practical expectations of team performance. This can include team metrics, and reward & recognition schemes based on team outputs (even if the members of the team span several functions). The way in which business strategy is communicated across the organisation is also important - ensuring that the strategy is described in terms which highlight the importance of cross-functional teamworking and how team performance goals support the overall business strategy also helps to consolidate the critical role of collaboration in the business.
Empowerment – A central principle of IBP is that only exceptions and outlier issues should be escalated through the hierarchy of monthly meetings. This demands that decisions are taken at the most appropriate (and lowest) level in the business. It is therefore important that the organisational culture supports and encourages empowerment. Any underlying cultural tendency to escalate decision-making overloads the executive review step of IBP and reduces the pace of decision-making greatly. It is important that senior managers not only communicate the importance of empowered decision-making but also demonstrate this in their interaction with the IBP process. This is especially important when deploying IBP for the first time in a business where functional leaders may have historically had autonomy to drive decision-making largely on a functional basis or through personal networks rather than formal decision-making processes. IBP seeks to optimise enterprise decision-making by creating a broad and transparent evaluation of business options. Whilst this clearly drives value it can be challenging for leaders to ‘let go’ of behaviours more suited to the pre-IBP approach. Recognising and proactively managing this is an important element of an effective change management plan for IBP introduction.
Whilst senior executive behaviours are clearly important to set the tone for empowerment in IBP, various practical steps are also helpful in realising this empowered approach. These include clear definitions of accountability for each cross-functional IBP team (eg in demand planning, supply planning, integrated reconciliation etc), creating specific decision rights for the leaders of the key steps of IBP and also ensuring that the structure of the various IBP teams have full transparency and alignment on how decisions should be made within their group.
Combining Data & Business Judgement – IBP aims to support rational enterprise decision-making by providing a broad evaluation of business performance and outlook and also proposing options to ensure the delivery of company strategy. Wherever possible, this is underpinned by the use of robust factual data (eg supply capacity, launch timings or inventory levels). However, various key data inputs to IBP are based on business judgement, and this can includes sales forecasts or competitor activity. These inputs are then used to assess risks and opportunities to the execution of business strategy in order to drive decision-making and alignment across the business. This highlights two aspects of the business culture. The first aspect is the importance of a culture which balances its decision-making between reliance on hard data vs the application of sound judgement. Whilst many decisions in the IBP cycle can be made purely on factual data, the most challenging decisions will often rely on business experience and judgement. It is therefore important that the culture values both approaches and does not routinely favour one approach or the other without a mindful assessment of the optimal approach. The second aspect of culture here is maintaining a mindset of healthy challenge and questioning of tangible data inputs to IBP. Having a clear view at all times on which data is fully fact-based and which is derived from forecast or other judgements is essential in order to weight decision-making inputs appropriately.
Process Discipline – The standard IBP architecture defines the hierarchy of meetings in the monthly cycle and the preparation and support required for each of these. The complex and inter-dependent nature of IBP requires a high degree of co-ordination. For this reason, the key elements of IBP are typically calendarized for the year ahead in order to support alignment across the business. Two cultural factors are important here. Firstly, this demands a culture which expects adherence to process. This ensures the alignment and integration of the numerous cross-functional inputs needed to drive rapid decision-making over a monthly cycle. Secondly, the adoption of IBP requires a culture in which IBP is seen as the overarching planning and decision-making mechanism for the business. Where deployments appear to succeed and then fail some months later, this is sometimes due to functions in the business maintaining their own parallel processes which duplicate some of the elements of IBP. This inevitably creates duplicated work and can lead to dissatisfaction with the IBP approach which is then seen as an additional and unnecessary process. For this reason, a clear way of working establishing IBP as the core planning process is a critical cultural foundation for IBP.
IBP deployments often have an excessive focus on process and system aspects of the process. Deployment programmes which take a broader range of issues, including the cultural context, into account are typically more effective. Cultural enablers for IBP success are critical and these span 4 themes;
· Cross-functional working
· Combining data & business judgement
· Process discipline
Ensuring these aspects are addressed in the change approach for IBP deployment enhances both short-term deployment effectiveness but also the long-term sustainability of the process.