{"id":7882,"date":"2019-01-08T12:55:00","date_gmt":"2019-01-08T18:55:00","guid":{"rendered":"https:\/\/blog.planview.com\/?p=7882"},"modified":"2019-08-15T11:22:51","modified_gmt":"2019-08-15T16:22:51","slug":"why-you-should-align-strategy-financials-and-execution","status":"publish","type":"post","link":"https:\/\/blog.planview.com\/why-you-should-align-strategy-financials-and-execution\/","title":{"rendered":"Why You Should Align Strategy, Financials, and Execution"},"content":{"rendered":"

\"Why<\/p>\n

The following content is taken from the whitepaper, \u201cPortfolio-Driven Performance: The 7 Process Areas That Drive IT and Business Results,\u201d written by Jerry Manas<\/a>. To make it more easily accessible to you, we are giving it everlasting life here on the blog. <\/em><\/p>\n

In part one of this series, \u201cUsing Portfolio-Driven Performance to Improve Project Delivery<\/a>,\u201d we examined how organizations can remain adaptive in the face of constant change through a portfolio-driven approach. Now, let\u2019s get into the first two process areas by examining why it is crucial for your organization to align strategy, financials, and execution.<\/p>\n

Process Area 1: Strategic Planning and Funding<\/strong><\/h2>\n

Most organizations that institute portfolio management primarily use it for managing projects, resources, and costs. They assume that strategic and operating plans are already in place as isolated components. Forward-thinking organizations incorporate business processes for governance and decision-making, particularly regarding which investments should be made during the strategic planning process and ongoing checkpoints. After all, a strategic plan should be dynamic, able to adapt to change at a moment\u2019s notice. This becomes unrealistic if the plan is disconnected from Finance and operations.<\/p>\n

A strategic plan generally incorporates a hierarchy of Missions, Objectives, Strategies, and Tactics (MOST), which work together to set a business\u2019s direction. Strategic planning involves assessing the current business direction, as well as any market drivers or internal drivers that may influence the organization\u2019s focus. This will most likely result in revisions to the strategic plan.<\/p>\n

The strategic planning process leads to the creation of top-line operations and capital allocation decisions, as well as portfolios of potential investments, products, programs, and other tactics. In this way, strategic planning and investment analysis are no longer separate functions, but are linked. Moreover, they are dynamic and adaptable to change. In a hyper-competitive market with relentless change, the ability to rapidly shift investment priorities is critical.<\/p>\n

\"Planview<\/a><\/p>\n

Funding and Budgeting<\/strong><\/h3>\n

The funding and budgeting process usually begins with an annual proposed order-of-magnitude budget. This is generally based on a review of the prior year\u2019s spending and earnings; each department\u2019s plans for the upcoming year; any special needs for the year; the current strategic plan; and projected revenues. The executive leadership team, including Finance, typically work together to rank investments and create a proposed investment portfolio. After negotiations and multiple iterations, funding is approved for capital investments and an actual operational budget, which can be broken down to departmental, program, project, product, and service budgets.<\/p>\n

It is essential that managers with financial responsibility build out their budgets within the context of the strategic plan so that they understand the broad implications of delivering programs, projects, products, and services \u2013 and any changes that are made to these. This is possible when funding and budgeting are included within the same process framework as strategic planning.<\/p>\n

There is always a dynamic tension, however, between the need for top-down cost constraints and the motives driving inflated bottom-up budgets. The art of organizational cost management comes in knowing when and where to squeeze without significantly impacting the time, scope, or quality of the outcomes. Experience, combined with an open culture rooted in dialogue, leads to the communications and accountability necessary to effectively adjudicate differences.<\/p>\n

 <\/p>\n

Process Area 2: Aligning Strategy and Operations<\/strong><\/h4>\n

A Japanese proverb wisely noted, \u201cVision without action is a daydream. Action without vision is a nightmare.\u201d Thus, it is important for an organization to get the operations right, and to be sure everything is aligned with strategy. Operations includes components such as:<\/p>\n