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Getting Your Executives Involved in Long-Range Planning—Part 1

Getting Your Executives Involved in Long-Range Planning—Part 1

Getting Executives Involved in Long-Range Planning and Benchmarking Your Company’s Long-Range Planning Process is the First Step Towards Improvement

If you were given the opportunity to directly influence your company’s success, would you take it? Would you want to help on develop the plans, direction, and spending of your organization? Or would you avoid such an opportunity at virtually all costs?

And yet judged by their actions, when given that very chance most executives choose to avoid such an opportunity. Why? Because the very process that seeks to achieve that corporate success, the long-range planning process, is fundamentally broken.

Long-range planning has a significant impact on company success, defining how your organization will operationalize corporate strategies into the specific investments that lead directly to corporate success for years to come. Given its influence, one would expect that participating in a process that shapes the company’s future is precisely the activity executives would want to be involved in. Instead we all consider it the most painful processes businesses perform today. Why? Today’s process is manual, labor-intensive, and not actually perceived to achieve any of those objectives. Instead it is considered tedious and frustrating, ultimately delivering a plan bearing little resemblance to current business realities. “Data confirms what many finance professionals know about the prevalent capital planning process ‒‒ it is broken and needs to be fixed.”¹

Given the dissonance between the importance of the subject matter and the actual process, there is clearly need for change. How do we move the planning process from loathed and shunned to productive and powerful? To something in which people want to participate? Given that, the question we must ask is what defines a good planning process.

What sets the few organizations that do planning well apart? In search of an answer, I looked at the 2012 Benchmark Report: The State of Capital Planning² for start here for two reasons:

  • First, it distills the feedback of finance professionals dealing directly with these challenges. Its findings lead to five practices every FP&A organization should incorporate when looking to alleviate the burdensome nature and improve the quality of the long-range planning process.
  • Secondly, it will serve as its own benchmark for comparison against the upcoming 2013 New Benchmarks in Long-Range Planning Study and Webcast on February 27, 2013.

The Five Characteristics of Best-in-Class Financial Planning Organizations’ Long-Range Planning Processes

  1. The priority of the major programs, projects, and initiatives is clearly defined both absolutely and in relation to each other.
    By understanding how initiatives align to strategic plans and the relative priority of every capital project, the organization can more easily allocate (or later shift) resources as needed. The process can consider the reallocation of resources as priorities change, becoming much more streamlined and efficient while providing the visibility to ensure the company maintains alignment with the strategic plan.
  2. The plan is developed iteratively through a low overhead process that emphasizes decision making and collaboration over simple data consolidation.
    A plan collaboratively built with all impacted groups (finance and business units) and a formal approval process for the final plan ensures buy in and agreement on what the major project, programs and initiatives are; and the business case for each. A streamlined and easy process for participants frees them up to iterate and ultimately produce a stronger plan.
  3. Understand how and where people and money become limiting factors for the business.
    When dealing with constrained resources it is important to be able to create scenarios in the long-range planning process to assess how they can be optimized and which mix of resources on each project or initiative make the most sense to help the business achieve its objectives.
  4. The cost (and projected benefits) of each project can be accurately forecasted both initially and adjusted throughout its lifecycle.
    Having a high level of insight and analysis on projects enables an organization to make informed decisions when they are considering whether to shift investments, kill an initiative or reprioritize it. There needs to be a simple way for both the business unit and finance to have downstream visibility into investment performance and ROI on every project.
  5. When a project is completed, the company knows how well it achieved its objectives.
    This insight is valuable in planning for the future ‒‒ not just at a project level, but at a corporate-wide level ‒‒ as comprehension will influence the outcomes of the long-range planning process on a holistic level; thus prompting even more procedural and conceptual improvements.

I invite you to join me during a live Webcast on February 27 where I will participate in a discussion hosted by Bill Sinnett, Director of Research at Financial Executives Research Foundation (FERF), and with new benchmark analysis detailed by Robert Kugel from Ventana Research, to discuss what are to be considered new benchmarks for long-range planning.

In Part 2 of this two-part series, I will compare what we discuss during the Webcast to these best-in-class characteristics of 2012. While I suspect these best-in-class indicators will not vary significantly; I will be interested to see how important they became over the past year in relationship to new benchmark levels.

Will more organizations using enterprise-wide portfolio resource management solutions top the list as “best in class”? Find out on February 27.

Related posts: Closing the Gap between Strategy and Execution Part 1 and Part 2.

1 Murphy, R. (2012). CFO View of the State of Capital Planning Benchmark Study

2 Carlson, M. (2012). Benchmark Report: The State of Capital Planning

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Marcus Klein
Written By

Marcus Klein is the director of product management at Planview, focusing on defining and delivering customer market focused solutions in portfolio and resource management. Previously he served as a product line manager for Planview Enterprise and incorporated application stakeholders’ input, including current customers and prospects, as well as market conditions in defining product direction and functionality, particularly around investment prioritization, financial planning and user experience.