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1、STRATEGIC PLANNING AND BUDGETING Part 2: Alignment, Budgeting and Resources Case Study, Concepts and Debatable Ideas Kenny Ong CNI Holdings Berhad,Summary: Todays presentation,1. Business Model, Done,2. Strategy,3. Alignment,4. Resources, Done,3. Align the business to the strategy,Dangers of Benchma
2、rking, BSC, KPIs and other evils sold by Consultants,“in the past 18 months, we have heard that profit is more important than revenue, quality is more important that profit, people are more important than profit, customers are more important than our people, big customers are more important than sma
3、ll customers, and that growth is the key to our success. No wonder our performance is inconsistent,CEO, Anonymous,Before we start,In the old days of HR Average training hours per staff % of staff attending training # of training programs % of training programs conducted Training needs analysis condu
4、cted Competency models developed Training budget as % of payroll,Whats wrong with this picture?,Before we start,Moral of the story Innovation: Business models Products Services Market Leadership Competitive differentiation,Get the picture?,Wrong KPIs,“What is the moral of the story?”,Dangers of Best
5、 Practice and Benchmarking,“Abraham Walds Work on Aircraft Survivability”, M. Mangel and F.J. Samaniego,Where would you focus reinforcement?,www.myCNI.com.my,www.OOBEY.com,Dangers of Best Practice and Benchmarking,www.myCNI.com.my,www.OOBEY.com,Company Performance,high,low,Best Practice theories,low
6、,high,zero Performance,“Selection Bias and the Perils of Benchmarking”, Jerker Denrell, Harvard Business Review 2005,Dangers of Best Practice and Benchmarking,www.myCNI.com.my,www.OOBEY.com,Company Performance,high,low,Best Practice theories,low,high,zero Performance,“Selection Bias and the Perils o
7、f Benchmarking”, Jerker Denrell, Harvard Business Review 2005,Dangers of Best Practice and Benchmarking,Selection Bias: Success Traits = Failure Traits Successful Cases + Failure Cases Worst effects in Old industries Overvalue best practice theories Current accomplishments unfairly magnified by past
8、 achievements Reverse Causal,Dangers of Best Practice and Benchmarking,Also known as Beware of Consultants: Selection Bias Big vs. Small company Selective success stories Correlation vs. Causal Survey problems Practical vs. Glamour-to-have Leaders who benchmark,www.myCNI.com.my,www.OOBEY.com,Survey
9、Problems,“In business after business, 60% to 80% of lost customers reported on a survey just prior to defecting that they were satisfied or very satisfied.”,HBR March/April 1996,www.myCNI.com.my,www.OOBEY.com,Why BSC?,Reason 1: Balanced Reason 2: Cause-and-Effect,www.myCNI.com.my,www.OOBEY.com,Finan
10、cial “To satisfy our stakeholders, what Financial objectives must we accomplish?”,Focus: Corporate Alignment,Revenue Growth,Base Retention,Share Gain,Positioning,Adjacent Market,New Business,Operational Excellence,Product Leadership,Customer Intimacy,Competencies,Information Systems,Motivation, empo
11、werment, alignment,Financial,Learning & Growth,Internal Process,Customers,Investment Strategy,Productivity,Market Value,Linking BSC to Strategy,Financial,Learning & Growth,Internal Process,Customers / Distributors,Focus: Corporate Alignment,Example: Selection of KPIs for BSC,Customer satisfaction Cu
12、stomer loyalty Market share Customer complaints Complaints resolved on first contact Return rates Response time per customer request Price relative to competition Total cost to customer Average duration of customer relationship Customers lost Customer retention Customer acquisition rates Percentage
13、of revenue form new customers Number of customers Annual sales per turnover,Win rate (sales closed/sales contact) Customer visits to the company Hours spent with customers Marketing cost as a percentage of sales Number of ads placed Number of proposals made Brand recognition Response rate Number of
14、trade shows attended Sales volume Share of target customer spending Sales per channel Average customer size Customers per employee Customer service expense per customer Customer profitability Frequency (number of sales transactions),Financial,Learning & Growth,Internal Process,Customers / Distributo
15、rs,Example: 1st Level BSC & KPIs,Profit after Tax. Revenue. Cash-to-cash cycle. Operating cash flow,Customer Complaints. Customer Acquisition Rate. Product Availability. Product Quality & Service. Renewal Annual Subscription. No. of Active Customers. No. Retail Shops.,Customer Database Availability.
16、 Accuracy of Forecast Planning. Continuous Improvement. Response Time to Customer Needs. Perfect Order Fulfillment. Inventory Turnover. Number of Effective Sponsoring Program. On Time Delivery. No. of Effective Training. Number of Effective A&P,% of staff evaluated on Core Competency Framework. % of
17、 staff with Career Development Plans. No. of training hours completed per staff. % of staff with access to strategic information. Q12 Index. % staff evaluated on Culture alignment,Sample: Other 1st Level KPIs across industries,Lagging and Leading KPIs,Historical, Outcome, Results, 1st Level, Usually
18、 Financial or tangible, Quarterly and Annually,Current, Indicators, Drivers, 2nd Level onwards, usually non-financial or intangible, Weekly, Monthly and Quarterly,Developing Driver KPIs,Operational Excellence (low cost producer),Ref: The Discipline of Market Leaders, Michael Treacy 1995,Product Lead
19、ership(best product),Customer Intimacy (best total solution),Strategy: Disciplines, Priorities, and KPIs,Operational Excellence Competitive price Error free, reliable Fast (on demand) Simple Responsive Consistent information for all Transactional Once and Done,Customer Intimacy Management by Fact Ea
20、sy to do business with Have it your way (customization) Market segments of one Proactive, flexible Relationship and consultative selling Cross selling,Product Leadership New, state of the art products or services Risk takers Meet volatile customer needs Fast concept-to- counter Never satisfied - obs
21、olete own and competitors products Learning organization,Strategy: Disciplines, Priorities, and KPIs,Operational Excellence Move know-how from top performing units to others Benchmark against best in class Ensure operations training for all employees Use disciplines like TQM for continuous learning
22、to reduce costs and improve quality,Strategy: Value Disciplines,Strategy: Value Disciplines,Customer Intimacy Capture knowledge about customers Understand customer needs Empower front line employees Ensure that everyone knows the customer Make company knowledge available to customers,Product Leaders
23、hip Reduce time to market Commercialize new products fast Ensure that ideas flow Reuse what other parts of the company have already learned Ensure there are multiple sources of funding,Strategy: Value Disciplines,Operational Excellence (low cost producer),Ref: The Discipline of Market Leaders, Micha
24、el Treacy 1995,Product Leadership(best product),Customer Intimacy (best total solution),Strategy: Value Disciplines,Operational Excellence (low cost producer),Ref: The Discipline of Market Leaders, Michael Treacy 1995,Product Leadership(best product),Customer Intimacy (best total solution),Strategy:
25、 Value Disciplines,Sample KPIs for Each Discipline,Operational Excellence Price Selection Convenience Zero Defects Growth,Customer Intimacy Customer Knowledge Solutions Offered Penetration Customer Data Customer-success focus,Product Leadership Marketing Functionality # of Successes # of Failures Le
26、arn from key users Interdisciplinary teams Pipeline,E3 Department BSC,Financial Perspective,Budgeting,Summary: Todays presentation,1. Business Model, Done,2. Strategy,3. Alignment,4. Budgeting, Done, Done,4. Budgeting,The art and science of allocating and aligning Resources to strategic plans,Budget
27、ing: Some thoughts,Two major roles of Budgeting: Provide real-life CONSTRAINTS to strategic planning Provide RESOURCES to realize strategic plans,Why Constraints? Over aggressive unrealistic planning, usually by Marketing/Sales need to be grounded to real life Creative entrepreneurial thinking when
28、resources are limited Enforce the need for Accountability i.e. ROI thinking for all Managers,Alignment: 4-Wheels Model,Culture,Business Model,Strategic Planning,Alignment: Framework,Focus point Alignment Quality Innovation & Differentiation Risk taking Performance Management Corporate obsession Deci
29、sion making,Culture,Alignment: Framework,Org Structure Job Design C&B Policies & procedures Decision making Job fit Management Systems BSC and KPIs Decentralized & Empower,Strategy: Framework,Role modeling Vision/Mission/Philosophy Leadership Style Delegation & Empowerment C&B, Promotions Sense of U
30、rgency Speak regularly about Performance,Strategy: Framework,Recognition Recruitment Training Profit sharing Values Motivation Self Efficacy Awareness Useful Competencies Career aspirations Attribution (control),Strategy: Framework,Enablers Technology Equipment Materials Human Intellectual Property
31、Partners Property,Funding CAPEX OPEX,Alignment: 4-Wheels Model,Culture,Business Model,Strategic Planning,Operational Excellence,Customer Intimacy,Product Leadership,Organization, jobs, skills,Management systems,Information and systems,Culture, values, norms,Each Discipline Requires Different Priorit
32、ies & Resources,Operational Excellence Central authority, low level of empowerment High skills at the core of the organization Disciplined Teamwork Process, product- driven Conformance, one size fits all mindset Integrated, low cost transaction systems The system is the process Command and control Q
33、uality management,Organization, jobs, skills,Management systems,Information and systems,Culture, values, norms,Each Discipline Requires Different Priorities & Resources,Organization, jobs, skills,Management systems,Information and systems,Culture, values, norms,Product Leadership Ad hoc, organic and
34、 cellular High skills abound in loose-knit structures Concept, future-driven Experimentation and out of the box mindset Person-to-person communications systems Technologies enabling cooperation Rewarding individuals innovative capacity Risk and exposure management Product Life Cycle profitability,Ea
35、ch Discipline Requires Different Priorities & Resources,Organization, jobs, skills,Management systems,Information and systems,Culture, values, norms,Customer Intimacy Empowerment close to point of customer contact High skills in the field and front-line Customer-driven Variation and have it your way
36、 mindset Strong customer databases, linking internal and external information Strong analytical tools Customer equity measures like life time value Satisfaction and share management Focus on Share of Wallet,Each Discipline Requires Different Priorities & Resources,Managing Gaps between actual and pl
37、anned budgets,Budgeting vs. Priorities Basic Budgeting policies Activity Grid to determine budget priorities Budgeting for Investments based on the BCG Matrix principles,Budgeting vs. Priorities,Priority = Time + Money,Budgeting vs. Priorities,Upturn,Flat,Downturn,Fight Complacency Sharpen Edge Keep
38、 Momentum Conquer,NPD Cycle Time Improve Edge Extensions Counter Competitor,Innovation Acquire Profits Build momentum,Sales Cash Flow,Focused on Breakthrough JV, In-source, Out-source Eliminate bottom 20%,Improve Top 15% revenue-generating products R&D, Sales,Example: Business Situation vs. R&D Prio
39、rities,Basic Budgeting policies,Flexibility to switch between line items Reserve Funds Loans/External Funding,Activity Grid to determine budget priorities,Manage conflicts where limited resources should go Solve problem of compounding activities & resources,Budgeting for Investments based on the BCG
40、 Matrix principles,Business Performance,Market Potential,How to maximize Budget?,Align budget to priorities Integration of businesses and functions for teamwork Do practical, implementable stuff that bring real results (hard work),Budgeting in a Downturn,Budgeting in a Downturn,Budgeting in a Downtu
41、rn,Budgeting in a Downturn,Budgeting in a Downturn,StratEx CoREx,Planning, Budgeting, Schedules, Processes,Tying it all up,The Planning & Budgeting Process,Review processes,Result Planning schedule inc. BSC, Budget Quarterly Performance Appraisals Sales performance Non-sales performance Divisional m
42、eetings Annual Appraisals Specialized KPI committees CAR, PAR, SCAR KPI improvements Internal Audit process problems HRM & TND people problems Supervisor Induction PM training Talent Management,Problems, problems and more problems,Problems, problems and more problems,No serious budget to tackle key
43、risks Too much optimism or pessimism Innovation vs. Results vs. Baseline Investment Portfolio Management Top down vs. Bottom up Good to have vs. Need to have Line Manager not thinking like Investors Too focused on KPI and BSC Budget allocation seen as popularity vote Public Listing - pressure for short-term budgets and results vs. long-term innovation,Alignment: 4-Wheels Model,Culture,Business Model,Strategic Planning,Thank You.,soft copy of slides: ,