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Strategy Implementation Essentials

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Guide to Operational Planning: Building the Execution Layer of Strategy

So much has been written about strategic planning, and so little about the real core element: operational planning. Well-implemented strategic planning provides the vision, direction and goals for the organization, but operational planning translates that strategy into the everyday execution tactics of the business that will ultimately produce the outcomes defined by the strategy. Operational planning is the conversion of strategic goals into execution. No business likes to admit it, but most are lacking in the know-how, competencies (skills, knowledge, experience) and discipline to carry off precise execution of strategic goals.

Operational Planning Is The Key to Executing on Strategy

Operational planning is truly the lynch pin of execution, producing plan outcomes while managing constraints on time, money and resources. It is the conduit by which strategy is converted to action and places accountability for goal execution on the leaders, the managers and the doers. Execution of corporate strategy can go awry very quickly in organizations large and small. The frustrating part of implementing strategic goals is that it usually takes far longer to detect that things are off track than it does to get off course in the first place. We all know that misfiring on execution leads to unnecessary costs, wasted management and employee time, committed financial resources that dont produce the desired outcomes and missed revenue or profit targets. So how do we ensure that strategy execution will be spot on? Superior operational planning is the answer. Unlocking the power of this element of planning allows organizations to accomplish strategy and builds alignment to the strategy into the business framework. If you think about what corporate strategy documents normally look like, it is not terribly surprising to find that a high percentage of corporate strategies fail to be implemented. They range from ugly Excel spreadsheets to beautifully bound books. What all but a few are missing though, is the planned-out operational tactics to execute on the strategy. They lack the resource plans, time lines, benchmarks and operating budgets to support the specific strategic activities essential for implementation success. Unless operational planning has accompanied the strategic planning effort, the strategic plan will always accomplish less than the intended result, resulting in wasted effort and executive frustration. Most companies would receive a failing grade for their operational planning efforts. This is largely due to a lack of understanding of how such planning should be done. True, it is sometimes perceived to be the less sexy part of planning, but it is essential that operational planning be done and organizations must learn how to do it properly. It gets overlooked or is done in such a lightweight fashion that it is almost worthless to the managers at the business-level.

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Performance management software databases are chalked full of objectives that dont really help their organizations. Why? Because they are not aligned with strategic activity at the correct level to make the employees objectives all that helpful in accomplishing strategic priorities. Its not that operational planning is that complex to carry out, but it does require some effort. It also requires some art and finesse to do it well. In short, operational planning requires a different skill set and discipline than its counterpart - strategic planning. The biggest difference is that we must adjust our thinking to the day-to-day business operations and consider all of the constraints, inhibitors and accelerators that must be evaluated and factored into tactical planning. The discipline required is a mix of strategic planning with good old fashioned program and project management.

True Story:
A multi-billion dollar financial giant implemented a leading software vendors Performance Management module. No sooner was the software live, than the CEO, who was excited to get value from their investment, issued an edict for every manager in the company to have their direct reports enter their performance objectives by the deadline (about one month from the issuance of the edict). There were numerous issues with all of this, but the two biggest were: 1. Corporate had no formal strategy, even though some of the subsidiary business units did. So what did the edict indicate performance objectives should be tied to you ask? The slogan, changed to protect the companys identity but kept to the same number of words, Push for Profit. Nothing vague about that. 2. Training was hastily put together to show managers and employees how to log into the software and enter their performance objectives. They shoe-horned the training into already packed schedules so that the CEOs edict could be met, so many employees had to miss the training due to work travel, client commitments, etc. Those lucky enough to attend a training class learned how to log in. At no point did corporate give any guidance on what a good performance objective might look like, or bother explaining the purpose of the exercise.

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Operational planning must be done if strategic goals are to be accomplished. This is because the enterprise is really an ecosystem, where a change in one area almost always effects others. The strategic goals of the organization must be translated one business unit / division / department at a time. Why? Because the goals mean something different to each area of the organization, based upon that areas function in the enterprise. It is not enough to simply put the strategic goals out there and let the business interpret the strategy on its own. To do so is not planning, but instead is crossing fingers and hoping for the best. Weve all seen or read about the countless examples of failed strategy implementation this leads to. Since hope is not a strategy, organizations need to buckle their safety belts and leave their comfort zones while mastering the art of execution or face the harsh realities of failing to execute on their plans.

Okay, So How Should It be Done?

Lets begin by examining the general requirements of operational planning. Goal-supporting initiatives must be identified, if only in a broad sense initially. Remember, operational planning is picking up from the point where strategy, strategic priorities and goals have been set. The following steps outlined in the graphic should have been accomplished.

Strategic Planning Steps Already Accomplished:

1. Step-1: Understand Where You Are Starting From (Current) 2. Step-2: Decide What the Future Should Look Like (Future) 3. Step-3: Close the Gaps Between the States 4. Step-4: Prioritization and Selection 5. Step-5: Remove Variability From Plan Goal Language

For starters, the executive strategy team must carefully construct goals and metrics that will guide the layers of the organization to plan very effectively. Goals and supporting metrics should be defined and pushed downward through the organization -- approaching plan goals almost as if they were marketing them to the rest of the business. The metrics and measurements promote the governance aspect of planning and the buy-in from the enterprise is part of the change management needed to excite and mobilize action for accomplishing the objectives of the strategy. This requires a communication plan that will educate, inform and help the operations leaders and management to understand what is expected of them and allow them to do the same thing with their people. This is important, since the tactics will be established by the operational leaders who are responsible for carrying out the execution of the goals. Their clear understanding and involvement is a must. This constitutes a bidirectional (or top-down / bottom-up) planning effort and lays the groundwork for operational planning.

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A bidirectional planning approach allows executive management to set the goals and plan initiatives collaboratively with all the lower levels of management, thus providing a consistent direction for the strategic plan execution effort. Taking a top-down only approach leads to confusion within the organization and undermines buy-in of the corporate direction. Alternatively, a bottom-up only approach can lead to mission-drift from the strategic plans intentions when operational managers are left to interpret the strategy goals on their own. This is especially true if the plan goals are ambiguous from the outset.

Lets Walk Through an Example on Bidirectional Planning

As an example of good bidirectional operations planning, consider this scenario: During strategic planning, executives set an organizational goal to reduce COGS by 3%. As operational planning is conducted, the director of purchasing sets forth ideas that support the plan goal of reducing COGS by 3% and might set as an objective to negotiate more favorable supplier rates and payment terms, or to aggregate buying channels to increase volumes and cut costs. In order for the example above to work, the strategic plan needed to state the plan goal crisply so that its outcome could be measurable. In this example, that was accomplished. Vague or ambiguous goal statements are subject for interpretation and should be revised when they are discovered. To sum up these two points, the ideal process for operational planning involves senior management working in conjunction with the other layers of management to set operational goals that ensure alignment the enterprise goals. This sets the direction for funded tactical initiatives that will produce the desired key outcomes of the business. Step-1: Understand Where You Are Starting From (Current) Step-2: Decide What the Future Should Look Like (Future) Step-3: Close the Gaps Between the States Step-4: Prioritization and Selection Step-5: Remove Variability From Plan Goal Language

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Operational Planning Steps

To put a finer point on what the process looks like, let us begin with covering an overview of the process steps. A process is different from a procedure, in that process in a framework and more fluid ... more adaptable than a procedure. The steps we will outline and the intended outcome of each step is more important than the exact sequence. That is because, in operational planning, sometimes multiple iterations will yield a more realistic plan and fit the actual budgets and time lines that the organization can support. The goal is to reach realistic. We want operational plans that everyone understands and buys into. While there is not always a lot of choice involved in participating in the work the plan will outline, at least we want managers and their direct reports to understand why we are asking this of them and what we hope to accomplish in doing it. Let us now review the steps of the process, then we will then walk through an explanation of each.

Operational Planning Steps

1. Define the initiatives needed to accomplish plan goals 2. Break the initiatives down into projects 3. Estimate raw resources required for projects and associated costs 4. Determine resource costs across P&L structures 5. Organize related projects into logical groupings (programs) 6. Determine time lines, interdependencies and sequence at program level 7. Assign programs to specific business units / departments, including budget responsibility 8. Implement employee-to-manager accountability contracts to meet project goals 9. Implement plan governance to manage performance to objective metrics 10. Implement ongoing plan adjustments

1.

Define the initiatives needed to accomplish plan goals

With the current-state now defined and the future-state goals agreed upon, the next step in execution planning is to develop the tactics to bridge the gap between current and future. In operational (or tactical) planning mode, the business layers below the executives become even more deeply involved in the planning process. Each enterprise plan goal explodes into a number of supporting operational plans, where tactics are defined, executed, managed and measured.

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There are six interrelated dimensions through which detailed tactical planning of the operational layers must be orchestrated: 1. Time 2. Processes 3. Technologies 4. Culture 5. Budget 6. People Against the backdrop of the six dimensions listed above, we are now ready to dive into operational planning. Finding a starting point for developing underlying operational plans is often difficult for organizations. This is due to the size of the task and to the level of planning that must be undertaken in order to holistically address strategic goals with detailed planning for operational execution. Here is an approach to get the job started. Card-storming is one technique that is very effective in beginning the operational planning stage and is used to generate an initial list of underlying projects and tasks that must be planned. The participants involved would include: planning process leaders and cross-functional operational managers. Card-storming can be used in a workshop setting where all participants are in the same location, or via video conference with multiple locations involved. With this technique for high-level planning, lots of wall space is recommended. This process should be approached in a bidirectional (top-down / bottom-up) fashion.

Here is a quick synopsis of how the Card Storming process works

Corporate goals are listed on flip chart pages and placed on the walls around the room. Participants then use 3X5 or 5X7 index cards to write down tasks and project ideas related to each goal placing the index cards under the plan goal it should be associated with. In cardstorming, participants can work individually or in teams for a short defined period of time to write down as many ideas or tasks as can be accomplished during the time frame related to each topic. At the conclusion of the time period, each person or team presents the ideas back to the larger group. From there, duplicate ideas are removed, and cards are categorized by topic area (grouping). All of this must be done while passing no judgment on the ideas presented by the other individuals or teams.

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This technique can take a lot of time to complete and might easily require a two-day workshop to fully identify project interdependencies. It benefits the group enormously by allowing for very productive brainstorming and builds an early visual task list indicating where work will be required to accomplish the outcomes of the enterprise strategic plan. The identification of interdependencies that present themselves can save man-months of work down the line. Groups of related projects can begin to be associated together as one program, even though they may span several departments or even divisions within larger organizations.

2.

Break the initiatives down into projects

Breaking work down into smaller units makes it far easier to estimate, understand and ultimately... to manage. Projects that have been identified can now be planned for at the detailed level, including: time frames, human resource requirements, technology requirements and in many cases, dependency on other projects or programs (groups of projects). Careful attention to detail at this level can help avoid collisions with other projects down the line. Even then, there may be inter-dependencies between these groupings of initiatives and shortages of resources where overlaps exist. Tactical planning must delineate to the maximum extent possible the time lines, dependency relationships, resource allocations and costs relative to the allocated budgets across operational areas to avoid collisions and conflicts.

Term Definitions
Plan Governance: Refers to the management of plan execution, tracking alignment of plan goals with the supporting initiatives. Portfolio: The collective body of all underlying programs supporting plan goals. Program: A grouping of related initiatives / projects within the plan portfolio. Initiative / Project: A discreet grouping of tasks related to the accomplishment of a component or sub-component of a plan goal.

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3.

Estimate raw resources required for projects and the associated costs

Operational planning is all about reality and execution, so estimating work effort and time-tocomplete correctly for chunks of work is important. To estimate effort as accurately as possible, past metrics are essential to help answer questions such as: How well can resource horsepower be utilized? How much resource horsepower is at our disposal? What is the expected productivity of their horsepower?

Shorter durations of projects allows accomplishment and reward to take place more frequently and adds to the energy and excitement required to fuel the enthusiasm we want the team and individuals to have before taking on the next task. Tactical planners who strive to define shorter discreet tasks that have clear start and end targets as well as crisp expected outcomes, construct operational plans which focus on goal accomplishment. The best predictor of future performance is the organizations own history. Historical Acceleration reduces uncertainty in detailed tactical planning by defining execution based on calculations of the organizations past performance in meeting goals. Acceleration may make you think of hitting the open road in a new sports car, but in the corporate strategic planning process, acceleration takes on a whole new meaning. The American Heritage Science Dictionary defines acceleration as The rate of change of the velocity of a moving body. In corporate planning, the actions or decisions taken by the organization can lead to positive acceleration (increase in speed) or negative acceleration (a decrease in speed). Knowing how your organization will respond and being able to establish realistic time frames for any strategic initiative is a valuable part of the strategic planning process.

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Why is acceleration important to corporate strategic planning?

Think back to a time when your organization planned to launch a new department, technology solution, internal reorganization, or product. The intent was to launch the initiative in three months but it ends up taking nine. Another project you anticipate to take six months is finished in just four. Measuring historical acceleration provides a way to reduce the uncertainty, remove subjectivity, and bring greater predictability to your planning initiatives so that realistic expectations can be set (and accomplished!). Historical acceleration is an important key indicator of organizational reality and provides a predictive measure for the future. Historical acceleration is the typical rate of change (accomplishment of objectives) for the organization - moving from idea generation through implementation. How to Calculate Historical Acceleration: With historical acceleration into the planning process, we take into account both the speed at which the organization accomplishes tasks and the desired direction of the organization. After all, how fast the organization can reach a specified objective is always affected by how far it has to go to get there. Simple metrics can be used to determine average historical acceleration and the resulting numbers can be used to design execution plans that are achievable and predictable.

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4.

Determine resource costs and budget requirements across P&L structures

Enterprise, division, line-of-business and departmental budgets determine the resources that can be invested towards a goals achievement. Goal time frames may not be accomplishable if financial resources are too limited or, worse yet, do not exist in key areas of the enterprise ecosystem. During tactical planning, financial constraints will begin to emerge and must be resolved. Sometimes plans must be scaled back or adjusted to reflect the limits of capacity to meet goal objectives in certain areas of the organization without additional investment by the enterprise. Finalized budget allocations allow the detailed aspects of the plan to be developed fully. Most large initiatives will span departmental / group P&L lines. That is certainly okay, but the impact on project time lines and budgeting must be accounted for in planning, and it is at this point that it becomes feasible and necessary to do so. What is the key outcome worth to the business and what will it cost to accomplish achieving the goal? Before launching a program of initiatives related to a plan goal, the business rationale should be fully understood in terms of expected benefit to the enterprise. A preliminary cost/benefit analysis should be a part of the business case for moving forward on a plan goal and the program of initiatives associated with the goal. Understanding the potential rewards to be gained as results of plan goals allows tactical plans to be developed that will satisfy the required time lines and budget constraints without compromising the intended ROI.

5.

Organize related projects into logical groupings (programs)

Dealing with programs as opposed to projects helps in looking at the big picture when tracking, managing and dealing with change management. Rather than try to manage communications to the organization related to tens, hundreds or thousands or projects, it only makes sense to group related projects into programs that can be described to the entire organization in terms of how they support the enterprise strategy and goals.

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Program Planning

Initiative 1

Initiative 2

Initiative 3

Initiative 4

Projects

Projects

Projects

Projects

Analysis of Similarities and Dependencies within Projects Groups of Related Projects

Metric Identi cation Goal Achievement and Progress Monitoring

An important approach to consider in the successful communication is to translate plan goals into strategy statements that the organization can embrace and enact, then relate those to specific programs. To effectively spread the enterprise vision throughout the ranks of the organization empowers and energizes employees to contribute to the successful execution of the strategic goals. As with the business strategy, the communication of the business goals must be carefully planned and well orchestrated to achieve the intended results. A multi-disciplinary communication strategy that works with the corporate culture is the most effective. Multi-disciplinary means that we have to look at the organization as a whole and take into consideration the way communication is occurring within the current state. What are the issues the existing communication strategy poses to the organization? What changes need to be implemented?

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A Program Planning Example

Lets assume that the enterprise strategic plan in this example consists of three major key outcomes (strategic goals), each one being well-articulated through a controlled vocabulary of minimize or increase statements. As a result, each strategic goal is measurable and has accompanying metrics that will be tracked for progress through plan governance. At the operational level, in business unit #1, the planning team (consisting of the companys Chief Operating Officer, the key business unit leaders and the departmental managers of the unit) would define the necessary changes in business tactics to address each of the plan goals effecting their business operations within the unit. This process is usually done through workshops and is very interactive in terms of discussion and brainstorming. These changes, once decided upon, would be refined through further planning into initiatives that are comprised of many projects to be completed by the business unit during the plan period. It is at this point that initiatives then need to be grouped into programs in order to fully understand interdependencies, resource sharing, scheduling and time lines. Each program represents a grouping of inter-related projects. Programs will likely span across more than one business unit or department in terms of impact. There is a one-to-many relationship between each program and the initiatives under that program. Additionally, the strategic initiatives at the business level may fall under more than one program once the operational plan groupings have fully been established and the programs supporting plan goals identified.

6.

Determine time lines, interdependencies and sequencing at the program level

The operational plan actually serves as the master-plan for execution of the strategy. While things may change and adjust over time, the operational plan is where we look for answers; it must serve as the plan of record for execution. All time lines must be reflected as accurately as possible, taking into account dependency relationships and resource constraints. Realistic expectations of the long-term performance required of those executing the plan must be considered. In terms of our schedule, are we defining a death-march or a walk in the park? Consideration of normal workload must be strongly considered when defining time lines for the incremental tasks we will add to our employees.

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7.

Assign programs to specific business units / departments, including budget responsibility

Accountability also must be clear in terms of expected time frames. For accountability to exist, all who are affected by the plan must understand what is to be accomplished and within what time frame. After all, it is impossible to hold people accountable for accomplishing a key outcome if there is no basis to measure. Similarly, if an objective that is not bound by time or if the team has unlimited time to complete it, the goal can never be considered to be complete or its progress evaluated. Tools such as RACI models can aid in mapping out Responsibility, Accountability, Consult and Inform roles relative to the programs or initiatives supporting the plan. Individual accountability cannot exist without consequences -- both positive and negative. Teams and individuals must understand both the organizations desired outcomes and their specific responsibilities in achieving those outcomes. Furthermore, their role and impact in meeting organizational objectives should be rewarded, while any behavior that impedes the achievement of organization goals should hold an appropriate consequence.

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The RACI Assignment Matrix

Responsible Those who do the work to achieve the task. There is typically one role with a participation type of Responsible, although others can be delegated to assist in the work required. Accountable (also Approver or final Approving Authority) The one ultimately answerable for the correct and thorough completion of the deliverable or task, and the one from whom Responsible is delegated the work. In other words, an Accountable must sign off (Approve) on work that Responsible provides. There must be only one Accountable specified for each task or deliverable. Consulted (sometimes Counsel) Those whose opinions are sought, typically subject matter experts; and with whom there is two-way communication. Informed Those who are kept up-to-date on progress, often only on completion of the task or deliverable; and with whom there is just one-way communication. Very often the role that is Accountable for a task or deliverable may also be Responsible for completing it (indicated on the matrix by the task or deliverable having a role Accountable for it, but no role Responsible for its completion, i.e. it is implied). Outside of this exception, it is generally recommended that each role in the project or process for each task receive, at most, just one of the participation types. Where more than one participation type is shown, this generally implies that participation has not yet been fully resolved, which can impede the value of this technique in clarifying the participation of each role on each task.

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8.

Implement employee-to-manager accountability contracts to meet project goals

Clarity regarding roles and responsibilities relative to plan goals requires people who have sufficient incentive and understanding to execute to that plan. Employees that understand what is being done, the reasons why, when to do what, and how they can contribute become empowered team players. To accomplish accountability at the employee level, tasks from the identified projects can be assigned to individuals who will be expected to fulfill their roles in the operational plan. After communicating expectations with the employee, it is recommended that accountability contracts be written, by the employee and approved by the manager, describing what they will accomplish, when and how. The contract can go through revisions until accurate, then approved by their manager. To bring about clarity, job descriptions must be updated in coordination with Human Resource departments and be kept current to support the accountability factor needed in sustaining execution standards of excellence over the long haul.

9.

Implement plan governance to manage performance to objectives metrics

Perhaps most important step in operational planning is plan governance. Organizations that have matured in their planning process have taken governance to another level and have implemented Plan Management Offices. Plan governance, whether implemented as a formal Plan Management Office or administered through a less formalized committee structure, should be responsible for the functions of selecting, managing and measuring of everything entering or within the plan portfolio. The plan portfolio is the overall macroscopic view of all programs and initiatives involved with strategy implementation. Plan governance manages alignment of plan goals and supporting initiatives through effective oversight at the corporate and operational levels. Plan Management Offices benefit the organization by having better visualization into all efforts supporting strategic implementation. Plan Management Offices also position organizations to better manage the interrelationships of all the underlying initiatives, considering dependency relationships and constraints on resources. Lastly, a plan governance model can harvest metrics and status reporting from across the portfolio of all programs and their underlying projects. Metrics are harvested from the tactical layer to provide historical acceleration data to offer continual improvement to the planning cycle. In the end, planning governance helps organizations filter through the minutia of everyday tasks to focus on accomplishing key outcomes sought by executive leadership.

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10.

Implement ongoing plan adjustments

As a function of the ongoing management of the plan portfolio, plan governance also involves refreshing the strategic and supporting operational plans to reflect changes as a result of completing plan goals and taking on new ones. This structure allows for strategic and operational planning to become much more actively managed and based on a shorter time horizons. Shorter time horizons for plans leads to more focus on execution and results in better outcomes. A rolling 12-month plan that is refreshed quarterly is best suited for achieving optimal results in execution. There are several reasons why this approach yields better planning outcomes. One reason for the better results is the tendency of shorter plan horizons to have fewer goals per cycle and therefore be more focused on tactical execution. Rolling 12-month plans allow the organization to be more responsive to change with goal setting, especially in the operational aspect of planning. Likewise, plans that are refreshed quarterly are easier to manage and keep the organization sharper and focused on achievement due to the shorter cycles to accomplish chunks of work. 12-month rolling plans have proven do better at addressing the pressing needs of the business, while maintaining the long-term focus of the CEO and corporate strategy team. Add refreshed quarterly plans to the mix and you have instilled into the organization a laserbeam focus on results. Plan governance administered on a quarter-by-quarter basis affords management the opportunity to review the initiatives underway and assess any backlog that exists. Management can also assess the organizations capacity to move an item from the backlog into the active plan furthering progress towards completion of the plans goals.

Most Detail

Detail

Less Detail

Least Detail

Quarter 1
Top 20%

Quarter 2
Top 20%

Quarter 3
Top 20%

Quarter 4 Execution
Top 20%

Work Log
80%

Work Log
80%

Work Log
80%

Work Log
80%

Key Outcome(s) Visualization

12-month rolling plans also tend to be more realistic. This is attributed to the higher quality data driving the process, such as: capacity to change, historical achievement, resource availability and current environmental constraints

Unrealized Desired Outcomes

Unrealized Desired Outcomes

Unrealized Desired Outcomes

Unrealized Desired Outcomes

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Conclusion
Linking strategy to action should be an integral part of planning. For this to happen, you need to take systematic steps within the execution process to make the critical organizational elements accountable stakeholders in the plan implementation and management process. Method Frameworks was born to help organizations link strategy to effective execution. Our clients experience success many times the rate of average. Contact us to discuss your needs and let us share our success stories with you. Better yet, let us make your organization our next success. For permission to use or reprint any portions of this copyrighted article, contact Method Frameworks at articles@methodframeworks.com.

Become a Client
Let us count your organization among our valued and successful clients. Contact us today to learn more about Method FrameworksSM and our Plan4SM approach. (877) 31-PLAN4 (75264)) E-mail: inquiries@methodframeworks.com Online: www.methodframeworks.com Address: 101 East Park Boulevard Suite 600 Plano, Texas 75074

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