Closing the gap between Finance and Operations
In my previous blog post, I discussed the disconnect between Finance and Operations, and the need to operate cross functionally. Key to achieving this, is an integrated performance framework, such as Oliver Wight’s Integrated Business Planning (IBP) process. In this blog post, I’ll walk you through IBP and how this integrated approach can benefit your business.
Integrated Business Planning is a forward thinking process that supports effective enterprise decision making and aligns a company’s plans every month. This established methodology addresses one of the most common shortfalls in sales and operations planning – linking strategic objectives to operational plans and financial performance management. Through such a connected approach, gaps can be identified and addressed early, and organisations can predict and respond to changing market conditions in good time.
Cracking this process is transformational, but the first step is establishing a culture and environment within a business for change. Long-term visibility hinges on buy-in from senior managers and their willingness to collaborate on planning. Once this has been established, the foundation is in place for IBP to truly work.
The 3 main benefits of implementing IBP
1. Reduced time and costs
Solutions enable Finance to transform from long, drawn out annual budget regimes to rolling forecast capabilities. Productivity gains are measured in days, weeks, often months, and the elimination of non-value-adding activities is the norm. The gains are also true for operational improvements, but with different resources, constraints, and bottlenecks. Each can be shaped into a state of domain excellence, but in isolation of the other. Bringing the two together in a more integrated solution adds an exponential impact. The overlapping synergies, shared processes and framework offer bigger gains. This translates to greater value for money and more focus on what the organisation is primarily about.
2. A shared framework
The convergence of operational and financial thinking will often bring disparate stakeholders together. This has massive long-term change benefits. I frequently hear “We do budgeting and they do planning”. This is a cultural and physical chasm that must be bridged in a forward-looking organisation. Let’s face it, every forward looking finance professional talks about supporting the business, stepping out from the bean counting stereotype, putting on the hard hat. An IBP approach offers a real bridge.
3. Instant overview of performance, risk and opportunity
Performance should be tracked and measured at the speed of business. Indeed, executives and management need insight across all perspectives – in an instant. The conversation should be about where risks and opportunities are, with consideration of lead indicators rather than lag indicators. All perspectives, financial and operational, need to be considered, going back and forth between a strategic top down view and the underlying products and services.
Getting IBP right can lead to alignment between your financial and operational plans and ultimately, a considerable advantage for your business. Technology plays a significant role in supporting this integrated framework. In my last blog post in this series, I’ll walk you through how technology can further drive your performance.