1. Integrated Business Planning Presented to the Association for Progressive Communication October 15 -16, 1998 by Charles P. Sitkin, Consultant in affiliation with Carnegie-Mellon University How To Best Meet Your Mission

2. Outline of Presentation Evolution of Management Concerns Strategic Planning The Mission Strategic Excellence Positions Goals and Objectives Action Plans Operating Plan and Budget Results Management

3. Integrated Planning Process

4. The Evolution of Management Concerns

5. Evolution of Management Concerns

6. Strategic Planning

7. Business, Operational, Strategic ? Business Plan Normally prepared to acquire financing Operational Plan Identifies specific results to be accomplished within a given time period Budget Expresses operational plan in financial terms Strategic Plan Identifies the basic concept and direction of an organization

8. Strategic Planning Process

9. The Mission

10. “I firmly believe that any organization in order to survive and achieve success must have a sound set of beliefs on which it premises all its policies and actions... “Next I believe that the most important single factor in corporate success is faithful adherence to those beliefs... “And, finally I believe if an organization is to meet the challenge of a changing world, it must be prepared to change everything about itself except those beliefs as it moves through corporate life.” Thomas Watson, Jr.

11. The Mission Purpose Values

12. Mission Shared purposes provide FOCUS by driving strategy. Shared values provide CONTROL by guiding execution.

13. Bread Machine Industry Association The mission of the BMIA is to expand and promote the long-term growth and use of all aspects of the bread machine industry for the mutual benefit of our members and consumers. Freehold Actors’ Studio & Lab The mission of Freehold is to deepen the transformational power of theatre to inspire through education, experimentation, and performance. Example Mission Statements

14. Strategic Excellence Positions

15. Without focus

16. Strategic Excellence Positions

17. Strategic success means to achieve better and more stable results than the competition. Achieving that requires superior competence, or the ability to excel, in a set of distinctive capabilities which have special value to a particular part of the marketplace. Note that excellence by itself is not enough. It must be excellence in areas of strategic significance, i.e., that determine the outcome of competition in the marketplace. That strategic excellence then forms the basis for the organization to achieve better results than the competition. In this sense it is a position which the organization “occupies” from which follows strategic success.

18. Strategic Excellence Positions

19. SEP Example BMIA Example Provide for the Unified Presence of the bread machine industry category in its marketplace Provide for intra-industry communications within the bread machine industry.

20. Goals

21. Define the key areas in which to expect strategic results and what is expected. Not measurable as stated, but contain factors that will be measurable as Objectives. With Mission and SEPs determine what Objectives should be selected.

22. Objectives

23. Statement of measurable results. Tied to Goals, provide the basis for operational planning and budgeting. Four general characteristics: Starts with the word “To” Specifies a single measurable result Specifies a target date or time span for Completion Must be realistic and attainable, but represents a significant challenge.

24. Goal and Objectives Example Goal One Educate consumers about the benefits of bread machines, facilitate their purchase decisions, and encourage usage. Objectives 1.1To create a media kit for distribution to key newspapers, magazines, and the 1997 Housewares Show by January 10, 1997. 1.3To host a New York City magazine editors event "Coming Out Party" for all new bread machine products (members Only) by June 30, 1997. 1.4To explore partnerships with like minded industry associations for the purpose of producing a jointly sponsored media campaign in 1997. 1.6To evaluate and report on the possibility of a BMIA web page by August 31, 1997.

25. Three Classes of Objectives Innovative Problem Solving Regular/Routine

26. Action Plans

27. Specify steps or actions required to attain an objective. Designate who will be held accountable for seeing the each step or action is completed. Define when these steps or actions will be carried out. Define resources needed to be allocated in order to carry out the required steps or actions. Define feedback mechanisms needed to monitor progress within each action step.

28. Action Plan

29. Operational Plans

30. Integrated Planning Process

31. Comprehensive Business Planning Mission Statement Strategy Vision Goals Objectives Strategy Issues Action Plans Annual Ops Plan & Budget Laws and Regulations

32. Operational Planning Framework Issues Analysis Key Result Areas Performance Indicators Objectives Action Plans Budgets

33. Operational Objectives Statements of measurable results to be accomplished within the time frame of the operational plan. Standards of performance related to financial and operating results that can be tracked on a regular basis.

34. Budgeting Determine the level of financial resources required to achieve the operational plan’s objectives. Allocate available financial resources to ensure their optimum use in achieving the plan’s objectives. Control the use of available resources to ensure the achievement of plan objectives.

35. Budgeting Problems Budgets can grow to be so complex that they become expensive, cumbersome, and even meaningless Budget objectives may come to supersede enterprise objectives—budgets should be considered a tool, not an end in themselves. Enterprise goals should supersede business unit plans Budgets may contribute to inefficiencies by continuing initial expenditures without proper evaluation Budgets as a pressure device defeat their basic purpose

36. Results Management

37. Integrated Planning Process

38. Results management Control Systems Management Reports Organizational results Individual Results Corrective Action Reward System

39. “I believe the real difference between success and failure in a corporation can very often be traced to the question of how well the organization brings out the great energies and talents of its people. What does it do to help these people find common cause with each other? And how can it sustain this common cause and sense of direction through the many changes which take place from one generation to another...” “The basic philosophy, spirit, and drive of an organization have far more to do with its relative achievements than do technological or economic resources, organizational structure, innovation, and timing. All these things weigh heavily in success. But they are, I think, transcended by how strongly the people in the organization believe in its basic precepts and faithfully they carry them out.” Thomas Watson, Jr.

40. Supporting Discussions

41. Issues Analyses

42. Steps in Operational Analysis 1. Identify Issues 2. Prioritize Issues 3. Analyze Issues 4. Summarize Issues Major Conclusions Alternative Courses of Action

43. Identify Issues Most critical issues facing the business unit, what might be their impact. Issues likely to have greatest effect on profitability. Issues likely to have greatest effect on long-term success of the business unit. What changes have taken/will take place effecting the business units performance in the coming year. What cross-functional problems or opportunities are likely to have impact on the business unit’s performance. What are major impediments to conforming to your Mission.

44. Analyze Issues What is the Issue. What data/information is available (or needed) to resolve the issue. What appear to be the factors causing this to be an issue for the organization. What types of results are needed in this area.

45. Key Result Areas

46. Key Result Areas Guidelines Those 4 to 6 major areas wherein performance is essential during the coming year. Include both financial and non-financial areas. Will not cover the entire organization—will identify the critical few areas where priority efforts should be directed. Most will require cross-functional effort. Each will be limited, generally, to 2 or 3 words and will not be measurable as stated, but will contain factors that could be measurable.

47. Indicators of Performance Measurable factors, falling logically within a given key result area, on which objectives may be set. May be hard numbers, percentages, significant achievements, or problems to be overcome. Identify what will be measured, not how much or in which direction. Represent factors that can be measured on an ongoing basis.

48. Example Indicators of Performance Return/ Profit Productivity People development Market penetration Return on Revenue Donations to Sales Ratio Net profit $ sales per employee Units produced/month Percent ethnic hire Days of training/employee Percent of market share Percent growth by product Key Results Areas Indicators of Performance

49. Strategies

50. Competitive Intensity

51. Strategic Implementation Direct Means Indirect Means Time Related Aspects.

52. Direct Means Action Plans and Project Plans Procedures/Management Systems Planning and Budgeting Management Information Systems Organizational Structure.

53. Indirect Means Communication Symbolic Actions Institutionalizing Actions Fostering Innovation Corporate Culture.

54. Time Related Aspects Research and Development Manufacturing Life Cycle Marketing Cycle Economic Trends Competition.

55. Strategic Plan Outline Executive Summary Current Situation and Vision Critical Issues Mission Strategic Excellence Positions Goals and Objectives Action Plans

56. Operational Plan Content I.Executive Summary II.Business Unit Description III.Product and Services IV.Operational Analysis: Issues and Conclusions V.Key Result Areas & Indicators of Performance VI.Operational Objectives VII.Action Plans VIII.Budgets IX.Plan Implementation and Review Schedule Appendices