Business planning or Performance management, what’s it all about
Business planning or Performance management, what’s it all about? There are all kinds of different specialist terms or jargon which have a lot in common. Because there are so many terms, it’s sometimes very confusing. This blog aims to provide a bit more clarity on this subject. Business planning for dummies?
What terms are used and what do they actually mean? For some of us this could be clear, but I’m sure it’s not for most of us.
Let’s start with a summary of the terms that are used in our industry:
- Performance Management (PM)
- Enterprise Performance Management (EPM)
- Corporate Performance Management (CPM)
- Financial Performance Management (FPM)
- Financial Planning & Analysis (FP&A)
- Sales & Operations Planning (S&OP)
- Self-Service Planning (SSP)
- Strategic Corporate Performance Management (SCPM)
- Financial Corporate Performance Management (FCPM)
- Business Performance Management (BPM)
- Business Intelligence (BI)
- Advanced Analytics
- Decision making support systems
- Forward looking solutions
- Forward looking decision making
- Business Planning
What do those terms have in common?
What’s exactly the meaning of those terms when we search on Wikipedia? An example. We are searching for ‘performance management’. We will get the following definition: “Performance management includes all activities which ensure that goas are consistently being met in an effective and efficient matter. Performance management can focus on the performance of an organization, a department, employee, or even the processes to build a product or service, as well as many of other area’s”.
On the Dutch Wikipedia: “The process of achieving goals, or delivering performance, is managed with the ultimate goal of realizing the organization’s strategy. The purpose is to provide a clear overview of the progress and performance of the different departments. This overview should help the organization to make the right decisions. It is thus about business objectives and how to achieve them”.
It’s a way for organizations to get better hold on business processes and performance. The terms described above have more or less the same meaning. Why are there so many terms that describe the same? Let’s assume that the following Dutch saying is true on this: “So many heads, so many sentences.” Mainly research and advisory agencies in the information technology sector are associated with the varity of terms.
We think the term ‘business planning’ is the best term to describe where it’s all about.
Planning describes both the process of making a plan, the plan itself and the correct and timely implementation of the plan. Planning can play a decisive role in avoiding mistakes and recognizing opportunities. A good plan indicates the management knows the organization and has thought about developments in products, management, finance and, perhaps most important, the external environment. These are markets, competition, users and regulation. Planning helps to predict the future, to make the future visible and, to a certain extent, to bridge the present with the future.
Business planning is about supporting people in all kind of business, departments to get their planning jobs done. It also supports better decision making. Here we don’t mean plans and decisions based on your abdominal feeling. Based on facts. These facts come from an ever-expanding volume of business data. This data is presented under the heading ‘information’. The transformation from data into information is done by processes which unite and clean data from the various sources. What people need is timely, correct, trusted and real time information for real time decision making. This is a huge challenge for most organizations.
At Planningyard we therefore have deliberately chosen to name this speciality business planning. To make it easier to understand.
Three main questions for decision making
In short, decision making in business is mainly based on finding answers to three fundamental questions:
- How are we doing? (measuring & monitoring)
- Why? (reporting & analysis)
- What should we be doing? (planning, budgeting, forecasting, prediction)
Business Intelligence (BI) is mainly focused on finding answers to the first two questions. This gives us insight into the past. You could compare it with driving forwards through looking in your rear-view mirror. Most companies nowadays use beautiful BI visualization tools. But BI doesn’t answer the last question, “What should we be doing?” Business planning is mainly focused on answering this question. In most situation it’s a combination of answers, get insight, look ahead, plan and predict. In reallity there’s insight yes, but action no.
Acting on insights through business planning, looking ahead and predict the future. Not with your abdominal feeling, with modern technology.
Traditional planning issue’s
With traditional business planning systems, it:
- Takes months before understanding the impact of decisions
- Average financial close is still 23 days
- Only 12% employee engagement
- 70% IT spend is on maintenance
- Last mile still in Excel
In a nutshell, your business is moving way faster than your financial and operational systems are able to tell you what is happening. They simply can’t keep up. Constant change and disruption requires your company to continually change and adapt – or risk losing competitive advantage. With change comes the incredible opportunity to reshape the speed, value and performance of the company to transform your business. Finance needs to take the leadership role to drive the strategic changes required to keep moving forward, but you can’t assume this role with systems that can’t adapt with you.
Traditional business planning systems were built for another era and can no longer keep up with the speed and change required to compete in today’s disruptive business climate. This situation is driving the need for a new set of business requirements for finance, FP&A but also for operations, marketing & sales, HR, IT and other departments and functions within the organization.
New requirements for business planning software
Being able to analyse the past, act in the present and project your vision into the future. You have become a data driven organizations! Data comes from the different business systems, present within your organization. But also data from outside your organization: internet, cloud, social media, big data, small data etc. This data can be structured or unstructured. All data should be converted into actionable information which you and I could use: fast, timely, correct and trusted.
What are the ingredients for success? Analyzing and learning from past information is called BI. What we want next is ACTION by focussing on the future, making plans and predictions. Constantly measuring those plans with what actually happens in your organization makes it possible to steer your organization better, more save and faster. The processes which supports this should be constantly aligned with your business strategy and goals. A performance-oriented culture should be created. If all those ingredients are created, your employees will constantly optimize and automate them. Your organization is heading for Best-in-Class transformation.
However, this is not reality unfortunately. In many cases, these processes are still supported by “good old” Microsoft Excel spreadsheets. Or the organization lacks the right culture to keep moving forward. Where do you want your organization to go? Being a business Laggard or Best-in-Class? Best-in-Class requires a new set of skills and business requirements. People responsible for financial planning and analysis (FP&A) are drivers for new requirements:
- Get out of the spreadsheet jockey; Especially finance spends too much time managing spreadsheets and multi-dimensional cubes – shift valuable resources to analysis and high value- add activities;
- Drive continuous business alignment: FP&A is being asked to step into the role to make sure the entire organization is aligned on strategy and numbers;
- Remove constraints on volume, type and timeliness of data: to manage the complexity of today’s business, modern FP&A must put to work the huge volumes of data that is being collected by the business and respond at business speed;
- Deeply engage at the edge: decisions made at the front line – to respond at the pace of today’s business and operate with a new degree of precision, FP&A must break-down the silos and engage planning, budgeting, analysis with the people at the front lines of the business;
- Stop arguing about the numbers: The discontinuity and lag time present in today’s FP&A systems makes it difficult to work from a single set of numbers. Today’s FP&A needs a modern system that eliminates this situation and gets everyone working on the same set of numbers without lag time;
- Don’t accept tools that force you to conform: Historically, finance has had to bend their processes and way of working to fit their IT systems. What is being called for is a modern FP&A solution that can be adapted to your way of working.
Business planning software should address those requirements and functional possibilities. Not only people in finance should own and drive this, but also in other departments like Executive/Strategic, Operations, Sales&Marketing, HR, IT. In our next blogs, we will do a deep dive in the functional possibilities of business planning software. We will also include some technical and architectural capabilities and considerations for new business planning software tools on the market.
Business planning support
Business planning is exactly what we do at Planningyard. We are a management and technology consulting organization. As being specialists in business planning, we support organizations unleash their potential in business, and their people.
With deep knowledge and expertise on most business planning solutions on the market, we support your organization on its journey towards digital transformation.
Why do forward looking decision makers choose Planningyard? First, our your business-first approach. Analyzing your business processes to liberate your people’s current way of working. Business processes should be configured to work your way – and embrace change and drive new levels of speed, alignment and ownership at the edges of your organization. Second, business planning is a participation sport. You’re looking for collaboration, powerful user experience and mobile capabilities to give people new capabilities to make things easier across all lines of business. Run business planning at the edges and self-reliance to deliver insights AND action at the front-lines. Third, run in the now, impact the future: make use of new business planning technology, process massive volumes of data and numbers faster than the speed of business. Use predictive capabilities. Finally, our fourth differentiator is to arm your people with powerful new business planning capabilities to ACT on the story behind the numbers. We address your business planning requirements as key components of achieving transformation in your organization.
Are you interested because of this blog? Don’t hesitate to contact us.
Business planning workshop
As a special action, we have some free business planning workshops available coming weeks. In a half-day workshop, we will together with you and your teams, analyse your prioritized business planning processes. Our goal of this effort is to make both of us comfortable KEEP MOVING FORWARD!