Hidden Treasure: Why Traditional Planning Approaches Waste Company Resources

Allan McCarthy
Posted: 02/27/2012

One of the key skills that any HR executive should possess is planning. Here’s a new planning technique that will wake up the productivity in your company and position HR as a high-impact player. The outcome can be leveraged throughout the company and laser-focus the HR agenda.

It’s highly unlikely that your company is using its resources efficiently. Why? The logic on which traditional planning is based is flawed. And, it can introduce huge inefficiencies into the daily operations of a company. On the surface, the operational plan might look great and make sense—but if it doesn’t use "sequencing" as the organizing principle, then behind the scenes that same plan is draining productivity by as much as 15 to 27 percent[i] or more. No kidding.

How much money does a 15 to 27 percent productivity loss equate to? You can do the math for your company. It could be a few million dollars in an early stage organization to hundreds of millions of dollars in lost productivity (and related market opportunity) in a large corporation.

The Problem with Traditional Planning

A traditional planning approach goes something like this:

1) The company defines its vision and purpose. This is why the organization was formed, where it’s going, and what it will look like when it gets there;
2) Leadership will also define its mission statement or "What they are striving to achieve"—looking out 18 to 24 months;
3) Next, a string of high-level objectives are typically identified (let’s call these imperatives). Then the functional leaders or heads of Sales, Engineering, Marketing, R&D, Finance, and Human Resources identify the work needed to be done, meaning, list
the key projects and programs in order to achieve these objectives (let’s call these Initiatives); and
4) The Initiatives identified by the functional leaders are then aggregated into a plan. That’s when the fun begins. Bright, motivated leaders spend time debating priorities and make a case for resources. I call this activity "resource roulette" because at this juncture resource allocation might as well be gambling since the logic on which it is based is severely flawed. Why?

When there is a high interdependency between imperatives and initiatives, which is the case in almost every modern-day company, the sequence or the order in which work is performed (like building a house) becomes extraordinarily important. When building a house a foundation must be built first. There is no confusion about this. Next, walls must be erected before plumbing and wiring can be installed. No one would dream of putting on the roof before the walls were built—and in reality it couldn’t be done. When one builds a house there isn’t debate about priorities. The house is built on the basis of sequence or the logical order in which work needs to be accomplished. And here in-lies the root problem: organizations are very, very complex systems (even start-ups) with a high sequential relationship between imperatives (high level objectives) and initiatives (where the work gets done)—but this sequential relationship isn’t obvious. And, "the sequence" is further hidden when bright, energetic functional leaders act independently to create their respective plans of work to be performed. Without a sequenced based plan the organization is doomed to essentially work against itself as an army of motivated employees pursue goals and objectives that aren’t in unison.

The Power of Sequencing

Let’s review an incredible, numbers driven example, to illustrate the power of introducing sequencing into the planning process. (See figure 1.1 below)

A CTO Group in a large corporation was struggling with lack of headcount, funding and their ability to meet general company objectives. The group had 111 employees and an $83M annual budget (excluding R&D capital). Prior to beginning the planning refresh cycle the current plan documents showed: 8 imperatives and 126 initiatives that the seven CTO Group executives had aggregated from their various departments into a plan.

After refreshing the Mission Statement we identified 10 Imperatives (8 revised and 2 new ones) that were needed in order to achieve the Mission. Next, we mapped the 126 existing Initiatives to the new Imperative set. See column #1 "Revised Imperatives" and column #2 "Existing Initiatives" that were mapped to the Imperatives. Examine the Initiative count by Imperative. To this point Initiatives have been identified and put in motion based on executive debate over priorities. Remember, building a company is like building a house. There is always an inherent sequence that should be the organizing principle on which a plan is based. Now let’s demonstrate the impact of introducing sequencing as the organizing principle of the plan.

Next, the executive team performed a very simple sequencing activity (on the new ten Imperatives) called the Interrelationship Digraph. This is a common sequencing tool used for a variety of applications. After sequencing we learned that Imperatives 8, 5, 4, 3, and 9 (ordered high to low in green area) were the drivers or, keeping with my sequencing metaphor, building the foundation and walls of the house. In other words, these Imperatives needed to be finished or at least significant progress made before the lower in sequence Imperatives could be efficiently completed. It turned out that Imperatives 1, 10, 6, 2, and 7 (in this order high to low in sequence in red area) were the followers or the wiring, plumbing and roof of the house. Notice that at this stage there is no debate about priorities! So, for example, it’s very difficult to build a sales plan without a market analysis. This is a no-brainer. Unfortunately, with literally hundreds of Initiatives in queue in most companies, it’s very difficult to determine where these might fall in sequence unless there is an explicit mechanism in place to identify it.

After completing the sequencing activity this is what we learned:

1) 63 of the 126 existing Initiatives were cancelled or suspended. These were deemed too low in sequence or simply unnecessary given new insights related to the sequencing process.
2) 22 new Initiatives were added—not in anyone’s queue—and deemed mission critical; 14 of these addressed high in sequence Imperatives.
3) 32 percent of the allocated resources (headcount and dollars) were rebalanced from low in sequence Initiatives to high in sequence Initiatives. This is where an extraordinary productivity boost occurs—maybe the difference between a successful business and failure.
4) The CTO Group executive team agreed that their confidence level in plan execution had significantly increased and weekly staff meeting debate ended over headcount and dollars.
5) The CTO also presented his new plan to the CEO and Board of Directors (CTO had previously been challenged by the BOD on his resource requests). He received accolades for plan composition and transparency. Stakeholder confidence and sponsorship had exponentially increased.

Summary

Is the organizing principle behind your company’s plan sequence or prioritization? I’ll bet it’s the latter. This means that you’ve got hidden treasure in terms of significant productivity gains awaiting discovery. As the HR executive, here is an opportunity to stem productivity loss and contribute to company success. The sequencing process will also help stage your HR programs, processes and Initiatives for maximum company impact. Now, go get it.

[i] Research performed on 87 companies between 1999 and 2009 pre and post planning process results. Planning process documented in Beyond Genius, Innovation & Luck: The "Rocket Science" of Building High-Performance Corporations, J. Allan McCarthy, November 2011, 4th Edition Publishing, available at Amazon.com.

Allan McCarthy
Posted: 02/27/2012

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