World-Class Planning and Decision-Making.

• Author: Paul, David
• Position: Brief Article

What takes nine months annually, on average, to complete and produces results that many regard as suspect? Unfortunately, for most companies it is the process of strategic, tactical and financial planning.

Planning is likely the most-detested corporate process, consuming an astonishing 25,000 person-days annually at the typical billion-dollar company. On average, five months are spent revisiting the strategic plan. Financial planning consumes the other four months, leaving only 12 weeks a year when the typical company isn't actively planning.

The problem is that more than two-thirds of companies worldwide fail to integrate strategic planning with tactical and financial planning processes. This divide is affecting planning cycle times, as well as the quality and speed of decision-making.

One explanation for the disconnection is that strategic planning is too often viewed as only a senior management activity, causing executives to divorce it from operations planning. The average company gives plan access to only 38 percent of its managers and less than 10 percent of its employees, according to Hackett research. (Hackett has surveyed more than 1,500 organizations with operations in the Americas, Africa, Asia and Europe as part of its ongoing studies. The typical company in the database averages $4 billion in annual revenues, and finance staffs range from as small as five to as large as 14,000.)

Making matters worse, most companies fail to tie incentives and rewards to strategic goals. Bonus pay is linked to financial plans for 97 percent of the companies, yet only 58 percent of the same companies also tie incentives to strategic plans. The result is that far too few companies have truly aligned business goals with their strategic focus.

This disconnection is also complicating and prolonging the process of planning and forecasting for most companies, resulting in extraneous and often obsolete information that cannot be effectively applied to managing the business. The top-performing companies ranked in the study's first quartile dedicate six months or less to planning, evenly dividing time between strategic and financial plans. Those defined as "world-class" complete all their planning in two months.

More than three-quarters of the companies report that their management information systems are inadequately integrated with transactional and operational systems. Even worse, fewer than half of these companies produce reports automatically. Most...