This is the fourth in a series of blog posts about sales and operations planning (S&OP), written by Ed Lewis, S&OP expert and Valizant CEO.
As discussed in S&OP vital signs to survive and thrive, too many companies have not fully realized the benefits of their S&OP program—and often, the barrier to higher value is a gap in the S&OP foundation. A check of the S&OP vital signs can determine if any foundational elements are missing. This blog will discuss the third vital sign that will help drive the corrective action needed to close the gaps in your S&OP processes.
But first, a quick recap of the S&OP vital signs:
- Executive support and participation in the S&OP process (read more)
- Fully cross-functional S&OP scope (read more)
- Practicing constructive issue resolution
- Minimal process compromise imposed by technology
<h3Vital sign #3: Constructive issue resolution
In 2006, the executive management team at Ford Motor Company had just turned in its worst performance in history with a $15 billion operating loss. As a result, the company was forced to make dramatic cuts to the workforce and close many of its U.S. plants. Disaster seemed unavoidable. But in a bold move that shocked both Ford management and the auto industry, Ford hired an outsider, Alan Mulally from Boeing, as the company’s new CEO.
In Why Great Leaders Don’t Take Yes for an Answer (2015), Michael A. Roberto explains that Mulally joined Ford when the executive management team was in discord. They were highly siloed and rarely had candid discussions of problems the company faced. To address this, Mulally immediately implemented a Thursday morning “business plan review” and established “working-together behaviors” to guide constructive disagreement.
Key among the prescribed behaviors were the following:
- Support positions with facts and data.
- No put-downs or personal attacks.
- No side conversations.
Mulally placed a lot of emphasis on the new behaviors and explained, “If you can’t do it or don’t want to do it or it’s too hard, that’s okay. You’ll just have to work someplace else.”
However, the team continued to have difficulty with transparency and candid dialogue despite Mulally’s mandate. The turning point came in a meeting with Mulally’s reaction to the first executive who reported bad news. Following the report, Mulally stood, vigorously applauded, and commended the executive for the transparency and visibility he’d provided to the team. Mulally then asked the team how they could help, and they in turn offered constructive suggestions and assistance. This commitment to problem-solving instead of finger-pointing cleared the way for big changes at Ford—Mulally had made it safe to speak up, and he often retold this story throughout the company to signal the change in culture.
Under Mulally’s leadership, Ford weathered the Great Recession and, in 2009, generated a small profit despite rejecting the government bailout GM and Chrysler accepted to survive. In 2013, the year before Mulally’s departure from Ford, the company earned $7.2 billion in profits and paid workers the highest profit-sharing bonus in the company’s history.
S&OP and constructive issue resolution
By its very nature, S&OP produces disagreement. After all, it is the process of developing the tactical plans necessary to achieve the corporate strategy. Functional heads are certain to have different opinions about the best approach. As demonstrated by the Mulally Ford executive team, the S&OP team needs to be able to have candid and constructive discussions about issues and challenges, otherwise tactical plans will not align with strategy, compromising the S&OP program and corporate performance.
Work with the executive team to institute “working-together behaviors” to create an environment that focuses on problem-solving instead of finger-pointing. Make it safe to speak up.
This blog series will cover each of the S&OP vital signs and provide practical suggestions for improvement. Check back regularly for updates. The final post will explore how to have minimal process compromise imposed by technology.