Strategic Planning Q&A with Mary Driscoll of APQC

If you want to learn about real-world best practices in strategic planning, talk with Mary Driscoll. As senior research fellow for financial management research at the American Productivity and Quality Center (APQC), she has researched and published widely on a variety of financial topics, with a special focus on planning, budgeting, and forecasting, since 2002. Driscoll was one of several experts interviewed for “The New Game Plan for Strategic Planning,” recently published by Harvard Business Review (HBR) Analytic Services and sponsored by Anaplan. We talked about the report with Driscoll after its publication to gauge her reaction to the research survey’s results.

Anaplan: What was your initial reaction as you read “The New Game Plan for Strategic Planning”?

Driscoll: I have been looking at strategic planning software as a researcher and journalist for many years, so I was struck by the fact that we are still having a conversation about things that have gotten in the way of efficient planning, budgeting, and forecasting for decades. Consider the concept of information quality. An important dimension is the availability of concise, fresh, reliable data that performance analysts and business unit leaders need for sound decision-making as market conditions and risks change quickly. If the decision-makers must wait weeks instead of days or hours to get a good look at performance patterns as they emerge, then business performance might suffer. And often the biggest obstacle that CFOs mention is an inability to drive standardization across ERP landscapes, processes, data, and analytical skills. Many of APQC’s 450 members—very large, complex organizations with operations all over the world—work hard to move ahead, only to find themselves taking two steps forward then three steps back. The result is a lack of progress on planning and performance management.

In part, the issue is that large companies are always buying and selling assets—it’s not a static state they operate in. But what holds so many companies back today are their complicated technology infrastructures. I heard of an enterprise company the other day—I won’t name it—that had 92 ERP systems! Imagine you are CFO of a company with that many systems; you have the first quarter under your belt, but now you need to accurately direct the business in the second quarter, the third quarter, and so forth. How can you do that when your systems can’t quickly give you basic data on how you did last week, last month, last quarter? If your technology platform is not able to support that kind of agile decision-making, you’re dead in the water.

Anaplan: Did the HBR survey findings align with the research you’ve done?

Driscoll: Definitely. What we see at APQC is that a segment of very large companies has made a commitment to ensuring that performance agility is front and center when they set policies and procedures for performance management. They don’t spend months and months creating an annual budget, and then expect everyone to use it as their primary performance management tool. These companies are totally committed to what we call agile planning, and that stands out as a best practice in the HBR report. The most agile companies plan on at least a quarterly basis or even more frequently.

Also, we completed a big research project in 2016 that focused on finance transformation. We found that the business side of any operation—the profit and loss owners, the budget owners—really lean on the finance organization to decipher performance trends in real time. When the business side wants to manage performance rapidly, they’re unable to do it without the finance department’s help. The HBR survey supports that finding.

Anaplan: You’re quoted in the HBR report as saying, “Too many companies still use the annual budget as their primary performance-management tool. The plans are developed in August, launched on January 1—and out of date by the end of January.” What is the result of these “dead on arrival” budgets?

Driscoll: Well, we find that the winners and losers are separated in terms of which companies have their finger on the pulse of the marketplace and can respond to change quickly. Changes in the marketplace, in innovation, in business dynamics, in resources and commodity costs all happen so quickly these days, so it’s really important to be able to allocate resources just as quickly. If a new marketplace opportunity pops up that you hadn’t foreseen six months ago when you put your plan together, where are you going to get the resources to pursue it? Can you stop spending in one area that’s not working and reallocate resources to another area? Winning companies tend to have a great deal of flexibility that way.

A lot of the problem is just cultural legacy: Too many non-financial managers don’t maintain tight alignment between strategic imperatives and performance factors because the organization’s most-senior executives don’t do such a stellar job at explaining the business strategy that was promised to the shareholders. You have get everybody focused on the same goal—and at the same time, everybody needs to understand what they can do to influence that goal. Then you can leverage the best technology to make that easy and efficient.

So, on the one hand, it’s a great aspiration to shoot for the moon, to go out there and get that new marketplace opportunity. But if the enterprise isn’t enabled to actually be agile in that way, there becomes a big disconnect.

Anaplan: What three things should companies consider if they want to make their budgets more useful throughout the year?

Driscoll: My honest answer is that software and enabling technology are probably number three on the list. Number one is educating and influencing the culture so that the entire enterprise understands what they can do on a daily basis to deliver the right return on the resources they control. People have to understand—whether you work in a nonprofit, a public company, a private organization, or government—that someone has given you resources to do something great. And if you’re not doing something great with that capital investment, then … well, that’s what performance management is all about. It’s easy for people in functional areas to forget that they are using other people’s money.

It’s a big education effort. If everybody is not on board—your salespeople and human resources people and supply chain people and all the folks in operations and manufacturing—then you have friction. And friction is what stands in the way of performance excellence.

Second, this culture change must be consistently reinforced by leadership. People need to really believe that, in this day and age, there is no wasting of resources. That’s my big theme: the preciousness of resources. That’s how companies compete today. It’s how sustainable profitability is delivered to shareholders—which, at the end of the day, is what drives up the value of a company.

Third, as I mentioned, comes the more tangible things—the systems, technology, and business processes that transform these cultural necessities and expectations into action, and that enable their adoption throughout the business. The success of the technology investment depends on human beings being very adept at tapping into the power of this vital asset.

End of interview.

Hear more insights on today’s enterprise planning landscape from Driscoll and other industry analysts in HBR’s research report, “The New Game Plan for Strategic Planning.” The report was developed based on a survey of 385 Harvard Business Review readers representing organizations with 500 or more employees in a variety of sectors and geographic regions.

And check back for more Q&A blogs with industry expects and analyst on strategic planning insights and reactions to new the HBR report.