Business Planning in Large Organisations

In large organisations, business plans are part of a planning and performance management cycle in which top-down strategic plans give direction to business units by defining the contribution that each unit will make to the organisation’s performance. Business Plans explain how each unit will deliver that contribution and measure its performance. The Planning and Performance Management Cycle The Corporate Plan is the highest order strategic plan. It gives overall direction to divisional or departmental strategic plans and, in some cases, to organisation-wide functional strategic plans for eg human resource management (HRM) or information technology (IT). These plans in turn provide the organisational context within which Unit Managers are to run their Businesses. They do so by devolving responsibility for implementing strategy to business units. The business plans explain what each unit will do to implement it. Unit Business Plans then roll-up to form divisional business plans, which can be rolled up again to form the corporate business plan. Thus, a business unit may take direction from a number of strategic plans. Their Divisional strategic plan may ask them to demonstrate how they will supply product range XYZ. At the same time the HRM strategic plan requires an explanation of how they will implement an OH&S strategy for reducing injuries and the IT plan asks how they will use a new information system. The number of strategic plans and the degrees of freedom allowed to interpret corporate strategy will vary widely from organisation to organisation and affect the content required in Business Plans. At one extreme, you have Strategic Business Units, which operate largely as stand-alone businesses (supplying to internal or external customers). At the other extreme, you have (what I call) Operational Business Plans, which have very little discretion to interpret strategy but are expected to show the action they will take to implement it. In reality, most business units operate somewhere between these two extremes. Business Planning for Strategic Business Units Strategic Business Units are introduced when an organisation wants to reduce its role to one of investment banker. That is, to funding businesses that fit within its portfolio and make a required contribution to corporate goals. Corporate planning processes define which businesses are, or can be made, commercially viable. Making a business viable may require restructuring and the organisation may commit to further support to get the business established. However, once the unit is established and competing in a market in which it can be viable, it is up to the business unit manager to structure and manage his or her business to capture the competitive advantage available to it within that market. Performance will be measured in terms of market share, return on investment and customer satisfaction. A rolling three-year plan is recommended. Plans should be contain strategies for marketing, operations, human resource management and financial management. The marketing strategy will demonstrate how the business will retain its current customers and attract new business. The operations strategy will explain the new or improved work processes and practices it will introduce to deliver the products and services demanded by its clients. The human resource strategy will demonstrate how the business will attract, develop, motivate and retain the people needed to implement the plan. The financial strategy will forecast income from sales and cost the marketing and operations and human resources strategies. It will demonstrate how the business will be financed - expressed in terms of the contribution it will make to, or the funding it will require from, the organisation. Operational Business Plans These are not really business plans in the true sense of the word, but are included here as they are often called business plans. These plans are much simpler. They are led by highly directive strategies and often do little more than break these strategies down into lower order strategies and actions. They are usually of one-year duration only. Performance is reported against indicators that are set corporately and often compliance driven. As I mentioned earlier, most plans will be something in between these two extremes. For example, an organisation may allow a unit the freedom to design their own strategies to improve work processes but demand compliance as to how they manage their people and finance. The Planning and Performance Management Cycle Business Planning for Strategic Business Units Operational Business Plans Learn how to write a Business Plan For further assistance visit Change & Perform's Business Planning Services or contact the principal Kerry Feldman