You don’t want your operating plan to concentrate on the past—to focus on the reflection in the rearview mirror. You also don’t want it to be a distortion of future possibilities—like an image in a fun-house mirror. Instead, your operating plan should be a kaleidoscope that exhibits various symmetrical patterns that reflect the loose bits of information you have aggregated. As you rotate it with new information and contingencies, new patterns and answers will appear. It is a look forward to the “how’s.” It includes the programs your organization will complete within a year to reach your strategic objectives in four major areas: finance, customers, processes, and people. It specifies how you will synchronize these four moving parts to achieve the objectives, negotiate the trade-offs, seize opportunities, and plan for contingencies.
The operating plan goes beyond last year’s budget to include challenges and opportunities that didn’t exist in last year’s reality. Too often the budget becomes number and gaming exercises designed to help silo mangers protect their own best interest. Frequently budgets represent little more than an increase based on the previous year’s results and don’t engender the requisite tough analysis and dialogue to determine what the financial goals really should be for the year. Budgets also limit growth and innovation if a new opportunity “isn’t in the budget.”
Change and opportunities exist outside the organization. Activities that can lead to both occur inside the business, but results depend on those outside—your customers. They will demand that you surpass competence and strive for excellence. They will require value and a driving force that separates you from your competition.
What does a look in the mirror tell you? Does your operating plan support your strategy? Ask yourself these questions:
- Do we force trade-offs as we allocate resources?
- Do we test the soundness of initiatives before we implement them?
- Do we set clear boundaries within which decision-makers must operate?
- Do we seize opportunities as soon as they appear?