S&OP: Is Your President Engaged?
This post was originally published in the DBMExecutive on December 8, 2011. You can download the original PDF here.
“Our President does not have time for S&OP so we are doing it without him. What do you think?” A common statement combined with a silly question. You already know the answer. Without the commitment of your senior executive, the S&OP process will fail. At the very best, you will end up with an Operations or Sales centric process that is not S&OP. The most important word in Sales and Operations Planning is “AND”, and the only person who can put the “AND” between Sales and Operations is the executive to whom both report.
Once you accept the fact that the senior executive needs to be committed, you are ready to face the real questions: How and why not?
The major reasons senior executives are not committed to the SOP process are that they don’t understand the value, they don’t understand their role in the process and they don’t understand the example that they set.
Let’s look at a story of a fictitious president, Tom, who is characteristic of a number of executives whom we have worked with over the years. Tom paid lip service to S&OP; a checklist item that he wanted the organization to address.
Through the first six months of the S&OP project, Tom attended two Executive S&OP meetings. There always seemed to be something else competing for his time. His team worked hard but they were getting nowhere. The VP of Operations dominated the meetings and the rest of the management team were spectators.
One of my associates involved in the project recognized the problem. He said:
“Tom, consider this your trip to the Principal’s Office. Your poor attendance record is derailing the S&OP project. I know the meetings aren’t that effective yet, but if you don’t show up, they aren’t going to get any better. There were some important decisions bypassed in the last meeting because you weren’t there. If you want to make S&OP work you need to show up. If not, scrap it now and stop wasting everyone’s time.”
“I didn’t realize my attendance was that important.”
The next meeting was a watershed. There was a major decision to be made about prebuilding inventory for the busy season. Building the inventory would mean missing the quarter end inventory targets. Not building the inventory would mean not being able to meet the forecast demand in the busy season. Sales wanted the inventory, Materials didn’t. Tom saw that it was his call.
Tom saw that he was the only one who could make the final call. He finally understood why he had to be there.
Six months later, I attended one of Tom’s Executive S&OP meetings. The meeting took 90 minutes, everyone was prepared, they never lost focus, they made critical decisions and everyone left the room understanding the plan. I congratulated Tom on the effectiveness of the meeting and the process leading up to it. He responded:
“I would never have believed I could manage this business in 90 minutes a month. If everybody does their role, I only have a few decisions to make and they are all packaged for me in one meeting. It’s the most important meeting I have.”
Of course Tom works more than 90 minutes a month, but spending an effective 90 minutes in his Executive S&OP meeting eliminated numerous ad hoc planning meetings that used to happen through the month.
The Keys to Executive Engagement
So what are the keys to getting the Toms of the world engaged? Here are a few tips we have learned through the years:
1. Make sure the CEO understands his or her role in the S&OP process. He/she must support the process and hold people accountable for doing the grunt work and also make the important decisions when there are differing opinions about the direction.
2. Manage the expectations. S&OP does not start out as a perfect process. The early meetings will be painful and the CEO needs to accept that. Copping out at this time could deflate the morale of the team. If the Executive S&OP meeting is not meaningful in three or four months, you need to re-evaluate your approach, as executives have limited patience.
3. Use an outside party (probably a consultant) as an advisor to the CEO. This is a new role for the CEO, and for many, it’s hard to accept training from his/her staff. For many of the staff, it is hard to give constructive input to the CEO. This is one of the key roles of an outside consultant.
4. Make sure the Executive S&OP meeting is efficient. Some of the common traps that will turn off the CEO include:
a) Not having the presentation ready ahead of time. Most CEOs like to have the data at least a day in advance so they can review it and prepare their questions.
b) Having erroneous data. The numbers have to make sense. The owners need to be able to support their numbers. This is the function of the pre-S&OP meeting. It’s a dress rehearsal intended to make sure the stories are aligned and valid.
c) Too much detail. We call it ‘getting in the weeds’. You went through a lot of data to prepare for the Executive S&OP meeting and must resist the temptation to show it all.
d) Getting side tracked. The Executive S&OP meeting is one of the few meetings where the management team gets together. People are tempted to bring up their burning issues even if they don’t apply to S&OP. Should we lease that new office space downtown? Which logo do you like better? S&OP Coordinator, step in please!
e) Forgetting the decisions made as a result of the CEO’s presence. It’s good to start the meeting with a list of the decisions made last month. This review will reinforce the importance of the meeting.
So here’s the deal. You want your CEO’s support? Make it worth his or her while. If it’s valuable, they, like Tom, will come to depend on the S&OP process.