Why even the smartest people make silly business decisions
If you’ve come across our recent LinkedIn campaign, you might have seen the stories we’re sharing about great businesses making silly decisions.
Those decisions aren’t a reflection on their people, or their purpose. They come about because modern, complex businesses often don’t give people the visibility they need to make joined-up, fully informed decisions. However smart or well intentioned those people might be.
It’s a systemic problem, affecting virtually every industry and department. And the result? Complex organisations making unwise, costly choices that aren’t in their best interests.
The problem with planning in silos
So, silly decisions happen when teams lack the visibility to understand how their choices might impact other parts of their organisation. But why do they lack that visibility? Because in almost all large businesses, planning systems just aren’t set up (or able) to talk to each other.
Planning therefore has to happen in silos. It’s a situation that comes about organically, for a whole range of reasons…
Systems
Once a business reaches a certain level of complexity, departments start to adopt specialised apps and tools. Over time, this leads to a fragmented system landscape that makes it hard to share insights between, for example, supply chain, commercial and marketing teams. With everyone working hard (but separately) this can lead to duplicate efforts and inefficiencies.
Goals
Function-specific metrics (like workforce utilisation or transport costs) might make sense within a single department, but they can quickly lead to conflict with another function’s KPIs. For example, using affordable agency workers might seem like good value and add much-needed flexibility – until the quality control team realises that inexperienced labour is leading to a drastic increase in the amount of rework needed.
Leaders might also reinforce silos by focusing only on their own function’s goals, and incentivising their people to pursue their particular KPIs – without understanding how those might impact other parts of the business.
Process
Planning cycles are often department specific too. Finance, for instance, famously focuses on quarterly reporting, whereas the supply chain team within a retail business might be strongly focused on seasonal peaks like Christmas or summer holidays – creating a disconnect between different parts of the business. An organisation-wide planning meeting that brings every function together tends to be a rare (and unwieldy) thing.
Culture
The lack of an integrated planning process also means the lack of a shared point of view and language (and that’s before we even start thinking about teams spread across different regions and time zones!). Finance, supply chain and commercial teams might interpret the same data in different ways, drawing different conclusions, leading to different actions.
Units (or granularity)
When the same thing is measured in different ways, organisations often lose out on valuable insight. Take a big chain of coffee shops for example. They might plan how much milk to buy based on the number of gallons ordered by each warehouse in the past. That’s easier than basing it on how many milky coffees they sell, but it won’t tell them whether they’re regularly throwing away a load of milk, or having to turn people away when they run out.
Disconnected planning hits businesses where it hurts
It’s pretty easy to see why disconnected planning happens, even when you’ve got great people on board. It’s understandable and some might see it as unavoidable. But bringing together disconnected planning to make better business decisions isn’t a nice-to-have. And it’s not about shaving off a few pennies here and there, or becoming slightly more efficient.
More often than not, it’s about the survival of a business in times of eroding margins. Or in the case of public services like the NHS, it’s about matching available medical resources to patients desperately waiting to be seen. This stuff matters.
And that, in a nutshell, is why we’re so focused on silo breaking here at Fidenda – because it’s the first step to joint planning, and the vast benefits that brings. I’m convinced that adopting integrated business planning (IBP) and aligning decision-making to business goals (rather than departmental ones) gives complex organisations a significant competitive advantage.
How to break your silos, not your operations
In the not-so-distant future, IBP will be the bare minimum expected of businesses, and those that don’t bring it in will be left behind. But right now, many organisations are just at the start of their integrated planning journey. And that’s ok – it’s not a process to rush.
That’s because changing the structures that have grown organically within your business is a delicate, potentially disruptive process. It should take time. And it should be done with care.
I’ve never seen any large organisation adopt IBP in one fell swoop (and I wouldn’t recommend it!). Slowly growing the practice from within is a much more sustainable approach. Its goal? To break down the walls between silos without also killing off all the good processes, deep expertise and best practice that each department has developed.
At Fidenda, we’ve developed an IBP process that starts small – often within a single use case in a single department (for example, demand planning within supply chain, or workforce planning within HR).
From there, we help our clients build a roadmap that connects them with another department – leading to joint planning meetings, joint decision-making and, ideally, a common language and shared planning culture. Once that’s established, they reach out further, and further.
It’s the best way to get rid of disconnected decision-making. And it’s the first step towards business decisions that make sense for everyone.
We’re better in person
Like to bring integrated business planning into your organisation? We’re always happy to talk through your challenges – and your goals. Just get in touch with our team.
