Tag Archives: budget

We read for you: (re)DISCOVERing VALUE – Leading the 3-D Enterprise to Sustainable Success


Rediscovering value - Leading the 3-D Enterprise to Sustainable Success

Rediscovering value – Leading the 3-D Enterprise to Sustainable Success

(re)DISCOVERing VALUE – Leading the 3-D Enterprise to Sustainable Success” is a book by Geary A. Rummler, Alan J. Ramias and Cherie L. Wilkins which describes the need for changing to a 3-D enterprise to gain sustainable success.

With the concept of a 3-D enterprise, the book describes the need of three-dimensional management of complex organizations on the resources, value and management dimension.

The book addresses the problem with resource management in organizations: the fact that there’s only one-dimensional management in the resource dimension.

Let me explain.

Resource management vs. end-to-end ownership

Currently in many organizations the performance is measured in budget spending of the different functional silo’s and not in value delivered to the end customer.

The result is a yearly battle for getting the most resources (money, human capital and other) for the specific silo’s in the organization. In this process, each manager does it best to acquire the best and most resources to optimize its own functional pool. Further, there are also no end-to-end value stream owners assigned with end responsibility for the process and it’s results.

The end result is that hard problems which affect the end customers are not solved because of silo politics and no end-to-end ownership.

When each silo get’s its budget to optimize, there could be continuous improvement in progress, but it could be done at the wrong places. Compare it with optimizing the chain of your bike while the rear tire is flat.

Pick up end-to-end ownership

So how could you as an organization grow out of this non-productive situation? By identifying the core value streams, laying organizational focus on them (top down) and assign resources to the places that need it.

If you have the process mapped, the RACI defined, the end-to-end owner assigned, critiques found, etc, you can optimize the process by assigning resources (yes, resources, not only money) to the areas which need it the most.

This implies that one year department X will get more of the resources, and maybe the other year department Y will get the most.

Key takeaways

Creating the value creation system:

  • Start with mapping the current state.
  • Assign end-to-end value stream owners.
  • Work top down with mapping the value stream, planning, budget rounds, performance measurements, …
  • Management involvement is important: let’s get your hands dirty.

Details of the value creation system:

  • Add possible errors, trends and corrective actions to your KPI explanation.
  • Add the reason WHY you are monitoring the KPI + what do you want to learn from it to your KPI explanation.
  • Divide budget by priority in value stream, not by bottom-up silo requests.

Working with the value creation system:

  • Avoid suboptimizing.
  • Technology changes only on specific request of the business.
  • Don’t make linear cost cuts, but look at the value stream and its priorities.
  • Cross-functional reporting per value streams and find solutions together. Overcome the “it’s not my problem” attitude.
  • Create an early detection system for problems so lagging actions are avoided.

Launching the new way of working:

  • Change will not happen overnight: this shift to value implies a culture change.
  • Use incremental changes to switch from the old system to the new. Wait with the next step until each step has proven itself.
  • If you start too many initiatives, you will lose overview and work floor engagement.

What will I do with the book?

I read the book but remain with an empty feeling. I have some key takeaways, but lack more information about bringing it to the next level. The book describes three generic processes, but remains at a high level. How would you switch from an old system which is in use for years to a new value based system?

The book uses a lot of charts and many details about the generic systems, but for me they are not adding value. There’s no use in studying a generic process like “product developed” because each step is so common, you could use it in any organization.

How would you bring a modern organization with many value creation systems of many kinds which are intertwined to the new way of working? The challenge remains and I guess it’s up to us to find our way and apply the key takeaways where possible.

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Result planning in practice


We all have our targets and make plans to reach them with our best effort. Using result planning in the correct way can be a great help with getting there on time and in full (OTIF).

This guide will help you set up result planning and make the move from result tracking to result planning!  As an example we take the non-planned maintenance budget of an ICT maintenance team.

Target audience

Every profile which is working with budgets or planning results.

After reading this guide you can:

  • Create a plan line for your work year
  • Follow-up on actuals during the work year
  • Get an idea of the impact of budget shifts or delays.
  • Use visual management with the KPIs during huddles with your team
  • Select opportunities for DADA-loops (Data – Analysis – Decision – Action) and RCA (Root Cause Analysis)

Step 1: selecting data for display

When creating a graph for visual display and follow up of results, you need to know which data you want to put on it.

These are the options:

  • Period to follow-up
  • Frequency of follow-up
  • Baseline
  • Target
  • Target savings

In this example we will use:

  • Period to follow-up: work year 2012
  • Frequency of follow-up: monthly
  • Baseline: actual time registrations of last work year
  • Target: 600 Md
  • Target savings: 10%

Step 2: set target

“What is our target?”

You can create you graph for different time periods (a calendar year, half a calendar year, a release, …).

Our example will make the planning for a whole work year.

The end target in this case is known as the non-planned maintenance budget and as example we take a target savings percentage of 5% this year.

Assigned budget for 2012

600

Target savings

10%

Target incl. 10% saving

540

Step 3: create baseline

“How did we do last year?”

Check with Ms Project your actuals from last year and copy them into an Ms Excell sheet.

With reusing the actuals of last work year, you cover areas like the holiday season and work peek periods like release moments.

2/jan

2/feb

2/mar

2/apr

2/may

2/jun

2/jul

2/aug

2/sep

2/oct

2/nov

2/dec

2/jan

Baseline 2011

13

34

74

118

172

200

224

278

362

430

514

550

580

Optionally, if the budget differs from last year, use the rule of three to tune the numbers. There is no value in just taking over the number if the total budget changed.

The “Baseline 2011 tuned to 2012” expresses the budget burning with all things going “normal”.

2/jan

2/feb

2/mar

2/apr

2/may

2/jun

2/jul

2/aug

2/sep

2/oct

2/nov

2/dec

2/jan

Baseline 2011

13

34

74

118

172

200

224

278

362

430

514

550

580

Baseline 2011 tuned to 2012

13

35

77

122

178

207

232

288

374

445

532

569

600

Example

Baseline 2011 tuned to 2012 for 2/apr = (118 / 580) * 600 = 122

Step 4: set the maximum target

“What is our target?”

Set the maximum target line so the end target is always visible.

2/jan

2/feb

2/mar

2/apr

2/may

2/jun

2/jul

2/aug

2/sep

2/oct

2/nov

2/dec

2/jan

Baseline 2011

13

34

74

118

172

200

224

278

362

430

514

550

580

Baseline 2011 tuned to 2012

13

35

77

122

178

207

232

288

374

445

532

569

600

Maximum

540

540

540

540

540

540

540

540

540

540

540

540

540

Step 5: set plan lines

“What is our plan to deliver?”

Distribute the target (inclusive the savings) over the months in your selected period. Use the rule of three to link the numbers to the baseline of last work year. The “Plan line 2012” expresses the budget burning with 10% savings.

Example

Plan line 2012 for 2/apr = (122 / 600) * 540 = 110

2/jan

2/feb

2/mar

2/apr

2/may

2/jun

2/jul

2/aug

2/sep

2/oct

2/nov

2/dec

2/jan

Baseline 2011

13

34

74

118

172

200

224

278

362

430

514

550

580

Baseline 2011 tuned to 2012

13

35

77

122

178

207

232

288

374

445

532

569

600

Plan line 2012

12

31

69

110

160

186

209

259

337

400

479

512

540

Maximum

540

540

540

540

540

540

540

540

540

540

540

540

540

Pitfalls

  • Do not forget to add the plan line. Otherwise you would not be result planning, but result tracking.
  • Dividing the budget linearly over the different months does not give an accurate reflection of the budget to spend because it does not take holidays and releases into account.

Step 6: provide row for actuals

“What are the actual expenditures?”

In this you can provide the actual during the year.

In the example table below, we have set actuals for the first two months 2012.

2/jan

2/feb

2/mar

2/apr

2/may

2/jun

2/jul

2/aug

2/sep

2/oct

2/nov

2/dec

2/jan

Baseline 2011

13

34

74

118

172

200

224

278

362

430

514

550

580

Baseline 2011 tuned to 2012

13

35

77

122

178

207

232

288

374

445

532

569

600

Plan line 2012

12

31

69

110

160

186

209

259

337

400

479

512

540

Actuals 2012

20

60

 

 

 

 

 

 

 

 

 

 

 

Maximum

540

540

540

540

540

540

540

540

540

540

540

540

540

 

Step 7: the prediction line

“What is the result of the actuals on the planning?”

Following up the actuals is one thing, but when we work with plan lines, we can also predict the impact of budget shifts and time delays. The prediction line uses the trend of the plan line combined with the actuals. If there are actuals in month X, the prediction is the same as the actual as month X. Otherwise the prediction is the actual of month X-1 added to the planned increase for the current month.

Example

Prediction for 2/mar is the actual of 2/feb added to (Plan of 2/apr minus 2/mrt) = 60 + (110 – 69)

2/jan

2/feb

2/mar

2/apr

2/may

2/jun

2/jul

2/aug

2/sep

2/oct

2/nov

2/dec

2/jan

Baseline 2011

13

34

74

118

172

200

224

278

362

430

514

550

580

Baseline 2011 tuned to 2012

13

35

77

122

178

207

232

288

374

445

532

569

600

Plan line 2012

12

31

69

110

160

186

209

259

337

400

479

512

540

Actuals 2012

20

60

Maximum

540

540

540

540

540

540

540

540

540

540

540

540

540

Prediction

20

60

98

139

189

215

237

288

366

429

507

541

569

Increase

12

20

38

41

50

26

22

50

78

63

78

34

28

Pitfalls

Do not forget to add the prediction line. Without the prediction line you cannot see the impact of the actuals and result planning would only be result tracking then.

Step 8: create the chart

Use the “Insert chart” button to create a chart in Ms Excel and add following data rows to it:

  • Baseline 2011 tuned to 2012
  • Plan line 2012
  • Actuals 2012
  • Prediction

Again, if the chart gets to crowded, you can opt to drop the “Baseline 2011 tuned to 2012” data row.

Result planning chart v 1

Result planning chart v 1

Step 9: tune the chart

To keep the chart simple and readable, add only data labels to the actuals. In the order of data series of the chart, the prediction data serie should have a position above the data serie of  the actuals, otherwise you can’t always see the prediction line. To stimulate taking actions during PDCA and providing a medium for follow-up, you can add action tables (with actions, names and target dates)  to the chart.

Result planning chart v 2

Result planning chart v 2

We explained “Result planning in practice” here in nine steps.

If you have remarks, tips and/or suggestions, please feel free to ask questions.

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