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Executive S&OP: Managing to Achieve Consensus

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 Sales and Operations Planning

Executive S&OP: Managing to

Achieve Consensus
Robert A. Stahl

Preview. Bob Stahl continues his series of columns on Executive S&OP with his framework for man-
aging the final two steps of the five-step S&OP process, the Pre-Meeting and the Executive Meeting.
Visit his earlier columns in Foresight for case studies of the demand-planning and supply-planning
steps.

INTRODUCTION be further from the truth. Executive S&OP is

The executive component to Sales & much more than a spreadsheet or a bunch of
Operations Planning, known as Executive numbers. As a well-defined and disciplined
S&OP, is one of the most important business monthly process, it can change the culture
practices to evolve over the last 30 years. and climate in which a company operates.
Properly implemented, it will transform the The very substantial hard benefits are a direct
way a company operates, thereby raising the result and consequence of the soft benefits of
potential benefits it is able to achieve. culture and climate changes.
Because the structure and logic of Executive Figure 1 shows the five steps that define the
S&OP is really quite simple, many companies Executive S&OP process.
have been misled to believe that it is easy to In previous Foresight columns, I have
implement and use effectively. Nothing could presented case studies about the first three
steps. In this column, I will provide a picture
Figure 1.
of how the final two steps--the Pre-Meeting
and the Executive Meeting--should work.
Understanding this difference between the
way the process should work and the way
it often does can generate an “aha moment”
and motivate an organization to change.
There is no formula for how to make that
change happen because the route to change
differs across organizations and managerial
styles.

THE PREPARATORY STEPS

Steps 1-3 are in part preparation for the final
two steps. In these first procedures, complete
34 FORESIGHT Fall 2010
collaboration is not required, but in the last
two steps, effective and full cross-functional Key Points
collaboration is essential.
Data Gathering (Step #1) • The first three steps of S&OP – data gathering,
I’ve yet to find one company that did not demand planning, and supply planning – are
have all the data in hand required for in part preparation for the final two steps:
authentic Executive S&OP. On the contrary, the Pre-Meeting and the Executive Meeting.
there is usually too much data thrust onto In both, full cross-functional collaboration is
management, and data overload impedes an essential component.
crisp decision-making. The information • Throughout the entire S&OP process, and
extracted from the data warehouse should specifically in the final two meetings, par-
be organized in simple and meaningful ticipants should have their say and their op-
ways, so that variances from demand and portunity to express disagreement. Given
supply plans can be identified. This is typi-
an opportunity to influence final decisions,
cally done on integrated spreadsheets, and
they are more likely to support the decision
graphical displays are created to convey that
made—even if it’s not the one they would
understanding to others.
have preferred.
In his 2007 Foresight article “S&OP, • In a traditional environment, important is-
Forecasting, and the Knowledge-Creating sues are often missing from the meeting
Company,” John Mello writes that “S&OP
agenda. That’s because they are perceived
offers a framework for companies to institu-
as big and ugly – much like a moose. Done
tionalize organizational knowledge . . . [by
properly, Executive S&OP will force “the
creating] a two-way [data] flow . . .” This is
moose” onto the table. This enables the or-
the S&OP step where such institutionaliza-
ganization to learn to accept differences of
tion takes place.
opinion as a natural and logical part of the
Once the data-gathering activity becomes decision-making process, avoiding the prac-
a well-defined and disciplined practice, tice of shooting the messenger.
required month-end activities become
routine:
• Updating files/spreadsheets
• Identifying and highlighting variances casts, which requires reconciliation of the
outside of “normal” variability Marketing View, the Customer View, and
• Updating inputs to statistical forecasting the Historical View of future demand.
models Reconciliation is the major purpose of the
• Disseminating this data/information to Demand Agreement Meeting (the DAM
appropriate people meeting, perhaps). This can be a difficult
meeting to run, seeking, as it must, to bring
The appropriate people are those line
divergent views into sharper focus and
management folks in Sales, Marketing, and
achieve consensus on the demand forecast.
Operations who are performing demand
“Successful companies,” wrote Tom Ross
planning (Step #2) and supply planning
(2005), “. . . establish a collaborative fore-
(Step #3). It is their responsibility to see that
casting process for integrating statistical and
the data received have validity and then to
judgmental forecasts.” This step is all about
prepare the data for decision-making.
establishing a collaborative demand forecast,
Demand Planning (Step #2) which is checked against the last call to the
Having possession of new month-end data, Annual Business Plan, and then passed to
demand planners should update their fore- the Supply Planning folks.

www.forecasters.org/foresight FORESIGHT 35
 Supply Planning (Step #3) greater achievement. The change in culture
Supply Planning has operations responsi- and climate needs to be a clear objective
bility – manufacturing, procurement, logis- from the get-go.
tics, warehousing, outsourcing, and more. Each meeting is geared to making collab-
Supply plans are updated after taking into orative decisions. Keep in mind, however,
account inventory and/or backlog goals and that running a business is not a democracy.
the collaborative forecast from demand plan- If consensus cannot be achieved, leadership
ning. has the responsibility and authority to make
The feasibility of the new supply plans is clear decisions. Every participant should feel
tested through rough-cut resource models, obliged to disagree with views expressed
the details of which I discuss in detail in my when appropriate. Given an opportunity to
Spring 2010 Foresight column (Stahl, 2010). influence final decisions, participants are
As a result of this procedure, there may be more likely to support whatever final deci-
(a) an increase or decrease in staffing and sion is reached.
capital equipment, (b) an effort to outsource Pre-Meeting (Step #4)
additional volume or recover some currently In attendance at the Pre-Meeting are
outsourced volume, and (c) some constrain- normally middle managers across the range
ing of demand by being selective about of disciplines – demand, supply, procure-
customers. ment, finance, new product, logistics – many
Overall, steps 1-3 should ensure that demand of whom were involved in the demand- and
and supply are managed as a set of connect- supply-planning steps. The facilitator of this
ed activities and the results made ready for meeting is usually the S&OP process owner
executive review and action. or the supply-chain manager.
Because the primary objective of this meet-
ing is to provide a broad cross section of the
organization with the opportunity to influ-
ence decisions, the size of this meeting can be
imposing. Segmentation into smaller groups
can help utilize the time more efficiently.
The desired outcomes:
•W
 here there is consensus, make final deci-
sions that are within the framework of the
existing policies, budgets, and risk levels.
•W
 hen actions are required that are outside
the existing policies, prepare a single set of
recommendations to executive manage-
ment.
•W
 here agreement cannot be reached,
develop alternative scenarios showing vari-
THE MANAGEMENT MEETINGS ous actions and consequences to resolve a
Two meetings constitute the final decision-
given problem.
making part of the Executive S&OP process:
• The Pre-Meeting (Step #4) • Update the financial view of the business.
• Set the agenda for the Executive Meeting.
• The Executive Meeting (Step #5)
Executive Meeting (Step #5)
In these final two steps, leadership makes
This is the culminating event of the monthly
decisions and institutes the changes in
Executive S&OP process. Attendees include
culture and climate that are required for
36 FORESIGHT Fall 2010
the CEO (GM, Managing Director, etc.) and lurking in the room, no one talks about it.
most of his/her direct reporters. An addi- Changing this company attitude is what I
tional person from each department may call “getting the moose on the table.” I believe
be there as well to support the leader of that that success in using Executive S&OP comes
discipline. Based on the agenda for a given not only from the proper application of its
meeting, ad hoc participants may also be tools, techniques, and processes, but in large
invited to attend. The administrator of this measure from the behavior of people with
meeting is usually the person who facilitated the willingness to get tough issues out in the
the Pre-Meeting, but the owner of the meet- open.
ing is the CEO.
Executive S&OP should force the moose
Within the framework of the agenda recom- onto the table. Doing so is particularly chal-
mended by the Pre-Meeting, the objective of
lenging in organizations that are conflict
this session is to: averse. Such companies will need to learn:
• review general business performance to • to accept differences of opinion as a natu-
goals – financial, customer service, etc.;ral and logical part of the decision-making
• review the major decisions made at the process;
Pre-Meeting; • to avoid the practice of “shooting the
• review consensus recommendations where messenger” – aversion to conflict is usually
they fall outside existing policies, strategies, the path people take who know that if they
current business plans and budgets, and raise a problem they will be linked to caus-
approved risk levels; ing the problem – and
• decide among alternative actions where • to strive for consensus, being aware that
consensus could not previously be reached; consensus is not the same as unanimity.
and
• decide whether or not to change the current I believe that success in using Executive S&OP comes not
call to the Annual Business Plan. only from the proper application of its tools, techniques,
and processes, but in large measure from the behavior of
people with the willingness to get tough issues out in the
open.

Absent conflict resolution, decisions are

often avoided. This in itself is a decision –
do nothing, sweep the problem under the
rug, and maintain the status quo. On other
occasions, uninformed decisions are made
by those in the organization who are not in
complete possession of the facts, and unin-
formed decisions are poor decisions.
In both executive-level meetings, the inten-
PUTTING THE MOOSE tion is to put the unfettered truth on the
ON THE TABLE table, and to do this sooner rather than later,
In many companies, there are very important so that there’s still time to take proactive
issues that never seem to make the agenda actions. Because brutal honesty is encour-
of executive meetings. That’s because these aged without repercussions to participants,
issues are perceived as big and ugly – much these meetings can take on a very serious
like a moose. Even though the moose is tone.

www.forecasters.org/foresight FORESIGHT 37
 Nevertheless, we find a number of common • Once this culture and climate is achieved,
attributes in companies that do Executive the organization is as concerned with
S&OP well: maintaining the quality of the process as it
• Even though tough decisions are at hand, is with the outcome.
the atmosphere tends to be informal, • There is a routine, end-of-meeting evalua-
comfortable, and relaxed. tion of the process and, periodically, a self-
• Disagreement, although discomforting, audit designed to improve the procedure.
does not bring on negative energy. People Hard benefits usually come in quantum
have learned how to disagree without being leaps, far surpassing expectations. They do
disagreeable, and how to stay focused on not, however, come directly, but are the result
solving the problems. and consequence of the soft benefits that
• Attendance is not a problem because every- cannot be so easily quantified. In companies
one understands that the meetings are criti- using Executive S&OP successfully, these soft
cal to the formation of policy, strategy, plan benefits are seen on the faces of the people
and financial performance, and risk. doing the work, and felt in the tone of discus-
• By blurring departmental boundar- sions that take place.
ies, every unit comes to see the business
RESEARCH STUDY TO FOLLOW
through the eyes of others, and realizes
Earlier this year, John Mello and I began
that this is a team sport.
collaboration on research into the culture and
• All are willing to accept final decisions, climate change that occurs when a company
because everyone had an opportunity to has effectively implemented Executive S&OP.
influence the outcome. The project is based on interviews with key
personnel in seven companies. We will be
sharing our findings with you in Foresight
Bob Stahl has spent 30-plus years during 2011. Keep your eye out for them.
as a practitioner and coach to manu-
facturing companies developing REFERENCES
leading-edge processes for their Mello, J. & Esper, T. (2007). S&OP, forecasting,
manufacturing, logistics, and supply- and the knowledge-creating company, Foresight,
chain practices. He is a teacher, writer, Issue 7 (Summer 2007), 23-28.
and S&OP coach, and has coauthored Ross, T. (2005). The sales forecasting revolution
six books, including Sales & Operations at Brooks Sports, Foresight, Issue 1 (June 2005),
Planning: The How-To Handbook, 24-28.
3rd Edition, and Sales & Operations Stahl, R. (2010). Resolving a family feud: Market-
Planning: The Executive's Guide. Three facing versus lean manufacturing families,
of his books are used for professional certification. Bob heads Foresight, Issue 17 (Spring 2010), 32-36.
up the consulting practice for TF Wallace & Company and is also
Foresight's S&OP Editor.
RStahlSr@aol.com

38 FORESIGHT Fall 2010

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