2. Metrics and Planning
Metrics and Planning (M&P) is top management’s main department, and toolset, for analyzing and elaborating strategy. M&P can be considered as a unit, just as R&D (Research & Development) can be considered as a combined function in the product and services division of the firm. Metrics includes accounting, analysis, forecasting, finance, budgeting, and any other quantitative reporting that can clarify the past and present, and provide better data and support for decisionmaking and planning the firm’s future.
This department is typically responsible for the Planning half of the specialty of Vision/Goals/Strategy & Planning, while Top Management is most responsible for Vision, Goals, and Strategy. In practice, both departments do both strategy and planning, with top management doing less detail. If a company is using Objectives and Key Results (OKRs),
a largely bottom-up goalsetting method, this department may be facilitating the process of employee goalsetting (objectives) and/or employee key results determination (outcomes by which objectives are going to be measured).
In addition to Planning, M&P is responsible for six foresight specialties in the typical firm, just as many as Top Management. In alpha order, those six specialties are:
- Accounting & Intangibles,
- Analysis & Decision Support,
- Benchmarking & Quality,
- Data Science & ML,
- Forecasting & Prediction,
- Investing & Finance.
Accounting & Intangibles have been discussed elsewhere, so we’ll say no more about them for now. Analysis & Decision Support, and their cousins Data Science & Machine Learning, have become increasingly valuable with the rise of decision support platforms, big data, and the ability to do much of this work in the cloud, or as a service, eliminating the need for many firms to maintain hardware and software.
Decision support, a blend of human and computer processes and tools, is an emerging practice that uses outcomes-testing to do more evidence-based foresight work. Decision modeling approaches like real options analysis, used by large firms for long-term capital investment decisions, is another state-of-the-art M&P foresight method. See John Mun’s Real Options Analysis (2005), and associated software, for more on this quantitative foresight technique. As connectivity, sensors, analytics, and cloud services grow in adoption, many more powerful tools and platforms for M&P foresight will emerge in coming years.
Benchmarking, which includes learning about industry and firm best practices, and designing scorecard systems for use throughout the firm, is the responsibility of this department, while Quality is often given to Operations, so we will talk about it under that department.
Forecasting now has a number of professional associations (IIF, IBF&P, and scores of economic forecasting groups) and these need to be better integrated with our primary professional foresight communities. Prediction remains a relatively minor specialty in most firms at present. Nevertheless, hundreds of firms run both internal prediction markets and ideation management platforms, and any kind of crowd evaluation system is implicitly a prediction system, so these are very important areas where foresight practice will improve in coming years.
Investing & Finance are also key responsibilities of this department. Investing includes asset management, real estate, and other major capital commitments, and is one area where better metrics, forecasting, planning, and strategic agility are rewarded. When a firm is in startup mode, with volatile sales and limited capital, cost accounting and cash flow forecasting are often the most important foresight metrics. Many firms have died while scaling up because they did not control costs, or ran into an avoidable or temporary cash flow problem.
In enterprise resource management there are also many opportunities for foresight professionals to add metrics and key performance indicators (KPI’s) that surface emerging issues, reduce risk, improve transparency, governance, and improve measurement and reporting. Triple-bottom line (economic, social, environmental) benefits and cost measurement has become the dominant approach to full cost accounting in the public sector. For more, see ACCA’s annual Accounting for the Future conference. See also Benchmarking for Best Practices, Bogan and English (2012), for more on benchmarking, another critical metrics method. Doug Hubbard’s How to Measure Anything (2010) is a primer on measuring business intangibles (brand perception, employee satisfaction, etc.), a big step to improving their management.
As we’ve said, the practice of strategic planning, as it includes both Vision/Goals/Strategy and Planning specialties, bridges both Top Management and the Metrics & Planning departments in many organizations. Strategic planning can be done rigidly and poorly, or flexibly and effectively, and it has been both misused and overused in many businesses. Some of strategic planning’s abuses and limitations are outlined in Lou Gerstner’s “Can strategic planning pay off?”, McKinsey Quarterly (1973, reprinted in 2014) and they are more extensively documented by Mintzberg in The Rise and Fall of Strategic Planning (1994) and more recently in Walter Kiechel’s excellent Lords of Strategy (2010).
Scenario planning is outlined in Peter Schwartz’s The Art of the Long View (1996), describing his experiences at Shell and Global Business Network in the 1980s and 1990s. An excellent practitioner book on “scenario learning,” the use of scenarios to test strategy and make plans, is Fahey and Randall’s Learning from the Future: Competitive Foresight Scenarios (1997). Thomas Chermack’s Scenario Planning in Organizations (2011) is also a great practitioner’s book, covering more evidence-based methods of building, applying, and assessing the impact of scenarios in organizational planning.
Foresighted firms must plan, forecast, and budget quickly, inexpensively, and often, since reality often changes plans. They will do strategic planning in the C-suite, and project management (project planning) in product or service departments. Good planners seek broad stakeholder participation in their plans, and use a variety of foresight methods, including scanning, expert groups, trend research, forecasting, and scenario planning, as front ends to strategy, to generate new options, uncover hidden threats, and generally improve outcomes.