The most misunderstood concept: Planning - Part 2

This post is a continuation of Chapter 1 of the MMM series, in which I made the case that "planning" is actually more about preparation - developing more capacity & capability to handle the growing complexity around us.

Having worked in ‘Tech.’ for 23 years and lived in Silicon Valley for 15 years, I’ve met with hundreds of employees of various companies and seen what fundamental mistakes tech. companies and their leaders make. Their incorrect assumptions and category errors trap those companies into a course of action from which they see no way out.

At the slightest hint of deteriorating revenue or eroding profit, their leaders blame their people, label them as “underperformers” and lay them off. Intuit is the most recent example. When they eventually fail, they blame it on changing customer preferences, disruptive innovation by competitors, regulatory changes, etc.

This post is dedicated to the countless employees who have been put on a PIP (Performance Improvement Plan) and then laid off.

In this week’s Cyb3rSyn post, I’ll discuss some of those traps which tech. company employees and leaders get themselves into and discuss some ideas with which you can avoid them and/or course correct. I’ll also provide a real-world example in which many of these ideas come alive. Hopefully, this post gives you insights to pivot away from top-down deliberate strategy to emergent strategy.

Table of Contents

• Finance vs Product

• OKR vs MBM

• Complexity vs Predictable Goals

• A New Perspective on People

• Bonus Takeaway - Focus

• Real-world Example

Let’s dive in…

Finance vs Product

It is not a coincidence or an accident that the finance department of Toyota, (the company about which most books have been written about and is also well-known for its practices rooted in systemic thinking) can’t place any financial controls/limitations or budget cuts on Toyota Production System (TPS).

But in Silicon Valley, leaders say they trust their people but establish an annual budget planning process that is top-down. The revenue and profit margin for the next year is pulled out of thin air (pressure from market “analysts” and “investor” day) by highly paid MBA-types (rolling up to and including the CFO) and set as a top-down annual goal. Any bottoms-up ideas and funding requests get shot down as existing power structures maintain the status quo.

In most corporations, finance is all powerful and controlling - therefore, planning becomes a once-a-year "numbers game". This is how profit turns into THE real-world motive and the production system ends up chasing growth and not focus on development. The customer is mostly forgotten.

The environment changes rapidly (chip shortage due to pandemic, new products by competitors, etc.) but the company is locked into an annual budget plan and chasing efficiencies due to previous years’ goals for profit margin. The C-Suite is happy with this model because it drives up the stock price in the short-term - let’s not forget that most of their compensation is in stock.

What can a CEO do instead?

Planning should be done based on your means of production. It should be the one that dictates what your corporation can do to create both short and long term value for your customers and stakeholders. Profit is just a side-effect of that value creation process. Don’t allow your finance team to become all powerful.

Finance as a function should be subservient to the product teams. They should provide the necessary real-time data and insights so that the production system (teams that design and build the product) can make timely decisions. Allow anyone in the company to propose and implement new ideas - at any time during the year.

Organize around work - not job families. Finance should track what products/projects are funded and what ROI is expected from them. More on that in the next section.

Subscribe to "I'm Serious" to read the rest.