By Gary Cokins, Founder of Analytics-Based Performance Management LLC
In my initial blog in this series related to integrated business planning (IBP) I described IBP as seamlessly integrating user interfaces and workflows. IBP links strategic, operational, and financial objectives and plans to improve employee alignment with the executive team’s strategy and financial performance. In my second, third and fourth blogs I discussed, respectively, how IBP is part of the solution for issues and needs related to strategy execution and next to product, channel, customer profitability and operations, processes and productivity improvement and then in my fifth blog of the series to driver-based budgeting.
In this final blog I will discuss issues, needs and solutions related to behavioral change management and how IBP is part of the solution.
What are the barriers slowing the adoption rate of IBP?
Organizations seem hesitant to adopt IBP. Is it evaluation paralysis or brain freeze? Most organizations make the mistake believing that applying IBP is 90% math and 10% organizational change management with employee behavior alteration. In reality it is the other way around – it is more likely 5% math and 95% about people.
With hindsight, we now realize that past barriers impeding the adoption rate are easily removable. That is, technical barriers such as disparate data sources or low quality “dirty” data now have software solutions like extraction, transform, and load (ETL). Problems like insufficient data are also not insurmountable with a little effort. We also now realize that poor implementation of IBP methods can be knocked down with experienced consultants or better training courses. Other barriers are misperceptions that IBP methods are too complex or from initial failures with prior pilot projects. But these are not show-stoppers, and they too can be overcome.
What other barrier continues to obstruct the adoption rate of IBP? That barrier category is social, behavioral and cultural. These obstacles include people’s natural resistance to change; fear of knowing the truth (or of someone else knowing it); reluctance to share data or information; and “we don’t do that here.” Never underestimate the magnitude of resistance to change. It is natural for people to love the status quo.
The need for IBP
I have learned that ambiguity and uncertainty should be a business analyst’s friend. Why? If getting answers were easy, a business analyst’s salary would probably be lower!
However, a problem with removing behavioral barriers to deploy IBP is that almost none of us have training or experience as organizational change management specialists. We are not sociologists or psychologists. However, we are learning to become like them. The challenge is how to alter people’s attitudes.
One way to remove cultural barriers is to acknowledge a problem that all organizations suffer from their imbalance for how much emphasis they should place on being smart rather than being healthy. Most organizations over-emphasize trying to be smart by hiring MBAs and management consultants with a quest to achieve a run-it-by-the-numbers management style. These types of organizations miss the relevance of how important is to also be healthy – assuring that employee morale is high and employee turnover is low. To be healthy they also need to assure that managers and employees are deeply involved in understanding the leadership team’s strategic intent and direction setting. Healthy behavior improves the likelihood of employee buy-in and commitment. IBP is much more than numbers, dials, pulleys, and levers. People matter – a lot.
When organizations embark upon applying or expanding its use of IBP, I believe they need two plans: (1) an implementation plan and (2) a communication plan. The second plan is arguably much more important than the first. There are always advocates for a new project, but there are also nay-sayers. Knowing in advance who the nay-sayers are is critical to either win them over or avoid them.
Why does shaken confidence reinforce one’s advocacy?
Here is some disturbing research from the field of psychology that relates to the social barrier. It deals with why people actually hang on stronger to their ideas even after they learn their ideas are proven wrong. Using tests with a control group, the researchers, Gal and Rucker, revealed that the more that people doubt their own beliefs, then paradoxically the more they are inclined to support and lobby for them. The test subjects who were confronted with evidence that challenged and disproved their beliefs subsequently advocated them even more aggressively compared to the control group.
This finding is bothersome because applying fact-based quantitative statistics and logical improvement methods are superior than making decisions based on intuition and gut feel. How can we transform people who are a “Dr. No” into a “Dr. Know”? Shouldn’t executives and managers desire to gain insights or know something about the future before their organization gets there? How valuable should it be to them to know things that their competitors do not know?
Early adopters and laggards
Another barrier involves organizations that are too distracted with problems and prefer to search for quick fixes. The urgent crowds out the important. They do not take the time to solve problems with a better way. In our personal lives, many of us have no problem making everyday decisions, such as whether or not to purchase a smart phone or join a social network. How can we as individuals make decisions so quickly, while organizations often struggle and are slow to react?
The field of marketing scientifically examines influences on the rate of adoption of products, services and technology. Everett Rogers, a business researcher, developed his Diffusion of Innovations model with five categories of adoption: innovators, early adopters, early majority, late majority and laggards. Which category best describes many organizations with respect to adopting analytical methods? My observation is that most fall in the laggards category.
I believe there is the explanation for the laggards is not simply due to resistance to change but rather they are too distracted. There is no doubt that increasing volatility is part of the problem. Examples include changes in consumer preferences, foreign currency exchange rates, and commodity prices. The Internet, global communications, social networks and relaxation of international trade barriers has introduced vibrations and turbulence. But is increased worldwide volatility a good enough reason to not adopt IBP methods?
Organizations that want to move beyond the laggards category must take on the mentality of the early adopters, who understand the importance of IBP to enhance decision making and align employee behavior and priorities to execute the executive team’s strategy. They must be proactive, not just reactive. Most importantly, remember that it’s never too late to go from being in the middle of the pack to taking a commanding lead over your competitors. Organizations that achieve competency with analytics are able to sustain a long-term competitive advantage.
IBP for value creation
Always remember that in the absence of facts, anybody’s opinion is a good one. And usually the biggest opinion wins – which is likely to be that of your boss or your boss’ boss. So to the degree your executives and work colleagues are making decisions on intuition, gut feel, flawed and misleading information or politics, then your organization is at risk. Does your organization know, or do they think they know? By creating doubt one can overcome resistance to change.
Until an organization gains mastery over validly answering questions and managing its operations with IBP, it will plod along and muddle through improving its performance rather than accelerate value creation.
 David Gal and Derek Rucker; Northwestern University’s Kellogg School of Management; “When in Doubt, Shout”; Psychological Research; November, 2010.
About the Author: Gary Cokins, CPIM
Gary Cokins (Cornell University BS IE/OR, 1971; Northwestern University Kellogg MBA 1974) is an internationally recognized expert, speaker, and author in enterprise and corporate performance management (EPM/CPM) systems. He is the founder of Analytics-Based Performance Management LLC www.garycokins.com . He began his career in industry with a Fortune 100 company in CFO and operations roles. Then 15 years in consulting with Deloitte, KPMG, and EDS (now part of HP). From 1997 until 2013 Gary was a Principal Consultant with SAS, a business analytics software vendor. His most recent books are Performance Management: Integrating Strategy Execution, Methods, Risk, and Analytics and Predictive Business Analytics.