ALIGNING BUDGETING TO CORPORATE PLANING *How budgeting and strategic planning fit together in the overall business plan *Aligning KPIs with business objectives and the budget *Effectively identifying leading and lagging KPIs in the budget *Identifying the gaps between the actual and the budget figure to enable allocation of resources for corporate plan *Resolving the variances between the actual vs the budget figures *Effective strategies to resolve the gaps to drive the strategic direction of the organisation

1. ALIGNING BUDGETING TO CORPORATE PLANNING CNI’s Journey, Mistakes, and Lessons Learned Kenny Ong CNI Holdings Berhad

3. Our History of Strategic Planning and Budgeting

4. How “Planning” got started Succession Planning (Business Continuity) Talent Management Differentiation Performance Management System Budgeting + Planning KPIs BSC Business Model

5. How “Planning” got started Succession Planning (Business Continuity) Talent Management Differentiation Performance Management System Budgeting + Planning KPIs BSC Business Model Today’s focus

9. Today’s Agenda

11. Summary: Today’s presentation 1. Business Model 2. Strategy 3. Resources

14. 1. Get the right Business Model first

16. The Roadmap to Failure Fred Wiersema and Mike Treacy Performance Time Clear Sailing Today’s performance Ad-hoc Tactics Denial & Defense Doom Projections Overdue Failure The Moment of Truth X Performance Freefall Tomorrow’s actual performance Downpresure of Unclear Strategy

18. The Roadmap to Failure Fred Wiersema and Mike Treacy Performance Time Clear Sailing Today’s performance Ad-hoc Tactics Denial & Defense Doom Projections Overdue Failure The Moment of Truth X Performance Freefall Tomorrow’s actual performance Downpresure of Unclear Strategy

20. The Roadmap to Failure Fred Wiersema and Mike Treacy Performance Time Clear Sailing Today’s performance Ad-hoc Tactics Denial & Defense Doom Projections Overdue Failure The Moment of Truth X Performance Freefall Tomorrow’s actual performance Downpresure of Unclear Strategy

22. What is the Business Model? USP Market Discipline Profit Model

25. Intro: Market Discipline * Treacy & Wiersema, The Discipline of Market Leaders , 1995 Product/Service Attributes Relationship Image

26. Intro: Market Discipline * Treacy & Wiersema, The Discipline of Market Leaders , 1995 Product/Service Attributes Price Quality Time Selection √ √ Smart Shopper Relationship Image Operational Excellence : Quality and selection in key categories with unbeatable prices

27. Intro: Market Discipline * Treacy & Wiersema, The Discipline of Market Leaders , 1995 Product/Service Attributes √ Brand Time Function √ √ Best Product Relationship Image Product Leadership: Unique products and services that push the standards

28. Intro: Market Discipline * Treacy & Wiersema, The Discipline of Market Leaders , 1995 Product/Service Attributes √ √ √ √ Service Trusted Brand Relationship Image Customer Intimacy: Personal service tailored to produce results for customer and build long-term relationships Relations

29. Strategy: Disciplines Operational Excellence (low cost producer) Ref: The Discipline of Market Leaders , Michael Treacy & Fred Wiersema; 1995 Product Leadership (best product) Customer Intimacy (best total solution)

30. Summary: Today’s presentation 1. Business Model 2. Strategy 3. Resources  Done

31. 2. Set the Strategies Dangers of BSC, KPIs and other evils sold by Consultants

36. What is Strategic Planning? Strategic Planning Variables: Research Growth Risks Stakeholders Constraints SWOT Misc. Output: Plans Priorities KPIs

38. Focus: Corporate Alignment Financial “ To satisfy our stakeholders, what Financial objectives must we accomplish?” Internal Process “ To satisfy our customers, in which internal business processes must we excel?" Customer “ Who are our target customers? What is our value proposition?” Learning & Growth “ What capabilities and tools do our employees require to help them execute our strategy?

39. Linking BSC to Strategy Revenue Growth Base Retention Share Gain Positioning Adjacent Market New Business Operational Excellence Product Leadership Customer Intimacy Competencies Information Systems Motivation, empowerment, alignment Financial Learning & Growth Internal Process Customers Investment Strategy Productivity Market Value

40. Focus: Corporate Alignment Financial Learning & Growth Internal Process Customers / Distributors Revenue Growth Productivity Market Value Department Operations Supplier & Alliances External Involvement Target Markets Products/ Services Channel Strategies Human Resources Technology Information & Intelligence Systems & Processes

42. Example: 1 st Level BSC & KPIs Financial Learning & Growth Internal Process Customers / Distributors Profit after Tax. Revenue. Cash-to-cash cycle. Operating cash flow Customer Complaints. Customer Acquisition Rate. Product Availability. Product Quality & Service. Renewal Annual Subscription. Distributor Rank Achievement. No. of Active Distributor. No. DC/Regional Sales. Distributor with commission Customer Database Availability. Accuracy of Forecast Planning. Continuous Improvement. Response Time to Customer Needs. Perfect Order Fulfillment. Inventory Turnover. Number of Effective Sponsoring Program. On Time Delivery. No. of Effective Training. Number of Effective A&P % of staff evaluated on Core Competency Framework. % of staff with Career Development Plans. No. of training hours completed per staff. % of staff with access to strategic information. Q12 Index. % staff evaluated on Culture alignment

44. Lagging and Leading KPIs Historical, Outcome, Results, 1 st Level, Usually Financial or tangible, Quarterly and Annually Current, Indicators, Drivers, 2 nd Level onwards, usually non-financial or intangible, Weekly, Monthly and Quarterly Leading Lagging

45. Developing ‘Driver’ KPIs Customer Retention % Lagging, 1 st Level Customer Satisfaction Index Leading, 2 nd Level On time delivery Time to market for new products TNA % Defect levels, warranty claims Leading, 3 rd Level onwards

47. Strategy: Disciplines, Priorities, and KPIs Operational Excellence (low cost producer) Ref: The Discipline of Market Leaders , Michael Treacy & Fred Wiersema; 1995 Product Leadership (best product) Customer Intimacy (best total solution)

53. Strategy: Value Disciplines Operational Excellence (low cost producer) Ref: The Discipline of Market Leaders , Michael Treacy & Fred Wiersema; 1995 Product Leadership (best product) Customer Intimacy (best total solution)

54. Strategy: Value Disciplines Operational Excellence (low cost producer) Ref: The Discipline of Market Leaders , Michael Treacy & Fred Wiersema; 1995 Product Leadership (best product) Customer Intimacy (best total solution)

57. E3 – Department BSC Financial Perspective Budgeting On Time Delivery Innovation Quality OPEX CAPEX Targets Measures Goals

58. Individual Performance 2.0 Goals and Targets for Q1 6.0 Appraiser Overall Comments/ Feedback 5.0 Rating (Merit x Weight) 4.0 Merit* 3.0 Achievements and Efforts for Q1 1.0 Key Results Area (Max 6)

59. Summary: Today’s presentation 1. Business Model 2. Strategy 3. Resources  Done  Done

60. 3. Budgeting The art and science of allocating and aligning Resources to strategic plans

62. Alignment: 4-Wheels Model Culture Business Model Strategic Planning Structure Person Leadership Resources

68. Alignment: 4-Wheels Model Culture Business Model Strategic Planning Structure Person Leadership Resources

75. Budgeting vs. Priorities Upturn Flat Downturn Fight Complacency Sharpen Edge Keep Momentum Conquer NPD Cycle Time Improve Edge Extensions Counter Competitor Innovation Acquire Profits Build momentum Sales Cash Flow Focused on ‘Breakthrough’ JV, In-source, Out-source Eliminate bottom 20% Improve Top 15% revenue-generating products ↓ R&D, ↑ Sales Example: Business Situation vs. R&D Priorities

77. Activity Grid to determine budget priorities Eliminate (-) What are features/ activities/services to eliminate? Reduce (↓) What are features/ activities/services to reduce? Create (+) What are features/ activities/services to introduce? Increase ( ↑) What are features/ activities/services to increase?

78. Budgeting for Investments based on the ‘BCG Matrix’ principles CNI’s Performance Market Potential

82. Planning, Budgeting, Schedules, Processes Tying it all up

86. Alignment: 4-Wheels Model Culture Business Model Strategic Planning Structure Person Leadership Resources

87. Thank You. soft copy of slides: www.totallyunrelatedrandomanddebatable.blogspot.com