Page 126 - Performance Leadership

Chapter 7 Business Interfaces Drive Collaboration • 115

usually the variance between the results at the end of the period and
the original plan, budget, or subsequent forecasts. This way of working
can easily lead to the wrong behavior. It becomes important not to over-
shoot the target by too much, because it will negatively affect next
period’s target. When a cost budget is not fully used, it becomes impor-
tant that it be spent as soon as possible; otherwise next year’s budget
will be smaller. Rolling forecasts, aimed at continuous improvements
help, but these are usually vertical of nature as well. The finance
department collects and aligns all plans from each individual depart-
ment, and cascades down a new financial translation.
Measuring the efficiency of the business interface between finance
and operations here is pretty straightforward: Are all deadlines in the
workflow made? Bringing in the horizontal alignment approach adds
precision and more meaning to the process. Operational plans from
managers are interdependent. Sales can only sell what manufacturing
has produced, or the other way around. Likewise, investments in logis-
tics need to be aligned with production and sales too. Cost-saving tar-
gets in procurement also depend on the same value chain. Supporting
functions operate under the same principle. IT capacity is linked to the
demand of the business functions. The HR targets for hiring people
are connected with the FTE budgets of the various departments. A
more horizontal approach for budgeting, planning, and forecasting
leads to managers aligning their plans with their peers before submit-
ting them. This makes the process more complicated, but also more
realistic and aligned. The feed-forward indicator in this approach
would be the variance between the estimates the various departments
make. If there are multiple rounds of planning, variances in the first
round of the process are bound to exist, and they should be eliminated
in the last round of planning. Figure 7.8 shows the feed-forward and
feedback indicators, as well as an indicator for the business interface
itself.

Case Study: La Réunion

Brasseries de Bourbon, an operating company of beer brewer
Heineken on Ile de la Réunion in the Indian Ocean, has been pio-
1
neering the concept of business interface metrics. La Réunion’s work