Sales and operations planning grew from the same pain as OKRs: the budget ages faster than the company can approve it

Sales and operations planning, S&OP for short, was named in the mid-eighties by a group of consultants who identified three problems: how often planning happens, its horizon and silos in the organisation. It sounds familiar, because it is exactly the same diagnosis from which, forty years later, working with quarterly objectives grew. A budget is made once a year for twelve months, while this process looks eighteen months ahead and checks it every month. A separate cost of the old arrangement is decision paralysis: everyone knows an investment or a hire has to go ahead, and nobody does it because the budget hasn't been approved yet. One myth is worth correcting straight away: the purpose of the monthly review is not to change plans. Its purpose is to challenge them, that is, to make sure we have no good arguments for changing anything. That is a different mindset from correcting course at every twitch of the market, and it is the same one we try to set up in the quarterly rhythm.

The second common point matters more, and that is where most of the energy in this conversation goes. Neither this process nor quarterly objectives are a tool for managing the day-to-day. Both are about management, not planning, and the time in them is meant for thinking about the future. If you let a discussion about what fell apart this month into such a meeting, it will swallow everything, because the day-to-day is simply the most exciting thing in the room. Hence the call for a thick line. The link with strategy, on the other hand, works both ways, and that is the most practical thing I take away from this episode. A strategic goal tells planning what to look at: if the company wants to raise exports to forty per cent of sales within three years, the monthly forecast review simply shows whether that share is going up or down. Without that, a goal can be written into the strategy and then never tracked by anyone. In the other direction, planning gives back the predictability without which goals are wishes: the decision to buy a machine for a new product is made as much as eighteen months before series production, while the first customers only test the hypothesis a year before it. You then have to work out both scenarios out loud: how much we lose if we buy and the product fails, and how much if we don't buy and the launch is delayed.

The episode also makes a firm claim about choosing the tool, and it applies just as much to objectives. If the pain is silos, with departments not talking to each other and everyone building their own Excel sheet, a heavy process makes sense. If the pain is inventory or production capacity resulting from a badly designed process, an implementation with a lot of inertia is a mistake and a targeted project will be better. Along the way the myth that this is only for big companies gets dismantled: it is most popular in companies with more than five hundred people and five hundred million in revenue, but that comes from history, because consultants implemented it where the money was. The concept itself, checking the forecast, the resources and whether it all adds up financially, works even for a sole trader. One thing we didn't settle in this conversation, and I won't pretend otherwise. The dispute is about order: whether to sort out the day-to-day first so that you have time to think about the future at all, or the other way round, because it is precisely the neglected future that later explodes in the day-to-day like grenades. Both sides have arguments and both have seen them confirmed in their own work. We do agree on one thing, though: implementing such a system will reveal things that have nothing to do with planning anyway, such as a lack of leadership skills, an inability to lead change or a market nobody has researched.