Financial and operational planning processes, typically go like this: set targets, apportion the targets to different parts of the business, and then each part of the business further assigns a portion of the target down through their ranks. Targets are usually set at the top (the board and the senior leadership team) and are usually derived using prior year performance plus a growth factor that’s been vetted by economic, market, and competitive models. The apportionment can be done by geography (since North America delivered 60% of last year’s results, they get 60% of the targets this year), by product line (the WidgetMaster 5000 accounted for half of our sales, so it gets half of the goal for this year), by headcount, or some combination thereof.
The “ranks” receive their granular targets and sometimes get to negotiate their allotment and sometimes they don’t. In a ‘top down’ plan, the likelihood of negotiating is low. Some plans are created from the bottom up: each of the “ranks” looks at their patch and assess what they thing is possible and then all those assessments are consolidated (by geography, or product line, or combination) until you get the top-of-the-house target. At that point, senior management pulls out the economic, market, and competitive models and compares it to the consolidated plan and then challenges the ranks to stretch what they think is possible and commit to a higher number than they came up with.
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Ron Dimon 