Steering Model Redesign: The “Plan, Do, Check, Act” Principle

Reinhold Exner and Kerstin Heining

Part 2 of the “Steering Model” series.

In Part 1 of this series, we looked at how mapping out a transformation strategy must involve redesigning a steering model that aligns directly with that strategy. Here, we’ll cover how to conduct that redesign.

Setting targets

Steering means setting targets. In other words, without touching the current and new requirements towards a target-setting or budgeting process, a discussion of a steering model will by no means be complete.

While starting a steering model discussion, we will enter the area of closed-loop thinking and acting. Commonly we see a “Plan – Do – Check – Act”[1] closed loop established as steering model principle. In this model, we typically understand the components as follows:

  • Plan: Planning starts with understanding the relevant context and the needs of the parties involved, and ends up in setting clear targets.
  • Do: Planning is useless unless the plan is carried out. “Doing” encompasses putting all activities in place to operationalize the plan.
  • Check: Monitoring ensures that targets are likely to be achieved as planned.
  • Act: In case any issues are found in the “Check” step, corrective actions are needed to eliminate the causes of actual or potential nonconformities

Granularity or an aggregated view?

Would it make sense to have on the “Do” side a granular view, along with an aggregated view on the “Plan” side?

Certainly not. It needs to be sufficiently balanced. This balancing is by no means a zero-one decision. It’s a result of a management discussion and future-oriented decision, which should consider the whole steering model. Otherwise we potentially end up by confirming the utmost granularity “down to line-item level” on the “Do” side while neglecting a balanced granularity on the planning side.

Does this mean that in consequence, we generally should aim for the highest planning granularity? “Certainly not” might be the first answer to this question. In practice, the question is not that easy to answer. If we are aiming for more detailed reporting granularity, we should rebalance this requirement with a potentially revised planning philosophy.

Furthermore, we need to understand the implications for follow-up decision-making (“Check”) and resulting actions (“Act”). Again, if we aim for the highest granularity, we accept that the checking might lead us to many detailed questions and decisions and by nature, follow-up actions. A situation where the organization needs 5 days to check, perform, and monitor corrective actions on a detailed level while getting the latest reporting update on a real-time basis contradicts itself. If on the other side, we accept “Plan – Do – Check” without ambition to act, steering will become a theoretical exercise.

Angles for a New Steering Model Discussion

In many large global companies, people complain about growing organizational complexity with lots of silos, scattered accountabilities, and hence, inadequate decision-making and steering capabilities. Additionally, driven by simplified communication technology at lower cost like email and community platforms, more and more people are involved in decision-making processes, often without sufficient clarification of prerequisites, rules, and expected contribution. The result is often too many meetings and email threads with too little outcome, which paralyzes the organization rather than enabling effective and efficient steering.

In his 1982 book Megatrends, author John Naisbitt wrote, “We are drowning in information but starved for knowledge.” This quote is particularly relevant to redesign of a steering model. Data comes at us faster than we can make sense of it. In consequence, it’s not sufficient to describe a future-state steering model just by “Plan – Do – Check – Act.” We need to dig deeper into other improvement areas.

But what are the improvement areas to be considered? The next blogs in this series will explore further.

[1] Source: Plan-Do-Check-Act (also called “PDCA”) originated by Walter Shewhart and made popular by Edward Deming.

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Reinhold Exner

About Reinhold Exner

Reinhold Exner is a principal business transformation consultant with SAP. He has 14 years of management experience in various controlling functions and has worked with SAP for 8 years. He supports international operating companies in optimizing their finance organization and processes leveraging SAP solutions. Reinhold holds a degree in Industrial Engineering (Dipl. Wirtschaftsingenieur) from Technical University of Karlsruhe, Germany.

Kerstin Heining

About Kerstin Heining

Kerstin Heining is a business enterprise principal consultant, working with SAP for 8 years. She supports companies in optimizing their finance organization and processes leveraging SAP solutions. Kerstin holds a degree in Industrial Engineering (Dipl. Wirtschaftsingenieur) from Karlsruhe Technical University, Germany.