Finance & Operations

Operating Reviews: 6 Preparatory Practices for Successful Execution

July 6, 2012

<Operating reviews. No other meeting consistently impacts the performance of a company more. But in order to execute them successfully, you’ve got to be prepared.

Vince Lombardi once famously said that the will to win is not nearly as important as the will to prepare to win. In other words, wanting to be successful at something — whether it’s football or business — is the easy part. Preparing well enough to execute the drivers of that success is the real challenge. That’s why the six practices below can be the difference between executing marginally helpful quarterly operating reviews and highly informative ones.

1. Develop Long-term, Company-Level Aspirations and Goals

Since one of the outcomes of quarterly operating reviews is to ensure you are aligned with long-term goals, you need to make sure you’ve established those long-term goals in the first place. Ideally, you’ll have done that already and communicated your mission, vision, values, strategy, and annual goals for the company. You should also ensure that all of your department managers have a clear understanding of those goals and that they’ve clearly conveyed them to your employees.

If you haven’t worked out your long-term aspirations and goals, you need to do so before proceeding. Check out OpenView’s eBook, What Really Matters: A Guide to Defining and Realizing Your Company’s Aspirations for help getting started.

2. Ensure Each Operating Unit Understands Its Long-term Goals and Responsibilities

To complete this step, your company’s CEO and CFO must lead the charge together by:

  • Determining the long-term goals that each of his or her operating unit heads is responsible for
  • Ensuring that what it means to successfully complete each goal is clearly defined
  • Requiring unit heads to understand the importance of quarterly operating reviews
  • Delivering draft presentations and other supporting materials to the participants well in advance each operating review
  • Making it clear that all unit heads must take responsibility for their respective goals

3. Have Each Operating Unit Develop Its Operating System Framework

Each unit head (working with the CFO and, in some circumstances, the CEO and/or outside advisors) should have an objective framework in place for the unit to assess itself on a regular basis. Overall, there should be visible and well-communicated information available to all of the senior managers, including:

  • The unit’s longer-term goals and, possibly, its aspirations
  • A summary of the unit’s current quarterly goals and measures against those goals
  • Plans to achieve the goals, including the specific tasks and associated deliverables
  • Current operating methodologies
  • KPI targets and results
  • Analytics and drivers behind each gap in performance (updated periodically)
  • An organizational chart that identifies key gaps
  • A unit calendar that helps everyone understand the key meetings and the overall approach to managing the unit
  • Ongoing lists of issues and a list of possible goals for the following quarter
  • Required resources, if any, to achieve goals
  • Anticipated impediments and plans to remove them

4. Set an Agenda

The best operating reviews are separated into two sections: One that catches everyone up on the unit and the current state of the markets, and another where the conversation is focused on the unit’s future direction. The first part is retrospective in nature; the manager updates everyone on the progress since the last operating review, reflecting on what worked and what didn’t, and why. This part of the meeting serves as a forum to:

  • Remind everyone of the unit’s longer-term goals and the goals that were set for the prior quarter
  • Compare results against goals from the prior quarter
  • Review the successes and failures of initiatives from the last operating review
  • Analyze KPI results for the previous quarter against short- and long-term targets
  • Dive deeper into the KPIs that are off-target and discuss possible causes for the gaps
  • Examine the organizational chart
  • Review assessments and/or capability maturity of the unit
  • Discuss obstacles to improvement
  • Describe the current issues and opportunities in the department and the list of ideas for improving them

The second part of the meeting is prospective in nature; participants help the operating manager determine the best possible goals for the following quarter. This part of the meeting serves as a forum to:

  • Discuss the potential goals developed by the operating unit prior to the meeting
  • Brainstorm a list of potential initiatives going forward
  • Exchange a list of potential things to stop doing going forward
  • Prioritize (first cut with a rough cost/benefit) the goals for further review at a later prioritization meeting
  • Discuss the new resources that might be required to meet the goals and the resources that will be freed up through productivity improvements, as well as the tasks that the unit will stop doing
  • Examine possible impediments to success and approaches to removing them
  • Determine a rough prioritization of the unit’s most important goals

During this part of the meeting, participants should offer independent ideas to identify the complete set of potential goals, debate the merits of each, and determine the short list of prioritized goals.

5. Assign Roles

There are three primary roles for the preparation of an operating review.

The CEO is responsible for:

  • Ensuring that the team is fully committed to the operating reviews, that the unit has the right set of outside advisors, that the first set of KPIs for each operating unit has been established, and that dashboards to report on the KPIs have been established
  • Reviewing and commenting on draft presentations
  • Providing support for any necessary changes moving forward
  • Helping the unit heads identify better approaches for assessing their units
  • Helping to identify each unit’s strengths and weaknesses
  • Bringing new practices and people to the attention of the unit heads to help the units function better
  • Offering possible goals and helping to prioritize the list of goals prior to the meetings

The CFO is responsible for:

  • Ensuring that each operating unit understands its budget and has the resources it needs to meet its goals
  • Educating unit heads about their unit’s economic models and long-term financial and operational goals; how their units fit into the company’s overall economic model; and how their units are measured
  • Providing top-notch (and independent) objective financial and operating metrics to the unit
  • Ensuring that the appropriate financial and operational control systems are in place

The unit head is responsible for working with the CEO, CFO, and operating unit to develop the material for the operating review.

6. Schedule the Reviews into Your Calendars

A typical operating review will take one to three hours of dedicated time depending on the preparation of the material, the importance of the unit to the company’s current long-term goals, and the number of issues in the unit. The first operating review meetings tend to be longer. As the senior management team gains experience with the rhythm, the preparation materials get better, and the participants become more knowledgeable about each unit, the meetings will tend to become shorter. Well-run units with managers who are fully prepared with the right material tend to have the shortest operating reviews, which last about one hour.

Operating reviews should be held at the beginning of every quarter. A series of meetings (one for each unit) can be scheduled over the course of one or more days, preferably off site. Since many board members will participate in operating reviews and the material from reviews will go into board packages, it is helpful to schedule the operating reviews directly before the company’s quarterly board meeting.

Find out more about the importance of operating reviews and how to execute them successfully by reading, Quarterly Operating Reviews: Moving Your Business Forward by Looking Back.

Founder & Partner

As the founder of OpenView, Scott focuses on distinctive business models and products that uniquely address a meaningful market pain point. This includes a broad interest in application and infrastructure companies, and businesses that are addressing the next generation of technology, including SaaS, cloud computing, mobile platforms, storage, networking, IT tools, and development tools.