What does AOP mean in business? An operating plan helps companies set goals, align teams, and remove ambiguity. Without a plan, employees are left wondering where they are headed and what needs to be done. AOPs also help companies avoid mistakes and create a clear vision for their company’s future. While making a list is simple, creating an effective one is much more challenging. Here are some tips for making an effective operating plan.
One of the first steps to creating an AOP is to establish measurable objectives. You can measure these goals using KPIs. This helps you determine how well you are progressing towards those goals. Also, you can track whether your KPIs are leading or lagging, a critical component of your AOP. Make sure you include stakeholders in the process if possible. By including them in the process, you can ensure that your AOP is as effective as it should be.
Another step in creating an AOP is to identify the business’s priorities. The finance team can help by identifying the levers that drive value creation. The Finance team can analyze volume, price, and mix impacts of revenue. They can also identify the activities that impact functional costs, such as headcount, labor rate inflation, and outsourcing. By identifying the key objectives, they can inform the business on what is needed to support them.
AOP can be developed at any time of the year, but it is most beneficial to start it before the fiscal new year. By doing this, you can take advantage of tax planning strategies, and prepare for a post-holiday slowdown. AOPs are often comprised of three components: (1) the AOP itself;
AOP processes require deep engagement throughout planning. They involve a broad range of employees across business units and functions. They require meetings, iterations, and collaboration. For larger organizations, the AOP process takes a longer time, but smaller companies can achieve a similar level of alignment within their company. Using AOP to align all functions will help the company lock down product, price, and distribution initiatives. These processes will also help the company develop its budget and allocate resources.