This article is an excerpt from my upcoming book Called “The Triple Double: How to Double your Revenues, Profits and Valuation” and you’re the first to see it. It’s longer than usual as I wanted to give you a useful framework to help your management team develop a strategic plan for your business and for you to oversee implementation. I welcome your comments and feedback.
Today’s article is especially relevant for you if you’re in a high growth mode and for founders who are transitioning out of day-to-day management and transferring responsibility for strategy to their leadership teams.
Outline: Plans, Metrics, and Timelines
This week, we’ll continue our discussion of strategic oversight by discussing management’s role of developing the strategy that the board will ultimately approve. The three steps include planning, identifying metrics to measure progress, and assigning timelines for implementation and monitoring.
Figure 130.1 Management’s Role
As a reminder, your business purpose is about your strategy. In other words, it’s about how you provide value to customers in a way that creates a long-term, sustainable, differentiated, competitive advantage for your business. In today’s fast-paced global business world, long-term seems to be about two to three years!
It’s management’s job to create the strategic plans, the operational business plans, and the budgets (both operational and capital expenditure) that guide the business into the future. It’s the board’s job to evaluate and enhance these plans, and then approve the plans (we’ll discuss the approval process in the next issue).
Many companies that I’ve worked with gather their leadership team at an offsite retreat, review prior performance, assess future opportunities, and develop strategic plans for the future. That’s a good approach to strategy. The best companies take a detailed look at how they can leverage their unique strengths and talents to create a long term, sustainable, differentiated, competitive advantage. They best ones know their competitors and their customers and how to position themselves.
This process, and it’s not just an annual event but a continual process, is time that is very well spent. A good strategy will generate superior business results and create significant shareholder wealth.
Now, let’s analyze the three steps in more detail.
Figure 130.2 Plans, Metrics, Timelines
A business needs a plan. If it’s not written down, it’s not a plan.
Are your plans written down? Does management use them to guide their decisions and actions on an ongoing basis? Do you know how you’re performing compared to your plans?
A strategic plan is about the long-term and overall strategic direction of a company in the current market and in the future. It includes an analysis of competitors, the impact of technology, environmental trends affecting your industry, and identifies risks and your plans to mitigate them. The plan concludes with clarity on where you need to position your company to create a long-term, sustainable, competitive, differentiated advantage.
Many companies use off-site retreats to develop their strategic plans. The best companies that I’ve worked with develop clear priorities and actions for the next two to three years, and then meet quarterly to review results and adjust their plans in real time. Strategic planning is not an annual event, it’s a continual process.
A business plan tends to be more operational and more short term in nature, typically the next operating year. It deals with how you will attract customers, deliver your value, manage your finances, and attract and retain talent. All of these need to support the strategic plan.
A budget is how you will allocate your financial resources to drive your growth. If you use a rolling five quarter or thirteen-month budget, the annual budgeting process will be eliminated and you will constantly have a relevant budget, and remember to include CapEx. In the absence of a written strategic and business plan, your budget becomes your strategy.
If you carry bank debt, your banker will require your annual budget and perhaps your business plan. That’s a great discipline for smaller companies who may think they’re too busy to formalize their planning. This thinking will also keep them small. In this case, your banker is doing you a huge favor if you’re not already doing these valuable management activities of planning and budgeting. Now, it’s up to you to use the plans and continually evaluate your performance.
If you don’t have any of these—a strategic plan, a business plan, or a budget—then your customers, suppliers, and employees are in charge of your strategy. That is not good.
How confident are you in the importance and accuracy of your strategic plan, business plan, and budget?
Metrics increases accountability and accountability increases performance.
When we played street hockey as kids, we always kept score, because the score mattered. Metrics allow you to track progress on your major strategic initiatives, short term business plan goals, and performance against your budget.
One method is to compare metrics to the plans and use an exception-based report that flags variances outside of acceptable parameters. This way, you can have a real-time exception reporting system on your business. Management doesn’t need to wade through pages of data to figure out what is and isn’t working. Results that are beyond normal parameters, both good and bad, are identified. Now, you can fix the problem areas and repeat the successful areas.
Metrics can be objective and subjective. They just need to be reported. A daily flash report can measure safety, production, sales, and cash position. These can be summarized into a weekly management report.
Figure 130.3 Weekly Flash Report
What’s the score in your business? How are you tracking progress on strategic initiatives?
Timelines create discipline and discipline creates results.
Everyone is busy! Does your company, or, more specifically, do your people, struggle with trying to get too many unimportant but urgent things done in a day, and not enough important strategic initiatives done in a year?
Focusing on accomplishing strategic goals in the long-term can be much more important and valuable overall than chasing short-term numbers like some public companies do.
Here is what Ewen Morrison, president and founder of EMW Industrial, says about goals and timelines. “If we slay a one-eyed giant [an issue or initiative] every month, we’ve made progress on 12 important items during the year. That’s progress on what’s most important for the company and for providing value to our customers to help them succeed. We’re continually building long-term strategic capacity to support future revenue growth.”
How many one-eyed giants have you slayed in your business this year?
It’s management’s role to develop the plans, identify the metrics, and create the timelines so that you can evaluate performance and contribute your expertise and experience to improve results. A strong board, whether an advisory board or a fiduciary board, will help the CEO and his or her team to continually strengthen the company’s performance.
That’s the advantage that private companies have over public companies. Private companies can focus on strategy execution for long-term benefit of its shareholders and customers whereas some public companies may be business chasing short-term quarterly numbers.
How I Can Help
If you’d like to discuss how your management team can develop and implement a strategic plan in six hours—called Six Hour Strategy®—please send me an email or give me a call.
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