Strategy and Tactics
Strategic planning? What you really need is timely information.
0ne of my clients uttered the damning words just a few weeks ago: "I don't believe strategic planning makes sense for a business like mine. I'm worried that all this planning will overwhelm my instinct."
"I agree," I said, to his surprise.
He was the second-generation owner of a cleaning supplies manufacturing company with sales of $5 million. The company's growth was steady, its profitability was good, and its market share was expanding slowly — all in a market undergoing massive change.
I compared him with another client of mine who'd barely survived disaster by merging with a competitor. He'd emerged from a three-year love affair with strategic planning only to find that the real world and the world he'd committed to paper had diverged in a significant way. He'd kept his eyes on global objectives, writing some of the best business plans I'd ever seen, but in the end, he had to surrender much of his company's independence. The problem was he'd spent more time planning for change than running the company effectively.
Strategic planning initially evolved as a tool for large companies and later was translated for smaller businesses by academicians and consultants because there were no other models to work from. It quickly became obvious to small-business owners as they struggled with all the detail, that the process was far too cumbersome for them.
Finally the truth is spreading slowly to advisors and consultants as well. Small and mid-sized businesses generally don't have the background, staff, money, or time to devote to traditional strategic planning.
The problem with strategic planning is not the idea behind it. Long-range thinking is as important for the closely held business as for any organization. The problem with strategic planning is the process. It is highly analytical, pulling broad objectives apart, specifying in exquisite detail individual responsibilities, numerical goals, and time-frames.
The process is not unlike a game plan for the Super Bowl. The coaches break down broad strategies into individual play combinations, which are further distilled to individual responsibilities and highly choreographed movements. Like a well-played Super Bowl, a large company's planning environment requires lots of interchangeable players, predictable conditions, understandable rules, and well-defined objectives.
But most family businesses are more likely to run a triathalon than play in a Super Bowl. Although a long-range outlook remains important, the process of reaching goals in this event requires more integration than analysis.
Training for individual competition usually focuses on conditioning, practic ing to develop coordination and sensitivity to feedback, and quite simply building experience. There aren't many coaches who would advise runners to learn control of each muscle individually. Wisely so. There's no surer recipe for a spectacular fall than being too self-conscious about what comes naturally — your performance can only improve through practice.
Strategic planning has its place, of course. As companies pass the threshold of about $10 million in sales, there's more reason for it. Their investment in the business expands, the number of managers grows, and the company begins to track financial information in greater detail (typically a controller is first hired at around this stage). More strategic planning now becomes possible — and even necessary.
No longer does the company rely almost entirely on the founder's instinct and feel for the market. The new cadre of managers enables the company to focus more of its resources on longer range, strategic issues.
For most smaller and even mid-sized companies, an accurate and timely feedback system is as close as they need get to the kind of detailed analysis typical of strategic planning. Every business, however, should have access to information on sales, costs, inventory, and general market conditions (such as commodity prices and interest rates).
What's more, managers must get this information in a timely way. Long gone are the days when you had to wait for monthly or quarterly results to come in. Now a modest investment in technology will enable you to take the company's pulse on a daily basis or even more frequently. You'll be able to identify problems immediately and do something about them.
Second, the organization chart of the business must be straightforward and understandable. Everyone on board must know who is supposed to respond to which threat or opportunity, and the organization must allow them to respond smoothly and quickly. This is the type of "conditioning" that translates mental commands into movement.
Finally, long-range expectations have to be clearly understood and shared by all people in the business. This may be all that companies under $10 million in sales ever need. Unfortunately, family businesses have real and enduring difficulty grappling with fundamental questions such as: Are we in the service business long-term? Are we going to grow by gaining market share from competitors or by adding new territory or product lines? Are we a low margin, high growth business, or a high margin, steady growth, niche business?
Companies should reach agreement on these issues — and then get back to the business. Once you and your team agree on general direction, risk levels, growth rates, and returns, it's usually past time to get back to work.
Donald Jonovic, founder of Cleveland's Family Business Management Services, is author of "Planmaker," a new succession workbook for family businesses.
CHECKLIST OF FEEDBACK SYSTEMS
What You Need To Know
Competitors' price changes
Budget to actual
|Field sales reports
Supplier pricing, delivery
Key ratios (ROI, ROS)
Sales manager reports