My tire dealership went from contender to champ the day we implemented a strategic planning system. The (drum roll, please) strategic plan is the sun in your systemic solar system. It illuminates the purpose of every proposal, every process, every project. Everything revolves around it. Everything radiates from it.
The strategic plan flows into team objectives, which flow into operating plans, which flow into individual goals, which flow into action plans, which, finally, flow into results.
"Our strategic plan put us all on the same page," said Jim Bemis, our CFO. "It made everyone accountable and helped us work more cohesively together. Without it, the level of success we achieved would have been unthinkable." It's not too much to say that every choice, every decision, every single action traces back to (drum roll) the strategic plan.
Seat-of-the-pantsers, particularly in smaller organizations, pooh-pooh strategic planning as a waste of time. Markets change too rapidly, they say. Its true long-term plans are subject to the whim of unexpected events. And strategic planning is conceptual at best when planning out five to seven years.
But short-term and mid-range strategic planning are absolute necessities. Certainly you can't plan for every possibility, but failing to methodically look out a year or two can be fatal.
Planning change, changing plans
Show me a leader who avoids planning and I'll show you a leader afraid of change. It's human nature. Grooves are safe and comfortable. Too much comfort, however, dulls the senses. You may think you're at the top of your game when you're actually skating on thin ice. A hockey player who rushes to where the puck is, instead of where it's going to be, will have his lunch eaten.
The best leaders expect change, embrace it, and inspire others with its promise of new opportunities. Managers who stubbornly cling to the status quo inevitably hasten a change in their own status. I'm reminded of a woman who attended a Change Management seminar only to walk away disappointed that the subject was managing change, not changing managers.
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Weave the management of change throughout your strategic planning process. Twice a month, at our executive committee meetings, people reported on what was new and different. What was the competition up to? What did customers want that they didn't want a year ago? What new tipping-point technologies were in play? Continuously challenging our assumptions kept us on our toes.
Don't be caught flatfooted, like New World Pasta. The nation's largest maker of dry pasta filed for Chapter 11 bankruptcy protection in May 2004, two weeks before Krispy Kreme Doughnuts reported its first quarterly net loss ($24.4 million) since going public four years prior.
The culprit? The low-carb diet craze -- the very phenomenon a New World Pasta veep had called "a fad" that would soon fade. Fade it did, but not before permanently embedding itself in our cultural consciousness and leaving a trail of corporate carcasses in its wake. Misjudge cultural cues and it's your company that will do the fading.
Whether you're running with the bulls or lying low with the bears, strategic planning is straightforward. Frame it with a searching question: How can we take advantage of our strengths and opportunities and neutralize our weaknesses and threats? Fix your eye on your SWOTs (strengths, weaknesses, opportunities, threats), and the right plan begins to unfold.
There are eight steps to strategic planning.
1. Identify SWOTs. You need clarity on every issue you're facing. In July (or six months prior to the next fiscal year), schedule a series of two-hour brainstorming sessions with reps from every group of stakeholders, from department heads and customers to vendors and the rank-and-file. Each group has its own point of view. Collect plenty of observations -- macro, micro and everything in between -- about internal strengths and weaknesses and external opportunities and threats. Keep it simple -- ask everyone to fill out a single sheet listing the four SWOT categories. Then merge the results into one report.
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2. Set priorities. Come September, gather the executive committee and other key people for a daylong priority-setting meeting. (The "executive committee" in smaller shops may simply be the owner and hishree top people.)
First, establish context by summarizing industry trends, competitor activity, last year's performance, and this year's financial forecasts. Next, vigorously debate which issues (gleaned from your SWOT list exercise in step one) deserve priority in the coming year, and which make the list over the next two to four years. (Best use a pencil for anything more than 18 months out.)
Simplify both lists by grouping similar issues under the same macro heading (approve no more than eight macro issues per time period). Now that priorities are set and ranked, assign them to the appropriate leader.
3. Taskforce it and plan, plan, plan. Each priority earns its own taskforce, composed of the company's natural subject-matter experts. For the next two months, they research the priority and design an action plan that assigns responsibilities and accountabilities, sets deadlines, allocates resources, and establishes controls.
4. Present action plans. Schedule a review meeting a day or two in early November that includes the same folks from the early-September gathering. Here, taskforce leaders present their action plans. Each presentation is like a Ph.D. dissertation -- it must be defended. That means respectful disagreement is essential. It pushes the taskforce to thoroughly prepare benchmarking protocols, ROI projections, and other necessities.
With the taskforce plans presented, start green-lighting. Some plans will be good to go; others will be modified based on availability of resources. (Plans requiring revision should be redistributed within two weeks.)
Of course, each strategic objective is generally multi-departmental -- hence the team approach. If the goal, for instance, is to open a dozen new stores, the executive in charge of real estate secures locations and oversees construction. Meanwhile, the CFO arranges financing; the retail operations people groom new store managers; marketing folks study the markets, develop a plan, and negotiate ad rates; IT analyzes and preps data systems.
Now that action plans are established, incorporate them into the annual grand strategic plan. The strategic plan -- ours ran 10 pages -- has two major sections. It kicks off with the company's mission, vision and operating values. Fundamental business plan issues follow -- product and service offerings, the marketplace and how you'll target it (much of this is carried over year-to-year with minor tweaks). The second section explores the company's SWOTs, and details its action plans.
It may be counterintuitive, but the strategic plan is not a top-secret document. Portions can be an ideal calling card for bankers, vendors and potential partners.
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5. Present departmental operating plans. Break each action plan into pieces and parcel them out to the right people. Those employees who have others reporting to them create individual operating plans to execute the pieces assigned to them. Department heads collect these operating plans, approve them, and roll them into departmental operating plans.
In December (or the final month of your fiscal year), round up the same group as in November to review and approve these departmental plans. Example: The accounting plan looks good except we need the financials two days earlier. Departmental and individual operating plans are then updated.
6. Budget it. Start the budgeting process in early November. All four parts of the corporate budget -- projected P&L statement, projected monthly cash flows, projected balance sheet, and capital expenditure plan -- should be built off last year's performance and this year's SWOT-powered operating plan.
7. Follow up. A poorly executed plan isn't worth the spreadsheet it's printed on. Follow-up is critical. After all, enthusiasm can wane. Attention can be diverted.
8. Team update. Gather the entire company for a few hours each month or quarter to motivate, inform, celebrate and educate. Have department heads update people on wins and losses, what needs to be done over the next period, and how the audience can make it happen. Solicit ideas and questions. It's also a good time to salute birthdays, births and employment anniversaries.
At first blush, the creation and execution of a strategic plan appears as complicated and overwhelming as learning a foreign language. Sure, it takes discipline and hard work, but following these eight steps can deliver you to the Promised Land. After upgrading our strategic planning, our profits increased tenfold and revenue soared from $40 million to $200 million in just eight years.
Coincidence? I think not.
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SWOT teamwork
Tom Gegax, cofounder and chairman emeritus of Tires Plus stores, founder of Gegax Management Systems and best-selling author of business management books, says to succeed in business, keep an eye on your SWOTs:
* Strengths,
* Weaknesses,
* Opportunities, and
* Threats.
You need to be clear on every issue your business is facing, says Gegax. Collect opinions and observations from all departments. Each one will have a different -- and useful – perspective.
Three-step approach to following up: Meetings keep everyone in the loop
Here are three ways to monitor the results of your strategic planning:
1. Six months after approval (and again six months later), convene the executive committee for an operating-plan review. Each department head introduces his key reps (from the accounting department, it may be the controller, treasurer and accounts payable manager) to present progress reports comparing accomplishments to operating plan goals.
2. The presenters, and the department chief, grade their own performance. The group's accomplishments and grades (later factored into employee annual bonus calculations) are open to compliments and challenges. The department head wraps things up with a summary of successes and shortfalls over the last six months as well as expectations for the next six months. Once complete, all but the department head who sits on the executive committee are excused, and another department files in.
Each manager keeps the operating plan humming by meeting one-on-one two to four times a month with everyone who reports to him.
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3. Regular, one- to three-hour executive committee meetings throughout the year -- once a week to once a month, depending on team experience and the pace of change (ours was every two weeks) -- keep the strategic plan on track. The agenda typically includes:
* mid-month review of P&L, including department-by-department response; * monthly review of key departmental metrics;
* brainstorming on inter- and intra-departmental challenges; * round-robin sharing of new ideas or recent successes;
* competitive updates; and
* introduction of new enterprise-wide policies and programs.
Source: "By the Seat of Your Pants: The No-Nonsense Business Management Guide"
Best-selling author Tom Gegax, cofounder and chairman emeritus of Tires Plus stores, served as that company's chairman and CEO for 24 years. By the time he sold the company to Morgan Tire & Auto Inc. in July 2000, it had mushroomed from a concept sketched on a restaurant napkin to a market leader with 150 upscale stores in 10 states and $200 million in revenue. Thanks to Tom's warm-hearted, tough-minded approach to management, and his team's relentless focus on customer service, the company's turnover rate ranked among the industry's lowest, and its guest enthusiasm index reached 98%. He was named Modern Tire Dealer's Tire Dealer of the Year in 1998. In 2000, Gegax founded Gegax Management Systems (www.gegax.com) to help growing companies raise profits and reduce stress through fast and affordable business management guidance. His most recent book, "By the Seat of Your Pants: The No-Nonsense Business Management Guide," is already a national bestseller. It can be ordered on the www.moderntiredealer.com home page. Gegax can be reached via e-mail at [email protected] or by calling (877) TOM-GEGAX (866-4342).
