Most every business school teaches that you have to have a business plan in order to put the business on solid footing. However, a number of businesses get off the ground and become successful, at least in the short-term, without such a plan. Yet, even these businesses may eventually require a business plan. When the entrepreneur is looking for investors, or when the business owner wants a bank loan to expand or buy a piece of equipment, the first comment is likely to be: “Show me your plan.”
The complexity of the plan can vary a great deal depending on the nature of the business. In simple terms, the plan describes how a business is going to have enough revenues to cover its expenses with enough left over to make it worthwhile for the owners. The amount of detail is based on what’s required to communicate how things will work for those who have to make the business decisions.
Communication is just one essential value of the business plan. Perhaps an even more basic value is what comes from thinking through and defining the objectives for the business. Closely associated with this thought process is determining how to make the objective become a reality. Putting it in an organized document is the final critical step. Written documents help stabilize actions and improve clarity of thinking. The next step is making it a reality.
All this seems like common sense. Therefore, one would expect that you could ask any business owner for their business plan and they could easily produce it. Could your business produce one? If yes, you are way ahead of many organizations. If not, why not? The answers may be very revealing about the organization, its operations and management practices.
Once the business is up and running, however it happened, you may ask if you still need a business plan. The answer is yes, if you are going to ask people for money or long-term commitments. In fact, there may be a strong desire to look into what you plan to do over some period of time. Determining how you will navigate the future can be highly instrumental in assuring that all the work you did in getting the business off the ground will still be viable when you want to sell it, pass it on to the next generation, or take it to the next level.
Strategic plans are like business plans, except they generally begin with an established situation and tend to be more specific in terms of timelines, outcomes and accountability; that is, if there is a strategic plan at all.
A strategic plan of action often starts when someone in the human resources department or a consultant convinces top management that it would be a good idea to create a strategic plan, based on some pending event or crisis. Then a bunch of the top executives go off to a conference center for a couple of days where someone helps them define the issues of: Mission, Vision, Values. This creates the umbrella under which the plan is supposed to operate.
Next, they may consider organization strengths, weaknesses, threats and opportunities. This discussion likely generates a number of projects. They may even identify who is the “champion” for implementation. The game plan then gets documented in a binder. There may be some general communication to employees that a plan has been developed. Some executives may jump on their assigned projects and stay the course for some period.
However, in general, it’s business as usual. The plan may be looked at again in six months or a year to see how things are going. The reality is it takes strong top-down leadership or a well designed, tied-in compensation plan to drive necessary organization behavior in assuring success of the strategic plan.
Why does this happen? People are motivated by immediate pressures, organization dynamics, executive changes, quarterly earnings statements for public companies — and the list goes on. The fundamental issue is that implementing a strategic plan is usually an add-on task, instead of integrated into the culture of the organization.
Senior executives, who should be leading the effort, often prefer to exercise power to solve immediate problems, which is a skill and practice that has often gotten them to the positions they now hold. Project and task work is middle management and supervisor responsibility. Top management is leadership, vision and steering the organization: ensuring they have the right people with the right tools to meet organization objectives.
Top management needs to balance the competing pressures with the proper priorities to protect, sustain and drive the organization. The strategic plan is the ideal tool to focus the efforts of top management. It is the road map. It should be the hymnal from which they read and speak regularly to the constituents of the organization: the owners/shareholders, the employees, the vendors and the customers.
To help them put their communication in perspective, they need a plan timeline. “Strategic” usually means somewhere between three and five years. It takes time to make notable changes, but you have to be able to see the end date and understand what may happen during the period. This end date also holds people accountable.
Next, the plan has to be integrated. All the critical operating units need to be going in the same direction, supporting the organization’s prime objective. Priorities are essential on all levels. Resources should line up with priorities. Clear accountabilities for who is expected to achieve the results need to be stated. Recognition of achievement also has to line up with priorities.
Finally, reporting and accountability should be routine for the organization. Presenting plan results graphically has notable impact. Ideally, reporting should be done at the same time as the quarterly financial statements, which are the historical look at organization success or failure. Results on the strategic plan will predict the financial statements of the future. They are the leading indicators for the success of the organization. True leaders will pay attention and use them effectively.
Ardon Schambers is president of P3HR Consulting & Services LLC.