1. Invest in culture as a corporate asset
2. Make listening an enterprisewide (sic) skill
3. Turn innovation into a continuous process
4. Provide a clear and compelling purpose
5. Extend and enhance the digital fabric
6. Practice good social citizenship

Lists like this one are very popular. I have been known to make lists of key practices and the like. But for the practicing manager lists are frequently tough to integrate into day-to-day work. Mr. Temkin’s six imperatives falls into this problem category. Overall, the six imperatives are reasonable enough as they stand. But I want to take a closer look at each and then suggest a more global approach.

Practice good social citizenship

Lets start with the sixth, “Practice good social citizenship”. This defies the laws of capitalism. Capitalism has never been about doing anyone other than the firm good. In fact, there are enormous built-in penalties for firms that attempt to do anything significant in this realm. One only needs to review the history of the last year or so to see that companies act in their own (management not necessarily stockholder) best interests.

Even today we are being treated a new episode in this  debacle in Europe with the near collapse of the common Euro currency under the weight of Greek financial malfeasance. Would not good social citizenship lead Goldman Sachs and the other big banks not enable the bad habits of the Greek government?

One of the primary rules of capitalism is that every individual firm seeks to externalize any and every cost that it can. You can see this all around in day-to-day life. Why do we have environmental laws that attempt to restrict how companies deal with the waste from their processes? Why do we have Workers’ Compensation Laws? How is it that the largest financial institutions in the country drove themselves into insolvency only because they knew that they would be shielded by the American government from failure? You can add you own examples to this list.

The forces of externalizing whatever a firm can and the desire to make profits wherever possible under any conditions, even outright illegal ones, has always overwhelmed calls for “good social citizenship”. Nothing in Mr. Temkin’s recommendations will change this. This imperative is just window dressing.

Invest in culture as a corporate asset

Every manager knows that company culture is important. Mostly, this awareness has grown through learning to manage in environments that are toxic or moderately negative at best. So this imperative makes some intuitive sense. A central problem emerges when you try to develop a strategy and tactics to carry out this imperative. Without an actionable definition of what corporate culture is, it feels like pushing the proverbial string towards an unknown objective.

So, lets step back a moment and ask, “What does ‘corporate culture’ mean?”

Wikipedia suggests some of the complexities in its definition of “organizational culture” in the following quotation from the beginning of its discussion:

This definition continues to explain organizational values also known as “beliefs and ideas about what kinds of goals members of an organization should pursue and ideas about the appropriate kinds or standards of behavior organizational members should use to achieve these goals. From organizational values develop organizational norms, guidelines or expectations that prescribe appropriate kinds of behavior by employees in particular situations and control the behavior of organizational members towards one another.”

Organizational culture is not the same as corporate culture. It is wider and deeper concepts, something that an organization ‘is’ rather than what it ‘has’.

Corporate culture is the total sum of the values, customs, traditions and meanings that make a company unique. Corporate culture is often called “the character of an organization” since it embodies the vision of the company’s founders. The values of a corporate culture influence the ethical standards within a corporation, as well as managerial behavior.

Mr. Temkin suggests tactics for managers to use to “manage their corporate assets”: ^[[2]]

1. Track employee goodwill
2. Develop a Voice of the Employee Program
3. Establish a vocabulary around culture
4. Actively manage it.

There is merit in each of these but without a useful understanding of the existing culture and a definition of the corporate culture you are trying to build. These programs will lead nowhere.

Here are a few references to statements by companies about their culture:

• Google
• Bunker Hill Home Insurance
• Kaplan Real Estate (PDF download)
• CareerBuilder.com
• Altera

As you have discovered there is considerable variability in what is, and is not, included in the actual day-to-day usage of the term “culture”. Nevertheless, there are lots of common threads here. The question then becomes how do you define the culture of your organization, and how do you make changes that respond to the gaps between the future states and the present state? More on how I might respond to this below.

Make Listening An Enterprisewide Skill

Listening as an active skill is required at the personal and organizational level. Every good and great manager is, by definition, a great listener. So, this imperative fits into the obvious category. The Web has opened new avenues to practice listening and made it possible for listening to the outside world, to customers, competitors, technologists, and so on, accessible far inside every organization. And, in parallel, the Web has made it possible for employees and managers to listen to each other in ways not possible earlier. Tempkin’s suggestions for how managers can cultivate listening are good:

• Listen in a variety of ways
• Listen by example (senior managers need to demonstrate active listening)
• Listen to employees
• Listen for soft voices
• Listen to online communities
• Actively encourage listening

But, Tempkin’s claim, “The bottom line: enterprise listening allows firms to embrace change”, is not satisfying. Listening is a way of engaging with those around you. It is a methodology for discovering what is going on and why. Listening supports real engagement by employees and stakeholders. Listening opens the social space to the creation of new ideas and connections. Listening provides moments when the brain of listener is taking information in instead of thinking about the next point they want to make. But, the connection between listening and embracing change is not causal nor even necessarily suggestive of a significant link. Embracing change requires an understanding of either the opportunities to be gained or disasters avoided. Listening is simply one of the many activities that might go on while change is considered, put off, avoided, or rushed towards.

Turn Innovation into a Continuous Process

Here is an imperative chock full of key words, innovation, continuous, and process. These are bread and butter for every high performance organization. There have been, and continue to be, significant experimentation worldwide in how to foster and drive innovation. Many of these encompass far more than individual companies. Whole countries are trying to foster innovation through combinations of academic, government, and private sector assets. But, to focus on the company level, there are numerous models of innovation. One thing they all share is a view of innovation as a process, a continuous process. Despite the use of the words “continuous process” in Mr. Temkin’s imperative, there is only a hint that a company has to define its own innovation process^[[3]].

As with other of Mr. Temkin’s imperatives the suggested tactics are good, just lacking a strategic and process based context. And this is why most companies that are serious about innovation answer Temkin’s closing challenge, “The Bottom Line: innovation is too important to leave to chance.”, by building a continuous innovation process into their overall company architecture.

Provide a Clear and Compelling Purpose

Temkin hits squarely on the central issue with Mission, Vision and Strategic Plans and Statements of all varieties.  “Just about every large organization has vision and mission statements floating around their hallways. But when it comes to making decisions on a day-to-day basis, these documents are no where to be found. They play NO Role in how the company is actually run.” Unfortunately. Temkin offers us a less then compelling set of recommendations.

• Rediscover your brand
• Look for alignment
• Market to employees
• Make decisions purposefully

The corporate world has been filled with experiments on how to solve the problem of putting strategy to work. It is clear that bridging the gap between vision and planning and day-to-day tactics requires a structured business process and  a lot of management energy to assure that the process is working continuously. Speaking of decisions, Peter Drucker pointed out in his 1967 book, The Effective Executive^[[4]] “”Unless a decision has ‘degenerated into work’ it is not a decision; it is at best a good intention.” This is still true and points to the fact that visioning and planning are the easy part, the tough work is putting the plans into action and having them become the day-to-day work of the company.

Here are a few names and phrases that you can investigate to learn more about current business processes that address this issue:

• MBO (Management by Objective – one of the original concepts)
• Hoshin Planning
• Balanced Scorecard

“Market to employees” is an unfortunate phrase. The very word ‘marketing’ inspires nothing but cynicism from every person on the face of the planet who has ever been exposed to the dreadnought of corporate pr, advertising, and general corporate manipulation. Management needs to communicate transparently and honestly with its employees and simultaneously try to be honest about the limits of its transparency and honesty. Almost 30 years ago, one of the original high-performance systems management gurus, W. Edwards Deming, in his 14 key management principles wrote:

Eliminate slogans, exhortations, and targets for the work force asking for zero defects and new levels of productivity. Such exhortations only create adversarial relationships, as the bulk of the causes of low quality and low productivity belong to the system and thus lie beyond the power of the work force.

Now, you may object that marketing is not “slogans, exhortations, and targets”. However, there are very few, if any, managements that do not descend to exactly this when addressing their employees. And focusing on this part of Deming’s principle is to miss the perhaps more powerful idea, fact perhaps, that the “causes of low quality and low productivity belong to the system and thus lie beyond the power of the work force.” Management controls the design and deployment of the company’s systems. They set the rules of work, provide training (or not) and guidance to getting the work done. Until management accepts its true responsibilities for the success and failure of the company, marketing to employees will always be seen as the manipulative cynical act it is.

Extend and Enhance the Digital Fabric

There can be no arguing with the momentum of the pervasive Web. The visible opportunities here are so numerous and the ones yet to be discovered likely to be just as numerous, so the imperative for every organization to engage is obvious. Temkin states four ideas for executives to keep in mind:

• Understand digital economics
• Assume increasing adoption
• Improve usability, a lot
• Connect online with offline

One point concerning Temkin’s view of digital economics is that business model making should never be left to finance people. Managers must take the initiative here because no finance team will reliably understand customer interactions and operations. Without the input from those directly involved at the front lines, finance driven business models almost invariably look good, even very sophisticated, but are usually disconnected from the realities of the business.

Temkin’s comments about connecting online with offline bring to mind again a guiding principle, one that is at the heart of his work. Every effort to design systems must begin with the requirements of customers, whether these are end customers or intermediary internal customers. Only by beginning with the customer view can you sort out the correct balance of system functions and user interfaces, whether online or offline. This process starts with customers, and only then involves others who play a role in creating and refining a company’s operational systems.

Epilogue: It’s Time To Reinvent Management

There is much that could be said about this call for reinvention. One thought stands out. Real change in management comes from two sources, the external realities that impinge on companies and senior management’s attention and approach to how to respond to the external realities. The first, the external realities, are uncontrollable, though at times unknowable, facts. The only controllable factor is senior management’s approaches to their work. Only when senior management brings new, more powerful models of management to bear on their work do matters like what MBAs learn, or how, and to what extent, the company trains staff have meaning to the results.

I have argued for years that the best systematic models of management are to be found in the arena of high-performance business systems. These are now widely known and globally deployed through models like Toyota Production System^[[5]], Baldrige Criteria, EFQM Excellence Model, and ISO9001-2008 Quality Management System. Though they differ in many siginficant ways, there is also substantial overlap, particularly at the top level of guiding principles and practices, All of them are widely used and under continuous improvement by users and experts.

If you would like to begin the journey towards high performance management consider these 14 management principles from The Toyota Way^[[6]] :

I. Having a long-term philosophy that drives a long-term approach to building a learning organization

1. Base your management decisions on a long-term philosophy, even at the expense of short-term financial goals

II. The right process will produce the right results

1. Create a continuous process flow to bring problems to the surface
2. Use “pull” systems to avoid overproduction
3. Level out the workload (heijunka). (Work like the tortoise, not the hare)
4. Build a culture of stopping to fix problems, to get quality right the first time
5. Standardized tasks and processes are the foundation for continuous improvement and employee empowerment
6. Use visual control so no problems are hidden
7. Use only reliable, thoroughly tested technology that serves your people and processes

III. Add value to the organization by developing its people and partners

1. Grow leaders who thoroughly understand the work, live the philosophy, and teach it to others
2. Develop exceptional people and teams who follow your company’s philosophy
3. Respect your extended network of partners and suppliers by challenging them and helping them improve

IV. Continuously solving root problems to drive organizational learning

1. Go and see for yourself to thoroughly understand the situation (Genchi Genbutsu).
2. Make decisions slowly by consensus, thoroughly considering all options; implement decisions rapidly (Nemawashi).
3. Become a learning organization through relentless reflection (hansei) and continuous improvement (Kaizen).

1. experiencematters.wordpress.com
2. I will not provide citations for mentions from Mr. Temkin’s book. It is only 15 pages long and so you can figure out the citations by just downloading and reading it.
3. the hint is in his last suggestion, ‘manage an innovation pipeline’
4. Peter Drucker, The Effective Executive – the definitive guide to getting the right things done, (Harper Collins, NY,  2006) p. 114
5. TPS and further expanded in scope in the Toyota Management System
6. adapted from Liker, Jeffrey. The Toyota Way. 1st ed. McGraw-Hill, 2003.

“DO YOU…

1. IMPROVE basic, measured efficiencies continuously?
2. THINK simply and directly about what you are doing and why?
3. BEHAVE towards others as you wish them to behave towards you?
4. EVALUATE each business and business opportunity with total, fact-based objectivity?
5. CONCENTRATE on what you do well?
6. ASK questions ceaselessly about performance, markets and objectives?
7. MAKE MONEY- knowing that, if you don’t, you can’t make anything else?
8. ECONOMISE always seeking Limo (Least Input for Most Output)?
9. FLATTEN the organisation to spread authority and responsibility?
10. ADMIT to your own failings and shortcomings and correct them?
11. SHARE the benefits of success with all those who helped to achieve it?
12. TIGHTEN up the organisation wherever and whenever you can because familiarity breeds slackness?
13. ENABLE everybody to optimise their individual and group contribution?
14. SERVE your customers with all their requirements to standards of perceived excellence in quality?
15. TRANSFORM performance by innovating creatively in products and processes including the processes of management?

Again from this email concerning this list: “These questions penetrate to the heart of successful management. They have passed, and will pass, the test of time.

This list looks a lot like others I have seen, and certainly many entries would be on such a list that I might create. But, whenever I see lists like this, I say to myself, “Great, but how do I do this?” Lets just take number 15, for example,  “Transform performance by innovating….”. What business processes do I put in place that assure that these results are regularly and sustainably produced? Or, what approaches and tools do I deploy to achieve number 8, “Economize…” ? Again, are there tools and approaches available that assure the we meet number 13, “ENABLE everybody to optimize their individual and group contribution?”

Without wasting further time with rhetorical questions, let me point out that in fact there are well-developed, well-tested systems of business processes available for a manager who wants and needs to achieve positive answers to questions like those posed by Heller. These include Lean^[[2]] , Baldrige^[[3]] , EFQM^[[4]] , or ISO9001-2008^[[5]]. None of these are simple cookbooks of management. The reality of management problems is much more complex and requires some subtlety in thinking through how to apply the principles and practices of these management systems to the individual enterprise. Nevertheless, these management systems provide the tools to systematically achieve results that answer the 15 points of this checklist, and more.

There is something else that interests me about lists like Heller’s 15. These lists almost always contain a provocative overlap between the attributes and skills of the manager and those of the organization. This overlap produces an opportunity (and responsibility) for the manager to drive the development and maintenance of these attributes in the organization. On the other hand, without the manager embodying a number of these attributes and skills, the organization will not come to embody them. In this case the manager’s performance is a negative driver of performance.

Lets take a look at a couple of Heller’s 15 as examples of this overlap phenomenon.

Number 4, “EVALUATE each business and business opportunity with total, fact-based objectivity?” calls for a fact-based approach to business. If the manager does not act, think, and talk in a fact-based manner consistently and rigorously, the organization will veer off this path quickly in response. If a manager does not gather facts and make decisions based on facts^[[6]] the organization will note this and begin to act in a fashion consistent with whatever decision making process the manager uses. This is a simple fact of life. People will do as the boss does, not as the boss says. On the other hand, if the manager is fact-centered in decision making, the organization will respond in like.

Number 13, “ENABLE everybody to optimise their individual and group contribution?”, is another interesting example of the overlap between the personal approaches and performance of the manager and and those of the organization. Central to every high-performance organization is the challenge to create an environment in which every person can and does make a fully engaged and productive contribution to the organization. The manager’s involvement in cross-functional team-based work expressly embodies this approach. After all, the people who report to a general manager (CEO, divisional manager, owner) are by definition cross-functional and they should solve the organization’s challenges as a cross-functional team. If the manager carries out his/her work in a cross-functional team-based manner, this will drive and support similar approaches throughout the organization. And, similar to our earlier discussion, failure here will support traditional management methods of command and control.

This overlap between the individual and the organizational is a great resource for the manager who wants to build a high-performance organization. They can make a direct contribution to the transformation by learning new approaches and skills and applying them in their day-to-day work. And, really, the principles and practices are quite straight forward. It requires more persistence than genius to build high-performance organizations. The transformation process is not like building a rocket where every part must work perfectly to even get off the launch pad.

1. http://www.thinkingmanagers.com/
2. Lean is the American name for the Toyota Production System, also more broadly the Toyota Business System. There is no standards organization for lean principles and practices. A good starting point is Womack, James P., and Daniel T. Jones. Lean Thinking: Banish Waste and Create Wealth in Your Corporation, Revised and Updated. 2nd ed. Free Press, 2003 and The Lean Enterprise Institute
3. Baldrige National Quality Program Criteria
4. European Foundation for Quality Management
5. International Organization for Standardization ISO9001-2008 Quality management systems — Requirements
6. Here is an interesting point about “facts”. Facts are by definition observable and independent of any individual. Facts exist in the shared space of the organization; they do not belong to any person, but to the organization.

I recently read 12 The Elements of Great Managing by Rodd Wagner and James K. Harter (Gallup Press, New York 2006) another in this series. Don’t be deceived by the title, this book is really speaking from the perspective of how employees experience high-performance management. So a little translation is required to uncover the implied principles and practices of the 12 elements. Here are the twelve elements as presented in the introduction to the book^[[1]] .

1. I know what is expected of me at work
2. I have the materials and equipment I need to do my work right.
3. At work, I have the opportunity to do what I do best every day.
4. In the last seven days, I have received recognition or praise for doing good work.
5. My supervisor, or someone at work, seems to care about me as a person.
6. There is someone at work who encourages my development.
7. At work, my opinions seem to count.
8. The mission or purpose of my company makes me feel my job is important.
9. My associates or fellow employees are committed to quality work.
10. I have a best friend at work.
11. In the last six months, someone at work has talked to me about my progress.
12. This last year, I have had opportunities at work to learn and grow.

A footnote at the end of this listing states that “Each of the Q12© statements above represent millions of dollars of investment by Gallup researchers…..”. This is one of the reasons these Gallup books are interesting. There is lots of data embedded in them. It is well worth the time to read through and absorb the anecdotes that flow from the data.

The questions I have about this list are not about the validity of these statements. They seem to jive very well both with anecdotal observation and the findings of many other studies about the attitudes and feelings of people in high performance organizations. The questions facing a manager is how to create the business culture, infrastructure and processes that produces these results in the human resources of the organization?

Without attempting anything exhaustive here, let’s take a look at several of these 12 elements and see how one might convert them into actionable tasks for a manager.

Looking at the first two elements,  applying Lean principles and practices creates an environment in which every person knows what is expected of them, how they are to accomplish the tasks, when the results are required, and what success looks like in terms of detailed deliverables of a product or service.  And, they receive immediate feedback concerning all of these characteristics from those around them in the work flow.

Since good Lean work design involves visual, simple feedback mechanisms, quality is a result of the process and failures are dealt with immediately. Apply Lean principles and practices develops processes that directly connect the work at hand to elements eight and nine. Central to Lean practices is the principle that quality is a outcome of the process and failures are identified in the flow and quality issues are resolved down to the root level.

Lean principles and practices include a focus on the development of every individual in the organization to be fully cross-functional in their skills. Typically this is implemented through specific cross-training requirements so that, over time, every individual learns to be a fully qualified practitioner of multiple skills required by the company’s processes and long-term goals. or

Element seven, “At work, my opinions seem to count.” requires some further comment. High performance organizations require the involvement of every associate’s mind and energies to solve problems and carry out the work at hand. It is not optional in a high performance environment. So, by definition, every person’s engagement counts. The word “seem” needs to be replaced by “does”.  A little further quibble here. Opinions are not very useful without the supporting facts and thought processes behind them. This is the reason that high performance organizations, whether they identify themselves under the banner of Lean^[[2]] , Baldrige^[[3]] , EFQM^[[4]] , or ISO9001-2008^[[5]] , use disciplined problem solving techniques that everyone learns to use. This assures that everyone’s engagement in the problem is represented, but the problem solving is fact-based, gets to the root, and is actionable.

Element 10, “I have a best friend at work.” is clearly beyond the control of management. It is understandably nice, but definitely not a controllable element of any work place.

Some elements are particularly subject to influence by the behaviors of senior management. Elements 3, 4, 5, 6, and 11 are typically elements to be found in high performance human resources management processes. But, making those processes come to life can readily be driven by the example of senior management in how they manage the selection, development and pruning of the people who report to them. If they practice sound high performance human resource practices, those practices will cascade down to everyone in the organization. It goes without saying that a component of that is direct involvement by senior management in oversight and monitoring of the health of the human resources management processes in the organization. A simple example of this is to impose a rule that no manager, even to the CEO level, can receive a pay grade review if they have any outstanding performance reviews for their subordinates. This drives timeliness quite nicely.

To conclude, this list of 12 elements is an interesting starting point to venture into high performance management. The list is really a slice of the results that flow from high performance management practices. The trick here then is to reverse engineer the list to uncover high performance practices from the world of Lean, Baldrige, and other high performance models that can be applied in your particular business environment. Building a high-performance organization is one sure approach to developing an organization that produces great results and solid answers to the 12 elements of great managing as described in 12 The Elements of Great Managing by Rodd Wagner and James K. Harter.

1. pages xi and xii
2. Lean is the American name for the Toyota Production System, also more broadly the Toyota Business System. There is no standards organization for lean principles and practices. A good starting point is Womack, James P., and Daniel T. Jones. Lean Thinking: Banish Waste and Create Wealth in Your Corporation, Revised and Updated. 2nd ed. Free Press, 2003 and The Lean Enterprise Institute
3. Baldrige National Quality Program Criteria
4. European Foundation for Quality Management
5. International Organization for Standardization ISO9001-2008 Quality management systems — Requirements

Mammone’s argument is captured in capsule form here: “Every skill set required to form a startup should be subjected to a make-or-buy decision process. In other words, if you don’t have it, outsource it. Let me just stop here for a moment and mention that outsourcing is the strategic entrepreneur’s solution to most problems.”

Outsourcing is a great strategy. In fact, outsourcing is a fundamental component of every business strategy. Outsourcing decisions reflect the fundamental values of the organization.

However, people may think that outsourcing gets you off the hook and solves all of the problems involved in the outsourced functions. The truth is that whether as a one armed paper hanger or a global giant like Boeing, outsourcing must be managed.   You can not manage functions that you do not understand. So, the executive level of any organization (back to the single entrepreneur to global giant span) must understand all of the basic functions of a business (strategy, sales, marketing, product/service development, personnel, operations, finance, information systems, and legal (these are the most important ones)) in order to decide which must be internal and which can be outsourced. Then, you have to have enough knowledge of the outsourced functions to decide on the desired results required, choose vendors, and manage for the results. This may seem to be daunting for the low end of the size scale, but most of this stuff isn’t rocket science at the basic concepts level and one can always draw on people in your network and consultants (like me obviously) to help out.

Outsourcing is tricky business as demonstrated by Boeing’s Dreamliner problems^[[2]]

1. Since Mammone’s article may not always be accessible where I found it, you can download a PDF copy here
2. here is a link to an article from Reuters about Boeing’s outsourcing issues. And here is a PDF download of the article.

This podcast is 2 minutes 51 seconds long. The text is available here.

All of this points back to a fundamental of business formation and business planning – the need for “what if” agreements among the owners.

What if someone dies, becomes disabled, divorced, married, wants to leave the business? How are new partners added? Can a founder be fired? Who owns what and in what form? How will disputes be settled? And, the list of “what ifs” goes on.

So often people start businesses and, in the glow of start up enthusiasms they think, or don’t want to think, about the almost inevitable “what ifs”. They quickly go through setting up the incorporation process and get to work ignoring what will turn out to be all important, the Founders’ Agreement. 

If you are just starting out, make sure that you work through the discussions and legal work for a Founders’ Agreement within the first couple of months. Put your Founders’ Agreement in place. On the other hand, perhaps you have ten years of success in your wake and you still have no Founders’ Agreement (referred to also as Owners’ Operating Agreement and other title). You are living on borrowed time. Get together with your business partners and make it a priority to think through the obvious “what ifs” and then involve your attorneys to formulate an agreement. When one of the “what ifs” occur ,you will be very happy to fall back on its structure.

For every startup the development of a business plan is a  required first step. It is so obvious – business schools have course on writing the business plan and it is impossible to get funding without one. Teams coalesce around the labor. So, every startup has a business plan.

For the going concern, the ones that are now three or so more years old, the business plan (also called strategic plan -really the same thing) is forgotten, only stumbled on when a move forces someone to pick it up and wonder, “Should I just relegate this to the dumpster?”

This is not a good situation. A business without a plan is like a boat sitting in a pond just waiting to sink to the bottom for nature to compost it. Or, if it has the fate to be afloat in a stream, it will be carried along willy-nilly until it bumps into a stone or dead branch or reaches the ocean where nature will also send it to the big composter.

Every business exists in a world that is changing and filled with opportunities and threats. Your business plan is your set of oars to provide the means to pull in the direction you want to go in, to avoid the rocks. You might even row to shore and portage around the falls, to move to an entirely new river.

But, many people, even accepting the wisdom of having a plan, find it a painful exercise, all too easily avoided. This may be driven by the idea that a business plan involves dozens of pages of writing, lots of spreadsheets with numbers they really don’t believe (sometimes don’t understand). Business plans, strategic plans, these are just the exercises one does in business schools. Or it may be the folk wisdom that business plans are not a useful part of managing and they always end up on the shelf or hidden in a file cabinet only dusted off for display when in search of a bank loan.

However, shift your thinking to view the process of building a plan as a value in and of itself, and adopt a simpler more flexible business plan model you will find that building that set of oars for your little boat is fun and productive.

The Business Plan Model

Lets talk about the business plan model first. Since we are developing a business plan for our internal use it does not need to look like or contain everything that bankers, MBAs, venture capital funders expect. This is a working document to help us move the business in a definite direction.

First, I have found that setting an arbitrary limit of 12 pages focuses the mind and edits out all the useless boilerplate that populates many plans. Second, if you and your team prefer not to write a paragraphed narrative, use an outline, PowerPoint approach. Third, get out your most recent Income and Balance Sheet statements – these will be the starting point for the financials. Fourth, establish an outline of the topics that you feel must be covered and keep to it.

Basically, the plan will include these twelve topics.

1. Describe why you are in business – what value are you delivering to which customers. An important corollary to this topic is to identify why customers buy from you and not someone else?
2. How do you find customers? Who are your current customers? List the big ones and their share of your business
3. How do you produce the service or product?
4. How do you make money by making your customers happy?
5. What are your objectives for growing a larger customer base, adding a new market segment, new products or services, or other growth strategy?
6. What are the external obstacles to accomplishing these objectives and how do you intend to get around them? This is where you might look at competition, SWOT and PEST analysis and apply other analysis tools.
7. What resources do we need to put in place to achieve the growth? Money, people, technology….?
8. What strategies are we going to apply to achieve our objectives over the next year to three years? This should be limited to three to five strategies. State clearly what the objectives are for each strategy – how many new customers, new products, dollars of sales, profits, etc? When will these happen?
9. What key tactics are needed for each strategy? Who is responsible, what resources do they get, when will the accomplish the tasks and what results are you looking for?
10. Build a financial model. The spreadsheet should be not more than 25 rows with columns containing quarterly projections for three years. Starting numbers must link to existing financial statements.
11. What is the schedule for follow up business review sessions where you will examine progress on the plan and take required actions to revise and push the plan forward. The first meeting should be one month after you kick off the new initiatives. The, not less than quarterly.
12. How does all of this fulfill the management team’s personal objectives? The answer to this is not money?

The Planning Process

Now, how do you actually develop the plan?

Four to six two to three hour working sessions with all members of the management team present usually suffices. Some homework will be required between the sessions, typically a  couple of hours. You might imagine a month to six weeks as a useful window of time.

Who should be in the room? Every significant stakeholder – owners, chiefs of marketing, sales, operations, technology or product development, finance, and HR. In small companies this sometimes means that one person has to cover several functional areas. Do not let the group get larger than six to eight people. More than that and you can not have good, deep interactions – the work sessions will be more like a conference or convention. Two or three is fine as long as every key stakeholder in the business is present.

These work sessions are more important, in many ways, than the plan itself. During these sessions, the team will talk out loud and write things down. Arguments, discussions, innovations, deletions, new agreements about the business emerge. These flow out of the group and the whole team understands and owns these discussions and the conclusions.

In my experience, if the management team represents all of the key elements, all of the facts and concepts about the business are sitting in the room. Some people think that business planning is a research project. But, with a team, the process is more a sharing around the table of the facts, consensus building about the situation, goals, and strategies to get to the goals. The most powerful outcome of the planning process is that it arms the management team to convert the strategies into actions to reach the goals.

You Need a Consultant

All of this seems quite straight forward. You may be thinking, “Well, I am the Owner, the CEO. I am a seasoned veteran.  I can lead my team through this planning process.” Resist this line of thinking and here is why, and I say this despite the obvious self-serving nature of what follows.

A good strategy consultant who knows how to lead groups through a planning process will do the following, much of which you as the Owner, the CEO can not do just because of the fact of your position. First, the consultant stands outside of the actual business discussions, runs the sessions, and keeps the team moving forward. Second, the consultant establishes an environment in which the team is a group of equals for the purposes of the planning. This assures that one person will not dominate, that the less forceful personalities, who frequently have significant contributions to make, will be heard and participate. This increases the breadth and depth of the team ownership of the plan. Third, the consultant can bring up the elephants in the closet that no one wants to talk about. Overcoming the baggage of history can be difficult and painful. The consultant can drive the conversations to confronting the facts of the business situation. Fourth, the consultant will bring appropriate analytical tools to the table. The bag of strategy tools is enormous. All of this liberates the Owner, the CEO from the burdens of running the work sessions to focus on the content of the process. This is where their highest value is.

How Do You Convert the Plan Into Action?

For most strategic plans and business plans the end is the document itself. This is the critical moment and here is where Step 11 above, that asks about the schedule of review sessions, converts the plan into action. This is where the Owner, the CEO must take the lead. Otherwise the plan is just a plan and is not converted into action. If you have done a good job of establishing the tactics you will know who is responsible, what the success metrics are and the timetable for action. By tying the planning to the existing financial reporting system, you will be able to measure results directly. The review sessions are not designed to be dull reports, but opportunities to understand where the difficulties lie and where new opportunities pop up. A review session brings together the management team to work on the most important strategic activities of the firm.

Summary

Let’s wrap up this discussion.  A business plan is the result of a process in which the management team comes to a common understanding of:

• • the business situation
  • the value the business provides to customers
  • strategies to achieve new goals
  • obstacles to be overcome or avoided along the way,
  • tactics to bring the strategies to life – this includes who is responsible, resources available, timeline, and results expected
  • schedule of review meetings to take corrective action and make course corrections

The business plan is converted into action through the tactics identified supported by active supervision and follow up by the Owner, the CEO. The plan also provides a common language about the business and a platform to communicate the business’s goals beliefs, and values to everyone involved, employees, vendors, and customers.

More information is available on the strategic planning process in our white paper: Introduction to the Strategic Planning Process here

This article was the subject of an earlier podcast of the same title. It is available here.