Why is it so important to create a plan, budget, and strategy for next year now?
Michael Gerber notes,“Businesses that plan always do better than businesses that don’t. But business that change their plans are always more successful than businesses that plan but don’t change them.” As I write this newsletter one of my clients is closing stages of selling his business. About 2 ½ years ago he began to integrate the Rockefeller Habits tools into his business. The transformation and structure that it provided ultimately gave his business an appealing look to outsiders. The purchaser is a large publicly traded company which has purchased over 20 businesses in the last couple of years. Last week they indicated they rarely see such structure and metrics as they found with a company this size.
The sale of his business was the ultimate goal of the owner I worked with. The annual, 3-5 year plan and Strategic Discipline we worked on built his business to the point that he not only had his best year ever but put him on track for the company to have a bright future as well.
The planning process this year gave us a curve. The plans we created in December changed in the first quarter when his largest competitor purchased another competitor in their industry and forced management to reconsider whether the original plans for the year made sense. Ultimately they changed their plans to be less aggressive and focus on protecting their strengths for the assault of their new combined competitors.
The value of planning and setting specific quarterly and monthly meetings to review your plan isn’t that you just know where you are going; you also know what’s most important. It allows you to chose carefully what to focus on and then make adjustments as the year progresses. It helps you decide whether or not the market has changed and whether those changes require you to change with it or not.
That two and a half year journey of planning ultimately led my client to a 35% sales and 50% profit increase for their best year ever.
Planning means you can make adjustments quickly to the market. Planning means you’ve surveyed your business, your competitors and the market to be more confident when any of these change. And you can be assured they will change.
The time you spend now with your management team, looking ahead 3-5 years, the next full year, and planning your four quarters in addition to performing a SWOT, Core Competency, Core Value & Purpose assessment, choosing your top 3-5 priorities for the year, quarters and ultimately deciding your top priority will be critically important to your future. Not just this year or next quarter but for the future of your business.
At the Growth Summit, David Sokol, Warren Buffet’s “Mr. Fix it,” noted that everyone of Berkshire Hathaway’s companies do five to ten year planning each year. If the most renowned investor in the world suggests long term planning doesn’t it suggest you should be crafting a plan each year?
Two other studies suggest that you can expect to do 40% less than you would without a plan. Aubrey Daniels book Bringing Out the Best in People noted that just 23% of employees perform to their full potential and capacity. The same report, revealed that 44% of employees did what is required of them and held back any extra effort.
A more recent report on company goal alignment looked at strong performing companies and discovered that the difference between these companies and their weak financial performing counterparts is goal alignment. The strong performing companies had 44% goal alignment where as these weak performers had zero alignment. Imagine that, you don’t even need to get 50% of your team aligned to achieve financial success!
The reason planning is so important now is because it’s a process not an event. Don’t expect this process to be easy. It takes time to align your people and get everyone on the same page. If you don’t have metrics in place already to measure your departments and team’s performance, expect establishing these to take 90 to possibly 180 days to settle on the most critical measurements. Meeting rhythms take time to get your team into a routine. Agreement on what to focus on and prioritize can take time as well. That’s why it’s so important to do it now.
Don’t expect a transformation over night. However with diligence, this strategic discipline pays enormous dividends. What’s your goal for your business? Make the time this month to plan for 2011 and your future. Positioning Systems is in the unique position of helping businesses establish the key structure to developing Strategic Discipline. Contact us for help in establishing your future.