If You’re Not Strategizing Now for 2017, You’re Counting on Luck to Grow
Midsized companies that don’t do strategic and operational planning ahead of their upcoming year run the risk of a no-growth year.
Originally posted on Forbes online.
If your top management team members aren’t sitting down now to determine how they will grow your firm in 2017, by the time January 1 rolls around, it will be way too late. It takes time to put together a good plan with the level of detail every functional and product line executive needs. For midsized firms, I’ve never seen that happen in less than four weeks. In fact, midsized companies that don’t do strategic and operational planning at least three months ahead of their upcoming year are like the proverbial college student who staggers into the final exam having done zero preparation in the weeks leading up to it. Many of us know how that story can end.
Midsized companies that stagger into their new year unprepared to grow likely will not grow – unless perhaps they operate in a thriving sector whose rising tide raises all boats. But realize that that’s growth on the basis of luck, not on the basis of careful growth planning.
For many companies, the whole year has been (and will be) a scramble. One professional services firm started to plan for this year way too late and was never able to focus on the coming year to develop their best strategic thinking. They tried a few different things that seemed good in the moment, but before they knew it, the year was over and they will cross the year-end finish line unremarkably. Another low-growth manufacturer entered the year unsure of what to do differently, so they never wholeheartedly kicked off any new initiatives. This turned into a no-growth year for them.
A primary responsibility of all business leaders is to consider the year ahead well in advance, and make time to set up the company for success in the following year. If they do this well, their leadership team will have the right people on board and will have complete clarity about who will do what by when in the following year. They’ll execute the most important projects first, watch the right key performance indicators and be less likely to be distracted. They will have graduated from small business-style scrambling to mighty mid-sized company-style disciplined leadership.
These midsized companies will have installed what I refer to as a leadership “operating system.” A leadership operating system is a set of leadership processes that creates a stable platform for the leadership team.
Consider the case of Pinchin Ltd., an environmental consulting firm headquartered in Mississauga, Canada. Founded in 1981, they have had great success: profitable every year, a strong balance sheet, consistent growth every year, and have been awarded the Best Workplaces in Canada award ten years running. Since 2006, they’ve grown from 80 people to over 400 people. This growth required a larger leadership team, and they sensed the need to be more integrated and aligned.
Two years ago, Pinchin upgraded its operational planning system, bringing over 50 leaders into the process. Each leader developed their own one-page business plan on a web-portal that cascaded the company plan down through two levels of leadership. With the passing of founder Don Pinchin in 2015, adjustments were made on the leadership team, including a few outside hires and quite a bit of promotion through the ranks. Jeff Grossi, CEO, says, “There was some concern that regional leaders might feel constrained by the rigor of the planning process. Yet it was quite the opposite. Since they created their plans and because the format was simple, they felt like they had more control, could better understand the plans of their fellow leaders (all leaders can see everyone’s plans and progress against those plans), and focused more on their priorities. In previous years our employees wanted to know how they could be part of and contribute to our strategic plan. Now they each have defined plans that align with our strategy at every level.” Grossi wanted the entire leadership team planning for the upcoming year.
The Pinchin leadership team grew to 60. They all became more comfortable and more skilled at operational planning and the month-by-month plan review process. More of the key company (or office or department level) initiatives were accomplished on time. Leaders at all levels were marching forward, directed by their own plan, which was well aligned to everyone else’s plan.
In February of 2016, the senior team at Pinchin, along with the senior team from their sister company Pinchin West, met to embark on a more formalized strategic planning process. Eight strategic initiatives were identified for study, with an executive sponsor for each. They met again in May, then again at an offsite in October where they made decisions about 2017 strategic shifts. Grossi says, “I remember joining the firm nearly ten years ago and I loved the entrepreneurial spirit. Today, with our scale, we need a bit more process, but we’ve done it in a way that creates a powerful platform to support the entrepreneurial spirit in all our people. At times, it feels like I have an army of leaders out there working every day to help us grow as a company and win for our clients. Like an army, they are focused, aligned and passionate about performing well, to achieve or surpass our forecasts.”
Pinchin, as an ESOP (employee share ownership plan) company, does not focus on growth for the sake of growth. Yet with the new planning system in place, revenue growth is accelerating. In the most recent plan set, individual leaders independently chose more aggressive growth targets reflecting that acceleration. The current growth targets are nearly double the prior year’s growth rate. Grossi says, “What a pleasure to be leading a company where our mid-level leaders are pulling the company up to the next level, and where our job as senior leaders is to support that growth—to keep up with them.”
Midsized companies that construct an operating system can get results over three years’ time.
Business Leadership Operating System
Year 1: Most midsized firms benefit immediately from increased clarity and some careful prioritizing before the new year. Writing a one-page business plan can be an excellent way for the top team at a mid-sized company to get on the same page. The CEO authors a plan for the company, then cascades it down to the next level of leaders in the firm. In the end, each leader has their own one-page plan listing key performance indicators, critical projects with timelines attached, and their strategies for success. With guidance and support, they set this up over a 4-6-week time frame, with each leader investing about 6 hours total into the process. Every month in the new year, each leader presents their results to their peers and course corrections are made where necessary. This increase in discipline typically increases the engagement of the leadership team and brings better results from competent leaders. This article lays out the subtleties of implementing operational planning as described.
Year 2: After a year of disciplined operational planning, the business will be stronger, but gaps in the leadership team will be more obvious. When responsibility is assigned with clear expectations and deadlines, those who fail to deliver are exposed. The operational planning continues in year two, but one or two new leaders are often needed. They are recruited, hired and integrated into the leadership team. Usually one or two other leaders need to accelerate development, and are put on a development program (leadership coaching/mentoring, training, educational assignments). As year two winds down, this stronger team is deeply engaged in the business, with finely tuned key performance indicators and a deeper ability to scope the difficulty of business building projects and select only the most important ones that can be accomplished on time and budget. They know what they are capable of delivering and can chew what they bite off.
With this newfound confidence, they start looking to adjust the higher-level strategies of the business to take advantage of market opportunities.
Year 3: Typically, with two years of operational planning and a stronger team, the senior leaders are able to rely on their direct reports for a higher percentage of week-to-week execution. They invest their free time into a more disciplined strategic planning process that begins about a year in advance. It starts with brainstorming strategic initiatives, prioritizing them, and then writing them up into business cases (Handy template here). Generally, near the end of the third quarter, the ideas are carefully compared and those that best support the company’s vision and mission are chosen, then handed to the operational planning process to detail out execution for the year ahead.
Even if you’re scrambling to make the most of the fourth quarter, set aside enough time and energy to build a cascading operating plan as a start on building a powerful leadership operating system. Will you enter the new year being able to say that you have made your best effort to prepare your company for success? Make sure you can answer with a yes before you take your holiday break.
Tags: business acumen, business planning, revenue generation, scaling
Robert Sher is founding principal of CEO to CEO, a consulting firm of former chief executives that improves the leadership infrastructure of midsized companies seeking to accelerate their performance. He was chief executive of Bentley Publishing Group from 1984 to 2006 and steered the firm to become a leading player in its industry (decorative art publishing).