Continuous Growth How to Keep Your Company On The Fast Track by Russell Holdstein
Continuous Growth: How to Keep Your Company on the Fast Track
Do you own your business or does it own you? Perhaps the most important (but also the most frequently overlooked) aspect of owning a business is making sure it is aligned around your personal, family and life goals. One of the most important questions you can ask is, “What do I really want out of life and how can my business help me make that happen?”
When he ran a rapidly growing payroll services company, Holdstein learned a number of lessons the hard way. These include:
Don’t confuse symptoms with problems. After several years of continuous success, Holdstein’s company began experiencing severe computer system problems. He kept trying to fix those problems with new programs and equipment when, in reality, the real problem was that the company had outstripped the capabilities of the management team. From a systems perspective, the worst mistake you can make is solving symptoms rather than problems. If you keep solving symptoms, you keep having the same problems.
• Don’t try to straight-line your current practices into the future. For example, don’t necessarily think that if you have two people in the accounting department that next year you will need four. Budgeting isn’t planning; it’s merely an extrapolation of what you did last year.
• The things that made you successful – processes, procedures, focus, talent and skills – won’t keep you successful. The old saying is, “If it ain’t broke, don’t fix it.” In a fast-growing business, Wit ain’t broke, it soon will be. If you wait until it breaks, it’s too late. You will already be behind the curve. The hard part is figuring out when something is going to break and doing something about it ahead of time.
Budgeting isn’t planning, but it’s still important. Planning is the key to staying successful. Planning involves looking ahead, anticipating, understanding, knowing where you want to go and involving people in your vision. Those things allow a company to grow on a sustainable basis.
Many strategic plans get written, but few get implemented well. Some common barriers to implementing strategic plans include:
- • Not enough time
- • Too many things in the plan; no focus
- • Haven’t looked at the plan since it was written
- • Not enough resources
- • Crises/fires take first priority
- • People don’t understand the plan
- • No commitment to the plan
- • No sense of urgency to implement
- • Over-ambitious goals
- • Lack of ability to deal with change
Too often, strategic planning is an intellectual exercise, done by a small group of people. As a result, the plan gets put away on the shelf and no one ever looks at it again.
A well-run company works from everyone’s understanding of the vision of where the company is going, why it exists and what it intends to achieve. Vision is a description of what everything will look like in five or ten years. A good way to describe the vision is to picture yourself five years out in the future. Imagine driving up to your place of business, parking in your spot and walking into the building. What does your office look like? What work are you doing? Who are your customers? What does it feel like to work there? These and similar questions allow you to describe the environment and what is going on in it.
After the vision, the company needs a set of values that say, “This is how we conduct ourselves in the course of achieving our vision.” After the vision and values comes the strategy, which dictates how you will get to where the company is going. The next step is to translate the strategy into tactics, which dictate the actions that occur in the business. If all the other steps are done properly, the actions your people take will be informed actions because you have directed them toward a goal. If the steps aren’t done properly, people will spend most of their time in reaction. They will react to events rather than taking informed action to move the company toward the vision and goals.
The overall goal of strategic planning is to have a focused company, one that can actually manage itself When people understand the strategic plan and buy into it, when it is a part of how the organization focuses, they can make decisions on actions that need to be taken because they understand where the company is going and how it needs to get there. Moreover, they have the ability to make those kinds of decisions without managers constantly looking over their shoulders.
When companies grow quickly, it’s hard to manage from the top down, from vision to action. Instead, you face an exponential growth curve, which impacts change in many ways.
Most systems work fine until just before they reach capacity. When they get close to capacity, you start to see warning signals. Most companies try to solve the symptoms instead of solving the actual problem. By the time you figure out that it’s really a capacity problem, it’s too late. You’ve already surpassed capacity.
For example, assume your company is growing at 100% a year. Your phone system can handle 500 calls a day and you currently get 100 incoming calls a day. Within a year, the number of incoming calls will double to 200. In another year, they will double to 400. In only three more months, you will reach 500 calls per day, and the system will reach 100% capacity. At 400 calls per day, you have no clue you’re approaching a capacity problem. Yet, three months later, the system has reached its limit. It now takes at least three months to put out a request for proposal, assess the bids, purchase a new phone system and train everyone to use it.
As a result, you wind up in the “red zone,” which causes you to manage in reaction. Customers get angry because they can’t call in. Employees get frustrated because the phone system doesn’t work properly. You now have a major bottleneck, but instead of taking your time and buying the best phone system, you buy the fastest phone system, which is not the optimum decision.
When you manage in crisis, you get stuck in the red zone. It becomes a negative feedback loop, which can be nearly impossible to escape. The red zone always starts with a lack of planning, which leads to resource shortages. The resource shortages lead to crisis, and you end up reacting to the crisis of the day. This leads to an endless cycle of crises that makes it very hard to get out of the red zone. Instead, the goal is to have a top-down, vision-driven, proactive management action.
ORGANIZATIONAL GROWTH PHASES
• Courtship. In this phase, you are just starting to build the business by putting ideas together, courting support (people and money) and building commitment to start the business. Many businesses never make it past this stage.
• Infancy. In this phase, you take the big risk and actually start the business. The main focus is on sales and cash flow as you struggle to survival the management style is primarily reactive. The focus is on doing rather than planning.
• Go-go. The business stops struggling and begins to thrive. Everyone says you are a success and you start to believe it. You begin to take more risks and jump at opportunities. As a result, it’s easy to lose focus. This phase involves a “Santa Claus” style of management. The CEO is Santa Claus and everyone else are the elves. The CEO makes all the decisions and the “helpers” do the work. The challenge in this phase is to recognize the need to change, which is very hard to do. Many companies fail in this stage.
• Adolescence. In this transitional stage, the entrepreneurial management style no longer works. The company grows a bit and then shrinks some. Old problems keep cropping up again and again. The company needs to standardize what people learn so they can eliminate problems rather than keep solving the same one again and again. The company has to move toward planning, standardization and control. Development of a professional management team, which often involves bringing in experienced managers from the outside, is essential. Yet, the founding entrepreneur is often afraid to delegate and give up responsibility. The founder’s trap, the belief that the organization can’t survive without the founder, often kills the company.
• Prime. This phase represents the ultimate goal for a business. Systems, processes and procedures work well. There is a balance between growing sales and profits, being in control and being flexible enough to take advantage of opportunities. There is a true management team. Strategic planning is filly integrated throughout the organization. People know where the organization is going and buy into the plan. The challenge is to build a new business model and establish a new curve so you don’t flatten out into stability and then decline. This requires reinventing products and markets.
FUTURE THINKING PROCESS
Future thinking involves a three—day planning process. Day one involves an environmental scan, day two talks about the vision, and day three creates the strategies and plans to get there.
The first rule of future thinking is “Just do it’. Don’t let any of the other rules get in the way. A weak plan is better than no plan at all. The process of sifting down with your people and talking about these kinds of issues is invaluable in itself
Day One — Scanning the Environment
Hold the meeting off-site so you can get away from the daily distractions of the business, If possible, spend a fill day on all thee parts of the process. Involve people at all levels of the company. Bring your senior management team, an equal number of middle managers and an equal number from the rank and file. Bring people who are doing the work and don’t have a clue as to what running a business is about. This gives credibility to the process and makes it more open and less secretive. Plus, the front-line workers bring a very different perspective because they deal directly with the customer every day. Sometimes their input is naïve, but sometimes it is very insightful.
If you can’t afford to take everyone away from the business for three days, hold the session on a weekend. Schedule day one and day two on a Saturday and Sunday, then go back a week or two later to finish up with day three. In a worst case scenario, steal a few hours in the morning, one day a week. This takes longer and makes it harder to stay focused, but the key is to just do it.
At certain points in the process, you may want to bring in key customers or strategic partners, but most parts will be too sensitive to involve outsiders. You may also want to bring in other business people you respect and ask them to review your plan. You might even want someone in the same industry who doesn’t compete with you directly.
Start the environmental scan by looking at customer, employee and competitive issues. Use customer, employee and competitive surveys to gather information and establish benchmarks. (After the planning session, use the surveys at six-month intervals to identify current issues and see what progress you have made.) Then look at other environmental areas in regards to business and environmental trends. At the end of the day, select the key issues you need to deal with.
Many companies like to do a SWOT (strengths, weaknesses, opportunities and threats) analysis. It doesn’t hurt to address those issues, but beware of turning the process into a mechanical approach to strategic planning.
Environmental areas to cover on the first day include:
• Customers. What is changing with your customers? How are their buying habits changing? How is the way they use your products or services changing? How are you doing and what can you do better? What can you do to help your customers improve their businesses? Often, you can’t answer that question because your customers don’t know. You have to invent the solution.
• Competitors. Who are your current competitors and who will compete with you in the future? What are their strengths and weaknesses? What do they do that you wish you could do?
• Strategic partners. These include everyone from your suppliers to employees. Strategic partners allow you to hire the best and brightest in certain fields. Tapping into expertise outside the company allows you to concentrate your energies on what you do best. What functions in the company could you outsource to improve performance, save money and allow you to focus on the core of the business?
• Market forces. These include things outside the marketplace that you have no influence over demographics, government regulations, technology, the economy, etc.
Understand how these will impact your market.
• Internal scan. Do you have the right people in the right jobs? How is your decision making process working? Do you have the right structure? Do you have the right compensation systems in place? Employee surveys are very useful in this area.
• People. Managers should be developing talent underneath them and modeling the values of the company. The best way to retain a strong corporate culture as you grow is to have the manager’s model what the company is all about. Managers should be appraised on how well they model the company, yet most are just judged by the numbers.
• Purpose. How well have you defined the vision and how well do people understand it and buy into it?
• Processes. This involves how you do things and whether you have the resources to do them. What are your core competencies and how are people focused on them?
Day Two – Vision to Action
Vision focuses the entire company. A 100-waft lightbulb will light up a room, but a 100-waft laser will drill a hole in the wall. The difference is focus and coherence. Most companies are like the light bulb. They radiate energy in all directions because people don’t understand what the company is all about and how they fit in. Vision gets people to focus their own personal lasers on the bullseye. When you get that kind of alignment and focus, you can achieve tremendous results.
Vision helps people understand what it means to win and how to win. It also explains the rules of the game, which is important because most employees don’t know the rules of the game. The best way to get people to understand the vision is to have them be part of forming it. However, you own the company, it has to be your vision. The business should serve your life purpose. You still have to consider the other stakeholders, but it is completely appropriate to bring your vision to day two so people can talk about it, modify it a bit and either buy into it or buy out.
To get people in alignment with the vision, they have to know:
• Where the company is going
• How it will get there
• Their role in helping the company get there (why their job is important)
• What’s in it for them?
When strategic planning is filly integrated into an organization, every person has their own personal strategic plan that talks about how the company helps them get what they want from their lives. They also have their own development plan and a short-term annual plan that identifies what they will do to help the company achieve its goals and where they want to be at the end of the year in terms of their career, financial goals and skill development.
This kind of plan balances the equation on both sides. It also dramatically increases employee retention. When people put together an annual plan to get what they want through the company, the sense of partnership goes up. This piece isn’t easy to install, and it’s usually missing in most businesses. But when properly implemented, it has a powerful impact.
Strategic alignment has two dimensions. First, you want vertical alignment between your people and the vision. They should care about the vision and the vision should care about them. Second, make sure that the way you do things also works for your customers. As a regular exercise, ask employees to state the purpose of your business. The answers will shock you.
Create a vision that creates buy-in. When you return to your office, spread the word. Tell people, “Here’s what we did (in day one and day two). What do you think?” When you get back together for day three, you can incorporate what others said.
Day Three – Implementation
Before proceeding with day three, take a break for a week or two. Report back to the organization everything you did in day one and day two and get their feedback. Take the information gained from the environmental analysis and put it on a balance sheet with assets and liabilities for each issue. Step back to analyze what you have done and let it sit for a week or two.
Strategic planning is about helping your company move toward the vision. Given your vision, what big strategies are required to help you get there? In order to get your company to be what you want it to be in five or ten years, it will have to change. It will have to look like a different company. As you move from today to tomorrow, you will go through a series of models of different ways of operating. Strategies are the stepping stones that can take you to your vision.
A strategy should not be something like, “We will be the low-cost provider.” Instead, a strategy should say, “Here’s what our company needs to look like to get to stage one. To build on that, our company has to look like this.” This is your role as CEO, to invent the next model, to live in the fixture and lead your people along. If you’re living in today and solving today’s problems, you’re in the red zone. You may be adding value in a technical area, but you can add a lot more value by leading your company into the fixture.
The first strategic steppingstone deals with the marketplace. Ask:
• What do we need to do in the marketplace that will help establish the foundation for growth?
• What tactics do we need to do in the marketplace to make that steppingstone come to life?
• What do we have to do inside the company to support those marketplace tactics?
For each steppingstone you identified, ask those kinds of questions. That will give you a list of tactics. Next, identify the measurable results you want to achieve. Examples of measurable results might be:
• Solidify customer loyalty and reduce customer turnover by 50%.
• Form strong strategic partnerships.
• Become an aggressive marketer.
Next, ask, “What do we need to do inside the company to make these marketplace tactics work? For example:
• Develop the management team.
• Build a sales force with the abilities to sell at high volume.
• Establish new production capabilities, procedures and controls.
• Strengthen financial controls and reporting.
Eventually, you will end up with a list of tactics in the marketplace and in the company. Assign each one of those tactics to a cross-functional team, a specific department or an individual. Using cross-functional teams offers three benefits:
1. It gets people involved in the implementation process.
2. It improves communication among departments
3. It puts responsibility where it belongs
The team then determines the specific actions that need to be taken to accomplish each tactic For example, suppose one tactic is to get financial statements out on a timely basis. The team will:
• Define what “timely” means
• Identify when the statements will come out
• Identify who is responsible for making sure the statements are out on time
• Identify the resources that person needs to get the statements out on time
To make these kinds of teams work:
• Carefully define the tactic and the actions to be accomplished. For example, “improve communications” is not a clear tactic. Narrow it down so you know exactly what improved communications means, what it will accomplish for the organization and the measures of success. Clearly define what The tactic is, what success looks like and how you will measure it.
• Have a clear leader who takes responsibility for calling meetings, putting agendas together and soon.
• Have clear roles for each team member. Identify who is responsible for what, make sure people know when things are due and give them the resources to do it. Write it down and hold people accountable.
• Prioritize all actions. What is the most important thing to do? Who will do it? When? What resources do they need? How will you measure success?
• Make sure every individual on the team gets their own action plan that identifies what they are responsible for, when it is due and the result that needs to be produced.
So far, you’re still in the planning stage. To make sure your tactics get implemented, follow up with regular meetings. The planning team should meet once a month to review what each cross-functional team has done compared to what they promised to do. At the end of each quarter, conduct a one-day, off-site meeting to review the planning process and any environmental changes and revise the plan as necessary. In the beginning, you may need to meet more than once a month, especially if the company is new to the strategic planning process.
During these meetings, ask:
• What have we accomplished?
• What haven’t we accomplished that we said we would?
• What have we learned working as teams?
• How can we improve?
• What are we going to change about the way we work as teams?
As CEO, it’s your job to force this regular follow-up. You have to drive it and make it happen. If it takes too much administrative work, put together a small team to help you. Get bright, up-and-coming people from the lower levels of the organization to design and create weekly reports that compare what the teams are doing against what they said they would do. Have these people bring you only the exceptions and the problems. This provides a chance to develop these people and give them a better overview of what is going on. Plus, you don’t have to micro-manage every team because you only deal with the exceptions.
STRATEGIC PLANNING TIPS
• (Jet the commitment of the entire management team.
• Set a date to go off-site.
• Select participants from throughout the organization.
• Let everyone know what is happening. You can’t over-communicate.
• Use a professional facilitator. When you try to lead the session, you automatically shut down discussion.
• Insist on follow-through.
• Re-plan every year.
• Understand how your company can support what you want from life.
• Draw up a design of what your company will look like when it becomes what you want. Then plan and implement long-term strategies that will move your company toward that vision.
• Make sure that all employees understand how they contribute, how they connect and how they will be rewarded for making it happen.