ANNUAL PLANNING PROCESS
Business plans must be an annual affair. Without them, leaders have no objective mechanism to identify goals and action plans for implementation. Without a plan, success will come only by chance, and failure is a matter of time.
Planning is essential in every type of business and industry, whether service or manufacturing, and regardless of size. If we look at a business as a ship triage, it is like an automatic ballast system, keeping things running smoothly on the journey. Triage identifies matters to be addressed, marshals goal achievement, and exposes poor performance for rehabilitation. Achievement of ballast in business is not possible without first identifying your company’s strengths and weaknesses. Historical and projected data should be carefully reviewed. Interviews are conducted with key decision-makers to ensure that accurate information is gathered and properly understood. A preliminary plan containing preliminary goals for discussion is prepared as a communication medium and used as a working document.
But before examining planning in detail, it’s important to acknowledge a point or two. Business planning is certainly not a new tool. Its theory has existed for several decades, although practical implementation only came later. Finding leaders who disagree with the merits of business planning is difficult. Finding those who fail to employ it properly is surprisingly easy. There remains a constituency of leaders who support the theory but not the practice. They may fear both the cost of the process, or lack the patience and discipline to implement it. In either case, an improperly implemented planning process encourages failure – a far greater cost! Plan focus depends substantially upon the maturity of the business. Plans for start-up operations are quite different from those of mature companies. Newborns struggle for survival: every management activity is focused on product development and cash flow.
Established companies are more concerned with growing market share and expansion. Determining the stage of a particular business is not as simple as one might think. Overconfident leaders whose new businesses are still in survival stage often act as if they are in the growth phase. This can lead to overly aggressive plans that unnecessarily risk a company’s viability. At the other extreme, profits stagnate in mature companies when leaders are too timid. Risk tolerance and personal make-up make the difference. Soul mates must be consulted for objectivity. Once the phase of business maturity has been accurately determined, the planning process can begin.
PHASES OF BUSINESS LIFE
Sifax Group is our case study as we understand the process of systematically building an annual business plan. Sifax Group employs a lot of people, and their services rendered is sought after nationwide and even abroad. Each year its leadership team conducts a formal planning process to identify strengths and weaknesses in each functional area, confirm the corporate mission, and identify specific goals and action plans for the upcoming year. Leaders of each of five functional areas assess their priorities in comparison with those of the company. Leaders in the areas of general management, finance, marketing and sales, production, and human resources then meet to ensure that their goals are compatible. When all are in agreement with the specific plan, it is committed to writing and guides each day’s activity for the upcoming year.
DEFINE YOUR CORPORATE MISSION
Business plans are composed of three pillars: Mission Statements, Specific Functional Goals, and Detailed Action Plans to achieve those goals. Corporate mission statements depict a company’s raison d’être, i.e. its reason for being in business. Typically a four- or five-line general statement of corporate values or direction, it becomes the corporate constitution. Some leaders have little use for the statement, considering it too general to have any meaning. Employees frequently don’t understand it, and customers may have trouble relating to it. They all fail to appreciate the value of a mission statement and its potential contribution to corporate success. The mission statement sets the tone for goal development and specific action plans by encouraging a cascading effect to planning — from the very general mission statement to very specific action steps, or ‘manageable bites’, if you like!
Mission statements are found in companies of any size, industry, or profession. The complexity of a mission statement does not necessarily vary from a corner store to a multinational corporation – although, of course, they’re likely to be more complex for the latter. Let’s again turn to Sifax Group’s mission statement for an example. “To be the foremost Nigerian organisation in all areas of our operations, offering world-class services built on professionalism, integrity, customer satisfaction, efficiency and distinctive business conduct, while being socially responsible to the society.” As a corporate body, Sifax Group strive to add value to the economy and are awake to the needs of the environment, the society and our world.
Again, take a look at Sifax Group corporate image statement; “we are known for achieving excellence in a unique way, inclining to creativity and innovativeness tailored to customer satisfaction. Our target is to be the best in every service that we render and hence ‘remain outstanding as a corporate entity’ ‘offering world-class services built on professionalism and integrity,’ ‘while maintaining healthy business conduct’ and keeping to the Codes of the international business of shipping.
What can we learn about the company by examining the Sifax Group mission statement?
For starters, the word “outstanding as a corporate entity” implies that the company develops products, lines, or markets which are ahead of its competition. By this, we can be pretty sure that the company puts research and development efforts high on its list of priorities in order to stay ahead of everyone else in the industry. The phrase “professionalism and integrity” suggests that any development plans are carefully weighed against profit expectations, both short- and long-term. To be “outstanding as a corporate entity” and “offering world-class services built on professionalism and integrity” at the same time, all the time, is a formidable leadership balancing act indeed. It requires split-second timing for product/service development to reach market readiness when the market is ready. Probability of success is not on Sifax Group’s side here.
We also have to look at the Sifax Group product line. Freight Forwarding (Sea and Air), Ports Operations, Haulage & Logistics, Plant Hire, Cargo Consolidation, Warehousing, Ship Agency, Stevedoring Services, Port Security, Ship Chartering, Off-Dock Terminal, Ship Husbandry, Brokerage, Bonded Terminal Operation, Passenger Handling, Ramp Handling, Cargo Handling, Flight Control and Crew Administration, Aircraft servicing (Cleaning and Toilets Services), (SAHCOL) and Downstream services of the oil and Gas sectors, are services rendered by a number of worldwide companies. Substantial competition creates a greater need for precision management planning, not to mention effective “worldwide service.” “Exceptional customer service” is expensive and difficult to manage consistently worldwide. “Challenging careers for the employees” suggests that fair measurement policies are applied regardless of country and culture. (So much for those who believe mission statements are worthless!) We’ve taken a known company, broken its mission statement into manageable bites, and we’re able to develop realistic expectations of what the organization might be about. That doesn’t mean we are accurate, but if we walked into Sifax Group’s head office we would be armed with a respectable list of questions — more so than if we hadn’t seen SAHCOL’s mission statement.
The same approach applies to 5-, 10- or 50-employee businesses. The company in question doesn’t have to be worldwide to have a mission. It may be the “most profitable manufacturer” while providing exceptional customer service and challenging careers for our employees, even if it is small and owner-managed. It’s fun to dissect a company through its mission statement, but what does the statement do for Sifax Group management? How does it help continuous leadership triage, the company’s ballast mechanism?
Well, when it is dissected into smaller, manageable bites and analyzed, the mission statement spells out the keys to SAHCOL success. It is the wellspring, if you like, from which all company direction cascades. Each phrase represents a functional area to be addressed by specific goals and objectives. If specific goals could not be gleaned from a company’s mission statement, it would serve little purpose to the company, and critics of mission statements would then have a point.
Setting goals for each functional area of a business also sets up a system of accountability. If managers accept responsibility for goal achievement, they may be held accountable for success or failure. Without accountability, how could a company profess to provide “challenging careers for our employees”? More important, how would it know when it had achieved anything? It wouldn’t. Mission statements, as corporate constitutions, have longer shelf lives than goals. Goals are short-term desires, the breadcrumbs on the trail to mission achievement. Annual revision of goals can prevent a company from straying too far from its intentions as expressed in its mission.
Changes in risk assessment and industry and economic environments influence the nature of each year’s goals, but they are always prepared with the mission in mind. Although financial information is an essential ingredient in the triage process, it alone does not ensure success. Other key ingredients include assessments of markets, competition, product or service acceptability, pricing, costs of production, productivity, customer service, new product development, advertisement, overhead expenditure levels, and, of course, people. Every year, triage information is presented internally to all senior management personnel by those responsible for each functional area. Sifax Group’s planning process provides an excellent checklist for businesses of all sizes to ensure important considerations are not overlooked. Sifax Group, as we suspected, prepares its annual goals by means of a major mission statement category.
Each year, for every foresighted company, managers from all locations must submit goals to key decision-makers. The company then updates planning forms to ensure management works with the most current business data — the first assurance that the ballast is in check. One department may provide functions for others; interviewing each manager ensures that the goals of users match those of suppliers. Incongruities are negotiated before proceeding further. Managers can then list the strengths and weaknesses of each supplier department in the company. When lists are combined in a written business plan, strengths and weaknesses are cross-referenced to see where the company needs to set corrective goals to improve the function of one or more internal suppliers.
The company chairman evaluates senior management performance and identifies mediocrity for corrective action. Mediocre performance means the company will not achieve full potential. Mediocre management prepares mediocre plans – and lost profit is the outcome. Cross-referencing strengths and weaknesses helps to reveal any traces of mediocrity. The chairman and board of directors ensure that everyone takes ownership of the planning process. This provides second ballast for the senior leadership triage team. In turn, senior leaders ensure that operating managers accept responsibility for the plan, so similar ballast occurs at this level. Cascading responsibilities from senior to junior management levels reflect the downward flow of the ‘manageable bites’ business plan. Operating managers must identify goals for day-to-day operations that are in line with the corporate mission. Cascading responsibility for the business plan must always ensure all hands on deck sail together.
Newswire Law and Events Magazine is Out. It's a collector's item. Get one - or two,or more - for yourself and loved ones.