Not all strategic decisions need the same amount of analysis. This is something that many founders understand intuitively. But it’s also something that becomes more complicated as a company grows.
Why? Because the decisions get bigger and more complicated, what worked for a Big Decision in the past often doesn’t work for the Big Decisions of a bigger company. In addition, the “decision environment” gets more complicated, with more potential participants and more dynamics among them. Who do you include? When? How? Who provides input and who participates in the decision? How is the decision actually made?
What qualifies as a Big Decision? Something where the payoffs are extraordinary – say, it could have an impact of 20% or more of a company’s revenue, or it could impact more than a third of the employees – and/or where the risks are extraordinary – say, it could take 20% or more of a company’s discretionary resources to implement.
Decisions fall on a continuum – as the stakes rise, so does the need to treat the decision more seriously.
And how do you do that? As the decision gets bigger, you should add more information, more structure and process, and more focus and energy on the decision before its made. If you don’t, you can be pretty sure you’ll be spending more time than you’d like or expect after the decision.
Many of you reading this post are 10%ers. And there’s something in the back of your mind eating away at your conscience. You know there’s something not quite right about it, but you tell yourself that 10% has always served you well.
And you might be right. You’ve probably gotten along well enough with your 10%. Then again, you may feel like it no longer has the same effect that it used to. So let’s take a look at your 10% and see if it’s still serving you.
I’m inspired to write about 10% because I met with a guy last week who said, “It’s just what I’ve always done. I don’t really have a reason for it, and sometimes I wonder if it’s what I should be doing. But I’ve never known how else to do it.”
Later on, after our discussion, he said, “Yes, that’s what I want – that would help me, and it would help my team. They’ve always been a bit confused and defensive about the 10%.”
What am I talking about? Let me use his words, “We did a strategic plan back in 2008, but we’ve never updated it. It was helpful and we did some things because of it. But for the last 5 years, I’ve just said that we should grow by 10% next year. And that’s what I say at the start of each year. I kind of know that I could or should have more to my goal, but we’ve been OK just trying for that 10%.”
It’s something I’ve heard many times before. So, let’s look at the good, the bad, and the ugly of the “Let’s grow 10% next year” approach to strategic planning.
The good is that it’s an easy way to communicate that you want to grow, but not too much. It says, “Let’s get better at what we’re doing.” It’s also quick – most leaders who use 10% as a goal (I just can’t bring myself to call it a strategy!) need about 1 second to access their intuition and come up with that number. And it’s also good that most leaders who use 10% don’t enforce it – some years they’ll decline 1%, and others they’ll grow 20%, and both are received equally.
The bad is that 10% doesn’t tell anyone how to achieve 10% growth, and, since the person who used it likes a planning process that only takes 1 second, they usually won’t commit the time to strategy and planning to figure out how to get the 10%. And so, they just react to whatever the marketplace offers. That’s not good, but often times 10%ers are bailed out by a strong market, and so reacting is bad but OK.
Which brings us to the ugly, which arrives when a 10%er is managing a business in a market that is seeing substantial change. If that’s the situation, 10% is of no use, and in fact may be counter-productive. Because at the heart of 10% is “let’s change, but not more than we’re comfortable with.” And that can breed complacency that appears to be fine…until it’s too late for any small adjustments to work. And if the only goal you’ve ever had is 10% growth, you and your team are not going to be prepared when you need to lead your company outside your comfort zone.
So, if you’re a 10%er, you have a choice – to be passive or active. Either keep enjoying that comfortable feeling until you’re forced to do more…or lead your team to have a new set of discussions that develop your company’s ability to identify opportunities a little outside your comfort zone, go after them in smart ways, and stay ahead of the market.
How could I not take up the challenge of finding the link between the 50 Shades juggernaut and my beloved Stage 2 small business clients!?!
Putting aside the more mundane topics of what Christian Grey’s DISC profile is, the importance of proper inventory processes, and the merits of NDAs, I’m struck by the similarity between Christian’s dominant role and how Shane Yount, owner of the Process-Based Leadership system, describes some companies:
“(Managing by position, proximity, or persuasion) creates dependency. Employees become dependent on their leaders to make the decisions, to solve the problems, to show them what to do and when to do it. Certainly managing by position, proximity and persuasion gets short-term results. But dependency is dysfunctional.”
It may seem extreme to draw a parallel between 50 Shades’ dominant/submissive relationship and how many small business leaders operate, but there’s probably more truth to it than many owners would like to admit.
Recently I talked with a group of Stage 2 company CEOs, and one of their big a-ha moments was when they realized how dependent their organizations are on the leader’s opinion, intuition, and judgment.
If you realize that your leadership is out of balance, or if your employees start to refer to you as Mr/Ms Grey…what can you do?
The first step is creating a dialogue with your managers. You want a process to be guiding the company, not a person, and to do that, you need to start a process that involves your leaders in key decisions – and then you need to stay committed to it. And, if you’ve been doing a lot of the talking, start listening more. Don’t totally hand over the reins, but start to share them.
What should you talk about? To start, I like to focus on today – what is working, what isn’t working? Once you have things working OK, then you can start looking out farther on the horizon – to the next few months, and then to the next year, and then to the next 2-3 years.
Let’s be honest about something Christian Grey knows – it’s fun and exciting to be in charge, to be The One Who Makes the Calls. But it’s also not sustainable, and if you’re looking for your business to prosper for the long-run, you need to mature as a leader and expand how you relate to your business.
Your sales process sets up the success or failure of your production team.
I’ve often been in meetings with operational people who are overwhelmed and not hitting their targets. They struggle to get more efficient or productive, and desperately seek more resources that rarely come.
But when I see a target that is missed more than 5% of the time, I ask, “How did you set the target?”
It’s then that we find out that there is no good rationale for the target. It’s also often the case that the sales team is part of the problem.
Although it certainly makes it easier in the short run for salespeople to tell customers they can have whatever they want, it usually ends up costing the company money. Why? Because it puts excessive burden on the production team to meet targets that aren’t a good fit for the business.
Most customers can be managed. When they understand the costs and risks of different options, they will make a reasonable selection. But it requires a sales team that is able and willing to talk with customers in an educational, supportive, and firm way.
If your operations team is struggling, dig into your sales process, and understand how you’re setting customer expectations. It’s likely to have a huge impact on your operations team – and will likely improve your profitability too.
How good is your business’ radar system?
Do you have a radar system for your business?
For my clients who are using my 12-month strategic planning process – and for those of you who want to create a system for sustainable success – summer is the time we wrap up our survey of market trends and forces. So, as I look back on the process I’ve been through over the last 3 months with my clients, it’s interesting to think about the RADAR system we’ve built for their companies.
How can you build a radar system for your business?
You can build a system on the cheap by using what your company already has:
- New project or product ideas customers have asked for over the last year
- Recent customer requests
- Internal brainstorming about new ideas
- Clippings of trade journal articles that you can collect throughout the year
You can build a more robust system by adding some resources:
- Using a consultant or service (or intern!) once a year to get more information about your markets – through web searches, customer interviews, and/or research reports
- Building a searchable database of market intelligence facts
- Naming one of your managers Trend Czar or Head Trendie, and
Once you have your company’s radar system built, then you have to read what it’s showing you. There are 5 steps to turning your “readings” into action:
1. Determine what resources you can devote to pursuing trends and new areas of business (as opposed to improving or expanding your current lines of business)
2. Assemble a long list (at least 12) of important trends from all the data you’ve collected
3. Filter your long list down to a short list (at most 5) by evaluating the general impact and potential of the trends
4. Determine which short-list trends will get resources by evaluating the details of the opportunity, the likelihood of your company’s success, the investment needed, and the risks.
5. Create an action plan for the trends that will get resources
Like any radar system, yours will give you advance notice of issues coming your way, so that you have time to prepare and react.
I have 2 clients who are focused on “accountability” this year, and it’s proving a hard row to hoe for both of them. Why?
Well, first of all, accountability is a somewhat scary term. If someone is saying we need it, then that must mean that we are not being accountable, and that sounds like someone’s not happy with people’s performance.
Worse, if there’s not a way to gauge performance, the people are likely to take a need for accountability as a judgment on their dedication. They’ll confuse accountability with work ethic.
It’s unfortunate that accountability gets this reaction. In Stage 2 companies, accountability is more about making things that used to be managed intuitively into things that are managed objectively. It does make a judgment about how people are working, but not in the way they think – accountability focuses on working on the right things, not the level of effort.
In fact, most of the time I work on accountability, people have a clearer sense of direction and less stress in their jobs.
I can spend lots of time talking about how to make your organization more accountable, but for now, let me finish by answering the question, “How do you overcome the initial resistance to accountability?”
I recommend 3 steps. First, before you bring up accountability, praise the team’s work ethic (assuming it deserves praise…if it doesn’t, that’s a deeper problem…), so that they know that you know they are dedicated. Second, give them an example of people spending more time in an area than they should. (Serving the bottom 20% of your customer base is a fairly typical area.) Finally, ask the team, “Do you have a way of quickly seeing whether the other people on the Leadership Team are succeeding?” If you don’t, then you’re probably spending more time than you should simply understanding how you’re doing, instead of diving into the issues that will make your business better.
I spent the last 2 days in a workshop learning about performance and accountability from Shane Yount of Process-Based Leadership. His model is a terrific match for the strategy work I do – once you know where you want to go, then you need to activate the organization in a consistent, engaging, disciplined-but-flexible process.
I often talk with my clients about “strategic management,” which is the on-going ability of the organization to identify the right things to work on, and then to actually work on them – as opposed to getting consumed by day-to-day work that puts things off-track.
What powers Shane’s performance system is a “culture of accountability.” What does that look like?
- There are clear priorities for each team – and the company as a whole – to focus on
- There is a sense of urgency in each team – Shane is a strong proponent of a weekly cycle
- There are “non-negotiable rules” that people hold themselves, others, and the organization to – things like showing up for meetings on time, coming to meetings prepared, and taking responsibility for “re-negotiating” commitments if they are not met
- The dialogue is about what people do, not how they feel
- How do you know if you need it?
- The performance of your company or team is driven by the force of the leader’s personality (and if that wasn’t there, who knows what would happen…)
- The company or team focuses on whatever is in front of it at the moment
- There is selective engagement – people are able to set their own level of effort and contribution
Many companies don’t need or want a complete structured performance system like what Shane offers. But whether you’re talking about my “strategic management,” or Shane’s “process-based leadership,” every company needs its own “management toolbox” to drive performance.
Is your company’s performance saying you have the right tools?
My 11-year-old son started playing hockey goalie this year. At a recent goalie clinic, his coach said something I think applies to business leaders…
“Goalie is a hard position. It’s hard to be in your stance through the whole game, it’s hard to shuffle across the crease while you follow the puck, it’s hard to move out to challenge the shooter. But those are the right things to do – those are what will help you make the save. You can play the easy way, but you won’t be successful. So, I want you to remember a simple phrase to help guide you while you’re in practice and in games…If it’s easy, it’s wrong. If it’s hard, it’s right.”
Let me review some of the easy things that I see business leaders do:
- Make important decisions before understanding the consequences
- Make important decisions without involving the people who will carry them out
- Focus on feel-good marketing activity rather than figuring out their marketing ROI
- React to sales opportunities rather than focus on the ones that are best for their business
- Hire someone that they like
- Keep someone they shouldn’t have hired
- Avoid the hard decisions during strategy meetings, so that the decisions are left for people in the field to deal with when they’re faced with a problem
- Assume they know what their customers or markets want without asking them
- Don’t question their own biases and blindspots
In every one of those situations, it’s hard to do the right thing. It would be nice if they weren’t hard, or if there was a magic wand that would make them easy. But that’s not how those situations work. And what happens if you handle them the easy way? Things take longer, you create more problems, you spend more money. In short, the easy way is actually not the easy way.
So, here’s the key message I want you to remember as a business leader: When you’re in a complex or important situation, the hard way is actually the easiest way in the long run, if you’re aiming for long-term business success.
I know it’s not easy, but please do the right thing. It’s what your company, customers, markets and communities need from you.
I am blessed with several clients who have embraced the idea of “measure twice and cut once,” and therefore have adopted a robust process for their annual planning. While most companies would say, “Why would you spend so much time on planning,” these companies have come to understand that time spent in planning pays off in spades through smarter decisions, better allocation of resources, and faster execution.
For these companies, my planning process starts in (gasp) August, so that we can have 4 monthly meetings starting in September. So, I was involved in 2014 planning for the last 5 months.
Mind you, I have other clients that planned 6-month goals for the first half of 2014 in just an afternoon. I’m not proposing a robust process for everyone – but everyone can learn from the more involved process.
What did I learn over the 2014 planning cycle?
It’s helpful, and an indicator of a strength, when the leader narrows the focus early in the process. For some clients, I start the process by asking the whole leadership team (a) what is important that’s happening in your world, and (b) of all of those things, what are the most important. With other clients, I have that discussion with just the CEO or COO, and then we come up with the 3-5 most important issues that we orient around for our planning with the leadership team. Would your leadership team trust and embrace the issues that your CEO came up with? Would your CEO come up with the right issues? If so, your planning can be more focused and efficient by starting the discussion with the short-list of issues. Remember, though, that you still need to describe a full picture of the many (often 15-20) issues that are occurring in the business, so that everyone sees the whole landscape.
A good process will make people strategic. One of the challenges I have as a strategy consultant is to make everyone on the team effective in a strategy process, even though many Stage 2 managers are not very strategic. How do I do that? By working through a process that (a) includes all managers in the whole process, and (b) helps everyone on the leadership team connect tactical, day-to-day issues with broader, big-picture issues. Admittedly, that takes more time in the planning process, but as change management consultant Randy Albert often told me, “You have to go slower at the start to go faster at the end.” Remember, though, that including everyone in the process does not mean that everyone makes all decisions – sometimes it’s just input, sometimes it’s just feedback.
The budget is where the rubber meets the road. I wrote a post last year about how important it is for your planning process to include both strategy and budgeting. With the environment still uncertain and/or resources still tight, this year’s planning cycle confirmed the value of the two parts. Budgeting without a solid rationale behind the allocation of funds is just guessing, and planning without honest decisions about limited resources is just hoping. Remember: at the end of your process, you should have a clear set of 3-5 company-wide priorities, and a “strategic investment budget” that identifies the specific funding and activities that support your priorities.
After taking a breath and recharging over the next few weeks, I’ll start working with some clients on their innovation and new venture portfolios, and the new places they can take their businesses over the next 3-5 years. I’ll write more about that topic sometime.
A friend of yours runs a successful Stage 2 business – but is also frustrated
that things aren’t going as well as he’d like. It’s your job to set him
on a new path.
How do you create that inflection point – that clarity of understanding and
focus that sets a new path and provides the basis for success?
Let’s look at how it works for Ebenezer Scrooge, because if ever there was a
tough customer for a strategy consultant to work with (cheap! close-minded!
domineering!), he is one. But Scrooge’s consultant (the ghost of his
former business partner) designs a great process that holds lessons for any
He starts with a look at the past (fond memories of Scrooge’s childhood).
What core principles show up then that Scrooge needs to reconnect with
today? What lessons does the past hold for Scrooge?
He then looks at today, from different perspectives than Scrooge usually sees
(a joy-filled market, a family feast, a miner’s cottage). What can
Scrooge learn from those people? What is happening outside of his normal
view that he can use? What does Scrooge have to offer those people?
And finally, he looks at the future to see where Scrooge will go if he
continues on his current path (a neglected grave!). What are the results
Scrooge will get from his present efforts? What results does Scrooge
want? Do the likely results line up with the desired ones – and if not,
what needs to change?
With a process like that, it’s no surprise that Scrooge emerged a new
man. Full of energy. Renewed with purpose.
The Wikipedia entry
about Scrooge’s transformation sums it up well, capturing both the immediate
impact and the long-term sustainability of Scrooge’s new thinking:
“Scrooge has become a different man overnight, and now treats his fellow men
with kindness, generosity, and compassion, gaining a reputation as a man who
embodies the spirit of Christmas. The story closes with the narrator confirming
the validity, completeness, and permanence of Scrooge’s transformation.”
So, as you do your annual planning, use the wisdom of Scrooge’s planning
process in your Stage 2 business, by tapping into the Ghosts of your
The Ghost of Business Past. What was at the heart of your success
in Stage 1? What was fun about the business? What made you
special? As you look to the future, you need to reconnect with that –
especially as your company has to change.
The Ghost of Business Present. Life in Stage 2 is more complex
because you are connected to so many more people and organizations, and because
you need to deal with broader markets rather than just isolated
customers. To come up with an effective plan, you need to take a more
holistic view. What are your customers thinking? Your
suppliers? Your competitors? Your employees? What is
important to them? What trends are happening in the market? You
need to see the world from other eyes, and use that perspective to come up with
The Ghost of Business Future. Stage 2 companies have reached a
point of sustainability, so now their leaders have to turn their attention to what
they are sustaining. What impact do you want your business to have on
the world? What results are you looking for from your business?
What does your business stand for? And what gaps and problems can you
identify today so that you can deal with them before they are urgent,
expensive, and entangled?
Successful Stage 2 leaders understand that it is not easy to design an effective
planning process, and so they put the time and effort into “planning the
When they do, the result is a business that is transformed overnight – with the
power to sustain that change over time.
What do you see when you go on a tour with your ghosts?
Enjoy the holidays, and best wishes for a good new year.
Annual planning is in full swing, and the Year in Review is a great place to start the planning process. But many companies stop there, and they miss out on a rich source of strategic insight when they do.
Looking at trends adds perspective that the Year in Review usually misses. The two sound similar, and there’s often some overlap, but most of the time there are many observations and issues that are raised only when you look at trends.
Why is that?
When we do Year in Review, we have our Doer hat on – so the question is, what did we do (or not)? When we look at trends, we have our Observer hat on – so the question is, what are we seeing? It’s remarkable what a difference that makes.
What specific questions do I like to ask to come up with a list of trends? I have about a dozen “thought-starter” questions I use that are designed to focus people on what’s important, and changing, in their environment.
Here are a few:
– What’s changing?
– What are you spending more time thinking about than you used to?
– What are your customers thinking about?
– What is your staff thinking about?
– What are the 3 most important forces impacting your market?
If you and your team ask those questions, you’ll open up a new set of opportunities that will stretch your thinking, your resources, and your purpose. And then the strategic planning can really begin!