Over the past decade, business leaders have witnessed an explosion of management tools and techniques in the workplace. Change Management, Total Quality Management (TQM), Enterprise Resource Planning, Balanced Scorecard, Benchmarking, etc. have all been promoted as the solution. The term “management tool” encompasses virtually every aspect of management and is subject to many interpretations. Many of these tools, however, offer conflicting advice. One may call for keeping all your customers while another advises you to focus only on the most profitable.
Staying current with the various management tools and then deciding which to use is becoming an essential part of every executive’s responsibilities. Unfortunately, there is scant objective evidence on
which tools are most reliable and effective and, equally important, which have enabled owners to achieve their business objectives.
Alas, Bain & Company, a prestigious management consulting firm, has assumed the onerous task of researching the efficacy of management tools and techniques. Armed with more than 6,000 responses from business leaders throughout 70 countries, from “Mom and Pops” to the largest multi-national conglomerates, their study touts strategic planning as the most widely utilized management tool.
Further, while choosing from hundreds of management tools, these same business leaders agreed that creating and applying a Corporate Code of Ethics and the process of strategic planning produced the most satisfying business results.
Why then, with results as clearly stated through the Bain & Company research, don’t more business leaders role up their sleeves and get going with some strategic planning? Probably because many owners and executives think that the end result of strategic planning is a nice binder, complete with color charts, that costs a lot of money, looks good, and sits on the shelf unopened. Sadly, this is probably true for many.
For various reasons, the process of strategic planning, especially in a second generation family-owned and managed business, should rank right up there with credible financial controls and management reports. Strategic planning is a process and a journey not a destination. How the strategic planning process is defined, created, and executed is critical to results. General Eisenhower commented that, “Plans are nothing. Planning is everything.”
Think of strategic planning as you might think of your health. You may not be overweight, may not smoke, get plenty of exercise, and even take vitamins. But would this mean that you no longer need to go to the doctor for a checkup? Hardly! It is ingrained in each of us that once we hit a certain age, we make an annual trek for a physical. Similarly, owners may agree on vision, the business may be growing, and employees may love their work but the need to engage strategic planning does not diminish.
Because customers constantly change their buying patterns, competitors vie for market share, and technology continues to accelerate information access and decision-making, strategic planning should become a routine part of every family business.
The process of planning should include:
- Formulating a strategic vision based on facts, informed assumptions, and the best possible “what-if” thinking.
- Implementing and communicating the vision throughout the organization to clarify and align the role of every strategically critical player and process.
- Monitoring and updating the vision and implementation to ensure its continued strength, agility, and relevance.
The first critical element formulating a strategic vision based on facts seems simple enough, but in reality is very difficult to implement. Within the family-owned business, some opinions are more respected than others. Often those with the loudest voice have a large portion of their personal fortune at risk, have been in the business a long time, and frequently are the entrepreneur who built the enterprise. The problem is that competitive environments change sometimes dramatically.
We once had the opportunity to observe the decision-making process in two bookstores: each owned and managed by a different family. The first bookstore was owned by a family that claimed a moderately successful mystery writer among their clan. This store was thematically oriented toward the mystery genre. Their marketing focused on mystery reader groups, occasional lectures by authors, and was supported by a very knowledgeable staff within a cozy, den like, setting. This long established business enjoyed a reputation as the place for readers to find the next good mystery.
Several miles away, was another family owned and managed bookstore this one a used bookstore. This family was adept at searching throughout the city for garage and estate sales, book swaps, library inventory reductions, bookshop remainder sales, and numerous other unique sources to find titles that would result in a quick turnover. This family always had their ear out for new sources and new trends.
As the 1990s matured, so did the use of the Internet. This family discovered additional online sources to secure obscure or “hot” titles. Additionally, they became comfortable with the emerging chat rooms to find out what people were saying and buying. They were the first to see the potential of Amazon.com, and rightfully, thought that Amazon could change the entire industry.
Eventually they used the internet to their advantage and began
expanding their reach for thecollectors market through eBay. This local bookstore created a global audience. Through technology, volume and customers increased, and business flourished.
The story was not the same for the mystery bookstore. They assumed that the buying public would continue to travel to their location to enjoy the cozy surroundings and chat with the sales staff. Instead, the mystery crowd quickly migrated to the online chat rooms where they could query authors and read reviews of dozens of critics not just the staffer in the bookstore and all in the comfort of their own homes. The result was a large majority of their clientele migrated to online shopping. After struggling for a few years, they finally folded another failed family business statistic.
The second critical element is implementing and communicating the vision. Consider the east coast graphic business that we encountered a few years ago. The founder had reached a point in her life where community work became her central focus. In her mind the company was a platform for community work. Her son, however, viewed the company as something that should grow and he needed cash for the planned acquisitions. A third family member wanted to cash out her ownership in the company in order to finance her lifestyle. With these conflicting agendas it should come as no surprise that several key non-family executives departed in frustration. Working with the family owners, all holding substantial amounts of voting stock, we helped to create a shared vision of the future for both the business and family.
The third critical element monitoring and updating the vision serves as a reminder to routinely challenge assumptions about the vision of both the family and business. In an industrial products company we found a particularly talented family member who was terrific at identifying and bringing new products to market. The problem his personal goal was to quit the business and go to graduate school. He was disappointed that his ambition was not embraced by his family his interest in the business waned. This internal conflict was compounded by the fact that one of the firm’s major product lines was becoming obsolete something that was realized very late in the cycle. In this case, a formal program was set up to continually gather competitive information while the heir identified and trained a non-family member to replace him while he pursued a graduate degree full time. Eventually he returned to the family business refreshed and full of new ideas.
Strategic planning remains the most widely used management tool in the world. As management fads come and go, the basics of planning for the future remain sound. In family businesses, where the planning cycle should provide cohesion between the goals of the family and the goals of the business, we find the benefits doubled.
Jim Webb, CMC is director of strategic planning for ReGENERATION Partners and may be contacted at 214.559.3999 or by email at email@example.com.