Planning makes perfect

Planning means different things to different people, in the minds of a lot of people it is a tedious exercise producing documents for the purpose of senior management, lenders, funders, and other third parties.  It prevents us ‘from getting on with it, represents a restriction and straightjacket on our activities, stifles our innovation and to cap it all once a ‘formal’ plan is produced it becomes out of date and is a handy paperweight at best.

I will throw my hat into ring and declare that I am a big fan of planning, both at a business and personal level, business and personal planning share many features.  However the focus of this article will be on planning in a business and organisational setting.  I have been involved in formulating and implementing plans for my own businesses and activities, advising and supporting individuals and organisations in the planning process, and assessing business plans.  My attitude and opinion as to what planning is and isn’t has changed over the last thirty years, one constant is that effective planning is vital to help us navigate an uncertain business landscape and reduce the risk of failure.  It is an unfortunate statistic that 70% of business failures are put down to poor management skills, which includes weak planning skills.

Planning is to a large extent a continual activity; it should not be confused with the end document(s) produced such as a business plan, budget or cash flow, these documents are merely capturing in words and numbers the results of (hopefully) some clear thinking and likely outcomes of our business journey.

The future is an uncertain landscape and none of us are blessed with the ability to predict with 100% accuracy what it holds for us, at the risk of using an overworked cliché, the only things in life that are certain are our own mortality and that we will pay taxes.   One of the primary purposes of planning is to demonstrate that we have considered and have tried to understand the risks involved in our business journey, and that we have considered how we may deal with those risks –all with the primary objective of realising and ultimately achieving our aspirations.

Planning has to be based on solid foundations, solidity starts with our mission statement, which helps our raison d’être, our calling card to the outside world.  The mission statement (effectively our aspirations), tells the world what are our aspirations are, how we hope to achieve them, and who will be benefit from this.  A mission statement is not a bland promotional tool; it needs to be simple, concise and memorable.  Shared mission, value & vision are the bedrock of businesses and organisations, work/business cultures create the environment in which behaviour – dysfunctional or otherwise is created.  Organisations are just another example of the family that we see & experience in our personal lives

Our mission statement helps generate critical success factors (CSFs), CSFs are the cause of our success, those areas in which we need to perform best if we are to achieve overall success and ultimately achieve our objectives.  For example, CSFs for a retailer would typically be the right product mix, product availability, effective marketing to attract customers and correct pricing.  CSFs help us generate measures to monitor and manage the achievement of those CSFs; these measures are also referred to as Key Performance Indicators (KPIs).  KPIs should normally be a blend of numbers (quantitative) and non-numbers (qualitative).  Targets can be set for these KPIs, and progress measured against these targets, any variations against these targets prompts investigation and ultimately action taken to rectify the situation.

There is a general rule in business that you cannot manage what you cannot measure; we need clues/milestones to identify if we are progressing on our journey.   Take the example of an individual who decides that their aspiration (mission) is to lead a healthier life style; one identified objective is to reduce their blood pressure to a certain level; a CSF is change of diet; a KPI to monitor this is body weight.  If we measure weight loss against a pre-set target then if that weight loss is not achieved we can have a closer look at what and when we are eating, and then hopefully put this right.

In the example of the retailer quoted above, appropriate KPIs may be levels of gross profit achieved; customer feedback, repeat purchases, and levels of spend per customer.

Within the planning process we need to consider the resources, both physical (tangible) and non-physical (intangible).  The ability of any business to perform effectively is determined by the adequacy and suitability of its resources.

There are a number of ways to categorise resources

• Physical:  For example buildings and equipment, their relative age and condition will determine their usefulness and adequacy
• Financial: For example adequacy of cash flow and working capital
• Human resources: This will include numbers and skills levels
• Intellectual capital: This will include brand names, reputation, client databases and business systems.

A resource analysis needs to consider how resources are managed, deployed and used.  For example, there no point in a business having a good reputation and brand name if it lacks the skills and expertise to exploit them effectively.

Successful businesses and organisations, in addition to effective planning require control and management decision making.   The role, purpose and benefits of effective planning, control & decision making can be compared to the control panel on an aircraft. The pilot relies upon his instruments to measure and control the performance of the aircraft, show him how the aircraft is doing, what outside conditions are like, the path that should be taken and so on. The instrument panel is not however flying the aircraft; it is helping the pilot to do their job effectively.

Knowledge and understanding helps all businesses, regardless of size, to maximise their potential. It puts them in a firmer position to shape and control their own destiny.