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BUSINESS
PLANS to
game plans
A Practical
System for
Turning Strategies
into Action
rev ised edit ion




JAN B. KING




JOHN WILEY & SONS, INC.
BUSINESS
PLANS to
game plans
A Practical
System for
Turning Strategies
into Action
rev ised edit ion




JAN B. KING




JOHN WILEY & SONS, INC.
To my wonderful son Kraig Rand King, my joy and inspiration.




Copyright © 2004 by Jan B. King. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey.
Published simultaneously in Canada.
No part of this publication may be reproduced, stored in a retrieval system, or
transmitted in any form or by any means, electronic, mechanical, photocopying,
recording, scanning, or otherwise, except as permitted under Section 107 or 108 of
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the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923,
978-750-8400, fax 978-750-4470, or on the web at www.copyright.com. Requests to the
Publisher for permission should be addressed to the Permissions Department,
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fax 201-748-6008, e-mail: permcoordinator@wiley.com.
Limit of Liability/Disclaimer of Warranty: While the publisher and author have used
their best efforts in preparing this book, they make no representations or warranties
with respect to the accuracy or completeness of the contents of this book and
specifically disclaim any implied warranties of merchantability or fitness for a
particular purpose. No warranty may be created or extended by sales representatives
or written sales materials. The advice and strategies contained herein may not be
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10 9 8 7 6 5 4 3 2 1
PREFACE



A ccording to the U.S. Department of Commerce, only one in five busi-
nesses remains open five years after its inception. The common de-
nominator in these failures is entrepreneurs who underestimate the
amount of time and money it will take to make the business succeed. On
the surface, this seems to suggest that businesses fail from a lack of re-
sources. In fact, the actual cause is the failure to plan the right resources
to make the business succeed, grow, and thrive. In this book, I provide
you with the strategies and tools you need to learn how to do things
right and how to do the right things.

During the nine years I was CEO of Merritt Publishing, we faced a wider
variety of challenges than I could have imagined, and I draw upon my
experiences throughout the book. I needed wisdom and luck, but also ac-
curate data and definitive analyses to make good decisions for the com-
pany. Because I couldn™t find the diagnostic tools I needed to chart the
best course for my company, I created them as I went along. I was able to
double my company™s revenues and improve profitability by an even
greater factor during my tenure.

The tools in this book will help you lead your company from your busi-
ness plan to your game plan. The worksheets and exercises provide you
with the kind of critical data you need to run your business successfully.
They™ll help you find the answers you need to:

• Shift the corporate culture so employees are more accountable for
their job performance.

• Better measure those areas that drive your business.

• Create an infrastructure that supports growth.

• Know what you need to grow your company: more capital, more
people, or new products.

iii
iv Preface


• Determine if sales are as profitable as they could be.

• Develop and launch new products while minimizing your risk.

I wrote this book to help other owners and managers learn what I learned
but in a much shorter time. Each chapter starts with a discussion of rele-
vant concepts and issues, including case studies. The case studies make
the point that all of these disciplines, whether marketing or finance, are
interrelated. In other words, in times of great opportunity and growth as
well as in times of business downturns and consolidation, solutions to
problems come from all segments of your business working together.
Therefore, I argue that all employees should see the results of all areas of
your business, not just those that directly relate to them. This discussion
is followed by a series of progressive exercises and worksheets, with di-
rections on how to use them entitled “Making It Happen,” and questions
to be asked about your data once you collect it, entitled “Reality Check,”
to help you discover your strengths and weaknesses.

These worksheets are intended to be used; please copy them freely. Dis-
tribute them to as many employees as you think useful. You may want to
visit our web site at janbking.com to find electronic copies of the work-
sheets and enter your own data on your computer. Whatever medium
you use, the object of these worksheets remains the same: to help you de-
velop your business plan and your game plan and finally to help you
take control of your business”and to make it an enduring success.

It takes more than data to run a successful business, and this book will
also help you develop simple ways to determine whether your business is
flourishing or failing”while there is still time to make mid-course cor-
rections. Another crucial ingredient for success that I™ll stress through-
out is developing the ability to inspire key staff to commit to the
business™s success. In part, this comes from communicating your vision
at every opportunity to your employees, suppliers, and your network of
business associates. You also will do well to listen to those employees
who work directly with customers. They™re in the best position to convey
what your customers want from the business.

Involving your employees fully in the business can have profound re-
sults. I™ll come back to this throughout the book. It™s hard for me to imag-
ine this now, but before I became CEO, I felt no direct connection to the
financial well-being of the company I worked for. My bonus aside, it
didn™t occur to me to ask about the financial statements, and anyway, my
v
Preface



job description said nothing about “making” money. Nor would I have
been interested enough to ask what our financial statements meant had
I seen them.

One of the things I learned when I took over the reins was that every em-
ployee must understand the financial implications of each decision.
Gradually, as I involved my employees more and more in the company™s
finances, I found that in effect management needed to become more flex-
ible and self-directed as well.

If you choose the path of including your employees in the management of
the company, you will be doing something for which little precedent ex-
ists. You will find little information in the management literature to sup-
port you or guide you in the difficulties you will encounter. Despite a
host of experts who talk about empowerment, few practical models exist.

Empowerment should mean imparting the wisdom and sharing the tools
with which to do a job successfully. In doing so, you may be giving em-
ployees more responsibility than they want. Before you decide whether to
involve your employees more fully, you™ll have to ask questions such as:

• By giving more decision-making responsibility to employees are
you avoiding your responsibility for managing the company”
and isn™t that your job, not theirs?

• Are you passing the buck to your employees for decision
making? This is something like the fundamental problem with
democracy”are less capable, informed, and trained people mak-
ing decisions?

• Is decision making too decentralized? Do you end up with “deci-
sions by committee?”

• Are you making peoples™ lives more complicated and more diffi-
cult? Are you creating chaos instead of clarity?

The answers aren™t simple but struggling with these issues and allowing
employees to struggle with their own problems was the only course of ac-
tion I was satisfied with. In my case, involving my employees with the
governance of the company enabled us to create an environment with
minimal rules, much open communication and sharing of information,
and high-quality thinking. We celebrated our successes as a group and
jointly took responsibility for our defeats. I am proud to have enabled
vi Preface


this organization to reach its potential, and throughout the book, I™ll in-
troduce ways to involve your employees in every decision.

Running a business is one of the most challenging, potentially rewarding
jobs in the world. Devote yourself to doing it well and use this book as a
resource to chart your course.

Finally, I want to acknowledge some of the many people whose help and
support were invaluable in the writing of this book. My gratitude to the
editors at John Wiley & Sons for their advice and counsel. Thanks to all
the business owners, managers, and consultants who agreed to be inter-
viewed for the case studies in this book. Thanks to TEC (The Executive
Committee) an organization of CEOs whose members, facilitators, and
resource speakers have consistently challenged my thinking about busi-
ness and made me focus on my own business. Thanks to the clients and
staff of the Small Business Development Centers. You are all an inspira-
tion, showing what can be done with scarce resources but a determina-
tion to succeed. And personal thanks to Jim Walsh, Walt Sutton, Harriet
Glicklich, and Andy Lipkis for being models of how to live rich, full, and
profoundly meaningful lives.

JAN B. KING
CONTENTS

PART I
CREATE YOUR VISION

1 MOVING FROM VISION TO ACTION 3
Inventing Your Company 4
Living the Vision 9
An Ongoing Process 9
Tools for Moving from Vision to Action 10
Creating Your Vision 10
Crafting a Mission Statement 13
Analyzing Your Strengths, Weaknesses,
Opportunities, and Threats 17
Defining Corporate Goals 21
Action Plans: Turning Vision into Action 23
Visually Representing Your Plan 25


PART II
SET HIGH STANDARDS

2 CREATING A BUDGET EVERYONE CAN USE
AND UNDERSTAND 31
The Budget Sets Priorities 32
Know When to Stop 33
Plan for Debt 34
Follow the Money 35
Control Expenses 36
Plan for Cash 37
Budget for the Big Items 39
Plan for Profits 39
Set Financial Controls 39
Revenue Forecasts 41
Profits Determine Survival 42


vii
viii Contents


Tools for Creating a Budget Everyone Can Use 43
Revenue Budget 43
Average Selling Price per Product 44
Unit Sales by Product 47
Dollar Sales Projections by Product 50
Dollar Sales Projections by Month 53
Expense Budgeting 55
The Budget Notebook 56
Payroll Projections 62
Income Statement Projections 65
Balance Sheet Projections 68
Break-Even Analysis 71

3 UNDERSTANDING THE NUMBERS 75
Flying Blind 76
Traditional Financial Statements 77
Cash Flow Is Critical 78
Following What Matters 82
Sharing Financial Information with Employees 83
Tools for Understanding the Numbers 84
Year-at-a-Glance Income Statement 86
Year-at-a-Glance Balance Sheet 90
Year-at-a-Glance Financial Analysis 93
Budget Variance Report 97
Same Month Last Year Variance Report 101
Analysis of Cash Position 104
Key Financial Indicators 107
Financial Report to Employees 110

PART III
BUILD LONG-TERM GROWTH

4 MASTERING THE ART OF THE SALE 115
Sales and Profitability 115
Customer Focus 116
Who Are Your Customers? 117
Quality Sales 119
The Right Person for the Job 119
Customer Service Professionals 120
Sales Management 121
Communicating Sales Data to Employees 122
Tools for Mastering the Art of the Sale 123
Dollar Sales Month-to-Month 125
ix
Contents



Product Sales by Customer 128
Top-Selling Products 131
Sales by Salesperson 133
Customer Service Key Indicators 135
Customer Service Survey 138
Sales Report to Employees 141

5 ACHIEVING QUALITY AND QUANTITY 145
Setting the Right Standards 145
Adding New Value 151
What Your Inventory Tells You 152
Supplier Concerns 154
Tools for Achieving Quality and Quantity 154
Unit Output by Product 156
Units Shipped 158
Average Days to Ship 160
Returns Analysis 162
Backlog of Orders 165
Inventory Control Report 167
Business Partner (Supplier) Survey 169

6 GROWING PROFITABLY WITH MARKETING
AND PRODUCT DEVELOPMENT 173
Research Your Market 176
Customer Marketing Data 176
Marketing Activities 178
Product Development 180
Sources of Innovation 181
Assessing Costs and Risks 182
Minimizing Risk 183
Marketing Goals 184
Tools for Marketing and Product Development 185
Assessment of Competition 187
Product Sales by Marketing Method 190
Product Development Checklist 193


PART IV
LEAD WITH COURAGE

7 DRIVING EMPLOYEES TO PEAK PERFORMANCE 199
Set the Standards for Your Employees 200
Invest in People 200
x Contents



Effective Communication 203
Compensate Fairly and Well 206
Make Time to Manage 207
Human Resource Administration 209
Avoiding Lawsuits 210
Tools for Managing and Motivating Employees 211
Performance Reviews 213
Team Feedback 219
Management Skills Feedback 222
Employee Ranking System 225
Human Resource Key Indicators 228


8 LEADING YOUR BUSINESS FOR
MAXIMUM RESULTS 231
Personal Characteristics of CEOs 232
Facing the Toughest Questions 235
Look to the Long Term”the Very Long Term 235
Find the Important Details and Focus on Them 236
Leading during Times of Growth 237
Managing Slumps 238
You Can™t Do It Alone 239
Getting Outside Help 240
Hiring Quality Consulting Help 241
Boards of Directors and Advisors 251
Starting Over: The Annual Game-Planning Process 253
Tools for Leading Your Business 253
Employee Opinion Survey 255
Company Performance Review 258

APPENDIX ONE:
THE 50 CRITICAL MANAGEMENT QUESTIONS
TO RUNNING A SUCCESSFUL BUSINESS 263

APPENDIX TWO:
TOP 50 PRACTICAL BUSINESS BOOKS 267

INDEX 273
PART I
CREATE YOUR VISION
1
MOVING FROM
VISION TO ACTION
There is nothing in a caterpillar that tells you it™s going
to be a butterfly.
”Buckminster Fuller




I call this book Business Plans to Game Plans because it takes you from
your business plan, that is, what you share with those outside your
business, like investors, to your game plan, which is how you really run
the business, and what you share with your employees.

As a business-planning consultant, I have written countless business
plans. While many of them received the funding they were hoping to at-
tract, a number of these businesses failed in the first several years or
never got out of the planning stage. In fact, a few of the entrepreneurs I
worked with expected the business plan to be a blueprint for how to run
the business. They couldn™t be more wrong.

Here is one major difference between the business plan and the game
plan: A business plan is written to impress others with how much you al-
ready know so that they can decide if they want to invest money in your
venture. Entrepreneurs need to build their weaknesses into some sort of
plan so that they don™t neglect to take care of them. It™s acceptable to
admit you don™t have all of the answers in the game plan, but you never
see any such admissions in a successful business plan.

Business plans do not include implementation instructions, because the
writers of business plans focus on accomplishment. They write as if once
you dream the dream, it magically becomes reality. They don™t write
about the hard part”that is, the work it takes to gain success.


3
4 Create Your Vision



Implementing a business plan and a game plan takes hard work. It takes
wisdom, discipline, courage, an eye for detail, and, most of all, persist-
ence. It also requires an outward focus and an inward focus. You must set
goals, communicate them, review them, monitor their realization, and
stick to them when other people might abandon them. Your hard work
will pay off, and with the tools I offer in this book, you can make your
company a success.



INVENTING YOUR COMPANY

I know how hard it can be to run a business. In 1990, I suddenly found
myself running a publishing company where I™d worked for seven years.
In a matter of weeks, I had to grapple with a wide range of management
problems; with little relevant experience and no formal business educa-
tion, I had to learn to take control.

My company had been in business since 1957. I came to it as a writer and
editor, then as the company™s editorial director”a solid middle manage-
ment position. The company also had the good fortune to be so profitable
and cash rich in its formative years that there had been little need to
project or monitor sales or expenses, cash or profit. The downside of this
was that very little had been done to set expectations or monitor perfor-
mance. It was hard to tell how well we were doing at any given time”or
how well we would do in the future.

By the time I began running the company, we were no longer cash rich
and our markets were changing dramatically, primarily due to new tech-
nologies that both made entry into our markets much easier and changed
traditional distribution methods dramatically. Without cash to invest in
our own growth, I knew we would not survive over the long term.

We had no choice but to reinvent the company. In effect, we were a 40-year-
old start-up. We needed a business plan and we needed a game plan. We
had to translate a new vision into action.

In the months that followed, I realized that the key to our survival was to
get a handle on where our cash was going and reduce our expenses. We
needed to change the corporate culture from a happy family business to
one where accountability played a significant role. Last, but maybe most
importantly, we also had to have a better understanding of what our
business was fundamentally, who we were selling products to and what
5
Moving from Vision to Action



they would want in the future, and which of our over 200 products were
profitable.


Challenge #1: Finance

Although my background was not in finance (or in business), company
invoices were much like the bills I paid at home: I knew we paid rent, util-
ities, insurance, and salaries. I also knew that we paid for the products
we produced and their marketing. Then, there were many other items
like the outside professionals, computers, and miscellaneous items like
office supplies.

Over several weeks, we sorted these invoices from the just-ended fiscal
year into categories that seemed to make sense and covered all the types
of invoices we found. In questioning people about what each individual
invoice pertained to, we found”to our amazement”that many bills had
been paid for services we no longer received. This was particularly true
for maintenance contracts on equipment we no longer owned. Once the
accounting department had been told to expect a particular bill each
month, they continued to pay it without question. Many bills are ad-
dressed to accounts payable, and paid without anyone else ever seeing
them. We cut about $77,000 in expenses simply by questioning old in-
voices. That was the first step to taking control of the business and to the
development of the worksheets in this book.


Challenge #2: Corporate Culture

My next challenge was in determining employee accountability on a
larger scale. How could I hold the employees accountable if they did not
know how the company was doing? Because my company was (at the
time) partially employee owned, the answer was to share financial infor-
mation with everyone. I™ve heard the arguments against this kind of
openness, the most compelling of which was that competitors could use
this information against you. However, I took employee ownership seri-
ously and expected everyone at the company to help run our business. I
couldn™t expect others to do what I couldn™t do myself”namely, to run a
business without knowing those numbers by which we measure success
or failure. Too, I shared financial documents with my employees in the
hope that they would see how the numbers sprang from their own work.
I wanted my employees to grasp the numbers as proof of the importance
to the company of everything they did.
6 Create Your Vision



In short, I gave my employees access to the financial statements and
other documents to help them make intelligent decisions about their
work. I educated them about what the numbers meant in the expectation
that they would use those numbers not just to gauge our success, but to
guide their actions. I discovered the remarkable power you harness by
doing this. I discuss in further detail how to empower your employees to
understand their impact on the bottom line in Chapter 2.

Informing your employees can have a profound impact on all aspects of
your business. Of all the memories I have of the early years, the one I
value most came after I started circulating the financial and operational
reports. At a rather ordinary operations meeting, an employee suggested
that we reduce inventory, saying that this would increase our cash posi-
tion going into the critical months of our year.

It was an extraordinary moment. Financial consultants talk to boards of
directors for hours about inventory accountancy, but on his own, this
employee figured out that a tight inventory meant more available cash
for us. His comprehension signaled to me that my openness with the
numbers had paid off. Moreover, this episode reminded me that when I
had been a nonmanagement employee, I had never stopped to think
about the impact of inventory on cash in the bank. This is the subject of
Chapter 5.



Challenge #3: Marketing and Sales

Like many entrepreneurs, the founder of my company hadn™t believed in
sharing financial information with his employees. We received monthly
sales reports, and the bonus program for managers depended on profits. I
knew that profits depended on sales, and sales interested me insofar as it
pleased me to see that the books I wrote actually sold. However, sales
seemed magical to me; I had no way to predict them. More important, I
didn™t think I could affect them in any immediate way. I eagerly awaited
the accountant™s proclamation at the end of each year”to find out
whether I™d get a bonus. I had no clue how I personally could impact sales.

When I became CEO, I found that trying to boost sales was hard, but I de-
veloped a number of steps you can take to make your forecasts more ac-
curate, as I™ll discuss throughout the book. In my case, I did the
following things, all of which are covered in the book:
7
Moving from Vision to Action



• I listed all the products we sold, from the biggest revenue earner
to the least; I then made the same list using our customer data. I
was eventually able to calculate the profitability for each product
and each customer. This became my company™s guide as to which
products to sell most aggressively, and to which customers, as I™ll
discuss in Chapter 4.

• We discontinued products where we were unable to reduce costs
or raised prices where we thought the market would allow it.
Some programs worked well, others didn™t work at all.

• We closely tracked all our marketing efforts and duplicated those
that worked well in tests, as discussed in Chapter 6.

• We constantly tested new approaches; and we worked out kinks
in marketing, production, and fulfillment.

• We refined and simplified our corporate vision and mission
statements, as covered later in this chapter.

• We began to develop offshoots of our most successful products.

• We paid close attention to what our largest customers liked and
didn™t like and constantly improved our existing products. This
resulted in a doubling of our sales in a few short years.

• We simplified our reports and key indicators, focusing them on
things of importance and ridding them of everything else. These
had started out unnecessarily complex, based on imprecise for-
mulas and assumptions. The longer we used them, the more basic
they became. I cover this area in Chapter 3 on understanding the
numbers.

• Finally, personally, I had to train myself to understand how the
business was doing on a daily basis. Equally important, I had to
make sure the other employees knew how the business was doing
so that they would work toward the objectives we developed. I
discuss tactics for motivating your employees and communicat-
ing your goals in Chapters 7 and 8.



Challenge #4: Creating a Future for the Company

After I had been CEO for almost two years, the founder of the company
passed away, leaving us without a plan for a change in ownership. The
8 Create Your Vision



company was already 40 percent employee owned, and we had decided
together to take it to 100 percent. Some of the money had to be generated
internally, so we had to become more profitable. Some of the money had
to be borrowed, which forced us to put together a written business and
marketing plan.

Creating a goal like this one generates unbeatable motivation. Suddenly,
our definition of winning was more similar to an athletic game”there
was a real dollar number we had to meet or beat to win. This was the
genesis of the game plans I™ve used. They gave people real reasons to
hold tight on expenses, and develop new products”reasons that people
could get excited about for personal reasons. Every person working at
the company had a reason to step up to the plate.

We decided to set up committees that would meet weekly and make sure
the plans we made were being implemented. The two major committees
monitored profitability (mostly from the revenue side) and expenses. Re-
porting to these committees were other subcommittees devoted to new
products, customer service, strategic alliances, and other business func-
tions. I asked for volunteers to serve on the major committees, and made
sure that members from each department were present.


The committees used many of the ideas and worksheets in this book to
monitor performance and progress toward our goal of 100 percent
employee ownership. The worksheets allow for self-measurement. Em-
ployees become responsible for deciding what work needs to be done,
and then for measuring what they do.


In 1996, Merritt Publishing became a 100 percent employee-owned com-
pany. This was not the end of the game”new challenges immediately
confronted us, which meant, once again, a reevaluation of who we were
and where we wanted to go. It meant a new business plan and a new
game plan.


In 1998, we were approached with a new opportunity, and the employees
voted unanimously to sell the company to a large computer-based train-
ing company. They believed in their abilities and wanted to participate as
a player in the e-learning market. Many employees had ambitions to start
and run their own companies where they would deal with the challenges
and opportunities of growth and people management like we did as
a group.
9
Moving from Vision to Action



LIVING THE VISION

As a business leader, creating an overarching vision can have a profound
effect on all aspects of your business. To do your job well, you have to
start with four broad intentions:

1. To create the vision and mission that define your purpose.

2. To communicate these clearly and effectively and to translate
the vision and mission into goals, objectives, and action items
down to the individual level.

3. To measure success and encourage progress through others.

4. To stay the course and refocus on making changes in your action
plan as needed.

If you accomplish these four goals, you™ve gone a long way toward realiz-
ing a fifth goal:

5. To build a culture that makes your company a good place to
work”and thus improves your prospects for success. You need
to give your company a strong sense of purpose.

If you achieve all of this, you™ll truly be able to take control of your
dreams. You™ll be living your vision. Remember, the main goal is to avoid
getting so busy managing today™s business that tomorrow™s business
gets pushed aside. Goals are most useful when they help you decide
what you and other employees should be doing at work today to help you
achieve what you want for the future.



AN ONGOING PROCESS

When you™ve set the basic objectives you need to run a company effi-
ciently, you™ll usually find you™ve done much more work than you real-
ized. These tools don™t always come easily to entrepreneurial managers.
You might doubt the value of something as abstract as a vision statement.
But give the matter a chance”exercises that seem simplistic to you may
have a fundamental impact on your employees or customers.

Think of your business as a place in which every person involved plays
an indispensable role. This is an ongoing process that lasts as long as
your company is in business. It™s not over when your salespeople sign a
10 Create Your Vision



customer. It™s not over when you cash that customer™s check. It™s not over
when you ship your product.

If ever, it™s over when the phone rings again, and the same customer
places another order. And then the whole process starts once more.


TOOLS FOR MOVING FROM VISION TO ACTION

In this chapter, we™ll work through the following tasks within this ongo-
ing process:

• Creating your vision.
• Crafting a mission statement.
• Doing the SWOT analysis.
• Defining corporate goals and objectives.
• Action plans: Turning vision into action.
• Visually representing your plan.

When you™ve finished, you should have a good idea of the best practical
goals you can set for your company. You should be able to look toward
the horizon without tripping over any obstacles at your feet.

Before we begin, ask yourself these questions about the future of your
company:

• Have you spent time, no matter how long your business has ex-
isted, in thinking about the future of your business?
• Is your thinking about the future something you have adequately
communicated to others who are involved in the business?
• Has your thinking about the future changed due to changes in
the market, the economy, and technology?
• Are you willing to do whatever it takes to get to that future? Are
you passionate and excited about the possibilities?


CREATING YOUR VISION

In a world where advances in automation and productivity have trans-
formed many traditional value-added businesses into commodities,
11
Moving from Vision to Action



successful companies need a strong sense of purpose. The vision is a
response to questions like: What does your company do? Why does it
do that?

To have a purpose and communicate it passionately is the essence of lead-
ership. The vision should be formulated by the founder, CEO, or chair of
the board”the person who is responsible for the future of the business.
This is the statement of your decision to act, and a definition for what di-
rection that action will take. You cannot lead a group of people unless
you set a direction.

A vision statement uses the future to help analyze the present. As the
head of your operation, you have to articulate the blend of present and
future. Expressing corporate purpose is the most important task man-
agement has.

A company needs a vision statement that everyone from the CEO to the re-
ceptionist can understand. It formulates what an organization wants to be
and stimulates specific goals that can be passed down to every depart-
ment in the organization. It needs to be something useful and applicable to
daily operations. You”and, more importantly, your coworkers”should
feel comfortable using your vision statement in everyday conversation.

Indeed, vision means something to people at all levels in an organiza-
tion. All employees might not know the specifics of the company™s mar-
keting plans or financial outlook, but they do know its reputation. They
know how other players in the industry or local market perceive it. They
know when they work for a quality-driven organization, or one that™s
content to skim margins from second- or third-rate work.

If you build an environment that values quality, in which people can be
proud of their efforts, you™ll find better people more easily. And you™ll be
able to keep them once you™ve found them. But you can™t achieve quality
without explicitly saying you want to achieve it. It isn™t something people
infer from all companies. It isn™t something you can effect passively. You
have to set it up as a goal and pursue it continuously.

Something you™ll find as you do this: People”employees, vendors, cus-
tomers”want to believe in quality. Quality is rare enough that it has in-
trinsic value. People will work hard when they understand a vision that
seeks quality performance. That kind of vision empowers people to per-
form well.
12 Create Your Vision




GR E AT V I S ION

Sam Walton had a vision for Wal-Mart. He believed that giving me-
dian to low-end retail customers in smaller geographic markets
the widest possible choice of inexpensive goods would establish
his chain as the market leader among discount department stores.
His vision was this:

To offer all the fine customers in our territories all of their household
needs in a manner in which they continue to think of us fondly.

Ray Kroc™s vision for McDonald™s was that people could find fast,
tasty food consistently wherever they traveled. One of the goals of Mc-
Donald™s is that the food in all of its stores”all over the world”tastes
exactly the same. And that its customers have a clean pleasant place to
eat it. This is clear in reading the McDonald™s vision statement:

To be the world™s best quick service restaurants experience. McDon-
ald™s accomplishes this by providing each customer with outstand-
ing Quality, Service, Cleanliness and Value.

What is remarkable is that so many employees at all levels in both
these organizations still share the founder™s original vision.




Results come when people develop a shared vision of how they want
their organization to be perceived and are willing to work every day
to maintain that vision.


Making It Happen

As you approach the task of defining your vision, first, spend some time
talking with someone close to you about your company and your dreams
for it: Ask yourself why you started your company, what you wanted to
accomplish, the legacy you want to leave personally and professionally.

Your vision should have several elements: It must be long term, meaning-
ful in a human context, and appeal to a higher purpose. A vision state-
ment is not easy to write in a sentence or two, but writing it will make it
clear to you and meaningful to others.

What do good vision statements have in common? You feel you know the
company when you read them. They give the company a human feeling,
13
Moving from Vision to Action



a personality. They set out what the company values. They often refer to
quality of life issues.

Try several drafts by answering these questions:

• What do you see your company becoming in 5 to 10 years?

• What values are an essential part of who you are and what you
want your company to be?

• What innovations will your customers be looking for if they
knew what was possible?



Reality Check

Circulate your vision statement drafts and edit and rewrite them until
you feel good about them. Remember, the goal is for everyone in your
company to believe in your vision; therefore, be sure to get the opinions
of different people throughout the organization. Next, make sure it an-
swers these questions:

• Who are you as a company?

• Where do you want to make your mark?

• How high do you want to shoot?

• What do you believe in?

• Does what you have written embody the spirit of where you want
your company to head?

• Can you live with this vision? Are you willing to (or more appro-
priately, do you automatically) act in accordance with what you
have written your vision to be?

If you find your new vision statement doesn™t jive with the above ques-
tions, then don™t be afraid to start anew. Defining your vision is an essen-
tial responsibility, and you might not get it right on the first few tries.



CRAFTING A MISSION STATEMENT

As you develop your overarching vision, you can use this process of self-
exploration to determine your mission statement as well. These are two
14 Create Your Vision



different entities”what the vision statement is to strategy, the mission
statement is to tactics. It identifies the critical processes that impact im-
plementation of vision. The vision statement will endure much longer
than the mission statement. The vision statement will change only if the
core purpose of the business changes. The mission statement may
change as competition or technology changes.

You should have at least one mission statement for your company”
and you may develop related ones for each distinct department or divi-
sion. You may also want to develop temporary mission statements to
communicate a current focus.

A good mission statement gets people to act in agreement with the com-
pany™s broader goals. It reminds them how to behave every day, regard-
less of what temporary forces work against them, so that they can help
realize the company™s vision.

The mission of a company is not dreamy, like a vision. It is based in today
and reality. It defines specifically your product and your market”who
you will sell to and what you will sell.

A complete mission statement clearly and fully describes which fac-
tors”and, if necessary, which resources”are most critical to supporting
the business strategy. The three factors that most managers consider in
terms of their mission are:

1. Quality and reliability must be defined in terms of the customer
(externally) and projected back (internally) to determine their
impact on product development and operations. Internal quality
benchmarks, as useful as they can be in monitoring operations,
don™t play as vital a role in developing a mission statement as do
customer needs and wants. You have to consider the level and
meaning of quality and reliability appropriate to the desired
competitive position in the marketplace.

2. Value can mean lowest manufacturing cost, lowest selling price,
or best quality for the money when other factors are considered.
The first two definitions are fairly objective. Even though many
management gurus stress so-called “best value,” that definition
tends to be so vague that it™s useless.

3. Service includes more than just the friendliness of the greeting
a customer hears when your receptionist picks up the phone.
It translates into the degree to which you can devote company
15
Moving from Vision to Action



resources to the needs of a specific customer”without ignoring
all others. As we™ll consider later, this has much to do with op-
erations. Service entails manufacturing flexibility and versatil-
ity, the ability to produce a large variety of products of various
volumes to supply a diverse market”and to do so quickly.

No organization can succeed by concentrating on any one of these factors
to the exclusion of the other two. Your challenge is to balance the re-
sources you apply to each in proportion to priorities based on current sit-
uations and future positions.

Management should agree on functional mission statements that iden-
tify the operating resources that are critical to support the business strat-
egy. For example, Domino™s Pizza made a dramatic change in emphasis
when it changed its mission statement. Domino™s was known in the
pizza delivery business for its 30-minute delivery guarantee. It discon-
tinued its 30-minute guarantee in 1993 and replaced it with this simple
statement:

Exceptional people on a mission to be the best pizza delivery company in
the world.

In those few words, Domino™s shifted its corporate emphasis from speed
to quality.

While a mission statement can be as simple as defining the product and
the market, some companies feel that the way they treat employees and
customers is just as important in defining who they are as is the product
and market. For example, since the late 1980s, the big players in the U.S.
automobile industry have focused mission statements on reducing new
product realization (the time passing from concept to the cars in the
showroom) from 48 months to the 12 months that carmakers like Honda
can boast. Ford, General Motors, and Chrysler have all raised their qual-
ity standards to match their foreign competitors, but they suffer in com-
parison because they take so long to respond to market demands.

General Motors decided to create a new paradigm with Saturn. Its mis-
sion statement is intended to benefit not just customers but the whole or-
ganization of which it is a part:

[Our goal is to] market vehicles developed and manufactured in the
United States that are world leaders in quality, cost, and customer
satisfaction through the integration of people, technology, and business
16 Create Your Vision



system and to transfer knowledge, technology, and experience through-
out General Motors.

As Saturn™s many devoted customers can attest, this is a different kind of
company within the GM conglomerate, and its mission statement sets
the tone with its customer-oriented practices.



Making It Happen

The discussion that can lead to preparing this portion of the mission state-
ment may be the most important part of creating it. To be able to clearly
define your market may be a more difficult task than you would think.

Look at your own promotional catalogs to see if all of your products have
a similar theme that you can define. Like Federal Express, is your pri-
mary product speed? Like Nordstrom, is your primary product quality in
terms of service? Or like Apple computer, is your primary product qual-
ity in terms of ease of installation and use? Like Wal-Mart, is your pri-
mary product wide selection?

Get a list of your customers and look for their similarities. Is your mar-
ket who you thought they would be? Can everyone who buys from you
be classified as a particular group? Or like FedEx, is your market almost
everyone?

Take these preliminary ideas to your employees and see if they agree.
Have meetings just to discuss these items. Then test them in the outside
world. Draft your mission statement from these questions:


• What do you sell?

• To whom do you sell it?

• What does your company do better or want to do better than any-
one else?

• How does your company rank the importance of quality, value,
and service?

• How do you define each of these based on customer needs and
expectations?

• How will you achieve your vision?
17
Moving from Vision to Action



Reality Check

As with the vision statement, circulate your drafts and edit and rewrite
them until you feel good about them. Then ask yourself and others these
questions:

• Does your mission statement capture what makes you unique as
a company?

• Would your customers and vendors recognize you in these state-
ments? Would they be pleasantly surprised because they could
really buy in to these directions?

• Are they directions your customers would agree with?

• Is your mission statement inspiring?

• Does this give everyone in your company direction for each day
when they walk in the door? Is there any ambiguity in what is
most important?

• If an employee faced a difficult dilemma at work, would thinking
of your mission statement lead them to make the right decision?



ANALYZING YOUR STRENGTHS, WEAKNESSES, OPPORTUNITIES,
AND THREATS

To begin to make certain that the vision and mission are attainable,
many companies participate in an exercise called a SWOT Analysis.
SWOT stands for Strengths, Weaknesses, Opportunities, and Threats.
The system stresses a more complete perspective on what accounts for
success in a company. It was originally developed by the Massachusetts-
based Boston Consulting Group in the early 1970s.

The SWOT Analysis works well because it contrasts the internal and ex-
ternal factors that affect a company. It matches the strengths found in the
company™s internal environment with opportunities in the organiza-
tion™s external environment in a way that makes its core competencies
self-evident.

Scanning the internal environment includes an analysis of the com-
pany™s structure, its culture, and its resources. Here are just some of the
areas that should be considered in SWOT Analysis:
18 Create Your Vision



Strengths. Our strengths are our core competencies”those things we do
better than any of our competitors or that really tie together all the
products we offer in a unique way. What internal structures or expertise
do we have that are a special source of pride? This becomes the center for
determining what we will do in the future. We want to constantly build
on the things we already do particularly well.

Weaknesses. For every thing we visualize clearly or do well, there is
something we can™t see so clearly or do so well. Some of these weak-
nesses we can change”others we can™t. Where do we need to build
our company? What is holding us back or creating a bottleneck for ev-
eryone else? If we choose to spend money or other resources in one di-
rection, in what other directions might we be tolerating or creating
weaknesses?

Ask yourself whether the following things are strengths or weaknesses
for your company:

• Product quality.

• Quality of the management staff.

• Quality of technical staff.

• Brand name.

• Planning process.

• Quality of staff performance management system.

• Profitability.

• Availability of cash for growth.

• Quality of marketing and sales efforts.

• Compliance with legal requirements.

• Facilities.

• Operations.

• Staff morale.

The Opportunities/Threats portion of the SWOT looks at factors out-
side of your company, but which will have a profound affect on your ul-
timate success. Scanning the external environment clarifies your future
19
Moving from Vision to Action



opportunities, but also forces a company to face problems that could
threaten the company™s survival if not taken into account.

Opportunities. The most difficult thing about opportunity is recogniz-
ing it. The old adage about opportunity knocking once does apply in
many cases, so we need to see it”and be able to act on it”when it
comes. What are our greatest challenges in the changing environment
of the industries we serve? How will new technologies help us? What
will our customers need in the future that we can supply? What op-
portunities will open up globally?

Threats. As with weaknesses, there are some threats we can minimize
and there are others we can™t. We need to do all we can to control the
threats we can predict”and prepare for the ones we can™t. What out-
side our control could threaten our existence? How might new tech-
nology hurt us? What in the political environment (government) might
threaten us? Will ups or downs in the economy hurt us? What in our
physical environment might threaten us? Remember to consider the
following factors:

• Market limitations.

• Lack of availability of capital.

• Problems with suppliers.

• Natural disasters.

• Location challenges.

• Quality of labor pool.

• Revolutionary changes in the industry.

• Governmental regulations.

• Technological changes.

• Socio-political challenges.



Making It Happen

The point is to build on your strengths, limit your weaknesses, capitalize
on your opportunities, and survive the threats to your business. Devis-
ing a strategy for doing each is key.
20 Create Your Vision



This is a tool often used for a group discussion by key people and for
good feedback to management of how employees view the company. A
SWOT Analysis can be done for the company as a whole, as well as for
various departments. This is how I use the process:

• Divide a blank sheet of paper into quadrants, marking a heading
for each of Strengths, Weaknesses, Opportunities, and Threats.

• Give copies to key staff members and ask them for their analysis
independently. Then ask for all the input brought in from each
member of the group in each of the four categories.

• Write out all ideas on a board in front of the group, and then pick
7 to 10 of the items in each category that seem best to fit your
company. As with many management issues, the challenge for
you is to judge well which items under each heading are key and
which aren™t.

When you™ve identified Strengths, Weaknesses, Opportunities, and
Threats, you can compare each to your vision and mission statements.



Reality Check

Doing the list is just the first step. Now look at your list and ask yourself
these questions:

• Are you using your strengths to their fullest capacity? Are they
things you could leverage by teaching them to more people to de-
velop more product, market better, or be more efficient?

• Do your weaknesses and threats make your vision and mission
unrealistic? If there are illogical connections or inconsistencies,
what do they mean?

• Do you celebrate what you do well enough?

• Why have you chosen to live with your weaknesses? Would elim-
inating these be painful? Result in difficult staff changes or cul-
tural changes? Are they financially costly to resolve?

• What is holding you back from taking advantage of your op-
portunities?

• Are your competitors taking better advantage of these than you are?
21
Moving from Vision to Action



• What can you do immediately to minimize threats?

• Do you have plans to minimize the damage if any of these threats
become a reality?



DEFINING CORPORATE GOALS

The next step in the process of analyzing your company and defining
your vision is to set your corporate goals and objectives.

Corporate objectives turn vision and mission into specific items to be ac-
complished. They should also be written to include specific measure-
ments to know if success has been achieved.

Corporate goals can be set for many years in advance. With the current
pace of change, focus on three years out at the most for setting real objec-
tives. Objectives must be updated often and most companies set a plan-
ning structure to update them on an annual basis. You want to do the
most detailed planning for work you decide is the next step toward your
vision”work that can and should be done right away or in the next 12
months.


Corporate objectives must be set at the corporate level. They should be
big, bold, and highly motivational. But there shouldn™t be too many
of them or they dilute the possibility of accomplishing any. Two is
probably too few, nine too many”five always seems like a good num-
ber to me.


The corporate objectives should also be realistic. The goal for a small dry
cleaning establishment to grow to $10 million in revenue its first year is
not going to be good for the owner or the employees. A more realistic
growth plan, perhaps to open four new stores in the next three years,
will make a better goal.


Ultimately, there should be subobjectives set for all aspects of the busi-
ness. You should set goals for constant improvement in all segments of
the business, even if you focus more of your time, attention, and re-
sources in certain areas. You may never set a corporate goal to streamline
your accounting department, but that might be a subobjective to an over-
all cost-cutting strategy.
22 Create Your Vision




Good measures will have numbers and times attached to them.
Here are some examples of goals and objectives:

• We will have 20 new customers at the end of the year.

• We will have a 10 percent market share in our main product line.

• Our substantial investment in R&D will allow us to have three
new products in the pipeline in 18 months.

• We will generate gross revenues of $1 million per quarter.

• Our gross profit margin will increase from 28 percent to 33
percent by the end of the coming quarter due to cost-cutting
initiatives.

• We will open three new locations over the next 12 months.

• We will increase our workforce to 70 employees by the end of
the quarter.

• The business will have a net worth of $14 million in 5 years.

• I intend to sell the business in 3 years, so it must have a compe-
tent management team in place by the end of year 2.




Once you decide what to do, you have to decide who does the work”and
this takes you to the action plan. Here you break down the work by de-
partment, team, and individual. You let each one know what part it plays
in the overall plan, when it must complete a given task, and how it can
measure its own success.



Making It Happen

Although corporate objectives are set by leaders and managers, they may
begin as a negotiation between the owner or CEO and the managers of
the company. The owners or the board want certain things accomplished
this year. The managers don™t know if those things are doable given what
they know about the capabilities of the company. The discussion of
whether the profit goal of 10 percent is realistic this year is important.

The owner or CEO should decide corporate objectives based on what trends
have led to this point, what resources are available to the organization this
23
Moving from Vision to Action



year, and what opportunities are open in the market. The objectives cho-
sen should be explained in detail to managers with a focus on why they
are right for the company at this time.

At a separate meeting, managers should have the opportunity to
counter the selected objectives or validate them. Why don™t managers
think they are achievable? What would it take in terms of additional re-
sources to make them achievable? Is the CEO willing to provide those
resources?

While the owner or CEO must make the final decision about the annual
objectives, it should only be after lively debate with key managers and
others. It is more likely that the achievements will be met if people agree
with them or at least have an understanding of their formulation.



Reality Check

Corporate objectives must be meaningful to the people responsible for
accomplishing them. Ask yourself these questions to see if your objec-
tives are realistic:


• Do your objectives further the intent of your vision and mission?

• If you completed all of the objectives, would you feel you have
accomplished something that is key for the company™s overall
success?

• Are the objectives realistic within the time frame allotted?

• Are the objectives realistic, given the circumstances of the current
market?

• Are the objectives realistic, given your resources in terms of staff
ability, time, and money?



ACTION PLANS: TURNING VISION INTO ACTION

Once you have determined your vision, mission, and corporate objec-
tives, you must then set into motion more specific plans of action. This
includes defining the person responsible for different aspects of the plan
and assigning specific due dates.
24 Create Your Vision



Action plans are marching orders and provide very specific directions.

This is the essence of employee participation in the planning process.
Some people enjoy the freedom of a blank piece of paper to dream about
what they would like to accomplish. Most, however, just want to know
that they can make a contribution.

Try to make it clear exactly what you”and your managers”want this
exercise to accomplish. Done well, these action plans can become mile-
stones that you use to gauge performance and progress. That goes for in-
dividuals, departments, and the company as a whole.

In many cases, this is an appropriate part of a person™s annual perfor-
mance and compensation review. In other cases, you use them on a project-
specific basis. Because action plans are so straightforward, they™re useful
in almost any managerial context.



Making It Happen

Give each person who works with you all of the material developed so far
(vision, mission, and corporate objectives) and then encourage each to
write his or her own action plans, linking them to specific corporate
objectives.

These action items should be discussed with the manager who sets the
objectives. They can become part of the employee™s personal goals for the
year, and compensation decisions can be made using accomplishment of
these specific goals as part of the decision process.

There are also objectives within a department or involving more than
one department that can only be met with a team of people. Pick the
team of people, or ask for volunteers, and give them the appropriate
worksheet to use to develop action items as a group.

Some individuals are much more creative verbally than in writing. En-
courage people to sit down with peers from other departments to talk
through the meaning of each objective and how their individual work
can help contribute. Notes taken from these discussions can translate
into meaningful action items.
25
Moving from Vision to Action



If you establish this process as a credible exercise, your people will tell you
things you might not have thought of before. And if you can tie a person™s
paycheck into what you want them to accomplish, and also make sure they

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