think they are creating the optimum results. Ask two ques- tions of the management of this type company:
1. How much more money could you have made if you had been better organized?
2. How much money did you leave on the table by the way you now operate?
These are killer questions that usually lead an arrogant company to planning.
H OW TO C HOOSE THE B EST T IME F RAME FOR
Figure 3-2. backPlanning is a concept of starting at some future point in time to establish a vision and goals, then working backward to confirm the mission. Execution is then a forward activity from the base of the mis- sion. Consider the phrase “back planning and forward execution.”
■ A ten-year period gives you more start points to put critical actions in place. There may be many things you would like to do but cannot start them all next year. A wide time span lets you spread the start points over a number of years and make reasonable commitments.
■ A ten-year span gives you time to ramp up if necessary. You may need to continue business as usual for several years until you build momentum.
■ A ten-year time frame makes your story more believable.
Employees can see a series of progressive actions to accom- plish heroic deeds more easily than attempting to create overnight successes. The latter is not believable.
■ A ten-year time frame allows you to build early successes.
Trying to compress a huge success into a three- to five-year span often leads to failure. You must guarantee a series of incremental successes starting small and growing.
Robin Jolley understood the need for long-term planning in his role as resources manager for a lumber company. While his plan far exceeded our recommended ten-year span, it was necessary for the wood products industry. His mission was to keep the division sup- plied in trees for lumber. Since the company bought from itself first, he had to know how many board feet were available at any given year. This helped him to project the shortfalls and advise the com- pany to buy more land, plant more trees, or be prepared to buy from the market. A shortfall might mean buying from a competitor at an unattractive price. How long does Robin’s strategic plan reach forward? Try fifty years. Why? Think how long it takes to grow a tree to any size.
While Robin’s plan is an extreme, it illustrates the concept of long-term versus short-term planning and the industry-specific nature of a time frame. Of the thirty companies that have imple- mented the model described in this book within the past five years, 95 percent have opted for the ten-year zone. After careful consider- ation of their industry rhythm they saw the value of reaching out to the future.
Planning requires more than just forward thinking in time. It also requires a look backward (see Figure 3-3). I suggest you extend your timeline back for a minimum of ten years. If you can plot data further back in time, that would be even better. The rule of thumb is to put as much information on the board as possible. You need extensive historical data to ascertain where you have been in per- formance and how the projections are forming. This is done using trend analysis of your time schedule.
Figure 3-3. Extend your time analysis backward to give as much depth to your business plan as possible.
Since all businesses have a sine curve of good times and bad times, you need to know how those are developing. You must know where you are in the cycle. Is your industry up or down? How long has it been that way? Is it on the upswing or downswing? How much longer will it go in either direction? These are the critical questions that must be answered from your timelines.
The normal resistance will be to shorten the timeline and not push out but instead proceed in a “planning creep,” or an incre- mental growth fashion (see Figure 3-4). The justification for not pushing is to give you time to react to the changing market or envi- ronment. There is some sort of crazy belief that if you focus only on the short term (say, six months or a year), you can better respond to situations. That belief is actually counterintuitive, meaning it is exactly backwards. With long-term planning you can be in a posi-
tion to deal with the new situations. Conversely, if your story is always short term you will always be in the reactive mode. Your model of the world will always be to play catch-up. You will never be the market leader or even close because all your energy will be spent trying to stay even. There is no way for you to break out. If you are a reactive-type business with a short-term orientation, I sug- gest you reconsider your basic assumptions and how they affect your time frame of planning.
Figure 3-4. Planning creep is a common business trap limiting a compa- ny’s potential.
To successfully carry out long-range planning you must alter the creeping methodology. You stand in danger of planning and thinking too small, not thinking in bold terms. Planning creep is moving toward the future by “adding 10 percent” to last year’s budget and goals. When these outcomes are added over time they do not give the same results as well-developed goals. Planning creep is moving cautiously toward the future in a nonrisk mode. It is safe, will get your plans approved, and will get you rewarded for accom- plishment.
In the normal planning process, planners build on past success.
An example is in sales volume. If $10 million in sales was good, let’s try for $11 million. Over a period of years a company continues to plan and implement in this fashion but finishes dissatisfied. It finds itself somewhere it didn’t want or expect to be. The result of plan- ning creep is mediocre or average performance.
Planning creep is the desired format for some shareholders because it is predictable and safe. It is called “blue chip” invest- ments. This is dangerous for four reasons:
1. It fails to meet expectations.
2. It doesn’t live up to organizational potential.
3. It fails to use full intellectual capital.
4. It leads to stagnation of mind and action.