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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.

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