I become wistful when I drive through the countryside and see a manufacturing company with the windows and doors shuttered and grass growing in the parking lot. I think, how did that happen? They seemed like such a vital company.
Many manufacturing companies, especially those headed by Baby Boomers today, should be mindful that successfully transitioning their companies can be quite painless with the appropriate strategic planning, the right attitude and a meaningful investment of time. The great news is if we prepare the company correctly, a strategic plan will bring more value to its (present and future) owners, its managers and its employees. And the benefits don’t end there. A vibrant, growing company governed by a thoughtful strategic plan will bring stable economic vitality to its customers, its vendors, communities, and to the state as a whole for a long time to come.
So it’s useful to take a 30,000-foot view of the process that leads to effective strategic planning, which is what I’ll provide here.
PREPARE TO PLAN
The process of getting ready to create or update your strategic thinking should be predicated on the clear and specific answers to the following questions.
- What has happened in the past three years in the external environment of our company that could affect our work as an organization?
- What opportunities should we prepare to take advantage of?
- What information should we share with others in the strategic planning process?
- Are we clear about our Vision, Mission and Core Values?
- What challenges have we failed to meet in the past 2-3 years and why did we fail?
- What is the most important outcome we want to derive from the strategic planning process?
SETTING THE STRATEGY
High-performance companies put a singular premium on growth. They operate from the sense that if they’re not growing, they’re eroding. And they get the value of formal strategic planning. Strategy connects a company’s organizational competencies with its customers’ needs. It is long-term, forward-looking, committed, purposeful and clear. Look at it like this: Setting strategy is like planning a dinner party. We all like the freedom of spontaneity, but we also know that it goes a lot better if you do some planning, especially as the event gets bigger. The same thing is true for companies. Growth-oriented companies succeed through planning, not spontaneity.
A strategic plan scripts the convergence of your vision, your culture, and your values. I grew up in the era of the five-year plan, but today’s business environment is too unpredictable to plan for five years, so we dial it back to three years. We stay committed to a plan that lasts three years. It analyzes your products, your pricing, and your customers. It contains the following components:
- We are clear about our corporate mission, our values and committed to our principal goals. Our CEO embodies the mission and values. Our leadership team and staff at all levels understand and endorse the mission and values.
- We know our customers, their needs and preferences. We anticipate their changing requirements, and we meet them.
- We know our competitors, their strengths, and their strategies. We know our market share and how to increase it.
- We know our core competencies. We innovate to strengthen and expand our competitive advantage. New business is a meaningful component of our revenue performance.
- We are purposeful about our future. We leverage the diversity of stakeholder perspectives and experiences in planning vital initiatives. Our long-range plans are thorough, timely, and well communicated, uniting our organization.
Continuous improvement is where you think about your plant layout. Is it efficient? Have you removed waste from the system? Are your processes in order, not just your plant, but any process that you have in the organization? Consider these objectives.
- We deliver maximum value (quality for price), utilizing the most effective resources (knowledge, skills, and technologies).
- We are highly efficient (no wasted time, energy, or material). Our productivity is the best in our industry.
- Our leaders are purposeful; they set attainable performance goals, monitor effectiveness, identify and analyze challenges, and manage change.
- We prioritize and invest resources accordingly in process improvement, skills training, and technology, equipment and facility upgrades.
- All employees seek and propose improvement opportunities. Ideas are evaluated promptly, implemented quickly and recognized openly.
Management system. Continuous improvement will get the wobbles really quickly in the absence of a strong management system. Most of the manufacturers we deal with choose ISO as their management system and for good reason (see sidebar). The new ISO is not your father’s ISO. Back in the day it was a lot of paper chasing, but today it’s about the management system, key performance indicators, making sure that we’re doing the right thing, and that we’re all doing it the best way. Here are the elements of a solid management plan.
- Management sets organizational objectives, budgets resources, and plans implementation. Objectives, plans, and budgets are clearly communicated.
- Management acts openly as a team to methodically track results, study trends and determine actions to ensure success.
- Key processes are regularly and formally evaluated (audited) for effectiveness, opportunities to improve, and risk management. Findings are an integral part of management’s analysis.
- The root cause of challenges and risks are systematically investigated and acted on to prevent occurrence or recurrence.
- Knowledge, systems and records are well documented, easily accessed, current, and maintained to common standards. We update or build new systems to ensure clarity, maximize productivity, eliminate recurring challenges, and foster future growth.
Talent. A few years ago we called this component “workforce,” but that description is too narrow. Most manufacturers have a large number of Baby Boomers in the demographic bell-shaped curve who will soon be leaving the workforce. A lot of manufacturers are facing the challenge of recruiting the bright talent to replace them in their organizations. And after recruiting, training takes on greater and greater urgency and importance. Years ago we could gather up the riches of letting the large companies do the training. We no longer have that luxury. We have to grow our own within our manufacturing companies. And then we have to ensure we retain them. The talent component of a strategic plan will include the following elements:
- Leadership skills are highly valued and developed at all levels to meet our future needs.
- We strive to build organizational capacity and capability with individual development plans addressing essentials skills as well as technical skills. Development and training are major commitments with appropriate budget and schedule.
- Compensation is linked to modeling organizational values as well as achieving company and individual performance. Employees consider income and benefits meaningful. We regularly and formally communicate individual performance. We actively recognize both strong values and good work.
- All new employees receive comprehensive onboarding and job specific training, ensuring a strong start and solid cultural fit.
- We actively plan for the succession of positions.
THERE ARE HURDLES
The day-to-day life of running a company sometimes gets in the way. Here are some comments (a bit paraphrased) that manufacturing executives have recently made to me regarding staying on the strategic track.
“I think about the vision, mission and core beliefs that we set out 10-plus years ago. They’ve all evolved since we first started talking about them. We don’t have coherence around them like we used to. We’ve evolved. We’ve changed as an organization. Our statements have stayed the same for the last ten years, but the world has changed. They need work.”
“Our strategy is clear on our leadership team, but maybe we haven’t communicated it. … No, it’s not that we haven’t communicated. It’s that somehow we don’t have that engagement we were hoping to get.”
“We’re more reactive than proactive. We get lost in the day-to-day—emails and phone calls, and all that. The vision is there, but not the focus. Vision creates that proactivity.”
“There is a lot of turnover in companies these days. If our vision and core values were communicated well over a year ago, we probably have two or three new employees who don’t know it. So we’re constantly re-educating new people who are coming in and getting them on board with the vision.”
“The larger you get, the less flexible your company can be to new ideas. I used to come into work and say, ‘I’ve got this great idea. Can we do it?’ Some days the answer would be ‘no,’ some days ‘yes,’ and then we’d just go do it. Now we have more than 200 employees. We can’t do that anymore.”
I’ll bet many manufacturing executives can hear their own thoughts in one or more of those comments. They’re pervasive. And there are other challenges that can get in the way of preparing an effective strategic plan.
Commitment to ownership. If employees have a stake in and responsibility for the plan, there will be leaps forward. I believe it is better to involve more people than fewer because early authorship equates to long-term buy-in. I’ve been on the other side of the table, where a senior manager comes in and says, here’s my plan, make it yours. Well, that can be inspiring, but not always effective. The fact is, those who get to participate from the beginning will be advocates until the end.
Overt, intentional communication. Effective communication leads to engagement. Again, an effective strategic plan includes a thoughtful engagement process. If it’s too overwhelming—if you introduce 26 comprehensive and complicated initiatives all at once—you’re probably not going to find sufficient engagement.
Stepping up from the day-to-day. It is easy to lose sight of long-term goals if daily operations are all-consuming. Staying mired in the day-to-day is working in the business rather than on the business. I encourage leadership teams to make strategy the first part of their regular meeting agendas. If your leadership team’s meetings are about firefighting, you’ve got the wrong people. You hire really good people to fight fires. The first part of that agenda should be to check the progress of the strategy initiatives. Are we in green mode? Good. Are we in red mode? Then what do we need to get moving forward? It should always be forward facing rather than looking back.
Relevance and meaning. A plan that is mostly fluff not supported by actions will not achieve employee buy-in. If they think you derived your strategy from a “Strategy for Dummies” book, they won’t give it a second look.
Periodic strategy. Market conditions can change significantly during the three-year duration of a strategic plan. That means strategy can’t be discussed only at yearly golf retreats. It must be an ongoing, organic part of every meeting.
Report progress. If there is no method for tracking progress, no employee will feel forward momentum. Numbers motivate behavior.
Accountability. Each measure, objective, data source, and strategic initiative must have an “owner” or “champion.” And there must be consequences when those people come in and admit, “I didn’t get to it,” especially week after week or month after month.
Empowerment. Champions must have authority, responsibility, and the tools necessary to impact measures. Hire great people and let them move their initiatives forward.
What to look for in a strategy facilitator
Companies count on strong facilitation in the preparation of their strategic plans. Here are several attributes you should look for in that person.
- Experience in running strategic planning process
- Strong business background
- Commitment to helping you reach your desired outcomes
- Logic, self-discipline, and the ability to operate systematically
- Understanding of organizational issues
- Insight and empathy
- Authority and credibility
- Confidence in handling conflict
- Good reputation with previous clients
- Verbal and written skills
- Commitment to deadlines
- Honesty and objectivity
ISO: AN ESSENTIAL TOOL FOR STRATEGIC MANAGERS
Our clients are motivated to pursue ISO by some combination of three reasons. One is that a large customer requires it as a term of doing business. It’s a form of ransom, really—they can’t keep doing business if they don’t comply. Another reason, related to the first, is to use ISO as a tool for business development. They think that an ISO designation will confer a prestigious market credibility on their company that will open doors to a better class of customers. These folks tend to look at ISO as an expense more than an opportunity.
The third, and best, reason to pursue ISO is because it creates a management system that makes your company better. It supports processes that make your company more effective, more efficient and more productive.
If you play a sport for real, you want to keep score, and you want outside referees to watch you play the game and manage the rules. Companies that seriously deploy ISO show the world that they play the game seriously, that they’re very proud of being able to sit across from any auditor and demonstrate that they develop services, manage documents, maintain client information and track key measurements. They’re proud of this accomplishment because it validates that they strive to be the best business they can be.
— John Connelly, director of consulting, Enterprise Minnesota
Mary Connor is an Enterprise Minnesota business growth consultant.