Why do annual budget discussions reveal so little about the growth prospects of the business and so much about the fears of those running the business?
I have come to observe that more energy is exercised in the haggle and obfuscation between line managers and their direct reports than the value derived from the process.
Should we have objectives and goals? Absolutely.
Should we place greater emphasis on a set of tactical targets that in of itself are arbitrary (based on a “best guess”) or a set of broader strategic outcomes that more profoundly describe what we want the business to look like in 12 months time?
In many high growth, mid sized businesses, where the overriding imperative for the owners is to build equity or transition the business (divestment, IPO and so on) I think there is a compelling case for the latter. Yet that is very rarely the case. The business may have doubled or quadrupled in size but the management focus and discipline and rewards system is largely unchanged (tactical targets).
I come across a lot of strong and dynamic businesses who are in self-congratulatory mode.
Senior Manager: “We have met or exceeded our budget for the last 8 quarters.”
Me: “Great, what SHOULD you have achieved in the prevailing conditions?”
I am met typically by quiet silence or a “what do you mean” response.
My point here is are you really focused on what really matters to the Owners (building equity or preparing a transition)?
Here is a quick set of strategic outcomes, my best clients use to drive their business:
1. Sustained Sales and Profit Growth (over past 3 years).
2. Market-leading Sales & Marketing Processes (array of rainmakers, leverage high tech, increasing market gravity, abundant mindset, room to accelerate growth)
3. Compelling value proposition and market position. (impressive clarity internally and externally about how the firm’s ideal clients are better off or better supported after using the firm’s products and services)
4. High Quality Management & Employees (high level of familiarity, clarity and implementation skills, behaviour and expertise supporting these strategic outcomes)
5. Breakthrough Client Relationship Approaches (acquisition, innovation, retention, profitable growth)
6. Market-Dominating Fees & Value (zero aged debt, 50%+ fees “banked” next 6/12 months, balanced growth, low working capital needs)
7. Intellectual Property Institutionalised (proprietary IP copyrighted, constant creation, internal R&D “laboratory”, systematic approaches)
8. Tremendous Loyalty (seductive rapport with key people, impressive career growth, diverse and dynamic environment, aligned rewards and value creation)
Go back to your 2016 business plans and accountabilities for key managers.
Producing Results Are each of the requisite improvements in each area set in stone? Are there influential exemplars lined up to reinforce this behaviour daily (mid-management)? Is the frequency and quality of performance assessments appropriate?
Rewarding Results Does the rewards system appropriately support or hinder your future health and well-being (bonus, long term incentives, recognition, promotions and so forth)?
I strongly suspect many people will be shocked how loosely the wheels are bolted onto their bus and how susceptible their best laid growth plans are to unforeseen events. Waste no time, take action now if you want to increase your resilience.
© James Berkeley 2015. All Rights Reserved.