Business planning: most companies fail to see the value of planning. Could it be why most companies ultimately fail?

WINTER SIGNALS A shift in focus by managers to one of the rituals of corporate America: the upcoming year's Annual Business Plan. Hate to say it, but based on the recent collective performance of our industry it surely appears that not enough of us have partaken in this ritual!

Which brings to mind that famous quote from the Pogo comic strip: "We have met the enemy and he is us." By not performing effective business planning, we contribute to our own failings. Companies miss profitable opportunities or become less commercially and technically competitive by losing the focus needed to be a long-term player. Equally, the accumulative result of little, no, or poor planning can contribute to the demise of the overall industry as other industries and/or technologies chip away at the traditional base of business.

Why is it that some companies embrace business planning and those that do often seem to do such a poor job of it? Many view planning as a pointless, go-through-the motion action rather than an integral business tool. Others often lack the conviction to manage the process well and/or delegate the process to people who are either not committed to the importance of the plan or not in a position to set the needed direction and goals.

One of the classic mistakes is having accountants run the planning process. All too often, the finance staff is looking for a pro forma income statement as a result that may or may not be used against managers and supervisors (who were forced into filling out the accountant's forms the accountant's way).

Another mistake occurs when the "boss" tells everyone involved in the planning process exactly what answer he or she expects. This usually means that the boss says something like "we gotta ship X so we can make Y" and then staff has to devise real or bogus plans to show how it might happen. While the boss should establish broad directional goals, by telling everyone upfront what they will put into the plan causes employees to stop thinking about how to improve and instead makes them rationalize that what they are doing fits the plan. A variation on this theme is asking a bank or investor(s) to tell the company what they expect: This variation of "boss dictates" is driven by less-qualified persons.

Finally, stone folks concentrate on putting a great effort into thinking "what" should be done but little effort into "how" it will be done, and by whom--which usually means that what is currently being done by the company is not working because no one wants to or knows how to change.

For the "job shop"--the company that relies on customers to consume available capacity by placing orders for proprietary concepts/parts to a schedule that cannot be anticipated--it is difficult to plan. But planning should be a lot more than just crunching numbers to see if the guessed-at volume based on anticipated product mix from prospective customers will float the boat high enough to satisfy demanding investors, bankers or family members. Planning should focus as much on how you will accomplish stated goals as on what those goals are.

How can a company do a better job of planning--especially a small company? First, the boss needs to believe that it is worth his and his staff's time to rough out a plan, and then stick to at least the key directional points and major goals. Second, stick to KISS ("keep it simple, stupid"). Don't get hung up on pro forma and presentation aspects; focus on what needs to be done. Finally, make sure it is attainable!

The toughest psychological hurdle is believing that by planning, the business will benefit. This is especially true with companies such as design bureaus or fabricators that are driven by responding to customers' time-critical requirements. The boss has to believe that by jotting down the direction he wants the business to go and key resources he will either use or need, it will be easier and quicker (and less expensive) to accomplish those goals.

No less important than business planning is believing in the concept that less is often more. By less, I mean less complicated. This is especially true in planning where the real meat of the plan is thinking through how you will accomplish your goals. If you want to increase sales, for example, then you need to plan what markets to focus on, the profile of a well-suited customer and the types of applications that use your capability and capacity, and, finally, who will go after those applications, customers and markets. By keeping the plan simple in format and instead expending your efforts on thinking through what you will do and how you will do it rather than the final presentation format, the plan will be more effective and will take far less time to develop, review and for your employees to understand.

Nothing will kill a planning process faster than either setting slam-dunk goals or such unrealistically unachievable ones. The slam-dunk ones send the message that management has no vision or confidence to do anything new. Setting unrealistic goals says that management is either out of touch or has no clue how to accomplish anything. And any business plan, besides requiring thought, imagination and insight, must encompass the abilities of your employees. No one needs an enemy who smiles back when you look in the mirror.

PETER BIGELOW is president and CEO of IMI (imipcb.com), a fabricator of microwave and military PCBs. He can be reached at [e-mail].