If You Fail To Plan....
A recent article in the Enterprise section of the Wall Street Journal stated that "when it comes to planning, small businesses need some improvement". The story went on to report some scary statistics concerning small businesses:
In all, nearly 60% of small businesses have no plans on paper at all! This could be a major reason why over 80% of small businesses fail within three years. The Journal goes on to repeat the old adage, "if you fail to plan, you plan to fail".
But small businesses and entrepreneurs arent the only culprits. Our client base includes companies ranging in size from $10 million in revenue to multi-billion dollar internationals. Whenever I call on a consulting prospect, I always ask about their business plans. It amazes me how few have a written plan. And of those who do, very few employees below the corporate board room even know about it.
There are many excuses for such haphazard management, but no justifiable reasons. Downsizing has eliminated a swatch of middle management who used to develop such plans. Some say that the volatility of the global markets makes such long range planning useless. Cost is often mentioned as a deterrent. Family run and privately held businesses seem to think they dont need it, since they have been successful for years without formal planning.
I recently spoke to a group of experienced consultants, professionals who are paid very high fees to advise clients on the benefits of business planning. Of the 35 in attendance, only 3 had an annual business plan. Not one had a marketing plan! I once asked a self-employed public relations professional if he had a budget (No!). I asked further how he could possibly determine his hourly rates...and he licked his finger and raised it to the wind!
Sound business planning doesnt have to be costly or time consuming. It should also be a "living" document, not some report printed, bound and sentenced to the credenza in your office. Plans should be reviewed quarterly, with variance analysis reporting (actual vs. plan vs. last year). It is also very simple to do.
Each year during the last two weeks of December (our slowest period), we develop the following: a long range plan, a marketing plan, a sales plan and a budget. The long range plan (3 years maximum) is a revision to last years plan, and it updates our goals and objectives for the coming year. The marketing plan lists the markets we need to improve in, new markets to penetrate, and those we want to drop. The sales plan lays out which services to concentrate on, the mix we expect, and how we expect the revenue to distribute. The budget lays out our revenue and detailed cost on a monthly basis, and projects profit, taxes, and expected pension contribution. We can then accurately forecast our "breakeven" points for fees and income.
Each is done on one 8 ½ x 11 sheet of paper, and remains on the wall above our desk to be seen every single day. Who says planning has to be difficult?
If you stay around long enough, sooner or later you will be asked by your boss to participate in your company's latest, critical, red hot project. The 'survival of the organization' depends its success, and it gets kicked off with great fanfare and emotion.
Then reality sets in, and the project manager is charged with executing the plan. Trouble is, the plan is usually faulty from the get-go and, despite all the skills and resources brought to bear, the project comes in late, over budget, or not at all.
"So what went wrong?", everyone asks. Actually, any number of things that are common to many large scale projects, be they construction, information systems, enterprise re-engineering or product development. They can be classified as follows:
1. Executive Level Non-Support
2. Improper Staffing
3. Poor Project Management
4. Unreasonable Completion Dates
5. Poor Project Planning
As you can see, many variables come into play during the course of a project. Next time, please don't shoot the project manager!
Business management has long been aware of the costs associated with information technology. They are keenly sensitive to the costs of new acquisitions, such as hardware, software, telecommunications and especially human resources. What they dont seem to understand, however, is the concept known as Total Cost of Ownership (TCO).
In general terms, TCO integrates the four major sources of costs listed above, and expresses them in terms of dollars per workstation, or cost per seat. This allows for a standard basis to measure costs, and permit the comparison of one architecture versus another. Once management knows the true cost of its computer systems, it can then go about the task of controlling and reducing them.
But other factors enter into the cost equation, and many managers are either unaware of them or disregard them as unimportant. However, they directly affect the cost per seat calculation, and should always be considered. Let us take a closer look at what these costs are, and what can be done to control them.
Many organizations utilize a broad range of computer systems, such as large mainframes, mid-range computers and desktop personal computers. The latter is further split according to Windows based PCs and Macintoshes. This type of environment does not lend itself easily to cost control. The answer is standardization.
Although full standardization may never be achieved in large organizations, the use of standard platforms directly reduces the costs of software and personnel dedicated to maintain and operate the other systems. Despite the claims of many vendors that their products support the concept of open architecture, the reality is that most systems are proprietary in some form or another. This means they will require special training and skills to operate as designed. Such special attention only increases costs.
Purchasing and Procurement
The purchasing process should encourage users to choose standard options, as opposed to others which meet their special interests. This does not mean we should discourage solutions which satisfy true business requirements, but provide a shorter list of non-standard options to choose from. This will also encourage preferred vendor contracts, and further reduce costs.
Leasing technology rather than purchasing is another method available to management. In most organizations, the purchasing process is easier if a capital appropriation is not required.
The old adage "..if you dont know where you are going, any road will get you there.." is especially true in the world of information technology. Management must commit to a long range view of their needs if they ever expect to control and manage costs.
One advantage of the long view is the reduced need to be on the "leading edge" of technology (some conservative techies refer to this as the "bleeding edge"). A strategic approach encourages a more thorough use of existing technology, and may discourage a spontaneous rush to upgrade when new options are available. A future yardstick will be how quickly organizations migrate from Windows 95 to Windows 98.
Using these concepts over a measured period of time will directly control and reduce your organizations Total Cost of Ownership.
No one likes to spend time thinking about or planning for a disaster to happen. This is especially true in the business world, where little effort is spent on "cost only" projects. Although many large corporations have elaborate disaster recovery plans in effect, they generally center around the corporate computer systems and information recovery. Very few have established a method to provide recovery for their business as a whole.
We recently assisted an Atlantic City hotel/casino in developing an emergency action plan to be executed in the event of a possible natural disaster, such as a hurricane. Since Atlantic City is an island, the City government has evacuation plans in effect should such a situation arise, but very few hotels have planned for this kind of disaster. Most have a simple "to do" list, which assigns duties to each executive. The last man out the door (the CFO) has only one task...can you guess what it is? (answer later).
Such one-disaster planning is myopic to say the least. A business today must be prepared for any event that may disrupt or shut down its operations. The actual event itself cannot be predicted, but a plan to resume operations as soon as possible afterward is absolutely necessary. This is known as Business Continuity Planning.
From our experience, hardly any small to medium sized businesses are prepared for a business disruption. They simply do not consider the necessary expense to be worthwhile. Recent estimates are that a manufacturing facility can withstand a disruption of only three to five days if it has any chance of resuming business.
Last year, we met an executive who owned a successful manufacturing and distribution facility in rural Iowa. His closest neighbor was a half mile away, so he felt relatively secure from all but the "biblical" disasters, such as tornado, flood etc.
One day a careless worker dropped a cigarette butt in the paper towel disposal, and a small fire ensued. Alert employees actually snuffed the flames before the fire company arrived, limiting damage only to the rest room. Unfortunately, the fire destroyed the older lighting ballasts, and the PCB's they contained spread through the ventilation system to contaminate the entire facility. The business was quarantined until cleanup was completed and approved. After ten days, the plant was closed, and 110 people lost their jobs.
As you can see, disasters are not limited to the computer room. Businesses must develop a plan to resume normal operations, even to the departmental level. This must include a way to accept orders, buy material, assemble and ship product even on a limited basis. If you don't stay in business, you will be out of business very quickly.
Finally, that executive's last task before leaving his casino? Grab all the markers (the gamblers IOU's) from the casino floor and take them with him. They may be the most valuable asset in the building!
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