1. business and industrial

STRATEGIC PLANNING
HOW TO IMPLEMENT A
SUSTAINABLE BUSINESS PLAN
“The Balanced Scorecard”
November 2, 2010
EDWARD J. CALLAHAN
JUSTIN AMICO
F e e l e y & D r i s c o l l , P. C .
Certified Public Accountants / Business Consultants
www.fdcpa.com
Agenda
2
A.
B.
C.
D.
E.
F.
G.
“The 7 Habits of Ineffective Business Planners”
Breakout Session
The Planning Pyramid
Vision - Core Values and Purpose
Goal Setting
Measuring & Execution – “Rhythm”
Balanced Scorecard
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A. The 7 Habits of Ineffective Business Planners
Why do companies fail to create, implement
or execute their business plan?
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Inefficient Habits of Business Planners
4
1.
2.
3.
4.
5.
6.
7.
Too many priorities
Unclear vision with lack of input
Inarticulate leaders
Non believers in top management
No Follow through or measurement
Managing up is discouraged, no mutual respect
Lack of discipline
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Growth Companies
Common Success Factors
5
q
Mastering Growth
§
§
Executive Team – Success depends on ability to
Delegate and Predict
•
96% of most Companies have fewer than 10 employees because
owners cannot delegate
•
Predict – Good Companies can predict 30-60 days, Great
Companies can predict weekly
Systems – Need systems and structure to identify and
respond to challenges associated with Growth
People and Systems are the 2 most important factors to create,
implement and execute a business plan.
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Tone at the Top
6
q
3 Key Rules of Parenting and Building a Business
1.
2.
3.
Have fewer rules - Priorities
Act consistent with those rules - Data
Repeat yourself a lot – Rhythm
= Simplicity & Clarity
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Priorities
7
q
“The organization with too many priorities has no
priorities.”
§
§
q
Top management must articulate Company’s top 5
priorities
Each employee must determine their top 5 priorities and
align them with the Company’s top 5 to create clarity for
top performance
Management Accountability Plan (MAP)
§
Develop activities that align directly with top priorities to
create a clarified vision
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B. Break Out Session
1.
2.
3.
4.
When was the last time your company documented a business
plan?
Was it a 1 year process? 3 years? 5 years?
How many goals/initiatives were identified as a result of the
plan?
Was the plan and/or process a success or failure? Explain why.
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The Planning Pyramid
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The Planning Pyramid
10
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D. Vision - Core Values & Purpose
Core Values
• “They define us and what we stand for”
Purpose
• “The Organization’s reason for being”
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Core Values
12
q
q
q
Timeless guiding principles
“The key is not what core values an organization
has but that it has core values at all.”
Always take the time to develop your core values
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Core Values Illustration
13
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
Practice what we preach
Service to the Customer above all else
1st class for less
Everyone is an entrepreneur
Never, ever, EVER give up
Hard work and continuous self improvement
Being a pioneer – not following others
Discipline
Make a difference
No cynicism
Never being satisfied
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Core Value Flywheel
14
q
Have a few rules, repeat yourself, and be
consistent
1.
2.
3.
4.
5.
6.
7.
Create Legends
Recruitment and Selection
Orientation
Appraisal Process
Recognition and Reward
Themes
Everyday management
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Purpose (Why?)
15
q
q
q
Why is our company doing what it’s doing?
What’s the higher purpose for why we’re in the
business we’re in?
Why do I have such a passion for what we’re
doing?
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Purpose (Why?)
16
q
“To give ordinary folks the chance to buy the
same things as rich folks.” ~Wal-Mart
q
“To preserve and improve human life” ~Merck
q
“To make people happy” ~Walt Disney
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E. The Goal Setting Process
Who are you and who do you want to be?
•
•
•
•
•
•
BHAG
Targets
Needs/Capabilities
Goals - Company
Goals - Individual
Measurement – Balanced Scorecard
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BHAG
18
q
BHAG
§
Clearly articulated goal that is reachable in 10-30
years
§
Clear and compelling, people get it right away
§
Commitment to a huge, daunting challenge
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BHAG-Examples
19
q
Stanford – 1940s
“Become Harvard of the West”
q
Philip Moriss – 1950s
“Knock of RJR as the # 1 Tobacco Company”
q
Nike – 1960s
“Crush Adidas”
q
Feeley & Driscoll- 1970s
Tom Feeley 1974 - 5 employees
“We will be the largest and best non-national firm in the City of
Boston”
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Targets
20
q
On the company level and the individual
level
§
Where do you want to be in 3-5 years?
• Geography
• Markets and share of market
• Job type - product or service?
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Needs/Capabilities
21
q
Do we have the right people?
PEOPLE
q
Are we doing the right things?
PROCESS
q
Are we doing those things right?
LEARNING
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Needs/Capabilities
22
Sore Points for companies:
1.
Not big enough to compete
2.
The company lacks a key player
3.
The economic engine is broken
4.
Someone else is controlling our destiny
5.
We need a war chest to compete
6.
We’ve got to scale back or we won’t survive
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Goals - Company
23
q
q
Targets 3-5 year goals
Capabilities needed
§
§
§
§
§
§
§
§
Personnel
Training
Equipment
Capital
Technology
Processes
Strategic vendors
Etc
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Goals - Company
24
q
q
Measurement
Potential metrics
§
§
§
§
§
§
§
# of “A” customers
# of customer “WOWs”
$ volume goals by
customer/markets/location/service
Gross profit $/% by all of the above
Operating profit/operating overhead
Key staff added and lost/turnover ratio
Strategic initiatives identified/executed
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Goals - Company
25
Potential metrics - continued
§
§
§
§
§
§
§
§
Revenues/GP by per field/office employees
Field/shop/machine hours
Hit ratio
Equity/working capital/efficiency targets
Technology initiatives executed/$
Marketing initiatives executed/$
Community service initiatives executed/$
Training initiatives executed/$
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Goals - Individual
26
q
q
Targets 3-5 year goals
Capabilities needed
§
Customer •
§
Personnel •
•
•
§
•
§
•
What processes need to improve to allow you to do your job better
Where are you stuck? Where is the bottle neck?
Strategic Vendors/Outsiders •
§
Continuous learning needed individually
Growth of existing staff-direct reports
Resources/Technology/Equipment
Processes •
§
New staff needed
Growth of existing staff-direct reports
Evaluation of and potential counseling of “cruisers”
Training •
§
What is the biggest customer need we are not fulfilling?
Who do we need to align ourselves with to allow you to achieve your goals
Etc
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Goals - Individual
27
q
q
Measurement
Potential metrics
§
§
§
§
§
§
§
# of “A” customers
# of customer “WOWs”
$ volume goals by
customer/markets/location/service
Gross profit $/% by all of the above
Overhead expense account responsible for
Key staff added and lost/turnover ratio
Strategic initiatives identified/executed
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Goals - Individual
28
q
Potential metrics - continued
§
§
§
§
§
§
§
Upward evaluation metric
Field/shop/machine hours/utilization ratio
Hit ratio
Technology initiatives executed
Marketing initiatives executed/activity
Community service initiatives executed/$
Training initiatives executed/$
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Goal Setting Flywheel
29
2
Targets 3-5
Years
3
BHAG
1
Needs/Capabilities
Measurement
Company Goals
4
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6
Individual Goals
5
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F. Measuring and Execution “RHYTHM”
q
q
Leadership Tools
Communication
§
q
q
q
People
Measurement
Flywheel Concept/Rhythm
§
§
§
§
q
Cultural Meetings
Core Values
Goal Settings
Right Things Right
Processes and People
Balanced Scorecard
§
§
Balanced Scorecard Company
Balanced Scorecard Individual - Illustration
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Leadership Tools
31
1.
Peer pressure
2.
Collective intelligence/Interdependency
3.
Clear communication
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Communication
32
q
To become and remain competitive:
1.
2.
3.
A framework that identifies and supports your
corporate strategy
A common language in which to express that
strategy
A well developed habit of using this framework and
language to continually evaluate your strategic
process
KEEP IT SIMPLE.
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Establish the Meeting Culture
33
q
q
q
Meetings increase the pace of deliverables and take
lots of time pressure off the leader
Daily Huddles: short, punchy meetings with a
structure, time limits and a specific agenda.
Daily agenda: (never stray)
1.
2.
3.
What’s up?
Daily measures
Where are you stuck? (scrutinize the exec who often
reports that everything is fine)
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Establish the Meeting Culture
34
q
Story telling:
§
q
Teach from experiences that represent your company’s
core values
Quarterly Celebrations:
§
§
§
Develop a theme that will make the numbers memorable
“A company’s goals and priorities won’t be successful in
driving the organization if they’re easily forgotten”
People need to know where they’re going and want to
know when they’ve arrived
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The Four Meetings
35
Meeting Type
Time Required
Purpose and Format
Daily Check-in
5 Minutes
Share daily schedules and
activities.
Weekly Tactical
45 - 90 Minutes
Review weekly activities and
metrics, and resolve tactical
obstacles and issues.
Monthly Strategic
2 - 4 Hours
Discuss, analyze, brainstorm, and
decide upon critical issues
affecting long-term success.
Quarterly Off-site Review
1 - 2 Days
Review strategy, industry trends,
competitive landscape, key
personnel, team development.
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The Right People
36
q
Groom the next leaders
§
§
§
§
q
q
q
Behaviors
Passion
Identify the winners early and retain them
Interact with the 25-35 year old employees
Fewer people, paid more and given lots of training and development =
high loyalty
Would you re-hire each person on your team, given the chance?
Do they have the potential to be the best person in their position in 3-5
years?
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Measurement
37
q
Financial
§
§
§
§
§
§
How can we predict our month end financial results
using daily/weekly metrics
Close the books by the 10th day
Owners know the numbers “the key number”
Invest in Technology
Field to Office – remote or daily capture
Backlog Roll Out by job, by month
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Measurement
38
q
Systems(Operational/Financial/IT)
§
§
§
Timely Data Drives Prediction
Identifying and measuring daily/weekly number that
will predict monthly/quarterly/annual income
Evaluate existing systems and functionality to meet
the goals of the Organization for the next 5 years
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Balanced Scorecard
39
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40
Core Ideology Flywheel
Reinforcement of Core Values
2
1
Recruitment
Legends/famous
person
3
Orientation
Reinforcement of
Themes/Core Values
7
Appraisal
Evaluation
4
Daily
Maintenance
Recognition
6
5
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Goal Setting Flywheel
41
2
Targets 3-5
Years
3
BHAG
1
Needs/Capabilities
Measurement
Company Goals
4
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6
Individual Goals
5
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“Right Things Right”
Leadership’s Role
42
Lead People
Manage Activities
Prospects
Get Work
Customers
Other Service
Professionals
Keep Score
Employees
Do Work
Vendors
Company and key staff get customer, systems, people and financial goals/grades every year.
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G. The Balanced Scorecard
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Balanced Scorecard - Company
44
Company:
Core Values:
Purpose:
ABC Electric
Ecstatic Customers; Make a difference everyday; We will never be outworked by the competition
To energize the world
BHAG:
To be the most profitable contractor servicing the Academic and Healthcare Markets working for the largest GCs
in the city of Boston.
Targets
(3-5 Year Goals)
1
1 (a)
1 (b)
1 (c)
1 (d)
1 (e)
1 (f)
1 (g)
1 (h)
1 (i)
1 (j)
To improve gross profit margins from 12-20%
Become the Company known for value added
BIM-Training needed
Train Foreman to project costs and hours to complete
Stop working with customers who we can't make money with
Nurture relationships with our most profitable customers
Need a new shop foreman to manage Prefab
Hire Estimator with BIM experience
PreFab is Required, not an option
New motto, "what can't we Pre-Fab?"
Identify job milestones and critical path to measure daily/weekly vs. estimated productivity
PM/Foreman will review Estimate before hand off meeting and be prepared to discuss their concerns
PM required to meet with Foreman weekly to update costs to complete
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Customer/Markets
People
Systems/Process
C
P
S
Learning and Growth
Financial
L
F
F
L
L
C
C
P
P
S
S
S
S
Or Call: 888-875-9770
Balanced Scorecard - Individual
45
Company Name:
Core Values:
Purpose:
BHAG:
Employee Name:
ABC Electric
Estatic Customers; Make a difference everyday; We will never be outworked by the competition
To energize the world
To expect $100 Million of recenue and 1000 employees by 2015
John Smith
Targets
(3-5 Year Goals)
Customer/Markets
People
Systems/Process
Learning and Growth
Financial
1
1 (a)
1 (b)
1 (c)
1 (d)
Obtain a degree in electrical Engineering
Complete the GMATs
Obtain 2 noteworthy recommendations from co-worker/top management
Complete application to 3 universities
Bring newly accquired knowledge to the workplace
L
L
L
L
L
2
2 (a)
2 (b)
2 (c)
2 (d)
2 (e)
2 (f)
2 (g)
2 (h)
Become a member of senior management team (i.e. project executive)
Originate 3 new projects
Teach 3 training classes internally
Manage $3 Million worth of projects
Achieve no less than 95% profit enhancement grade
Develop 2 assistant PM's into PM's
Average no less than 20% gross profit margin
Achieve a "wow" status on three projects
Achieve a minimum 4.0 upward evaluation rate
L
C
P
F
F
P
F
C
P
3
3 (a)
3 (b)
Develop enough "A" contacts to originate $2 million of new work annually
Complete marketing plan with 25 contacts
Participate in 30 marketing related meetings
C
C
C
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C
P
S
L
F
Justin Amico
Edward J. Callahan
46
Mr. Callahan is Director of the Construction Services Group
at Feeley & Driscoll, P.C. Ed has over 30 years of
experience in public accounting, specializing in
accounting/tax and business planning issues as they apply
to contractors and suppliers. His other areas of expertise
include: information management systems (job cost,
accounting, and estimating), operational and financial
analysis, workers compensation planning, surety bonding,
and banking -assistance. Ed is a Certified Construction
Industry Financial Professional (CCIFP). He is also Treasurer
of the ACE Mentor Program of Massachusetts. Mr. Callahan
holds a BS degree in business administration from the
University of Massachusetts (Amherst) and an MS in
taxation from Bentley College. In 2005 he received the
Accounting Alumni Award from the University of
Massachusetts.
Visit us on the web:
Mr. Amico is a Director at Feeley & Driscoll, P.C. He
has over fifteen years of experience in public
accounting, concentrated in the construction
industry.
Mr. Amico provides accounting, tax,
pension audit and MIS consulting services to
contractors and suppliers. He has focused his
expertise in financial and operational analysis, and
is a Certified Construction Industry Financial
Professional (CCIFP). Mr. Amico holds a BS degree
in accounting, MS in Taxation, and an MBA from
Bentley University.
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SAVE THE DATE!
Tax Planning Strategies for Contractors
Tuesday, December 14, 2010
3:00 PM – 5:30 PM
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Or Call: 888-875-9770
References
48
q
Mastering the Rockefeller Habits
§
q
Death By Meeting
§
q
By Patrick Lencioni
Building Your Company’s Vision
§
q
By Vern Harnish
Harvard Business Review by Jim Collins & Jerry I. Porras
Execution – The Discipline of Getting Things Done
§
By Larry Bossidy & Ram Charan
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