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Time for change
A decade or two ago, business planners worked with a five year planning horizon.
Technology adoption and implementation time frames, market share change rates, and consumer behavior patterns could be relied
upon to span several years. Today, however, things have speeded up to the point where new business strategies are implemented
and benefited from during the current fiscal year. Consider, for example:
- With current enterprise computer network technology, packaged application software
can be rapidly installed chain wide to achieve current year pay-back. This has created two seperate classes of retail company
- those with enterprise open systems networks and those without.
- Big box store formats grab huge chunks of
market share wherever they are rolled out. As they expand, they change forever the price/value awareness of consumers who
have learned to vote with their feet for the format that meets their needs. They also put tremendous global sourcing power
in the hands of people who will demand and get lower cost goods and services against all resistance, social, economic, and
political.
- And, of course, the Internet has raised the specter of a global market where
every product and service can be offered by a competitor with less capital investment and lower operating costs.
Strategic planning is about determining the nature and direction of the business -
what we are actually going to do. Only now it's about what we are going to do in the next year or two. This creates
new emphasis on the need for a top management team that can think strategically while employing modern management techniques
to change and grow the business.
Defining the mission
We have often been puzzled by the reluctance of some companies to develop
and disseminate a current corporate mission statement. It seems obvious, that in the absence of a written mission statement,
each employee is invited to invent or assume one of their own - with a predictable level of misinformation and cynicism
built in. The actual wording in a mission statement should have very specific meaning to top management as it represents the
blueprint for strategic planning and leadership.
Strategic thinking
As retail companies grow beyond the one billion dollar revenue mark they can reach
out to find the wide range of technical talent and expertise they need - inventory management specialists, real estate professionals
and even Internet merchants. They can afford to have one of everything and the hiring standard is "best in class." Best practices
and winning strategies can be developed in-house by experienced executives.
For companies on their way to the one billion dollar mark the problem is more acute.
Home grown talent is used to manage an ever increasing complexity and span of control. Frequently, the company outgrows the
incumbent executives. Often, vital strategies are developed and implemented by outside resources. Sometimes great ideas like
supply chain management or price management are ignored because nobody has been made accountable for championing their funding
and introduction. The management "silos" become defensive.
Winning strategies
Winning strategies are those ideas or practices that put management in a position
to drive the business. It seems that competitive success in the global market for products and services is cyclical. Every
company wishing to stay ahead of the pack must field a team (cross discipline) management effort so that strategic change
and continuous improvement become a way of life.
Case studies
Just how top management teamwork trumps the alternative can be illustrated through
two recent client case studies:
- A national specialty retailer was plagued by high store staff turnover which made
an adequate level of training expensive and difficult to maintain. By rethinking (zero base budgeting) the assortment plan
the retailer was able to develop value added signage for the customer. The resulting display and signage program made the
stores easier to shop and provided instant self-training for store personnel. The result was increased sales, lower training
costs and improved customer service.
- A large chain store retailer had a complex portfolio of real estate leases. Decisions
on new locations, renewals, kick-outs, refurbishment and moves were made case by case without a clear mechanism for setting
priorities and capital budgets. By tying the real estate strategy to marketing priorities and by establishing return on asset
benchmarks, it was possible to develop reliable decision support systems for all real estate decisions. Even the developers
were happy.
The role of the Executive Committee
The primary role of the Executive Committee of management is to agree the mission
and to decide what the company is actually going to do in terms of organization and budget. Implicit in this role is the concept
of team work in strategic planning. Each member is responsible for managing their own area of the business but they must also
demonstrate a broad understanding of the big picture. To achieve this understanding they will have to apply themselves in
new ways:
- Think outside the box - including the box of their own career experience which may
or may not be appropriate to today's business environment.
- Think conceptually with analytical rigor.
- Prepare reports and analysis with the needs of other executives in mind and thoroughly
study the work of other Committee executives.
- Once a decision is made by the Executive Committee, support it and make sure proper
coordination takes place.
Basic stuff, but in the real world this standard of behavior is tough to achieve. The
process has to be aggressively led and managed by the CEO.
The role of the Chief Executive
In large or small companies, the CEO will generally get best results by constantly
striving to match the organization to the mission. This means making sure that each business process is clearly articulated
and that individual management responsibilities and accountabilities are properly assigned. This results in increased management
leverage and assures that effective management teamwork can thrive.
In such a structured environment, the CEO's major role is to run the Executive Committee
by determining who participates, establishing the rules of behavior, setting the agenda, insisting on analytical integrity,
and enforcing accountability. If only the US Senate ran that way.
The meaning of information
Just because we have data warehouses and reports on demand doesn't mean that we make
the right day to day decisions. Whether we are talking about store construction, assortment planning or customer service,
we need to agree on how much is enough. The logical place to start is the mission statement (what are we trying to do?).
There is no susbstitute for a properly articulated strategy with defined rules for
decision making. Strategies must be fully integrated across the supply chain, the merchandise and marketing process, and the
selling system. Only then can we use the data to create decision support systems that will drive the business.
The role of management
Our belief is that you are managing someone when they know exactly what is expected
of them - when to start, when it must be finished, what resources they will need, what the end product will look like and
so on. In most cases, a manager will only need to explain a task once - but when a subordinate does not deliver on time or
delivers a poor piece of work - it's a management failure which will have consequences on down the line.
In an era of increasing specialization, maintaining this level of management integrity
is a challenge. Today the people we must manage tend to be computer literate and trained on sophisticated application systems
at their current or prior place of employment. They may not have had to work on the development of new policies, systems and
procedures. They may lack objectivity or the ability to imagine something that does not currently exist. Great managers have
to be coaches as well as task masters.
The only way to know if an executive really is committed to a shared mission, is a
team player, is coordinating activities with other departments and has a program of continuous improvement is to demand a
written business plan. Development of such a plan need not consume vast amounts of time (it will probably save a great deal
of time). It should reflect the best thinking of the executive and say loud and clear - "I get it, this is what I am
leading and managing my staff to achieve, and I am in a position to coordinate activities with other executives in support
of the mission."
Making sure that
everyone gets it
We always go back to first principles when talking about people in a business. We
say "everyone has a right to come into work each day, to know exactly what is expected of them, to have the right tools and
training, to work hard all day, and to go home each night feeling that they have achieved something and that their contribution
is acknowledged and appreciated."
The position description is the tool that we employ to make sure we live up to these
management responsibilities at all levels. The position description needs to be specific, up to date and action oriented.
As management consultants, this is where we can often provide the most value added.
A special thanks to all those great client executives who have taught us everything
we know about leadership, organization and management. You know who you are.
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