Execution of the Business Plan

The plan was a good one. The right people in the right place at the right time. It had quality thinking and the correct perception of reality. The timing was right. Yet, the plan failed. The bench-marking, the metrics, goals set, with incentives in place to motivate employees – it was all there ready for success. How could that plan have failed?

The reason for the failure is that the excellent plan was not executed well. Execution is the part of the business planning process that controls the effectiveness of the plan. The planning can be superb, but the quality of the plan makes little difference if the execution is poor.

The process of execution is that of taking a plan to reality and reacting to the experience. Here is a comprehensive definition:

“Execution is a systematic process of rigorously discussing hows and whats, questioning, tenaciously following through, and ensuring accountability. It includes making assumptions about the business environment, assessing the organization’s capabilities, linking strategy to operations and the people who are going to implement the strategy, synchronizing those people and their various disciplines, and linking rewards to outcomes. It also includes mechanisms for changing assumptions as the environment changes and upgrading the company’s capabilities to meet the challenges of an ambitious strategy.” Execution, Larry Bossidy and Ram Charan, Crown Business, 2002.

To the extent that the decision-making group is not involved in the execution of the plan, the less likely the plan will succeed and the less likely subsequent planning will be successful. The decision-making group is the group of owners and managers that make the policy decisions for the business. These decisions should not only result in the origination of the plan but also the revision of the plan. Within this group will be those who have the legal authority and business responsibility to make decisions and also (on a less static and structured basis) those who are affected by the decisions made to create the plan. The construction and maintenance of the decision-making group is a business art of its own, but for the purposes of this discussion, it is important to state that the decision-making group should not only create but thereafter continuously revise the business plan.

The business planning process starts with a policy idea that develops into a written plan after discussions with the decision-making group. The documented plan is communicated from the policy-making decision-making group to executive managers who create and implement an operational plan to carry out the plan by meeting its benchmarks (metrics) and goals. At some point, the experience of carrying out the plan will suggest that the plan be revised. Traditionally, the segments of the business planning process (strategic, operational, execution, and revision) have been viewed as separate activities. This primarily has to do with the communication of the plan. If the plan is in a three-ring notebook that must be handed to an executive group to be read or if the plan is in a PowerPoint slide presentation that must be viewed, the communication of the plan provides an obstacle for the fluid implementation of the plan. The creation of the operational plan by executives will be an iteration of the strategic plan which will alter the strategic plan in a variety of ways that are necessary and appropriate but those changes will not be known by the decision-making group. When the operational plan is initiated and communicated in various ways to the productive elements of the business, as a matter of practicality the effect of the business environment will also cause changes to the plan. These changes also are not brought to the attention of the decision-making group.

The more fluid and dynamic the business planning process, the more the decision-making group will be involved and the more effective the plan will be. The more segmented the planning process, the more restricted the information will be to the decision-making group and the less effective the plan will be. To the extent that the strategic plan is different from the operational plan and does not consider the realities of the marketplace, the success of the plan is in jeopardy. When the plan is changed, either by the drafting of operational planning or the practical aspect of experiencing the reality of the marketplace, it is the reaction to these changes by the decision-making group that will result in the success of the plan.

For a dynamic planning process to exist, the aspect of any revision to the strategic plan must be identified and communicated to the decision-making group in a timely manner. Whether this occurs or not has to do with the communication between the decision-making group, the managers, and the productive elements of the business. What format of the plan will allow information to flow between these business elements in all directions? Traditionally, it was not unusual to see a strategic plan documented in a three-ring binder, communicated to managers, and then placed on a shelf. In due time, managers reported back to the decision-making group after installing and monitoring benchmarks and metrics. Then, the notebook would be pulled off the shelf and revisions would be considered.

Where a dynamic planning process is in place, the same communication instrument contains the strategic plan, the operational plan, and reflects the monitoring of benchmarks. Deviations from the strategic plan indicated by the drafting of the operations plan, the establishment and monitoring of metrics, and the experience of the marketplace will be communicated to all parties, especially the decision-making group. The planning process (strategic, operational, execution, and revision) will become continuous – that is to say, dynamic. This communication can be done on a spreadsheet or perhaps more elegantly by the use of business software such as Microsoft Teams.

Effective execution of the plan requires overall communication involving the decision-making group and immediate revision to the plan as the necessity is perceived.

A Safe Place

As a private business owner, with whom do you have meaningful discussions about new ideas? Think about the last good idea – the one that became a plan, was executed, and made money. Did it emerge as a written document, ready for an action plan and metrics, or did it require development, revision, and support for implementation? Most good ideas, that is to say, ideas that are implemented and make money, require nurturing. There is the creative act of conceiving the idea, but then it must be articulated. Those who hear it will measure it against their perceived reality and the test of their experience and foresight. The reaction of those listeners will revise and shape the concept.

Wise owners understand that as fallible human beings – no matter how talented or brilliant – the articulation of ideas to another comprehending the problem is essential before an effective problem-solving strategy can be constructed. The responsibility of the listener is to absorb the concept and compare it to the listener’s perception of reality and evaluation of the logic and thinking involved. This discussion can establish whether the idea is based on an accurate perception of reality and logical thinking. The chafe of the delusion and absurdity must be shucked away to obtain the kernels of realistic solutions. The incubation of ideas requires discussion. There must be a safe place for that discussion.

More Than One Owner – Risk Losing Control?

Often, when I advise an owner who owns all of a business, I recommend that appropriate individuals be allowed to buy into the business. The reason for this is the overwhelming benefit of having an owner agreement with buy-sell provisions among the owners to assure appropriate control in succession and to protect the owner’s business interest value. It is a very good situation to have multiple owners where there is a competent owner agreement containing succession and buy-sell provisions. It is a very bad situation to have multiple owners where there is no owner agreement or a deficient owner agreement.

The Legal Basis for Control with Multiple Owners

The presence of other owners can greatly affect the actions of a majority-interest owner of a business. Usually, an owner of a majority interest in a business will be able to control the business; however, there can be significant problems relating to having other owners holding minority interests. When bringing in other owners with minority interests, the majority-interest owner intends to maintain control (including the ability to sell the business, control compensation, and make all important decisions).

The basic element of control is the legal basis of authority. A business should be operated through a legal entity that provides limited liability to its owners. The legal documents that set up the entity and the statutes of the state in which the entity is formed will provide certain procedures and define certain authority for owners and managers of the business.