The perfect plan

I recall one corporate planning meeting I attended where the European VP presented budget numbers which fell well short of what the Chairman wanted. After a short private discussion with the Chairman, the European VP presented new numbers in line with the Chairman’s requirements.

Not only was it obvious that he had been bullied into the increased forecast but it was clear he had no faith in his ability to meet the revised targets. I can only imagine the reception he was going to receive when he returned to his office and told his managers what they were expected to achieve. Of course, if they had no faith in the numbers, they would simply ignore them.

This was when I realised that top-down planning did have its limitations.

There has been a long running discussion in corporate circles about the benefits of top-down or bottom up planning. Clearly, top management see the big picture and have an overall strategy for the business. They can see patterns and relationships which may not be obvious from the level of operations management.

At the same time, field operations have to deliver the numbers and can build up revenue and costs brick by brick to see what they could achieve. However, they may end up taking the business in a sub-optimal direction by pushing the wrong products or taking the easy short-term path.

So perhaps there’s no right answer. But clearly a disconnect between the two is even worse than a single approach. Setting overall priorities, major strategies and key milestones is the province of top management but this should be opening stage of the planning process – not the end. Once the overall strategy and major assumptions are set down, the budgeting and planning process should ask field operations what is achievable. If there is a gap between these two views, more detailed analysis needs to be undertaken as to why. In the end, what you need is a consensus on where you are going and commitment and faith at all levels that you have a good shot at getting there.

We learn very little by simply projecting our current business trends. The breakthroughs in thinking and the creative developments in a business come from pushing the envelope to see what the possible might look like. When you ask yourself what your business would look like at five times its size in a three-to-five year period, you will discover all sorts of insights into what products and services you should be selling, what structure your business should have and what people you need to make it work.

It is not that you will implement such a plan, but simply that it opens your mind to a new set of possibilities. Now take the best of those ideas and work them back into your current business strategy.

It is important to have big goals because they drive innovation and creativity, essential components of competitive advantage, but don’t forget that you still have to go to work each day and make it all work.

Tom McKaskill is a successful global serial entrepreneur, educator and author who is a world acknowledged authority on exit strategies and the former Richard Pratt Professor of Entrepreneurship, Australian Graduate School of Entrepreneurship, Swinburne University of Technology, Melbourne, Australia.