One of the first questions we ask senior management during our FOCIS and FOICS-plus reviews is if they have a strategic business plan. In response we usually get a blank stare. More recently some managers have indicated they haven't put together a plan because they are waiting for more clarity on new regulatory reforms.
My partner, Joe Garrett, often says that one would not go on a long road trip without a map or at least an idea of what they wanted to see. Without a road map, one could get lost, waste time or maybe never even find the place they set out to visit.
A strong plan has the following components:
- Key Objectives
- Strategies to meet the objectives
- Action plans to implement the strategies
- Measurements to ensure the action plans and strategies are working
- Review of the plan and contingencies if areas of the plan aren’t working
As I review successful and unsuccessful companies, I’m finding a strong plan is really subordinated to management’s ability to execute the plan. In fact some of the best companies don’t have a written plan at all; they know exactly where they are going and what they need to do. Monitoring and measuring the plan is part of management’s DNA.
Execution is where the rubber meets the road. Let me share some of the traits I’m seeing with successful companies:
- Management focuses on the granular components of the business rather than the averages. What I mean by this is a company may be profitable, but some areas of the company might be more profitable than others. Averages can distort a train wreck. Managers should benchmark all aspects of their origination business: Production by channel, revenues by loan officer, GOS by investor and products, employee productivity, etc.
- Management requires financial statements within 10 days of the close of each month. Monthly financial statements and all the specifics of these statements should bee measured against management's big picture plan and budget. These results should be reviewed early in the month to ensure problems are given an opportunity to spread deeper into the business model.
- CEO meets with all senior management, individually and collectively, to review the previous month’s results. Each unit has a specific strategy to meet corporate objectives. The CEO is responsible for making sure all business unit managers are executing their individual strategies. If deliverables are not on track, senior management is held accountable and must explain the reason for the delay.
- And finally, we find successful companies have a process I call ETED: Explore, Test, Exploit and Ditch. Successful companies explore new opportunities and test ideas before implementing. If the testing phase turns out positive results, they quickly allocate resources in a manner that executes the idea before competitors enter the market. Because successful companies are monitoring and measuring all aspects of their companies, if something isn’t working, they ditch it quickly and do an autopsy to figure out why it didn’t work.
Yes a written business or strategic plan is important. It provides the broad map to help management earn a return and be successful. However, without the skills and discipline to execute, a plan is nothing more than a worthless written document.