Posted: December 30, 2014
Best of CoBiz: A top-notch leadership model
On the road to a vision statementLaurence B. Valant
Using the value proposition, Don was able to develop broad budget targets and return goals for each of the market entries so his business unit managers would understand to what they were committing in terms of quantitative deliverables and budget performance. Don defined his deliverables for each market entry and investment in quantitative terms for the next five years and then again for the five years following.
When challenged to create his organization strategy, Don determined that he would maintain a hierarchical structure to assure accountability, every entity in his organization would be subordinate to a single other entity. By organizing his company into business units (profit centers), he was able to hold strict accountability for managing the capital investment required for their startups and entries into new markets. He was able to project planned residual income by business unit and then sum those projections in the overall definition of success for his firm. Finally, Don created a holding company which would be responsible for overall company growth in value and performance and for corporate governance.
After completing his organization structure, Don was able to clearly define the roles, responsibilities, and authorities for his top management and business unit managers. This structure and layering of accountabilities provided the basis for day-to-day management of the operations as well as defining roles for planning and measuring performance and holding people accountable for results based on the firm's commitments.
Don settled on a structure in which he reported to a board of directors whom he knew and trusted and who had extensive and successful business experience. He then specified a COO position which reported directly to him. This COO would have direct responsibility and accountability for each business unit. The business units in turn would be run by VP/general managers who would have complete P&L responsibility.
Once these broad determinations were determined, Don provided the company with his formalized, written vision statement:
The firm will grow from its current level to four times its size in revenues and four times its value in residual income over both of its five-year planning periods.
We will support our growth by entering new markets where we have technological and organizational superiority, giving us the opportunity to manage our risks, grow successfully and to maintain acceptable marginal returns, based on expected values.
We will build a profit-center based organization, led by competent leaders and managers with clearly defined roles, responsibilities, and objectives by profit-center.
The profit-centers will report through a COO to the Holding Company, which will be directed by the CEO.
We will recruit young competent engineers to join our seasoned technical managers to create a mix of talent that will provide new, creative and practical solutions to the challenging energy problems which face us today.
In implementing his vision for the company, Don filled the COO position and three of the business unit positions from inside his company. Because of Don's and his COO's relationship with key people in the industry, they were able to gain recommendations of qualified people to fill the fourth business unit leadership position. Seeking recommendations from a trusted source who knew the details of the candidate's performance, Don limited his risk substantially and did subsequently find a good candidate to lead this division.
Laurence B. Valant is President and CEO of Valant & Co., a Denver-based business performance improvement consultancy that has worked with almost 300 firms to increase their value by billions of dollars. He is co-author of the hot-selling new book, “Make Plan! With Effective Execution” and now, “Lead and Manage!” Valant can be reached at email@example.com or at 303-589-3840. If you want more information or would like to order a copy of “Stop Breaking These Rules! 100 Hard-Hitting Truths for Business Integrity and Performance,” please visit www.valantco.com.