Best of Cobiz: Make plans — then make plan

Editor’s Note: This is an excerpt from business performance improvement expert Larry Valant’s book, Stop Breaking These Rules! 100 Hard-Hitting Truths for Business Integrity and Performance.

The job of the CEO is to grow shareholder value.

Most CEOs know that their job is growing shareholder value. Since growing shareholder value means growing company value, the CEO must realize that the best way to improve company value is to make plan every month, every quarter, every year.

Ah, you say, there is the problem. Most CEOs and their top management teams are pretty good at developing plans; the rub comes in making plan. Something always seems to get in the way: the market, the competition, or “lower-level management just didn’t carry out the plan”. Failure to execute the plan is usually perceived by the CEO and her top management team to be “the fault of lower-level management”. This perception is totally wrong. The CEO and her top management team are accountable for the results produced by the people in their organization.

While planning is a critical part of the CEO’s job, it is only half. The other half of their job is execution, known as making plan or making the numbers. And the ability to effectively execute is what separates the competent CEOs from the 95 percent who continually miss plan for one reason or another. If a CEO doesn’t make plan, company value decreases. If company value decreases, the shareholder’s value decreases. And, unhappy shareholders fire the CEO who can’t make plan to find a CEO who can.

59 – Most companies are good at planning, very few are good at executing to plan.

Planning – the ability to identify where you are, where you want to be after three, four or five years, and the actions you must take to get there. Executing – delivering all the actions defined in your planning, on time and on budget!

Most companies are indeed good at planning; however problems arise when it is time to execute their plans on time and on budget. To execute effectively, all the people in the company must understand the plan and work together in a coordinated effort. (Very rare). To achieve a coordinated effort, management must be highly competent. (Also, very rare). The act of managing (executing the plan on time and on budget) is truly one of the most complex activities required of humans, and that is why so few companies consistently achieve their objectives on time and on budget.

Membership in the ranks of the few who are good at executing is never accidental. It requires following the rules of effective execution: 1) clarifying and quantifying expectations 2) employing systems and processes which assure plans are carried out on time and on budget 3) methods for relentless follow-up and 4) rewards tied to performance.

Organization is defined by the plans that must be executed.

It is surprising and sad how often managements err in their organization planning. They err by going directly from their objectives to the organization structure without paying adequate attention to the underlying strategies and plans which must be executed to determine the organization structure, and without considering the functional alignments required to effectively execute those plans.

Organization planning is a complex and intricate process which to a great extent determines a company’s success in executing its plans. Since management centers around the ability to clarify expectations by defining responsibilities, accountabilities, and how and to whom to delegate, a strong organization plan becomes central to the firm’s success.

The organization structure defines who reports to whom not just in terms of people, but in terms of functional responsibilities. If the organization structure is not carefully thought out and arranged correctly, delegation and tracking accountability become very difficult, if not impossible.

It behooves top management to take adequate time to develop its organization plans, both short and long-term. Management must always go back to the strategies and plans that are to be accomplished when structuring the functional roles and responsibilities, and finally in making staffing decisions for its organization.

And just as the strategies and plans must be reviewed quarterly to identify the critical changes that are required, so too must the organization be reviewed constantly.