Help! We've Been Missing Our Targets

We'll be referring to this in our column this Friday, so we're reposting this in our blog. Hope this helps you Strat Planners!

MarketingRx for December 4-09

“Help!We've been missing our targets...”

By Dr Ned Roberto & Ardy Roberto

Q:  This year it looks like we’ll again be below the market performance we set at our corporate strategy plan that we crafted before the start of this year.  This below-the-target record was true of last year and the year before. 

We do our annual corporate strategy planning September of each year.  We devote 3 full days for this planning at an out-of-town hotel.  We start by having outside speakers to tell us what to expect about the coming year’s PEST (political, economic, social and technological) environment.  This is followed by a SWOT analysis and a review of the company’s past two year’s sales and profit performances.  From this analysis and review, we derive the direction to take for the coming year and the strategies to bring us to the chosen direction.

But we’ve been missing our targets for the past 6 years.  Someone told us that he heard you once in a conference say that when something like what we’re experiencing happens, it’s likely that the strategy planning process is flawed or wrong.  Can you tell us what’s wrong with what we’re doing?

A:  That's a difficult question to answer. So, we WILL ANSWER BASED SOLELY on your brief and general description of your corporate strategy planning process.  We can be more specific if you were also specific about what happened between the time you strategized in September of the previous year and the end or toward the end of the current year.

Benchmarking with Jack

In the particular context of your question, we’d like to answer by benchmarking against a known and acknowledged classic in corporate strategy planning.  This is Jack Welch’s system at General Electric (GE).  Awarded by Fortune Magazine as the “Manager of the Century,” Welch’s strategy planning for GE has the enviable record of never having missed its target market share, sales and profit numbers.  The elements of Welch strategy planning evolved over his 20-year tenure at GE.  They are found in his two books, Straight from the Gut (2001) and Winning (2005), and in the two books about his leadership at GE, namely, Jack Welch and the GE Way by Robert Slater (1998), and Jacked Up: the Inside Story of How Jack Welch Talked GE into Becoming the World’s Greatest Company by Bill Lane (2007). 

In its final form, here’s the way Jack Welch has developed his GE corporate strategy planning system.  Incidentally, Welch conducts and facilitates the sessions himself.   There are four sets of planning sessions in the entire system and each has its own specific focus. 

Every Six months

The system’s first part is an every Spring and Fall strategy planning for the intermediate term.  The purpose here is to take a serious look at each of GE’s strategic business units (SBUs) along a 3-year time horizon.  Why every six months?  That’s a Jack Welch signature thinking.  The visibility of the longer-term gets less and less unpredictable as the short-term unfolds.

Annual stratplan:how to beat...

The second part is the annual strategy planning.  That happens every January and takes place in a Florida resort, the Boca Raton Hotel & Club.  The planning sessions here are devoted to sharing of “best practices” and to setting each SBU’s coming year’s business priorities.  Each strategic plan ends with a budget.  Welch’s sets two rules for what he regards as a “good focused budget.”  The budget must focused on answering these two questions: (1) “How can you beat last year’s performance?” or how can you successfully compete against yourself?  (2) “What is your competition doing, and how can you beat them?”       

"Implement like hell"

The third and fourth parts are related to each other because they fall under what Welch regards as the more consequential component of strategy planning.  This is “execution” or strategy implementation on which Welch’s attitude says: “Strategy is actually very straightforward.  You pick a general direction and implement like hell…  (So) when it comes to strategy, if you want to win, then ponder less and do more. ”   

There are two critical components in strategy implementation: (1) people planning and management, and (2) operations planning and management. 

Management retreat

For Welch, planning for people management is a twice a year “retreat.”  The retreat’s focus is on how to continue empowering his executives in each of GE’s SBUs.  The planning sessions therefore reviews and insights into the changing managerial and staff needs for each SBU.  The review and insighting are directed at enabling each SBU in attaining their market performance targets.  It is here that Welch applies his famous 20-70-10 formula for managing people.  He generously rewards and further sharpens via tailored fit training, his top 20% executives and their staff, and fires the 10% bottom performers and laggards.  What about the middle 70%?  Here’s Welch’s policy and counsel to his SBU heads: “Spend half of your time evaluating and coaching the middle 70% -- those who are neither disrupting nor shining.”

During the sessions in this people planning, Welch relies heavily on his HRD (Human Resource Department).  When asked by Fortune magazine in an interview who is a good HR head, Welch quipped: “The best HR type?  A pastor and a parent in the same package.” 

Finally, the planning for operations is a 2-day every quarter event.  The focus here is on the initiatives and activities closely related to the agenda set during the annual strategy plan.  Welch also takes the two days as the occasion where he can identify the company’s future leaders as gleaned from their responses during the sessions to the challenges of change and issues. 

Prescriptions

So there’s your model for transforming your own strategy planning into a more doable and attainment empowered planning system.  The prescriptions for the needed transformation are:

1^st.  Separate the planning sessions for the 3-year and the annual, and for the people and the operations necessary for effectively implementing the annual strategy.  Don’t compress all four into one planning schedule.     

2^nd.  Schedule the occurrence and frequency of each of these 4 components of the

              entire strategy planning over different times of the year.

3^rd.  Give a specific focus for each planning of the 4 components but relate each

focus to the attainment of the direction and priorities of the annual strategy plan.

Keep your questions coming.  Send them to us at drnedmarketingrx@gmail.com or  MarketingRx@pldtDSL.net. God bless!