It is January so business plans and last year’s results were front and center with several groups this month. The thing about this topic that never ceases to amaze me is the different ways that highly talented people go about this process. There is an almost magical process in building out the assumptions of the plan and a very precise logic in linking and assembling the assumptions into the business flows.
What is clear from the meetings is that there is no one way to do planning. Many members noted that the more inputs they got the more confused the assumptions became and the better the plan. More than one person noted the complexities of the interrelationships between variables and the fact that improving one thing often degraded some other variable. What was clearly understood in the room is that getting from an observed effect to the cause was extremely difficult especially in areas like sales and marketing.
What drives the complexity of business planning are some of the classic conflicts such as the clash between:
- Quality and Quantity
- Opportunity and Risk
- Revenue and Expense
All of these are balance issues where pushing one side often results in an offsetting negative impact on the other. Improve the quality of your market targeting and the size of the market shrinks; seek to expand market opportunity and you increase risk; increase revenue and expenses move with it. There are lots of stories of businesses that saved their way (Expense Control) into bankruptcy and those that grew too fast (Opportunity) and exploded (Risk). For those that seek a right or wrong way of doing business planning the real world environment of balance issues can be confusing.
The other item with wide support was that business planning helps you think through the challenges your business will face but it does not make things happen according to plan. As a matter of fact I think the consensus was that it is nice to have a plan to deviate from. Everyone in the room knew that a plan is a living document and that before it is done it is already changing. The agreement was that change was the only constant in the CEO universe.
It is always interesting to see how different CEOs take on the challenge of a business plan. Everyone has their own approach to the planning assumptions and how to move from those assumptions to the next logical steps in the flow. Some start with revenue while others focus on expenses and both ways work. I know some very successful businesses that come at this from very different directions. Some of the conversation caused me to go back and reconsidered some other possible outcomes in my plans. I think I learned what I often learn in these meetings. Not that I did something right or wrong but that other people can see different outcomes and bring different perspectives that you have to consider as a CEO.
Viewing your business through the eyes of others can be an enlightening experience.