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Saturday, July 08, 2006

Passion For Long Term Planning

During my corporate life, the chief operating officer for our group was a frequent flyer with a huge territory. He would schedule meetings roughly twice a year although an unannounced visit was possible at any time. One topic was front page in every scheduled visit. Long range planning was his passion. He viewed the company as a "confederacy of entrepreneurs" and encouraged all of his direct reports to view their plans as a contract.

This passion was best manifested in his favorite story. I will do my best to paraphrase his short tale:
"Every one needs to be a good planner. Sometimes managers forget to plan. These managers may lose sight of their vision.

Planning isn't just for managers. Every person in the organization should have a plan. The time period we need to plan for is a function of our position in the company.

A good pot washer has a plan of attack. He needs to organize the pots and pans and setup a sequence of tasks to accomplish his mission. The tasks might include preliminary rinsing, separation of pots which require soaking and scrubbing, washing the easy pots first and then finishing the tough ones after they have soaked.

This pot washer will be much more productive than one who takes one pot at a time and deals with it.

I expect the top managers to have a much longer time horizon than one meal period. We need to forecast years in advance and have a plan to grow. This plan should keep competitive threats in mind. The plan should focus on the discovery of profitable opportunities.

We use five year plans to provide a compass for the future. Our annual budgets provide us with a means of tracking the plan and making changes over time."

We worked on a new five year plan every year. Our budgets were always based on the year 1 numbers from the most recent plan. The budgets of future years would always take into consideration the most recent year's actual results and the original expectations from the five year plan.

These plans were used to evaluate results monthly, quarterly, semi-annually and at year end. A significant portion of executive compensation was tied to performance.

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