How do I get people to work the plan? Every year we go through the exercise of preparing a business plan, and nothing changes!" Sound familiar? Most companies perform some form of business planning to plot the course for the future. However, experience has demonstrated this type of planning is often very poorly conceptualized and executed even worse. Insanity is defined as doing the same thing over and over in the same way, but expecting a different result.

To be successful, a growth management planning process should provide the criteria for making day-to-day organizational decisions based on a defined strategic direction. This framework provides a template against which all decisions can be evaluated. By developing a focused growth management plan, communicating it effectively to each person in the organization, asking for contribution to vital strategies and business improvement initiatives, and tying performance to incentive compensation, you can help to drive successful plan achievement.

Many owners are unprepared when asked about personal goals (including financial ones). If, however, the owner doesn't know what to expect of a company's performance, how does he or she drive it? More importantly, what is driving the owner? Will the company generate enough profit to allow the owner to invest and live as he or she desires? While many individuals say they want to maximize profit, few can state those expectations in detail.

There is a difference between establishing direction and determining how to get there. Top management should set direction by providing a balance between strategic decisions and operational enhancements. These are two issues that should be integrated in any customer-- focused strategy. Exhibit 1 represents the concept.

Given decisions about your products and services and/or customers, you develop business strategies. These strategies will result in changes to your key assets-people, buildings, infrastructure, and financial strength. As changes are made, they should be done in the context of their potential impact on delivering the products and services to your chosen customers.

A good plan cannot only address "strategic opportunities" or business improvement; it must be a blend, as you can't divorce one issue from the other.

Communication is key-in more ways than one. We have seen executives in a meeting agree to double the company's revenues in three short years. They excitedly leave the meeting and convey to their department staff the expected growth and forthcoming rewards for their hard work.

Exhibit 1

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That communication and the plan break down when the first person asks, "How?" One item not addressed in the meeting is how the executives define "double." Do they mean jobs twice as large or two times the amount of jobs? One executive may mean new customers and markets while another may mean more people, machines, and inventory. Communication is the ability to articulate not just the direction, but the major initiatives in getting there-some will be strategic (e.g., new markets or products) while others are operational (e.g., new plant layout, new computer system, etc.).

There is a saying, "That which gets measured and rewarded gets performed." Are you tied to the old standard financial measures? Consider this: most of those measures are a reflection of history-- you're looking through the back window. Why not a new approach looking through the front windshield? Select measures that reflect the proper activities that will lead to the lagging financial indicators. For example, when looking at profit, people tend to focus on sales. You will yield better results if sales are measured earlier in the sales cycle, before sales are proposals or bids. Why not measure the leads and track conversion rates-what percentage of leads develop into proposals or bids, and what percentage of those results in a sale? Typically, by the time we learn that sales are soft, it is too late to react. If you track a different indicator earlier, you have more time to make adjustments.

When discussing measurements, you should have those at the company level keyed directly to the plan. A good approach is the Balanced Scorecard, which involves identifying two or three goals in each of four dimensions-financial, customer, people and innovation, and internal business processes and operations.

Once you have measurements at the company level, they will cascade down to the department level. Now you have some power behind the implementation process. People in each department are working toward goals that reflect the company goals and lead to the plan.

Remember, that which gets rewarded gets performed. Many companies have tied performance against the goals to incentive compensation. Others have tied to both incentive determinations and base adjustments. Some companies have restricted the approach to executives, while still others have implemented the approach with every position including clerical staff.

The keys to growth management planning begin with knowing where you are going. It is implemented through a series of action plans that are specific to each initiative. Communication, measurement, and incentive compensation work together to keep your employees focused on the plan.

Tying Executive Performance to Compensation

Tying Executive Performance to Compensation: What is the Link between Corporate Planning and Executive Performance?

With the economy showing significant signs of improvement, linking performance to compensation is more essential now than ever before. But how do companies do it successfully? The answer is easier than you think-they create and sustain a performance and accountable work culture and start at the top with their executives.

There are many different types of incentive plans. However, by utilizing a Balanced Scorecard plan, which ties the achievement of specific goals to incentive compensation, your company will be able to create a team environment where executives begin to be concerned about all aspects of the company because their compensation is determined by goals set in different categories linked to the company's business plan. As noted in the main article, the Balanced Scorecard focuses on four, measurable dimensions:

* Financial (revenue growth, profitability, shareholder value)

* Customer (market share, customer satisfaction, customer retention)

* People and Innovation (motivation, employee capability, retention)

* Internal Business Processes/Operations (quality processes, communication, operating methods)

The Balanced Scorecard approach establishes executive goals in all four dimensions that are tied to the corporate goals in these same dimensions. It creates a business strategy that supports all of the elements because they are connected and linked to the company's business plan.

It is important to keep in mind the following tips when setting goals:

Select performance measures that:

1. relate to the business strategy.

2. are controllable by the individual, yet linked to department metrics.

3. focus and drive employee behavior.

4. are integrated and cross-functional.

5. can be easily measured and reported.

6. are simple, clear and sensitive to organizational changes.

Award opportunities at the end of a plan year may be determined a variety of ways including a percentage of base salary or a pre-determined set amount. In every case, it is essential that the determination of how the incentive/ bonus pool will be established and dispersed be communicated to executives before the measurement period begins.