This article first appeared in IMPO's September 2013 issue.
As I outlined in last month's column, Taking the What to the How, I think it is easy to develop a vision or mission. But the big question is, how do you get from the vision to actual sales growth? Many articles on the wonders of vision statements imply that if a manufacturer writes a good vision statement that somehow it will be implemented (the rain dance myth). In my experience, visions and goals are never realized unless someone develops a plan that shows every department and manager what they must do to reach the goals.
The following outline describes a planning process that was designed specifically for SMMs who manufacture industrial products. It is based on the author’s real life experiences in a manufacturing turnaround situation and was implemented during the fires of combat to survive.
How Much Growth Do You Want?
Since growth in sales is the primary goal, the obvious first question is how much growth? It is important to write down the objectives for increasing sales volume, gross margins, and net profit for each year of the plan in terms of percentage increases. This will set up the parameters for the rest of the plan.
The second step in the process is to develop a one page sheet that describes the major problems facing the company. I call it the Master Quad Plan because it has four quadrants that describe the following:
- Major Problems – After analyzing all of the internal and external information, the major problems the company must address are summarized in one-sentence statements such as: “Delivery time on half the jobs is poor,” or “Some major customers are losing the company money and are forcing price discounts.”
- Solutions and Strategies – The team reviews and debates the problems until they agree upon the general solutions to these problems. The solutions can be written as one-sentence statements, which become the corporate strategies that would drive the rest of the growth plan. Examples might include: “Install a completely different type of production control that can track jobs through the shop and predict better delivery dates,” or “Raise prices to certain customers over a period of time and look for new customers to replace them.”
- Hard Mission Objectives – The third corner of the quadrant includes the measurable objectives – or hard mission goals – on sales, cost of goods, net profits, new products, market share, new market niches, acquisitions, and replacement of unprofitable customers. These hard mission objectives will be used to create a proforma budget and sales forecast and might include statements to: “Improve gross margin from 16 to 26 percent in year one,” or “Diversify customer base so that no one customer has more than 20 percent volume in any given year.”
- Tasks – These are major answers and potential projects that address the problems in the first quadrant. This could cite goals like “Assess and redefine all sales reps into two classes,” “Develop a training program for all reps,” or “Develop a list of all target markets as well as a lead generation program.”
With this single piece of paper you now have a way of communicating your objectives, major problems, and solutions to the employees and all departments.
Implementation is the step where even well conceived plans break down. Implementation requires that the plan be shared and known throughout the company and that problems and solutions are broken down to the specific strategies and tasks and who will do them.
From the author’s experience, it seems to make the most sense to develop a simple action plan for each department in the form of a one-page quad sheet. The idea is to push the authority for the specific strategies down to the people who must do or supervise the work. Since they and their staffs are the people who will make the plan work or not work, it is important to use a process where they can systematically examine the problems and solutions once they know exactly what the mission is from the Master Quad sheet.
This is a collective process executed by the whole team. The process begins by presenting the Master Quad Plan and asking each department what obstacles or problems they must overcome to achieve sales, profit, new product and other company goals. Once they define their problems and obstacles, the next step is to collectively define the solutions. From many years of experience, the author believes that finding the right strategies is best accomplished by the managers and people who control specific functions of the company.
The next step is to define the measurable objectives or to measure whether they have accomplished their plan. The last step (or quadrant) lists the tasks that also must be accomplished during the year. (The specifics of how to develop a quad sheet for each department and function are explained in detail in Saving American Manufacturing, Chapter 9).
If I had to guess, the question in your mind right now is: Is all of this tedious work really necessary, and does it work? My answer is that it certainly worked for me. The division that I developed the Quad Planning process for has grown from $10 to $25 million in sales and is profitable. They went from number five in market share to number one and grew during every year of the Great Recession.
Mike Collins is the author of Saving American Manufacturing. You can find him on the web at www.mpcmgt.com.