Having met a few entrepreneurs over the years, it is interesting to hear their views on planning. Some of which are quiet dismissive:
- What is the point of planning, something different always happens
- Planning just ties you down – these days you need to be quick to react and adaptable.
- Accountants plan – I’m an entrepreneur, I make things happen.
- Budgets are a waste of time, who can predict where we will be in a year.
The last two, in particular, were aimed at me. I can understand their reasons for being sceptical as we do live in an ever-changing world. How many people can say that the last five years of their lives have gone exactly to plan? Did you think five years ago that you’d be reading this blog, which was brought to your attention by the power of social media?
The fact that plans change is widely recognised, and nowhere more so than in military circles. Hence the phrase:
No plan survives first contact with the enemy
Although attributed to a number of great leaders, this phrase was the creation of Helmuth von Moltke the Elder who was the chief of staff of the Prussian Army for some thirty years. He is widely regarded as one of the great strategists of the latter 19th century, and the creator of the modern method of directing armies in the field. Unlike many entrepreneurs of today, von Moltke was not advocating the futility of planning. He believed in the need for a process that defines how to react in the face of changing events. He believed in the art of deep delegation whilst remaining true to the goal. His theories have evolved over the years into the concept of Mission Command.
Rather than rewrite the work of those before me, I’ll quote the expert: Stephan Bungay:
The two core demands of mission command are to establish a high level of alignment by being very clear about the ‘what’ and the ‘why,’ and to grant a high measure of decision-making authority to relatively low levels of the organisation who are dealing with the question of ‘how.’ Rather than following detailed orders, an officer’s responsibility is to understand his commander’s intention and to take whatever action he deems necessary to fulfil it. If the situation changes – as it is expected to – the guide to decision making is the original intent.
This can be understood as a form of what we would today call ‘empowerment.’ It involves creating space for decision making by giving power to those who need it, and not allowing it to be withheld by those who do not. Decision levels should be set as low as possible. This also reduces the need for all but essential information to be passed up and down the chain of command, ensuring that decisions are taken by the competent individual with the most up-to-date information.
The combination of aligning everyone about ‘what’ and ‘why’ and pushing down decision-making results in an organization that can adapt rapidly in the face of uncertainty while retaining cohesion.
So, how does this help the modern entrepreneur? Well, what it tells us is that the answer to an ever-changing environment is delegation and review. Take this simple delegation example:
The owner of a business says to the office junior “Go to the stationers and get me a pack of six dark blue A4 folders like these” at which point he waves last month’s board pack in the air.
The office junior goes to the stationers and is told “I only have light blue, but can get you the dark blue in two days”
The office junior doesn’t know what to do. The task was delegated by a communication of the “How”, with a little piece of “What”, but with no “Why”. As a result, it is unclear which option is the best choice. Now imagine if the owner had used one of these two phrases instead:
“I have a board meeting in four days time but I’ve run out of my favourite folders in our corporate blue.”
“I have a board meeting tomorrow but I’m out of folders. I usually use dark blue but the colour isn’t that important.”
In both of these versions the “Why” and the “What” take priority leaving the office junior in a position to decide on the “How”.
The other half of the answer is about review processes.
One of the most well known tools is Deming’s Plan-Do-Check-Act Cycle. It isn’t rocket science – it just formalises the process of saying “Oh that didn’t work, let’s try a different approach.” The official version goes something like this:
- Plan: Identifying and analysing the problem.
- Do: Developing and testing a potential solution.
- Check: Measuring how effective the test solution was, and analysing whether it could be improved in any way.
- Act: Implementing the improved solution fully.
What I always recommend is that this simple process is embedded at all levels of the business. By doing so, the organisation remains flexible and adaptive whilst keeping decision making at the lowest level.
What happens if you don’t follow these two rules?
Good delegation and review processes are essential yet, so often, they are something that the entrepreneur fails to achieve. The business grows yet all the decision-making remains at the highest level. The increasing quantity and complexity of those decisions results in a business that becomes slow to react and a founder with increasing levels of stress. The owner then reaches the point where they try to exit the business but find they cannot do so as they have become intertwined and inseparable.
Some of the blame for the understandable dislike of planning must rest with the accountant’s obsession with the annual budgeting process as, in the real world, a twelve month cycle is far too long. A modern business must adopt a process of creating rolling fifteen-month financial plans that are reviewed and updated every quarter. However, you will be pleased to hear that my thoughts on that subject will have to wait for another blog post.
- 15 Jul 2012No Plan Survives First Contact With The Enemy
- 03 Jun 2012What is your kidnap fund? – The power of language
- 28 Apr 2012Company Valuation Methods – You Need to Plan Ahead
- 17 Nov 2011The Double-dip Failure Shortlist
- 01 Nov 2011Do you really need the cost and commitment of a full time finance director?