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Leader's Edge, November/December 2004
Author: Robert J. Lieblein

Fast Focus

As rates soften, scrutinize operations and set priorities to maximize returns.
Your options are the sell out, maintain status quo and get eaten alive, or map new growth opportunities.
To create a strategic plan, deploy a SWOT team, plot direction and set goals.

“Here’s how to be a millionaire and never pay taxes,” advised comic Steve Martin in a late 1970s standup routine. “First, you get a million dollars…”

Would that it were that easy! But really, that’s not much of a plan. We won’t even repeat his tax strategy. The devil, as they say, was in the details.

In today’s get-hard or go-soft marketplace, the person at the top of a brokerage firm’s roster had better have a more complete plan for success.

During the recent all-too-brief hard market, brokers could simply shuffle papers and business would grow. But now, as rates stabilize, intense competition has returned. So to assure your destiny, you’d darn well better be in control. How? Scrutinize operations. Set priorities. And execute strategic and tactical initiatives.

We’ll break down these tasks for you, but the first piece of advice is, be honest about your current situation.

Most brokerages, as they navigate their courses, face three choices.

Hard to port. Sell the firm. Easy way out perhaps, but does that route supply the best shareholder value? It’s a fair question and deserves thoughtful study backed up by solid financial analysis.
Steady on. The status quo—business as usual—often means being reactive and allowing the market to dictate your results.
Tack to starboard. Map your growth. The waters may be choppy, but beyond lies a distant horizon with visible waypoints and milestones and the proverbial sunken treasure. Savvy executives choose the challenging route with the best payoff. Strategic planning will chart you onto this course—and it’s the one that will lead to beating the market.

Every business has to have a course and a direction; that is, a strategy. Without one—just like a boat without a captain or a destination in mind—the business will drift with the wind and the current, leaving the future to chance. Strategy is not some gimmick or fad, but rather the number one tool companies use to gain competitive advantage. The future should not be a vague concept, nor strategy some monstrous task. Strategy can be simple. It needs to be comprehensive but it does not have to be complicated.

No matter how good business is now, like everything else in life, it will change. If you are ready for the future, you will succeed. And being ready is where strategy comes into play. Strategy will help you recognize change, understand your options, and make decisions.

Where to Begin?

Strategic planning is all about structure. A structured approach to such planning will make sure you cover key areas without wasting time and energy. A solid strategic plan can be developed if you answer the follow critical questions:

Where are we now?
What do we want to be?
How will we get there?
Who must do what?
How are we doing?

Having been involved in strategic planning for many companies over a 20-year career, I am confident this simplified approach will yield the desired results. So let’s board the boat, leave the port and chart your course to success. But remember, keep it simple.

How can you plan the future without knowing your past? Really, you can’t. So start the process by asking questions about your firm’s past. Become completely familiar with the wake you’ve left behind.

Strategy makes you consider many different facets of your business. You must analyze both its broad, general aspects and its narrow, specific details, and you do so both internally and externally. Looking at it at this sort of high level and then sifting through its details gets you to your options and your answers. This is where a SWOT (strengths, weaknesses, opportunities and threats) analysis comes into play. It must be your first step in strategic planning.

Deploy a SWOT Team

Before you can get to the point of actually creating a strategic plan, you must go through a three-step internal and external SWOT analysis. First, assess troop strength (your staff and it capabilities), battle readiness and field barriers. Second, deploy spies to scout the external landscape for areas of opportunity and looming threats. Finally, marshal your firm’s admirals and generals—the managers who will set strategic attack priorities.

When considering the organization’s strengths, weaknesses, opportunities and threats, managers often put too little effort into proper analysis. A thorough SWOT review of the business climate and your competition will give you the ability to set priorities once you get to the battlefield.

Market and competitive analysis begins with identifying existing and target markets, market segmentation, and needs or openings that you might exploit. Gain as much solid information as you can from your staff, your customers, the industry at large and your competitors. Define your position in the market and your performance. What you do better than your competitors, and where are they eating your lunch? What market segments, products or services offer the most growth opportunities? What might happen to sabotage your best laid plans? The best way to find out where you’re at is to look back and look forward. And then apply these same questions to your competitors.

Another necessary element in the analysis phase is to gather your company’s financial history and use it to forecast growth. Arm yourself with numbers.

What Do You Want to Be?

Now you’re at the point to start actually preparing a strategic plan. You’ve banked that million dollars in the form of a solid internal and external assessment through your SWOT analysis and your outline of your key priorities. Now it’s time to develop your mission statement.

Uh-oh, there’s that “M” word. It may surprise you to know that many firms don’t have a truly actionable mission statement and vision. It may further surprise you to know that your mission statement may fall into that category.

It is amazing how many people do not know the difference between a mission and a vision. In keeping things simple, I refer to this as creating a “statement of direction.” This is another critical step to successful strategic planning and to staying on the road toward that pot of gold.

A direction statement includes four elements:

1) Mission—Defines the core purpose of the agency. It is your fundamental purpose in life. Why do you exist?

2) Vision—This is where you want to be in the future. The vision includes the goals and objectives that drive the agency into the future. Cite key numbers, core markets, values and key strategies.

3) Business Definition—This is simply the nuts and bolts: your products, services, customers, technologies, geography and market share.

4) Values—Your desired attitudes and behavior toward shareholders, employees, clients, vendors or any entity considered a stakeholder will determine the cultural and business results you want. They turn into results when you apply them to policy, programs, procedures and personnel decisions.

When tackling a mission or direction statement, the work generally falls into three main categories: inspiration, definition and action.

A direction statement must be clearly understood by all employees, must reflect the organization’s values, must be achievable and must serve as a rallying point. That’s the inspiration. Then it must define the clients and their needs and the company’s business and its particular competence. Also, it should identify forces driving the strategic vision. Finally, the statement should be a template for the third piece—decision-making and focused action—yet flexible enough for implementation.

The direction statement also must be realistic, for it is the basis of how you see your company and what you want it to become.

Once you’ve laid the groundwork, worked through the analysis and created a direction statement, you can set priorities to consider the best prospects for future growth and profitability.

While your analysis may produce a long list of possibilities, good generals recognize that they must deploy their resources strategically. The process may identify priorities essential to the firm’s basic survival, such as a core process that needs to be redesigned. Or you may have the opportunity to enter new lines or geographic markets. Time and resources are limited, and you’re looking for the killer KRA (key result area). Developing priorities into strategic programs will enable measured growth.

Addressing priorities takes focus, commitment from the top down, decisive action, proper management and the patience to allow time for changes to take hold.

Chart a Growth Horizon

Look forward along a five-year time horizon. What level of growth needs to be sustained to continue to create shareholder value? The value proposition must assume steady results in a market atmosphere fraught with intense competition and falling product rates. It must assume that if this does not occur, shareholder value will deteriorate.

To chart your expected growth rate, consider these potential methods: acquisition, geographic expansion, adding new products, or investing in the sales force. Make the case for each undertaking, and chart its expected time to return on the investment.

Then you can sequence the initiatives. Set priorities for these steps and establish ownership of each initiative. Your direction will become clearer as you map the priorities, and you can identify a process for each initiative that will take you forward. Set methods, costs, duties and performance objectives. Define any missing skills or competencies. Budget your investment into each initiative. These steps add up to development of a near-term business plan.

Though you’re considering a five-year plan, corporate direction is set through the budget and year-one priorities. Financial projections should dovetail with the initiatives while linking seamlessly with the reality of current operations and initial-year tactical objectives.

Include a multitude of steps for the plan to become an operational reality. Start by turning objectives into action plans and setting up a path to accountability for each plan element. Apply creative leadership to make the necessary changes quickly to get to your plan’s starting point. Create teams with the power to enact change to obtain staff buy-in. Then brook no resistance.

Accountability is a key factor. When you align actions with the strategic plan, you set objectives for those actions. Departmental planning enables operations to continue while individuals and teams knock out their objectives. Track interlocking actions by tasks and budgets. Keep your people on task through performance management that includes day-to-day work as well as strategic team participation. Individual accountability is essential.

Once you’ve implemented your plan, continually review it to ensure your company’s work is aligned with the action plan. Fix core processes that don’t support it, train and mentor the most promising staff, and keep communication flowing.

Finally, get out the gavel and follow through on the accountability, judging how well plan elements are being enacted. Institute a reward system for success.

When you’ve worked through these steps, circle back and repeat, evaluating how the plan is working.

Show Me the Money

Getting both the short- and long-term plans out to the troops, gaining buy-in and taking action, then continually evaluating the plan’s effectiveness, are the everyday activities that will make your plan work for you. There’s no magic to becoming a millionaire. That first million dollars sits on a piece of paper known as the strategic plan.

10 Steps to Implementing a Successful Strategic Plan

You have prepared the initial strategic plan, now how do you it implement successfully?

Follow these 10 rules.