Making Strategic Planning Matter

March 1, 2011
In his book, Strategic Planning for Distributors: Execution Isn't Everything - It's the Only Thing, the author teaches distributors how they can develop strategic plans that transform their companies. This excerpt gives you a taste of the process.

Poor execution is the top reason why distribution strategies fail. Strategic planning is not only about the planning — just as importantly, it's about the execution of the plan. Said one distributor in an online survey for this book, “We developed a plan, but failed to achieve it because of lack of follow-up.”

Many distributors invest much time, energy and resources into strategy creation and development. Yet the vast majority of these distributors blame their business failures on poor strategy execution. When distributors say “poor strategy execution,” they often either mean they select the wrong people to participate in their strategy meetings or they execute the wrong strategic-planning process.

One distribution executive we met through our research and consulting work proudly displayed four annual strategic business plans that lined his bookshelf. When we asked him for the strategic execution progress based upon these planning documents, the executive sheepishly admitted his company consistently failed in executing its strategic plans and had no documentation. This is a common experience among distribution firms.

Another distributor said in survey, “We really struggle as a management team to get on the same page. The four of us will schedule a planning session, but we never get complete agreement and buy-in. It's like a root canal. We stopped doing these planning sessions. Four years go by. Someone reads an article about the need to do strategic planning so we give it another try. We can't seem to ever succeed at it.”

Does this sound like your company? Most distributors hold strategic-planning sessions. Yet the majority of them fail in creating and executing a sound, sustainable, profitable business strategy. Despite holding planning sessions, they believe their organizations are ineffective in “creating, communicating, and executing clear mission, vision, goals and strategy.”

A mission describes what your company stands for and the purpose of your organization. A vision states where you want your company to go and what you want your organization to become. Goals detail, in measurable terms, what you want your company to accomplish over the next three to five years. A strategy encompasses the plan that will differentiate your distributorship and give it a competitive advantage over all of your rivals. The top four reasons for failure of strategy execution within the strategic-planning process are as follows:

  • Limitations in a company's top-down leaders

  • Poor strategic team selection

  • Lack of structure and accountability in strategy process

  • Resistance to experienced outside facilitators.

Limitations in top-down leadership

Leaders who rigidly apply a top-down approach to strategic-planning meetings will not achieve strategic success for their firms because the leaders fail to capture creative and innovative thinking of diverse groups of people.

Top-down leadership is the number-one reason why strategic-planning meetings fail. Most often, owners, family and a few trusted key employees at a distributorship will hold a planning meeting, but they then only dabble in strategy. They grossly underestimate what it takes to lead a long-range strategic-planning process. They are immersed in the problems of the day, not the challenges of the future. Most believe strategic planning is a one-year operating plan and budget rather than a thoughtful three- to five-year strategic analysis. Even when top leaders do annual planning, the event is likely short-lived.

Another distributor said in our survey, “There is a total lack of leadership from owner/president. Every year we set annual goals and set into place plans to accomplish them. Then after a short period of time, we lose sight of our goals. Our top management does not keep us on target or review our goals.”

Top-down leaders are autocratic and rely on their own thinking rather than on the thinking of others. They possess tunnel vision because they don't seek outside opinions and diversity. Autocratic leaders are not comfortable with collaborative decision making. Therefore, they do not want to engage nonleaders in their strategy formulation. With their “inside-out” view of the distribution world, they also tend to resist “outside-in” feedback from their strategic suppliers and customers. Inside-out feedback is acquired from inside the company and consists of a confidential SWOT analysis (a strategic planning method that evaluates a company's strengths, weaknesses, opportunities and threats). Outside-in feedback is acquired from outside the company from strategic suppliers, customers and competitors.

Top-down leaders are highly focused on two jobs

The first is to build a teamwork culture. People are profoundly affected either positively or negatively by an organization's culture. A great place to work can attract the best performers and a lousy place to work can drive them away.

Their second job is to lead a collaborative strategy-creation and strategy-execution team process. Developing a teamwork culture and leading these processes require their full commitment and drive, and it should become the boss' top priority. The top leader should have extensive ownership and investment in the process, and becomes the strategy team's biggest cheerleader by actively participating on the strategy team and by enthusiastically communicating the company's vision, mission, goals and strategies through company meetings, informal talks and written communications. Additionally, leading the collaborative strategy further builds a teamwork culture through the top leader continually demonstrating to everyone how it's everyone's responsibility to execute the company's strategy. Although they are active participants, top leaders oftentimes decide to not be the team leaders of their strategy teams. They feel their corporate positions may stunt innovative, creative strategic thinking as well as synergistic decision making.

Many distributors, no matter what their revenue size, continue to apply a top-down approach to strategic decision making with little to no feedback from others within the organization and stakeholders outside the organization. They maintain an absence of trust, and without trust, teamwork is impossible. This strategic approach is never successful.

You can build a cohesive strategy team. No matter what your line of business, all successful strategic creations and strategic executions are built upon teamwork. Effective distributors make strategy everyone's job. The leader ensures everyone is plugged into the organization's strategy by doing the following:

  • Fostering teamwork and creating a work culture at the company that values collaboration

  • Creating a cross-functional team approach to strategic planning

  • Continually communicating company vision, mission, goals and strategies to employees, strategic suppliers, customers, and the community.

The days of the Lone Wolf leader at the top who sees the development of the company's strategy as his job alone are gone. Lone Wolf autocratic leaders were successful in the 1970s, 1980s and 1990s, but that leadership style fails today. Top-down leadership that doesn't empower a cross-functional team to develop and execute the strategic plan will end up with a myopic plan that lacks necessary creativity and innovation for success. Most strategic-planning meetings lack the structure and accountability that a skillful outside facilitator can bring into the strategy process.

Transitioning from top-down leadership to a cross-functional strategy team ultimately made up of strategic suppliers and customers participating alongside your company's cross-functional team members should be every distributor's goal. But what if your company's senior executive does not concur?

Senior executives often become so immersed in the day-to-day activities of running their companies that strategic thinking with respect to long-term planning is often not a priority. CEOs/presidents of some distributorships even view strategic planning as a waste of time because they believe they know what it takes to be successful in the future.

Successful team strategic planning requires the sustained commitment and support of the CEO/president. How do mid-level managers sell a cross-functional team approach to senior executives who haven't bought in?

CEOs/presidents of distributorships face a daunting dilemma of how to create and execute a strategic plan in an environment that remains uncertain. If you are a mid-level manager with senior managers resistant to a cross-functional strategy team approach, you must stress the ever-changing needs of customers, strategic suppliers and employees with new and better equipped competitors to challenge market share. Stress with your senior managers that in such an uncertain environment they can ensure the company achieves a sustainable, profitable future through developing and executing a cross-functional strategy team.

CEOs/presidents first must develop visions of where their companies are going five or more years into the future. The next step for the CEO/president is to select the right cross-functional team members and incorporate the 11-step systematic approach described throughout this book. This step-by-step strategic path will achieve the following five energizing breakthrough results for distributors:

  • Confidential, honest and candid outside-in feedback from the company's customers and strategic suppliers that produces innovative strategies that build and sustain distinctive competitive advantages

  • Ownership to the key team members who will be responsible for both strategy creation and execution

  • Unified support from employees throughout the organization for the company's strategy

  • A performance management system for all employees with incentive-compensation plans linked to achievement of the company's strategy

  • A coaching process for all employees tied to achievement of the company's strategic goals

Poor strategic team selection

Team selection can also impair the strategic success for a distributor if the strategy team does not include creative and innovative thinkers from a diverse group of people, including strategic suppliers and customers.

Team selection is another major reason why distributors' strategic-planning meetings fail. Most often strategy creation is only done by the few individuals at the top of the organizational chart. The most effective strategic-planning process involves a strategy team that consists of those people who can add the most value.

Adhering to a strict top-down approach to the strategic-planning process limits the ability to strategize effectively within a distributor's ever-changing environment. Adding a broader range of perspectives to the planning process allows distributors to capture the expertise both internally within their organizations and externally from suppliers and customers they would never otherwise have. There are four stages to the evolution of strategy teams:

  • A cross-functional owner/family team

  • A cross-functional management team

  • A cross-functional manager-employee team

  • A cross-functional distributor-supplier-customer team

Every distributor should make its mission to evolve into a cross-functional distributor-supplier-customer strategy team. Which stage is your company in?

Cross-functional owner/family team

At Stage 1, the owner/family team is made up of owners, family members and often one or two trusted, key employees. At Stage 2, the company transitions to a cross-functional management team. A cross-functional management team is a group of managers with different functional expertise working toward a common goal. Typically within a distributor, the cross-functional management team can include a marketing manager, sales manager, branch managers, purchasing manager, distribution manager, accounting manager, information technology (IT) manager and human resources (HR) manager.

Colonial Electric Supply provides a good example of a distributor that began planning with a top-down approach and then transitioned to a cross-functional management team. The King of Prussia, Pa.-based Colonial Electric Supply has over 300 employees and operates 14 electrical counter operations and five retail-oriented lighting design centers covering four states. The company is owned and operated by the Bellwoar family partners.

Colonial Electric began its strategic-planning process with family members and then added a few trusted, key employees. Eventually the strategic-planning team realized key job functions were missing from its planning process. According to Steve Bellwoar, Colonial's CEO, “We have always had a tight-knit group at the top. The buck always stopped with the four partners — my two brothers, my cousin and me. Over the years as we expanded, we would bring in one or two to the inner circle. This was seen as a high privilege. However, it became apparent to me that this group was not really able to guide the company. Key functional areas and high-profile employees were not represented.”

The company recognized all key functional areas, including marketing, sales, branch, purchasing, distribution, accounting, IT and HR, needed to participate in the strategic-planning process. The management team then embarked on an organization plan to bring in leaders from other areas of the business. Steve Bellwoar said selecting the new leadership team was not easy. It's always a major challenge to integrate talented, new leaders into any family-owned, family-run organization. Centralized paternalistic control among family members must end. Family members who have jobs but who lack the skills and personal attributes to lead must not interfere with a new management team.

Said Bellwoar, “We have four regional vice presidents, a projects V.P., a national major projects V.P., a V.P. of our retail-lighting sales division, and a V.P. of business development. We also included leaders from accounting, HR, logistics, IT and supply chain. As CEO, I am the leader.”

As a result of an organizational restructuring that ensured all functional areas of the company were present, Colonial Electric's management team began to better coordinate and solve tactical challenges and think more strategically.

Said Steve Bellwoar, “While it might seem counter-intuitive to include so many people from the same world on the team, I felt it necessary due to the importance of these 14 people to our success, their connection to the customer and their communication ability. Our strategies always included goals that we measure in dollars or in actions completed. We celebrate our wins and conduct a post-mortem to understand our failures, using what we've learned to better craft the next strategy.”

Despite size and lines of trade differences, Colonial Electric Supply and several other distributors mentioned in the book bypassed the top-down, autocratic approach where their strategic plans were created by a small group of senior managers and then handed down to the remainder of the organization to execute the plan. All three companies saw organizing cross-functional strategy teams that take equal ownership for both strategy creation and strategy execution resulted in success.