Change, But Not Without A Plan

 
 
goals2Our last blog covered the topic of change and the inability of some CEO’s or business owners to anticipate foreseeable events and make the necessary changes in their business to mitigate risk.

Making proactive changes is an imperative for any CEO, however what happens if major changes are made without a carefully researched plan?

A major example of a business that executed changes without proper planning and thought is JC Penney. A recent article in Fortune magazine chronicles in great detail how the new CEO Ron Johnson directed major strategic changes and almost destroyed the company. The lead headline in the article is:

 

How to Fail in Business While Really Really Trying

The article highlights a number of strategic and tactical mistakes that resulted in an almost fatal blow to the business.  Several of the following quotes from the article capsulizes how the CEO’s vision negatively impacted the business:

“While nary a whisper of opposition the 109-year old retailer had decided to abandon not only its strategy of many decades but arguably its fundamental way of doing business.”

“Just 16 months later Johnson was out. Penny was hemorrhaging cash; it lost $1 Billion during his last full year as CEO.”

 

So What Can We Learn From This?

So what can CEO’s, business owners and independent board members learn from this extreme example of gross mismanagement?

We are frequently asked to help companies in circumstances where they have implemented change or have made an acquisition without really having a plan or understanding the consequences of their actions.

When we interview the CEO or business owner to find out what their basis was to execute change we frequently hear; “It felt right” or “We know our market and everything will work out in the end”.

 

It Is Important To …

Given that change is necessary, it is important to plan for change and assess the business from an objective perspective. The following are important questions that should be asked:

  • Where does the business stand from a product and competitive position relative to its competitors and its industry?
  • Is the company’s sales and profits consistently increasing year over year?
  • Does the company have an annual financial plan and is it consistently achieving it?
  • Does the company have a three year strategic plan that outlines the vision for the company and provides a thoroughly researched blueprint of how they are going to achieve the plan?
  • Does it include financial benchmarks that provide a basis to evaluate its performance along the way?
  • Has the strategic plan been vetted by independent board members or outside experts?
  • Does the company regularly assess its progress in achieving the strategic plan and provide for the ability to assess what is working and not working along the way?

 

Every Business Must …

Every business must anticipate and proactively execute plans for improving performance. Executing change without a properly vetted and researched plan in most circumstances will result in declining sales or profits or in extreme situations destroy the business.

A final quote from the article characterizes what not to do:

“His mandate could be reduced to a single word: CHANGE. What that entailed could be figured out later.”

Do not put yourself in the category of business owners or CEO’s that “Fail While Really Really Trying”!