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Better Financial Results by Increasing the Quality of Strategic Thinking

April 17, 2012 | Comments: 0 | Views: 141

The elements of strategy - the right people, disciplined dialogue, empiricism, creativity, documentation, and reasonable goals - are all necessary. But if strategy links the specific actions managers take to accomplishing goals yielding financial results, what determines the extent of financial results? The better the decision-making at both the policy and executive levels, the better the financial results.

The business strategic planning process may be viewed as a series of decisions. These decisions are best made utilizing the input of policy group members (who have diversity, independence, and decentralization) articulating written judgments concerning planning problems. A collection of these written judgments will constitute a plan. The plan will be executed by the executive officers of the business. To achieve quality, what decisions must be made in an excellent manner?

First, there must be a distinctive value proposition propounded as a matter of policy. Which needs will the business serve, which customers, and at what price? This should be a position that is distinct from competing propositions.

Second, the action plan for executives must contemplate and enhance the value proposition. Will the products be distinctive, so that higher margins are realized? Are operations to be accomplished so that lowers costs are realized resulting in lower prices? The action plan must place the value proposition in meaningful perspective for the executives who must accomplish the action plan.

Third, are choices between options defined and trade-offs made to enhance the value proposition? Executives cannot implement the strategy and enhance the value proposition without a thorough understanding of the plan. Accepting limits is evidence of adherence to the value proposition, which rarely allows a business to be all things to all customers or clients. It is as important to choose what not to do as well as select what is important to do. Policy makers will not be making the trade-offs, rather it will be the executives who must know the strategy and exercise proper discretion.

Fourth, how do the decisions interact? Part of the decision-making process is understanding where intelligent choices conflict. One adjustment is what to do and what not to do, and another adjustment is how to fit the choices to work together for the value proposition. The better the fit, the greater the strength of the plan. Not all the conflicts can be discerned ahead of implementation, but many can. Policy makers and executives working together can provide a cohesive implementation of strategy.

Fifth, change is double-edged. Often change is difficult to initiate, but it is as dangerous to change too frequently, especially for reactive or poorly thought-out reasons. Change must be determined by consideration of unique periods of turbulence, negative aspects of change, and costs of implementation.

Where there is an established decision-making structure and the resulting strategic plan is communicated and understood by the executives, there will be a distinctive value proposition, the action plan will enhance the value proposition, choices made will enhance the value proposition, policy-making and executive decisions will interact to enhance the value proposition, and change will be undertaken only for good reason. These good decisions representing quality strategic thinking will yield better financial results.

Rick Riebesell is the Principal Consultant and Manager of Business Transition Consulting LLC ( ). Rick finds solutions for the problems of owners of closely-held (owner-managed) businesses. He is experienced in business transactions of all types and understands sophisticated estate planning. Rick was a practicing lawyer for over thirty years.

To download the E-book Implementing the Buy-Sell Agreement see

Business Succession Planning - Forms and Practice Manual published by Data Trace Publishing Company is Rick's latest book. Rick conducts presentations concerning business succession issues.

Source: EzineArticles
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