Budget or Plan? Which One Do You Use?

In our last post, we discussed the annual planning ritual, and a three step process for more effective and useful planning.  After thinking further about this issue, we thought it would be helpful to define the difference between Planning and Budgeting, as the terms tend to be used interchangeably in many organizations.

As defined by Webster’s, there is a very clear difference between these terms:

  • A Budget is a plan for the amount of money that can be spent, and how it will be spent.
  • A Plan is a detailed formulation of a program of action to achieve something.

Most budgets are simple plans that are generally prepared by businesses that have not yet developed a formal Vision and Strategy for their future.  While budgets are generally relatively easy to prepare, most do not necessarily consider longer term strategic objectives or actions, or the full extent of potential changes in the business environment.

The basic Budget is developed using the current year’s results to date, which are then projected for the year, and applying a percentage increase to each line item, to calculate projected revenues and expenses for the new year.  Monthly financial projections may then be calculated for use in reporting and evaluating the operating results during the year.

An Annual Operating Plan, on the other hand, will utilize the results of the Vision and Strategy process, to develop a comprehensive plan (read chart or map) to help the business execute the actions required to achieve the strategic objectives, and navigate through the year.  These plans are generally very detailed, and typically include the following:

  • Monthly financial projections
  • Specific tactical programs, actions, and milestones required to meet/exceed those projections
  • Key metrics to evaluate and measure performance to keep the business on track.

Which would you prefer, a spending plan, or a detailed chart to navigate and guide the business for the year?

Regardless of what process you choose, it is critical to have a plan to manage the business.


“A goal without a plan is just a wish.” ― Antoine de Saint-Exupéry

“By failing to prepare, you are preparing to fail.” ― Benjamin Franklin

“We have to build the framework in which we will execute the tasks.” ― LTG Christianson

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It’s Back – The Annual Planning Ritual!

If you look at the calendar, there are now less than 12 work weeks until the beginning of 2015.  If your business is similar to those that I’ve worked for, we’re now in the Annual Business Planning Cycle, where the business performance so far this year is evaluated and projected, in order to peer into the future to identify objectives and potential changes that may be required, not only for 2015, but also several years out.

In my former lives, I’ve participated in, and led, this annual ritual in different roles, from Staff Accountant to President and CEO.  However, the prescribed process and schedule was always the same;  Review and evaluate the results so far this year, consider and set objectives for the next three years, and define the changes that may be required to achieve those objectives.  Once this is done, update the current Strategic Plan, and develop the Operating Plan to match Year 1 of the “new” Strategic Plan.   In many instances, however, this process doesn’t include an objective, critical review, or discussion of the Vision for the business in the future, and how it will be achieved.  Generally, it’s just a rehash of last year’s plan, updated for new conditions and goals, with a new Year 3, and placed on the shelf until next year.

Over the years of using this process, I noticed that most businesses very rarely, if ever, get to Years 2 and 3 of the Strategic Plan.  Most of the management effort, and reviews, focus on next year (Year 1), and then on Year 3, assuming if the right things are done in Years 1 and 2, Year 3 will be the culmination of all of those efforts, and won’t it be great when we get there!  However, Year 3 never comes – it’s always pushed out another year.

This year, I’ll challenge you to develop a clear Vision, and prepare Strategic and Operating Plans that will actually be used to manage, control, and guide the direction and decision making of the business over the next three years, with the ultimate goal of achieving Year 3, with only minor adjustments.  Yes, I know it’s three years out, and conditions change.  However, if you’ve done this properly, and have the right Vision and Plans, shouldn’t you be able to get there?

I recommend the following three step process for effective, and useful planning:

1. Define the Vision  

What will the business achieve, and look like in the future, say three years out?  This step is the most critical part of the process, providing clarity about the objectives for the future, and the framework for the rest of the planning process.  The Vision should be clear, written, and communicated to all stakeholders, before proceeding further, to ensure that the entire organization understands the objectives for the future.

If the business doesn’t currently have a Vision, it should take the time to develop one as the first step.  Size doesn’t matter, every business should have a Vision of its future.  If there is already a Vision in place, is it still relevant, or should it be revised and updated?

2. Develop the Long Term Strategy and Plan 

The Strategy and related Plan will provide the course and direction that the business must follow to make the Vision a reality.  The strategy and high level plan will clearly define specific actions and programs, including resource requirements, performance goals, organizational structure, and any other actions necessary to achieve the Vision.  It will be the framework to guide decision making over this period, and keep the business moving in the right direction.

3. Prepare the Operating Plan

This will be the detailed plan to execute the Strategy for Year 1, including specific tactical actions and programs, and monthly operational targets to measure progress throughout the year.  The Operating Plan is used to manage and control the business, and guide decision making in the short term, and to allow for regular reporting, performance evaluation, and identify potential course corrections, during the year, to achieve the strategic objectives.

This process, done properly, does take a great deal of time and thought to be useful, and in my experience, is well worth the effort it.  By the end of the process, the business and organization know the course and direction, and have the “charts” necessary to control and manage the business, make the right decisions, and measure progress to achieve the Vision, and that elusive Year Three!


The winds and the waves are always on the side of the ablest navigators.” – Edward Gibbon

“Good business leaders create a vision, articulate the vision, passionately own the vision, and relentlessly drive it to completion.” – Jack Welch

What Business Stage Are You In? – Part 2

Here’s the second part of our series on the “7 Stages of Every Growing Business”  that Les McKeown, President and CEO of Predictable Success, described in his Inc. Live presentation last October.  Part 1 summarized the first two stages, Early Struggle and Fun.  In this part, we move on to the next two important stages, White Water and Predictable Success.

As we left the business last week, it was in the latter part of the Fun stage.  It’s grown rapidly, become more and more complex, and the team is having difficulty managing it effectively, and losing control.  At this point, the business now has a critical decision to make about its future.

There are only two real choices;  1) Stay small and continue in the Fun stage for as long as it can survive, or  2) Take the actions necessary to move forward, and grow the business for the future.   The business can’t have it both ways, it must choose one of these directions.
If it decides to grow, it will need to enter, and successfully pass through the next stage, White Water, to scale for future growth.  A businesses cannot scale from Fun to Predictable Success without going through this stage.

Stage 3 – White Water

The decision and commitment have been made to scale up for growth, and the business is now in the water.  However, it is now much more complex, with more products and services, customers, people, and management.

The business activity has outstripped its capacity, capabilities and resources, and it’s out of control, losing focus on its direction, and customer requirements and expectations.  As a result, customer problems and complaints are piling up, in terms of service, quality, and delivery, etc., operational issues are increasing costs, and customers are beginning to defect to competition.

The first tendency is to try to sell more to prop up the business, but this strategy will only make matters worse, as the problems and issues continue to increase with the level of activity.

To survive and make it through this stage, formal Systems, Processes, Structure, must be developed and implemented, the Culture may need to change, and an expanded Management Team put in place to effectively manage, stabilize, and get the business back under control.   In most instances, however, the initial team and programs won’t work out, and the business will remain unstable for a period of time.  In fact, it may take several years and attempts, and different team members, to finally get through this stage.

Also, during this stage, the business may go back and forth between Fun and White Water several times, and it will be a very painful process, fraught with challenges and opportunities.  But, successfully navigating through this stage is absolutely necessary for future scale and growth.

The strategy is to develop and implement formal Processes, Systems, and Structure, Change the Culture (as needed), and to recruit the proper Management Team to effectively manage and control the business to provide long-term growth.

Once the business has successfully passed through this stage, it is now positioned for ….


Stage 4 – Predictable Success

The business has finally made it through the White Water stage, after several attempts.  The Systems, Processes, Structure, Culture, and Team, are all in place and working well, and it is stable, growing, and profitable.  Life is good for now.

Growing and maintaining the business in this stage, will require an ongoing, dynamic process of evolution and adjustment to consistently meet the changing expectations of the market, customers, and other stakeholders over time.  As long as the business continues to do this, and maintain its focus on its vision, strategy, and customer base, it can remain in this stage for a long time.

The strategy is Keep Doing It, Evolve as Needed, and Grow the Business.  

With long-term success, however, there is a danger is that, over time, the business may become too successful and stop evolving, resulting in complacency, a bloated and bureaucratic organization, and a loss of focus on vision, direction, and most importantly, its customers.  Once this happens, the business may eventually fall forward through one, or all, of the last three stages, including Treadmill, Big Rut, and finally, Death Rattle.

What will happen next?  Will the business survive?

We’ll find out in Part 3, next week!

“The great thing in this world is not so much where we are, but in what direction we are moving.” – Oliver Wendell Holmes

 “Making an enduring company was both harder and more important than making a great product.” –  Steve Jobs

Are You Ready for Growth?

What would happen if your business suddenly experienced rapid and significant growth?  My guess is that many of you are thinking that this would be great news.  But – don’t be so fast to welcome it.  

  • Would you and your organization be prepared, and have a plan? 
  • Could you manage that growth effectively and profitably?
  • Do you have enough cash to support and fund it?

There are three key challenges that come with growth, including Management, Cash, and Operations.  All must be planned and managed properly, so that the business can continue to operate profitably through this period, and reap the reward.   Each area is briefly described below, including some questions that you may want to consider in planning for your next growth phase.

Management 
As a business grows, the activity levels and complexity increase significantly, and need to be managed and controlled properly.

  • How much activity and complexity can your current Management team handle effectively, without losing control of the business?
  • At what point will your organizations’ internal capabilities,capacity, and resources become overwhelmed with the increased pace, resulting in the operational issues described below?
  • Is your organization’s team, capabilities, capacity, and culture, capable of absorbing the increased activity and complexity, and to what level?

Cash
Growing businesses require more cash, especially in the early stages, to fund and support the higher business level, as receivables and inventory rise, and the cost of doing business increases over time. 

  • How much cash will be required, and will the business have the ability to generate these requirements?
  • If not, will the business be able to qualify for additional funding to meet these requirements?
    •  Note: If the business is not able to obtain additional cash, it will need to make a decision regarding how much additional growth, if any, it can take on without experiencing ongoing cash “crunches”.
  • What investments and costs will be required to support the increased business and activity, and service customers efficiently and effectively? 

Operations
 The higher activity level, and complexity, will normally require increased capacity and capabilities, and more effective, streamlined processes.  If these are not in place, the business will experience increasing customer, service and quality issues, and higher costs.

  • Can your existing systems and processes handle the increased activity?
    • Note: In many instances, these systems and processes have grown with the organization over time, and may have a number of “band-aids” in place.  As the operation is stressed, these “band aids” will start to pop off, one by one, leading to further breakdowns in service and quality.
  • Will you need more staff?  How many, and with what capabilities and experience?  How will you train them.and how long will it take for them to become effective?
    • Note: In many situations, hiring is reactive and after the fact, leading to poor decisions, high turnover, and increased operational issues early on.

Those businesses that have planned properly, and prepared, will take the growth in stride, and continue to grow profitably.

The businesses that are unprepared will find themselves drowning in activity, out of control, and unable to cope with the requirements, demand, and complexity of the business.  As service and quality problems increase, customers will be disappointed and leave, revenues and cash flow decline, costs increase, and profitability disappears.  If corrective actions are not taken quickly, the business could enter a death spiral downward, and eventually close.

Be careful of what you wish for, and plan now for your next phase of profitable growth. 

If you have any questions, or would like to discuss your organization’s specific issues, please call us at (727) 637-4666, or email me directly at Don@HuttlinAssociates.com.

“Whatever made you successful in the past won’t in the future.”  –  Lew Platt, CEO, Hewlett-Packard
“You can’t have a better tomorrow if you are thinking about yesterday all the time.”  –  Charles Kettering
“Failing to plan is planning to fail.”  – Alan Lakein

Organizations Need Metrics

Let me ask you a few questions about the performance of your organization so far this year.

  • Is it Performing To Your Expectations?
  • Do You Know Where You Are (after 4 months of the year)?
  • Are You Making Progress Toward Your Objectives? 

If you can’t answer these questions quickly, without having to read a bunch of reports, then I’m willing to bet that you really don’t know how your organization is really performing, and if you’re on course.

As we’ve noted in the past, successful organizations have a formal business plan, and a budget to achieve that plan.  The business plan provides the overall direction and key objectives for the organization, and their budget is the chart to help plot the course, identify the current position, and measure progress toward the objectives.

There is, however, a third component that all organizations should have in place to quickly evaluate their performance – a set of Key Performance Indicators, or KPI’s.  KPI’s are specific, quantifiable targets to measure the critical factors that are essential to the organization reaching its objectives, and can provide information about its performance in those key areas. Every organization will have their own individual set of KPI’s to measure their performance and progress, and identify actions required to improve that performance over time.

In order to set effective KPI’s, an organization must establish its objectives in the business plan and related budget, and then choose those KPIs that best reflect the objectives that are essential to the organization’s success, and can be measured.  Think of them as a dashboard that will tell you the performance in key areas of the organization at a glance.

Generally, most organizations will have up to five primary KPI’s, although each department may have a separate set of KPI’s that support to overall organization objectives.  More than five will dilute the organization’s focus, and be distracting vs. helpful.  In addition, most KPI’s are usually are long-term, so the definition of what they are, and how they are measured, should not change often, unless the organization’s objectives change, or it gets closer to achieving a particular objective.

Effective Key Performance Indicators will:

  • Reflect The Objectives of the Organization
  • Be Specific Factors That Are Critical to the Organization’s Success
  • Be Measurable, and Include Specific Performance Targets

Once you have the set of Key Performance Indicators that define your organization’s goals, and can be measured, use them as a performance management tool.  Effective KPIs will give your entire organization a clear picture of what is important, what actions are required, and insure that all activities are focused on meeting or exceeding them.

While it may be possible to manage without a plan, budget, and KPI’s in the short-term, I can guarantee that your organization will survive, and be much more successful, with all of these elements in place.

If you would like to discuss your organization’s particular issues, please give us a call at (727) 637-4666, or email me directly at Don@HuttlinAssociates.com.

“It is an immutable law in business that words are words, explanations are explanations, promises are promises but only performance is reality.” – Harold S Geneen

“Manage your destiny, or someone else will.” –  Jack Welch

“What’s measured improves.”Peter F. Drucker

“If you don’t drive your business, you will be driven out of business.”B. C. Forbes

 

Are We Having Fun Yet?

Since our last few posts have covered a number of serious and heavy subjects, we thought this one should be a bit lighter, while still providing some useful information.

As the title suggests, let me ask you two questions.

1. Is your organization having fun and enjoying participating as part of the team?
  2. If not, what can you do to make the culture and the environment more enjoyable for everyone?

If you’re not having fun and enjoying what you’re doing, chances are that your organization isn’t either, and will be less effective, productive, and successful over the long run.  Since you and the team spend most of your waking hours at work, you should enjoy the time that you’re there, otherwise, why bother?

Many articles have been written about this subject, and some have a “formula” to follow in order to improve the organizational culture.  But, when you come right down to it, there are a few things that you can do that will make all the difference.  Oh, and by the way, I’ll be the first to admit that it took me a long time to learn them, and learn them I did, mostly the hard way.

  • Loosen Up

Operations are serious, no doubt, especially when things aren’t going particularly well.  However, rarely, if at all, are the issues or decisions that you are facing, life or death (although at times they may feel that way!).  Yes, there are times to be serious, and there are times when you can lighten up and keep your team loose.  In the long run, this will improve decision making, and the organization as a whole.

  • Have Patience

 Stuff happens in every organization, maybe in some, more than others.  The question is how you deal with it. If you approach the issue/mistake calmly, with a  desire to learn for the future, there is a very good chance that it won’t happen again.  However, if you’re yelling, and/or looking for someone to blame, you’ll create an atmosphere of fear, and the organization will run scared, trying anything to avoid making a mistake, and/or being taken to task or blamed for that mistake.  At the same time, two other things will happen: 1) mistakes will increase because everyone is trying too hard not to make a mistake, and 2) the organization will stop taking “prudent” risks to improve the business because it is afraid of being blamed if something goes wrong.

Note that I’m not suggesting that the organization lower its standards.  Quite the contrary, set high standards, be very clear about them, and make sure the organization lives up to them, which leads to my next point.

Talk with your team about the organization, direction, performance standards and improvement, and what is required to succeed in your market.  People want to know where they stand, and why, and you should be communicating that to them, clearly.  At the same time, ask for their help in resolving issues and improving performance.  Nothing works better than an organization that has active participation and engagement, at all levels, and is moving in the same direction.

By communicating both ways, you’ll find out all sorts of interesting things, including ideas to improve the organization from the people who are actually doing the work.  This will make for a much happier and productive organization over time.

  • Have Fun

Have fun while you’re there.  Organize some fun, inexpensive events that get people involved, and lighten things up.  Doing this consistently will improve participation and engagement, and the overall environment of the organization, and becomes infectious over time.

While these things may not seem difficult, they are a challenge to do, and do consistently.  However, by doing these things, you’ll have a much happier, effective, committed, and participative organization ready to take on anything.  And that’s exactly what you want!

“A business has to be involving, it has to be fun, and it has to exercise your creative instincts.” – Richard Branson

“Find a job you like and you add five days to every week.” –  H. Jackson Brown

“If you don’t do it excellently, don’t do it at all. Because if it’s not excellent, it won’t be profitable or fun, and if you’re not in business for fun or profit, what the hell are you doing there?” – Robert Townsend

Organizations Need Profitable Growth

There is a saying that “an organization can’t cut its way to profitability“, at least on a sustainable basis.  While this is certainly true over time, many organizations have implemented internal cost reduction programs over the past several years to improve profitability in the face of the poor economic and market conditions.  Although the majority of these programs were probably overdue, and have been effective, many organizations are finding that there is not much more that can be done internally without sacrificing service, efficiency, and quality.

As a result, organizations must now look outward, and improve their profits through profitable revenue growth.  However, this growth must be planned, managed, and controlled in order to make it sustainable over time, and generate the desired results.

One of the more popular, and potentially dangerous, strategies, is growth for growth’s sake, using the tactic of cutting prices, and hoping to “make it up on the volume” to improve profitability.  While there may be some special situations where this tactic may actually work (at least for a period of time), in most instances, the increased revenues will not be enough to offset the lower profit on each sale, reducing overall profitability over time.  In the worst case, some organizations will continue to cut prices, further reducing profits, eventually threatening its survival.

The dangers associated with this strategy include the following:

  • While the lower prices may, in fact, generate more revenue in the short term, this revenue may not be profitable for the organization due to the higher costs, and increased activity required to support it.
  • In many instances, cutting prices will result in an overall decline in market prices, setting the expectation of customers for those lower prices.  Once this happens, it generally takes a long time to get prices back up to reasonable levels.
  • Finally, if the growth occurs too rapidly, and is not profitable, the organization may find itself without the resources or financing required to support the growth, and unable to manage the activity properly.  This will lead to service and quality breakdowns, and the potential for future revenue declines.

Generally, no organization can be successful in the long term with this strategy.

Profitable, and sustainable, growth results from a strategy that is well designed, managed and controlled.  In order to accomplish these objectives, the  organization should ask itself several key questions:

  • Where will the new profitable business come from?
  • Do we know our real costs, and are they competitive?
  • What are the additional costs and resources that will be necessary to support the future growth?
  • What is the real profitability of our current customers, and/or market niches?
  • Who are our most profitable customers, and can we increase our share of their business?
    • Are there more potential customers like them in our market?
  • Can our existing processes and procedures handle the increased activity without a breakdown?
  • What differentiates us in the market, so we are not competing just on price?

The answers to these questions may lead to even more questions, all of which will assist you in defining your profitable growth strategy, the requirements of that growth, and how best to manage and control it over time.

Those organizations that can define and execute a clear strategy for profitable growth, and manage and support it properly, will sustainably improve their profitability.

If you have any questions, or would like to discuss your organization’s specific issues, please give us a call at (727) 637-4666, or email me directly at Don@HuttlinAssociates.com.

“Without continual growth and progress, such words as improvement, achievement, and success have no meaning.” – Benjamin Franklin

“Companies that grow for the sake of growth, or that expand into areas outside their core business strategy, often stumble. On the other hand, companies that build scale for the benefit of their customers and shareholders more often succeed over time.” – Jamie Dimon

“Growth is never by mere chance; it is the result of forces working together.” – James Cash Penney

Are You Taking Care of Your Customers?

As we work with our clients, many of them believe, rightfully so, that their particular organization is unique, and requires a number of complex processes, procedures, and reporting for their operation to work efficiently.  However, while there is nothing wrong with being unique, too many organizations make their operations much more complicated than they need to be.  As a result, the organization gets bogged down in the process, procedures and reporting, and loses its focus on the most important goal of any organization – Taking Care of the Customer, in the most cost efficient way.

Let me give you an example from my sailing days.

Tacking a sailboat is basically a four step process including turning the boat to the new course, releasing the sheet on one side, pulling in the sheet on the other side, and trimming for speed.  All a straight line process to accomplish one goal.  Yet, I have seen this simple process become very complex when there are too many hands involved, and/or too much talking and direction, resulting in a very inefficient process and a bad tack.

If we apply this straight line concept to an organization, there are really only three major steps for the entire customer fulfillment process, regardless of the organization, service or product lines.  These steps include:

  • Receipt of a customer/client order, or request
  • Taking action required by that order or request, which could include:
    • Ordering material
    • Processing that material
    • Performing a service
  • Delivering that product or service, cost effectively

That’s it.  Now I realize that the list is oversimplified, and that there are a myriad of details and actions required for each step, but the question is – Are all of those details and actions required to fulfill the customer’s request as efficiently and effectively as possible?  Probably not.

As you look at your organization, ask yourself some key questions:

  • Do you have processes and reports in place because this is the way it’s always been done, or just in case?
  • Is your organization getting bogged down following the processes and procedures, or filling out reports?
  • Does your customer see value in all of your processes and reports?  Are they willing to pay for them?
  • Can you fulfill their request in a straight line, or have detours grown up over time that are inefficient?

Depending on your answers, you may need to take a hard look at your operation, and update the processes to make them more efficient and effective.

Successful organizations have the following attributes:

  • Processes move in a straight line, with as few steps as possible
  • Processes, procedures, and reports have perceived value for the customer
  • The processes and procedures are cost effective, and efficient
  • The client/customer experience is the best it can be

It all comes down to just two objectives:  A great customer experience at the lowest cost.

It’s all about the customer.  How does your organization compare?

If you have any questions, or would like more information, please give us a call at (727) 637-4666, or email me directly at Don@HuttlinAssociates.com.

“Reduce the layers of management. They put distance between the top of an organization and the customers.” –  Donald Rumsfeld

“Quality in a service or product is not what you put into it. It is what the client or customer gets out of it.”Peter Drucker

“The single most important thing to remember about any enterprise is that there are no results inside its walls. The result of a business is a satisfied customer.” – Peter Drucker

Are You On Course?

Many organizations have just completed their First Quarter, and should be asking themselves several key questions:

  • What Were Our Actual Results?
  • How Do They Compare to Last Year and Our Budget?
  • Did We Make Money?
  • What Was Our Cash Flow?
  • Are We On Course?
  • Are We Making Progress on Our Objectives?

If these questions can’t be answered accurately, your organization may be off course, and drifting.

To determine your position, progress to date, and course, you must have accurate and timely reports including, at a minimum, an Income Statement, Cash Flow Statement, and Balance Sheet.  These reports will provide most of the information necessary to answer these questions, and should be carefully reviewed to identify where your organization is presently, and any changes in conditions that may be affecting your performance and course.

Other, related reports will also be of benefit, including Sales by Customer, Productivity Measures, and Accounts Receivable and Inventory aging, among others.  The key is to get as much detail as possible to identify significant variances from either the prior year, or budget, and the root cause(s) of the variation so that appropriate action can be taken to get back on course.  At the same time, these reports will also help to identify trends, and potential issues that may require action in the future.

Finally, assuming that specific objectives have been set for the year, the progress on each one should be reviewed, in detail, to insure that determine if you are on course.

Successful organizations also prepare forecasts of their results for the next quarter.  This will help identify potential operating and cash flow issues, in advance, so timely action can be taken, if necessary, to keep that organization on course, and under control.

The bottom line is that organizations must have accurate, timely information and a regular review process in place, to properly manage and control operations, identify position, progress, and course deviations that may require action, as needed, to keep the organization sailing toward its destination.

“Keep your hand on the helm.” – Matthew Goldman

Sailing requires the management of all the systems on the boat, plus all the controls on the boat, while assessing the weather and navigation. It’s planning everything to a fine level of detail and making the required adjustments all at the same time things are changing” – Unknown

 

Leadership Principles – Volume 3

In this, the final post of our Leadership series, we look at the last three of George Marshall‘s Nine Principles, including:

  • Focusing on the Big Picture: The Principle of Vision
  • Laying the Groundwork: The Principle of Preparation
  • Sharing Knowledge:  The Principle of Learning and Teaching

We’ll also distill all of the Principles and postings down to a simple summary of what it all means.

First, let’s review the last three, and how they can apply to your organization.  While these particular principles apply to the leader, they also have a significant impact on the entire organization and how it operates.

Focusing on the Big Picture: the Principle of Vision
Every organization must have a vision that defines its direction and objectives for the future.  Unfortunately, many small and medium size organizations (and some large ones, as well), do not have a vision, or have a vision that has not been shared.  As a result, these organizations tend to swing from one direction to another over time, with no alignment of performance or goals, and their leaders tend to apply the management solution du jour to try to identify where it is ultimately going.

Effective leaders first establish a vision, and communicate it, clearly, to the entire organization.  This allows for  identification of those areas/actions that the organization must focus on, and alignment of the activities and objectives required to achieve that vision.

Leaders must also identify the members of the organization that either choose not to support the vision, or that can’t or won’t see the big picture, and move them out quickly.  In addition, trivial activities, that don’t move the organization in the right direction, should be avoided so as not to get bogged down, or distracted.

Laying the Groundwork: The Principle of Preparation
As organizations begin to make significant progress toward the vision, some leaders may get complacent and put the required activities on auto pilot.  As a result, they are surprised when events or issues occur that take them off course, and/or threaten their future. The key is to prepare for these potential events.

First, there is no such thing as an organization just staying in place.  If it is not moving forward, it is actually moving backward.  The leader and organization must constantly review their operations to identify for new opportunities for growth and improvement, and worst case scenarios.  This ongoing review will allow the organization to prepare and plan for the potential future, and stay on course, regardless of event.

Sharing Knowledge:  the Principle of Learning and Teaching
As noted above, organizations cannot stand still, and must constantly evolve, and move forward through learning and teaching.  This is especially true in today’s environment, where conditions and technology are changing so quickly, that it is critical to understand and stay ahead of those changes.  Without this learning and teaching, organizations continue to repeat the errors of the past.

Effective leaders learn constantly and share their learning, expertise and vision with their organizations on a regular basis.  In fact, Jeffrey Immelt, the Chairman and CEO of General Electric, states that one of a “leaders primary role, is to teach the organization. People have to feel that you are willing to share what you’ve learned, and what the organization is doing, in terms that are understood by all.”

One tool to accomplish this is for the leader to ask their organizations from time to time, “What do you think we should do?” to resolve a particular issue.  This helps the leader connect with, share, and teach their organizations to think constantly about different ways to solve problems and issues, and exploit new opportunities for the future.

What Does This All Mean?
If we summarize the Nine Principles, and related postings over the past few weeks, we can simply say that:

True leaders have the values and courage required to establish, and communicate, the vision and direction of the organization.  They establish open cultures that encourage communication and debate, live the values, focus and align activities around the big picture, avoid trivia, and constantly learn and teach the organization to think, prepare for, and identify opportunities and issues. Their organizations are always moving toward the vision, constantly improving, and achieving long-term success.

“A leader is one who knows the way, goes the way, and shows the way.” – John Maxwell

“The very essence of leadership is that you have to have a vision.  It’s got to be a vision you articulate clearly and forcefully on every occasion.  You can’t blow an uncertain trumpet.” – Reverend Theodore Hesburgh

“A true leader has the confidence to stand alone, the courage to make tough decisions, and the compassion to listen to the needs of others.  He does not set out to be a leader, but becomes one by the equality of his actions and the integrity of his intent.”Douglas MacArthur

“Leadership and learning are indispensable to each other.” John F. Kennedy