How to Plan for the Short Term
- 09 October, 2002 10:00
From Managing for the Short Term: The New Rules for Running a Business in a Day-to-Day World, by Chuck Martin © 2002 by Charles L Martin Jr. Used by permission of Doubleday, a division of Random House Incorporated.
The concept of managing for the short term has traditionally suffered from a stigma when contrasted to the notion of being a long-term visionary thinker. Short term was considered bad, while long term was considered good. Long term connotes something lasting, well thought-out and perhaps even capable of leaving a legacy, while short term brings to mind shallow, reactive and even shoot-from-the-hip thinking. When employees are working as fast as they can and believe that short-term thinking means reacting to only the crisis of the day, it's understandable that a manager might question the idea of focusing on the short term.
However, the reality is that managers today have to be more oriented toward the short term to be better synchronised with their organisation's needs. In addition, that orientation allows an organisation to be better in tune with the changing needs of customers and their desire for quick gratification.
Once a manager gets over the negative perception that anything short term is inherently bad, short-term execution and long-term vision can begin to be aligned.
Beyond being demanded by the current business environment, managing for the short term can also have distinct advantages for the manager who understands how to use such methods to support the company's overall strategy:
Because it focuses on quantifiable information, managing for the short term is based not on guesswork but on reality. It is, by definition, market-influenced, as customer contacts and interactions actually can cause management to adjust if the organisation is set up to do so.
By providing incremental forward motion, it offers the opportunity to correct errors quickly before they become disasters.
By producing documented immediate results, it offers opportunities to garner support needed to implement projects on an ongoing basis.
By focusing on information flow, it provides companies with a fresh influx of ideas, constant updates, and the ability to stay abreast of and capitalise on change.
Calendar Versus Event Planning
Any company's strategy must be accompanied by planning for how to achieve it. However, managing for the short term means that the planning process must be an evolutionary one. And it must recognise that to move forward given the short-term demands of the business environment, organisations must achieve in incremental, short-term steps.
Traditional planning has been calendar-based. A corporate mission is developed, usually at the top. The word is handed down, and off everyone goes - often back to being distracted by the day-to-day events that can very quickly make the original strategy seem distant or even irrelevant.
Of necessity, strategic planning has to become more event driven - not just by major events, which happen relatively infrequently, but by the cumulative impact of smaller events.
At Redix International, a software development company with offices in Freehold, New Jersey, and Walnut Creek, California, president and CEO Randall King meets weekly with his key managers; those meetings constitute the company's planning process. "We have a long-term plan for items we want to incorporate into the software," says King. That development plan gets modified perhaps three to four times a year but not based on any particular schedule. Rather, the shifts in direction occur based on discussions during the weekly meetings about what demands from clients reveal about where the marketplace is heading.
When the development plan shifts, the company's chief technical officer not only redirects programming efforts but makes sure to explain to the software developers why the change is necessary and how it affects the company's metrics for success. That ability to integrate responses to market demands with clear communication about how changes in the plan relate to the company's overall strategy is a classic example of event-driven planning.
Organisational Pace Versus Individual Pace
Across the board, senior executives and middle managers believe that organisations make decisions primarily for the short term. By contrast, these same executives and managers see themselves personally as making management decisions on a medium-term basis. The obvious question that raises is how in sync managers are with the pace of their own organisation. At a time when companies must deliver quarter-by-quarter, a primary focus beyond that time frame can be problematic.
When managers perceive a difference in focus between themselves and their organisation, it can become a self-fulfilling prophecy. Even if an organisation is managed well for the short term, managers who don't perceive that it is, or who believe that managing for the short term is a negative, can become dissatisfied and impede progress. If managers do not have a clear understanding of the forces driving the need to manage for the short term and how their decisions roll up into the company's overall plan, any need for rapid change is more likely to be perceived as arbitrary, not well thought-out, short-term and therefore negative.
That difference in perception is another distinction between short-term management and managing for the short term. Short-term management can also be seen as shortsighted; truly, managing for the short term isn't.
Because they may be better positioned to see short-term moves as pieces of a larger puzzle, senior executives sometimes have an advantage over managers in the context of long-term strategy. Executives tend to see the environmental forces driving the need to make short-term plans - the shareholders, the global environment, the capital markets. By contrast, lower-level managers may see only what looks like an arbitrary directive from the top and follow their own plans for succeeding in the business, which may be based on their contact with customers or their personal desires.
The challenge is to increase everyone's comfort level with short-term managing by providing the strategic context for it.
That was one of the refreshing aspects of the early Internet start-ups, which changed - sometimes radically - as the market evolved and shifted. The ability to change rapidly was considered a positive in most of those companies. Granted, they were entering new territory, where gaining early market share could determine leadership positions, and experience offered few lessons in how to proceed. One of the lessons those companies taught the business world is the value of having the flexibility to change with market changes and the ability to integrate those rapid changes with the planning process.
That degree of flexibility means that an organisation needs to be able to manage the inevitable inefficiency as projects and the resources already devoted to them are abandoned or reassigned. That is part of the price required for being more efficient in pursuit of the overall strategy.
Strategy: A Jumping-Off Point
Strategic planning may be most successful when accompanied by scenario planning - asking the traditional What if? "It means looking at your business and deciding if the trees really grow to the sky or not," says Michael Franks, director of strategic planning for O'Sullivan Furniture; with $US394 million in annual revenue, the Missouri-based company is the second-largest manufacturer of ready-to-assemble furniture in the United States. "Most people who have to forecast do so based on what's happened historically. If you do so, you're assuming all trends are linear, and very few things in business are. If you don't have any tool other than history, you're at the mercy of things that have no precedent," says Franks. Examining what you might do if all plans go south means that the company has alternative paths roughly traced instead of having to bushwhack untrodden forest.
To perform that examination, Franks says, "You have to really understand the assumptions that underlie your original plan."
The fact is that without the short term, there is no long term. The company overall is forced to deliver quarter-by-quarter without much breathing space. However, unless they are tied to an overarching vision that all managers understand, those results will not be relevant to the long-term direction.
One example of a company that aligns its vision and strategy with its ability to manage for the short term is MasterCard International. "Being flexible and being able to respond to problems and opportunities is important," says MasterCard International president and CEO Robert W Selander. "While we may have set objectives, new things come about, and you need to have a reprioritisation. You have to walk away from budgeted items sometimes."
MasterCard set a new strategy in 1997 that is still in place. "But you add to it, rather than redo it," says Selander, who reorganised the company so that it could take advantage of new developments, such as e-business and projects that require nurturing. Selander modified the processes for reaching the organisation's goals while keeping them linked to the strategic objectives. "We're recycling through our objectives more than once a year," he says. "An individual will come in and say, I was working on this, but things changed, so we adapt. If you have a strategy you believe in, you can motivate your people. If you're successful at one thing, you do more of that."
Attitude Adjustment Time
Clearly, working with two types of planning requires a certain amount of attitude adjustment. Managers and executives alike need to understand that saying they manage for the short term is no longer a negative but a necessity - and can be an effective way to function.
Many managers feel that they work all day just "putting out fires" and that they "don't get any actual work done". In fact, putting out the fires can be a major benefit to the organisation. It's easy to forget that even if it doesn't feel productive personally, a doused fire that allows a subordinate to become more productive again or helps colleagues tackle their work can benefit the organisation as much as a task that helps the individual achieve his or her personal targets and goals.
No one questions the need for firefighters to respond quickly to events when they occur. Corporate firefighters are doing the same thing, and they can be the most valuable people in the company. The trick is to tackle the fires that are the most threatening to the company's immediate needs.
Firefighters often battle blazes by digging a trench or setting afire a swatch of forest to prevent a fire from spreading; the line is called a firewall (just as the software that helps shield a company's computers from the outside world is called the corporate firewall). It may be helpful to think of the daily firefighting done within corporations as digging the firewall that will keep the fire from bringing down the entire forest. In some cases, putting out a fire may be the one thing that most benefits the company.
Managers become frustrated because they often feel that the short-term demands placed on them are a negative and that the short-term stuff isn't as important as long-term stuff. They fail to recognise that in today's business environment, managing for the short term is a reality with which everyone is having to come to terms.
Chuck Martin is a former vice president of IBM and founding publisher and COO of Interactive Age Planning Styles Long-term planning is anchored to the calendar. Short-term planning is more agile, taking advantage of unforeseen events.
SIDEBAR: PLANNING STYLES
Based on time.
Produces a document.
Focuses on goal.
Creates obstacles to change once strategy is set.
Creates strategy implementers.
Based on events.
Produces a sequential process.
Is interactive and iterative.
Focuses on process.
Creates environment for constant change.
SIDEBAR: The CFO as Sheriff
Don't shoot the one who's only enforcing the company's budget.
The Chief Financial Officer is often seen as the one who won't fund a new project that the proponent is certain will help the organisation become more productive, more efficient or more profitable. When that money isn't forthcoming, the CFO frequently is the one who takes the blame.
However, that's like going after the sheriff for enforcing the law. Like the sheriff, finance is merely applying numbers to the corporate strategy; the "law" he's enforcing is the company's budget.
To effectively manage for the short term, any executive who wants his operation to produce demonstrable results quarter-by-quarter must look at the information flow within the corporation, how individual managers are enabled to use that information, the integration of corporate strategy and day-to-day "street truth", and how all of these factors can be used to improve the organisation's numbers.
All of these processes must also feed into how the corporate strategy is developed and executed. If they are aligned, the budget the CFO has to enforce will be a truer reflection of what the company wants to achieve.