7 Reasons Every Business Should Have a Multiyear Operating Plan
I bet that as soon as you read the title of this post, you rolled your eyes and thought, “Oh no!” Trust me, I get that a lot from some pretty amazing people in my orbit, including CEOs. To them, multiyear plans mean rigidity when companies need to be agile. The plans are outdated before the ink dries.
And yet it is precisely because the world is unpredictable that you should have a multi-year operating plan. A seminal report by McKinsey found that the revenue of companies that maintain a long-term outlook grew 47% more than the revenue of other firms over a 13-year period – and did so with less volatility. When you know what success looks like three years out, mapping the plan to get there facilitates a culture of operational excellence. It allows you to thoughtfully pivot as you progress. That’s real agility.
What I mean when I say “operating plan”
Whether you call it a “brand growth plan” or “long-range plan” at your business, a multi-year operating plan is simply the CEO’s vision articulated. It includes financial targets, customer and market positioning, product plans and channel expectations. I recommend setting your horizon three years out: short enough that your current actions will have predictable impact and long enough to make the investments you need to get there. A dynamic, rolling operating plan serves two critical functions: first, as a benchmark to gauge recent performance (How did we do?) and second, as a map toward your strategic goals. (How will we get there?)
An operating plan gives your business the ability to pivot in a crisis like the one we’re facing now, and it builds the organizational muscle to power forward once the crisis recedes. In a recent PwC CFO Pulse Survey, 65% of consumer-facing companies say that finding new ways to serve their customers during the COVID crisis will yield long-term benefits. These companies have strategies that put customer experience top of mind in every function and department. They have clear goals and know how close they are to achieving them. They’re not thrown by vulnerabilities that crises always expose.
7 superpowers that an operating plan gives you
Grow profitably. Profitable growth means investing your limited resources wisely. What products will you develop? What niches will you fill? What revenue streams will you pursue to achieve the financial goals you’ve set? Without a clear plan, you’ll be forever chasing a customer you don’t need, building a supply base that fails to deliver and working with talent that doesn’t fit.
Dream as a team. Realizing your dream comes down to what a CEO I worked with calls The Three C’s: culture, collaboration and communication. I’ve found that collaborating on a plan is (almost) more important than the plan itself. Have your team take a few days to write down their vision of success based on growth targets – marketing success, product success, financial success, etc. – then regroup for a discussion of the results before drafting a final plan.
Imbed in the DNA. This is a critical step that is often overlooked, and one that I believe is the “secret sauce” of the process that ensures your larger strategy will become reality. Ask each department to respond to the operating plan with a department-specific plan detailing the steps they would take to operationalize the larger vision. This is your chance to see how well they understand your vision, and it facilitates building out capabilities to support growth and competitive advantage. Now you can be certain that everyone, in every department, is truly marching in the same direction along the path to success.
Read minds. What if one of those departmental operating plans is off base? A CEO friend of mine recalls greeting just such a plan from a department head with a raised eyebrow – proof, he says, that long-range plans can be unreliable. I told him, “That is the greatest gift! Now you know what he thinks success looks like, and it didn’t take months to understand his perspective on the business.” A well-articulated multiyear operating plan gets everyone literally on the same page, builds consensus and greases the wheels of progress
Reinforce trust. If you want to sustain a culture of shared purpose, innovation and accountability, everyone has to understand not only the vision of where you’re going as a business but also how you’ll get there and how long it will take. Cynicism kills culture. A foggy vision of the future gives cynicism fertile ground.
Leverage the Board. When it comes to discussing current-year performance metrics, boards and CEOs are usually in agreement. If friction does arise, it’s often around the future: how, where and when growth will occur, what capital you’ll need and what impact your ideas will have on the organization. Without an operating plan to provide context, the Board may get the impression that the CEO is offering new growth initiatives every quarter. To the CEO, it could appear as though the Board is throwing up unnecessary roadblocks. If this cycle continues unchecked, the CEO will feel under attack, and the Board will get fed up.
Gain hours in the day. Imagine how much time that you as a CEO could save if everyone on your team knew what they needed to do over the next 18 months. Imagine if you could free yourself from the tyranny of the day: how focused and productive each conversation would be when you didn’t have to explain (again!) what “innovation” really means or which metrics everyone should focus on. Imagine the white space you could explore and the external partnerships you could develop with all those hours. That’s what a concise, dynamic multiyear operating plan delivers.
It’s often said that being a CEO is a lonely job, and if you’re new in the role, I’m sure it can be a disorienting one. It’s not enough to surround yourself with great people. Everyone has to pull in the same direction. By articulating your vision into a multi-year operating plan based on the knowledge and insight of your team, you will realize the “team dream” and make this tough job more fun.
To learn more about ways in which NEXTConsulting can collaborate on developing a multi-year operating plan to make your vision a reality, connect with us today.