STRATEGIES & ANALYSIS
Business Corner

organization at large, key customers and suppliers, funding sources, and any other significant constituency;

• Consistently refer to the established strategic plan when presented with resource decisions;

One caution: remember the one thing we know to be true about any plan is that it is wrong. So be flexible enough to adjust the plan in the face of appropriate information and knowledge.

Corporate Governance Cycle

BUDGETING

This is an explosion of the strategic plan’s first year. It has more details, project plans, specific timelines and detailed financials. The CEO should follow many of the steps shown above. However, each business’ results and consolidated company results will become the basis for goals and rewards in the following year. Therefore, the CEO must be judicial in applying reasonable stretch targets while protecting the company from over committing.

other business leaders on their progress against goals. Remember, these goals are rooted in the strategic plan and exploded into specific projects and actions in the budget/operating plan. This is the status of their business’ results against their commitment to the company.

These reviews are usually presented on predetermined slides with a heavy emphasis on financial results and analysis of variance from plan. How to get back to plan or exploit market opportunities are the hot topics.

Source: Chemark Consulting

OPERATING PLAN

This year budget planning started around July 1st or six months before the end of the year. The operating plan, in the first quarter of the next year, is where the numbers can be adjusted for known changes learned in the previous six months.

This can be handled in one of two ways. As a final budget where the third quarter exercise was the preliminary budget. This is a fairly relaxed approach which indicates a ready willingness to change the company’s commitment to its owners/shareholders; Or, as an opportunity to make changes only where there is an order-of-magnitude change in key assumptions from the third quarter exercise.

In either case, the operating plan becomes the final budget and basis for the current year’s measurements.

CORPORATE INITIATIVE

I ask CEOs to think of corporate initiative in this way: What does the organization, or leadership, need to learn so that the company is prepared for the future?

In the late 1970’s, with inflation in double digits, GE’s CEO, Reg Jones, decided the company’s executives didn’t understand how to manage in an inflationary economy. The entire executive layer was enrolled in a one week course at the company’s Crotonville campus. It took six months to get everyone through, but the changes in decision-making were significant and beneficial to GE’s results.

Acquiring skills such as listening or coaching could be a corporate initiative. The initiative for the current year should be announced and rolled out in the first quarter. That means the selection, design and development must occur in the fourth quarter.

QUARTERLY REVIEWS
At the end of each quarter, each business
reports to the CEO, corporate staff, and
My hope is that this corporate gov-
ernance model becomes a framework
for what you actually do. The fact is,
once this is in place and running
smoothly, the fire fighting and sur-
prises will drop in number and inten-
sity. The whole organization will run
smoother.