Six Sigma
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Phil's Journal
Philip Crosby


Business Plans vs. the Real World

The first thing investors or senior managers demand when faced with a new proposition is the preparation of a business plan. The principals go to work and lay out the concept of their product or service, the development time, the production/training plan, necessary personnel, expenditures and the resulting successful income. All of this is documented, and the documents are placed in a binder along with the biographies of those who will make it all happen.

 The investors carefully examine the binder to determine how long it will take to begin receiving a return on their money and when the organization will be ready for a public stock offering--that's where the real money lies. They ask for more information about capital expenditures, cash flow, the marketing approach and the timing of development. They also want to make certain that the board of directors, which will include them, is stocked with experienced people.

 When this process is complete, the officers begin to implement the plan while the board monitors the process. The milestones are ticked off each quarter, and eventually the plan is complete. That's when they discover that the product or service is not going to make them any money. They've created something that no one wants anymore, if they ever did. The money is gone, there's no real organization, and everyone moves on to something else.

 Business plans are useful for making us think about the work that is going to have to happen in order to accomplish something. However, the world doesn't hold still for several years while what we laid out gets executed. On the way to work this morning, I was detoured from my favorite route due to repair work going on in the street. My e-mail provider was down for a few hours, so my plan to check my e-mail was changed. The client I was going to have lunch with was called away suddenly, and I was left with no lunch partner. I had planned to play golf tomorrow morning, but it looks like it will be too cold.

 I've been able to deal with all these events and come through them without damage, but they were not foreseen. My neatly planned day has fallen apart. The question has to be: "If I can't know what's going to happen today, how can I project events and actions for several years ahead?"

 The concept of realistic management has to be based on "chaos." This means that events happen for reasons out of our control or knowledge. This means that management must concentrate on building an organization that can deal with whatever shows up, rather than one that can implement a business plan laid out to cover several years of activity. This is the "reliable organization" I've been writing about.

 We need to set goals for the organization and, of course, for ourselves. We need to make certain they have numbers in them. We need to say that we will spend no more than X dollars in the next Y months; we need to say that we will test our new product or service by Z. We need to say that we will be on the market by a specific date. These are goals, and to meet them we have to handle the random occurrences along with the planned ones.

 Markets change in the blink of an eye, as do styles; competition lurks behind each bush; new technology is not always readily appreciated; and customers are fickle and unreliable. There is no Easter Bunny.

 So plan for tomorrow and deal with today.


About the author

 Philip B. Crosby, a popular speaker and the founder of Philip Crosby Associates--now PCA II--is also the author of several books, including Quality and Me: Lessons from an Evolving Life (Jossey-Bass, 1999). To order a number of products, visit his Web site at www.philipcrosby.com or call (800) 223-3932. .

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