Business Family of Plans


© 2003, Kenneth A. Polcyn, Ph.D.

Senior Consultant

Deva Industries, Inc.



One of the most dreaded words in a lot of companies is PLAN. There are a variety of reasons given varying from...."It takes away from the real work of the business" and "No one uses the silly thing" to "The damn thing is outdated as soon as we've finished writing it" and "I work 14 hour days, who has time to plan?". A recent Wall Street Journal article expressed concern over the lack of small business planning in a sample of more than 500. Only 13 percent had a written annual budget, just 14 percent had a written annual plan and only 12 percent had a written long-range plan. In sum, nearly 60 percent of the businesses had no plan on paper. [1]


So what are the implications? One need only look at the failure rates of small businesses to see an alarming 52.2 percent go out of business within 4 years; nearly 71 percent within 8 years.[2]  While Dun & Bradstreet did not list planning per se as a reason for failure, some of the causes shown in Table 1 are symptomatic of poor or no planning.[3]


 Table 1

Small Business Failures By Cause



Business conflict, Family problems, Lack of commitment, Poor work habits


Acts of God, Burglary, Fire, Death of owners, Strike


Interest rates, Inadequate sales, Industry weakness, Inventory difficulty, Poor growth prospects, Poor location


Institutional debt, Heavy operating expense, Insufficient capital


Lack of business experience, Lack management experience


Excessive fixed assets, Over expansion, Receivable difficulty




Challenge of Planning


Let's not kid ourselves, planning is hard work, mostly mental work and a continuous process, because planning is not an event! Planning by definition is futuristic, therefore subject to constant change. Consequently, planning is evolutionary, a feed forward, feedback process, where you project into the future then evaluate whether projections are met; periodically lesson learned and new information are received and adjustments to plans are made accordingly as you progress toward your goals and objectives.


Relative to the work involved, remember when the first plans have been created the energy and resources required for the initial effort yield dividends. There now exists a foundation, a framework, from which to build and evolve. It becomes a matter of taking the first step, the commitment to plan, understanding what planning can do for you, your staff and foremost the source of your existence, your clients!


Planning Purpose


Simply stated, a plan serves as a road map, containing the stepping stones to move from where you are to where you want to be. Moreover, the planning process:


1.      Can be an educational tool for understanding yourself and your business,

2.      Helps with understanding what is possible within resource constraints,

3.      Assists with the establishing priorities,

4.      Brings order to thinking and operation,

5.      Helps anticipate potential pitfalls, and

6.      Provides a rational for how to operate your business.


Furthermore, one plan does not meet all needs. Important, but often overlooked is there are several plans in the life of a business; they are relatives, interrelated... The Family of Plans, when designed to work together can guide a company on a success journey.


The Family of Plans Concept


As Figure 1 portrays, there is the initial Business Plan that gets a company off the ground. Within it is the genesis of three advanced plans: 1) Research, 2) Annual Operations, and 3) Strategic. Research is required and serves as the basis for creating the Business Plan; moreover, research is required for creating subsequent Annual Operating Plans and eventually the Strategic Plan when a company has sufficiently matured. Without the research into such things as competition, markets, legal issues, product/services, etc. planning is superficial and ineffectual. Therefore, research is continuous and must be planned for, and results incorporated to meet evolving needs.



Figure 1, Family of Plans


When the Strategic Plan does come into existence, it envisions/projects where the company is going in the future based on the best available formation about the present and the future. It is from the Strategic Plan all other plans receive direction. The Annual and related Division and/or Department Plans are the "enablers"; they bring the Strategic Plan to life by operating within its guidelines, translating objectives into tasks to be accomplished. Finally, a plan frequently overlooked is the Contingency Plan, perhaps because we do not want to believe the world will not behave as we wish. Unfortunately, it will not! Similar to the Strategic Plan, it anticipates, heightens awareness and provides guidance... when the "bad and ugly" occur.


With some companies emphasizing flat organizations or teams, the above plans maybe labeled something else; nevertheless, no matter what operational components are labeled planning is required so you know where it wants to go and how to get there. Without planning the overarching goals of the company will not be achieved. A more detailed discussion of each of the plans is provided below.

Business Plan


The Business Plan is the first plan anyone starting a business creates. Very simply it defines who you are, who you want to be and how you are going to achieve your goals. As noted above the Business Plan is the genesis of the Research Plan, Annual Operating Plan, and Strategic Plan. The research starts from day one; some questions requiring research include... Who and where is my market? Who is my competition? Are there legal and regulatory matters that will impact operations?  What insurance coverage is needed? How will the economic climate affect my business? And, what are the financial requirements?


Basically, the Business Plan needs to address all of the above and the following. If done properly the information is the foundation for the next planning level. Try to not think in terms of the past because there are major changes occurring. You need to do your homework!


·        Nature of products and services

·        Marketing and sales approaches

·        Product and service distribution

·        Staff requirements

·        Taxes

·        Facility location(s)

·        Furnishings

·        Technology

·        Record keeping

·        Business processes

·        Operational policies and procedures

·        Start-up event schedule


Often overlooked is what putting together a Business Plan can tell you! If the plan is created truthfully, without fudging the facts, it may indicate you should not be in the business. Or it may tell you you're not ready because, for example, there is lack of knowledge, experience or money. In other words, the plan may signal an ending rather than a beginning.

Research Plan


Research is akin to doing your homework, an often used term in the business world. When you read about successful business people normally there is a reference to getting an edge on the competition by doing "the research", their homework. Some individuals may question the necessity for research, labeling it academic stuff. However, it is one of the most important ingredients of any planning whether a start-up Business Plan or an Annual Operation Plan. A Research Plan evolves; as noted above, in the beginning it is just a task to provide information to a start-up business. Nevertheless, the central question underlying the conduct of research, or creating a Research Plan, is.... What new and/or refreshed information is needed to successfully start, operate and grow my business? Refreshed relates to what already exists but has become obsolete; new relates to any type information that will impact business but not previously known. Nevertheless, there will be constantly changing internal and external information research requirements as a company grows.


What kind of information are we talking about for the more mature business? Some of the information gathering will focus on such things as industry trends; how competition conducts business and the pricing of its products and services; characteristics of markets to be pursued or changing needs of exiting clients; Workers Compensation, health benefits and SUTA trends; economic trends impacting the industry or your primary markets; technology that will assist with client self service access or delivery; client and internal staff satisfaction; and, where to expand operations, etc. Yes, this can be an overwhelming task, if there is no Research Plan.


The key is to first determine the plan(s) objectives and for what timeframe; then identify existing information, obsolete information, information that does not exist, and therefore as a consequence, what is needed and how it will be collected and used. After, prioritize the importance for gathering relative to the timing of the various plans, or other events, where the information may be needed. By properly planning the research, time can be saved by identifying 1) common information requirements, 2) necessary timeframes to collect and 3) when to analyze certain information to meet the needs of particular plans. In other words, creating the Research Plan!


Sources of information will vary, as will how it can be collected.  But, considerable information is readily available relative to external factors that are or may impact the industry. There are many useful sources on the Internet, since most state and federal governments, along with  professional associations, trade journals and vendors now have Web sites. Also information can be gathered about competitors from Web sites and public records. In most cases the information content and presentation is good to excellent allowing for ease of use.


Relative to internal operations and client research, information collecting and analysis,

methodologies usually need to be created. Here again it starts with objectives...What do you want to know and How will it be used? Then determine how best to collect the information. Both questionnaires and personal interviews work. It is a matter of creating the least intrusive approach. For example, a quarterly postcard query along with a client representative periodic meeting might be used for client research, whereas internally an online "suggestion box" or problem/issue forum related to specific operational topics could be used as research tools.


To reiterate, research is continuous; it provides the nutrients vital for direction and growth!

Annual Operating Plan


The Annual Plan is an extension of the Business Plan that was basically a concept; it is a more mature version of the Business Plan with greater detail based on experience and understanding of the business environment. Moreover, it deals with growth and projected growth, and the establishment of more meaningful and realistic goals and objectives. Its purpose is to provide short-term direction, guidance and milestones for accomplishment with some look to the future.


As the company matures, the Annual Plan, guided by the Strategic Plan, takes on the role of structuring the companies' operational elements such as departments, creating and clarifying roles and responsibilities, allocating budgets, establishing performance requirements and standards as well as evaluation methodologies. Based on this information, eventually as departments evolve, they create their own plans to accomplish specific goals and objectives within their operational charter and budgets.


The Annual Plan has an assessment dimension. It looks at was projected the previous year and assesses related accomplishment, shortcomings and problems along with related reasons. These are then factored into the current year plan with objectives and guidance for overcoming the negatives and emulating the positives. The genesis of the Contingency Plan is also there in terms of a discussion of potential major problem areas that have a high probability of occurring, along with alternatives about how they will be address.


The plan also pays particular attention to products and services, vendors, pricing along with marketing and sales expectations based on growth projections and the previous year results. Specifically addressed are the markets being pursued, successes, new markets, new products or services, and any changes in pricing strategy given competitor profiles. Eventually, a business will reach a point where greater attention must be paid to the future and the Strategic Plan is born.

Strategic Plan


As Figure 2 depicts, with the Strategic Plan, the Annual Plan becomes the interpretive and implementing bridge between the Strategic Plan and the Department Plan.



Figure 2, Annual Plan as Bridge Between Strategic and Department Plans


Very basically, the Strategic Plan addresses who you are, where you are, where you want to go, and strategies for reaching your goal.  It starts with the vision. The Vision is often viewed as a singular statement; however, it is really comprised of four parts that a company must articulate:


·        Core Values-The rules you live and operate by: e.g. Honesty, integrity and mutual respect.

·        Purpose-Contribution to client or public: e.g. Preserve and improve small businesses.

·        Envisioned Future-Major reachable goal: e.g. To be a successful global company.

·        Mission Statement-Vivid description: e.g. We constantly innovate to provide outstanding products and services to our customers...We train and retrain our personnel to better service our customers...We listen to our customer to understand their needs...etc.


The Vision is what the company lives by and for; it guides the corporation's beliefs and behaviors; it is the standard by which you operate.


Critical Success Factors[5]

What is it that a company must achieve to be successful, without which it will fail or be mediocre at best?  One obvious factor is minimizing risk!  Some Critical Success Factors for your business will be the same as for the industry as a whole, but there may be others that are unique. By establishing these factors your company can benchmark where you are relative to where you need to be. In other words identifying the gap. A common practice is to identify the most successful company in the industry and its attributes. Why? Because you need to know, and understand success. After you can plan for success by answering the questions...Where is my company relative to the industry leader? And, how do I close the gap? Also important is measuring gap closure progress!


Strategic Planning Process[6]


To begin to answer these questions, two things need to be known... the condition of both the external and internal business environments. Knowing the external environment is analogous to

understanding and preparing to go to Antarctica for three years. What's out there? What's good? What's bad? What are the obstacles? What can harm you? What do you need to survive? The internal environment is similar to self-evaluation.  Is your body and mind prepared to make the journey? What are your strengths and weaknesses? What do you need?  And, how do you prepare? These are referred to as SWOT; Strengths, Weaknesses, Opportunities and Threat analyses. Based on this information objectives can be established along with strategies for accomplishment and associated Strategic Plan projecting several years into the future. Based on the Strategic Plan, at this point the Annual Plan takes over and provides guidance to departments.


Department Plans


Plans that treat the major functional areas of a company are essential even when formal departments do not exist. For what these functions are responsible and how they operate, interact and deliver products and services must be clear and within budget. Most planning topics will be similar, but content will differ based on Strategic and Annual Plans objectives and what is provided to the client. For example, payroll problems may have dictated a change in payroll systems, therefore the payroll function must reflect how this will occur in specific terms; however, sales may be given specific objectives for new clients and number of employees therefore must explain how it plans to make this happen. Nevertheless, as noted above, they will all share topics such as Objectives and Assumptions, Workload Projections, Schedules, Budgets, etc. When formal departments exist, related plans will be required with somewhat expanded information as the company grows.


A common problem when departments come into existence is the failure to acknowledge inter- departmental relationships, their dependencies and the necessity to communicate. Many operational issues are the result of this phenomenon. While some department planning must occur independent of others, there should be joint department planning sessions to treat interrelated work. For example, typically marketing and sales are the first to emerge with the image of independent planners. However, there is nothing these two functions do which does not impact the rest of company operations, from the image marketing has portrayed that the Service Representative must understand in talking with clients/employees, to the Benefits person who must discuss a variation on the products or services actually provided.


Smaller companies, and some larger ones, should stay with centralized planning with those responsible for HR, Payroll, Risk and Benefits, etc. contributing to the development of the Annual Plan and then working with their respective pieces. This is particular true when organizations do not have a lot of planning expertise onboard. Centralized planning helps to reduce anxiety, contributes to communication and reduces overall time to plan.


Contingency Plan


Generally speaking the Contingency Plan is overlooked at all levels of planning. However, given the fact so much goes wrong almost daily, one has to wonder why. Even when it is known that a particular event could occur, it is ignored rather than creating a plan for dealing with it should it occur. Every plan should include a section that treats what could go wrong, with alternative means to address them. Just "Brain Storming" the top five or ten eventualities, so solution and resources can put in a position just in case bad things happen, could save clients, staff and/or a lot of money.


A part of Contingency Planning is the Disaster Recovery Plan. Fire, earthquakes, hurricanes, mass violence in the workplace for example could bring your company to its knees, or destroy it, if treatment and recovery are not planned. Whatever disaster is addressed, among other things, the plan needs to be explicit about what is to be done, how to do it, responsibilities for execution, and be accessible at multiple locations plus involve scenarios for training, which should take place periodically. What are you going to do if a hurricane is going to hit company headquarters where all records are kept and the payroll is run? You had better have a plan!

Summary and Conclusions


Some companies do not have any written plans, others are still operating off of their original Business Plan which have not been updated. Then there are those who go through the motions of planning only to let the plans gather dust on the bookshelf. Now is that anyway to run a business? Apparently it is because a lot of businesses do it. Unfortunately for many it is their downfall! All businesses must learn the importance of planning to survival and plan. There is not one major corporation in the world that does not plan for the present, and plan for the future…. They plan for success.


Planning by definition is futuristic; it is uncertainty wrapped in a changing environment. That is what is frustrating to many individuals; they wrote the plan yesterday and it is outdated today. But businesses must learn to live and survive with the evolution of their industry in a constantly changing political and economic environment. Your plans, as a result, are subject to continuous change and therefore require monitoring the internal and external environments so timely changes are made and correct decisions are made. The Family of Plans is there to assist your company survive and be a successful business. 



[1] Dan Morse, "Many Small Businesses Don't Devote Time To Planning" in The Wall Street Journal , September 7, 1999,  p.B2.

[2] Small Business Administration, Office of Advocacy, Small Business Answer Card " Percentage Dissolution of Small Businesses by Years in Business 1996" Washington, DC, 1997, p.3.

[3] Dun & Bradstreet, "Corporation Business Failure Record 1992 Final, 1993 Preliminary" New York. NY, 1994.

[4] James C. Collins and Jerry I. Porras, Built to Last, (New York, NY,HarperCollins Publishers, Inc.,1994), Chapter 11.

[5] Rick Sessions, Patrick Schaefer and J.J. Gutierrez, Strategic Planning: What Works… and What Doesn't, Presentation at APQC Third Knowledge Symposium, October 1998.

[6] Ibid.