The KPI Question

I recently discussed KPIs (Key Performance Indicators), where I was asked why I needed to see the vision and the mission statements for the law firm.  The answer I provided was; the key performance indicators are based on the goals of the business, which are defined by the vision and the mission found in the strategic plan.  That got a blank stare, so I tried the more official-sounding explanation. A Key Performance Indicator is a measurable value that demonstrates how effectively the firm is achieving key business objectives. That didn’t exactly go over any better, and I was asked, what is an indicator? Before I drown in this analysis, let’s use the KISS principle.  When I use the term KPI, I think of measurements of performance.  Let me also say I have seen where every single measure is called a KPI. That makes no sense to me as not all indicators or measurements are key – some must be more important than others.

Let’s start at the beginning.  The vision statement defines what success looks like. It should contain all the key elements you want to be successful.  You could start with a simple statement saying the firm is a successful law practice.   What does that mean?  So you change it a little to be, the firm is a profitable personal injury law firm that is known for great client service.  

Now you just defined two potential measurements; being profitable and having great client service.  OK, so far.  If you decide these are key to your business, you just defined two KPIs. Now you develop a mission statement to realize the vision.  The mission could be to provide personal injury legal services.  Not very exciting, so you work on it some.  The mission is to provide legal services for personal injury clients in North and South Carolina.  You quickly find out that a lot of law firms do that, so you try and differentiate your firm.  The mission becomes; we provide timely and compassionate personal injury legal services with the best settlements in the Carolinas.  You have just defined several more potential KPIs. All of this was done before we completed the strategic plan or decided on any processes.

You complete the strategic plan and define some tools, processes, and procedures to meet your goals.  Each of those will have a few KPIs. The point of this discussion is, you will develop a unique set of KPIs based on your strategic plan. Using KPIs is a good way to look at the success of a business.  There is also a balanced scorecard approach. The balanced scorecard asks that you translate the mission statement into specific measures that reflect success. The balanced scorecard looks at the firm from four perspectives – financial, client, internal, and growth.  Within the strategic plan, you would develop measurements relative to each of these perspectives — potentially more KPIs.

One last observation, we all have a different idea of what the measurement focus should be. You can probably guess that I look at the strategic plan as the starting point to define the business.  Someone else may be focused on marketing and another on job performance. I have even seen a focus on process effectiveness.  All of these ideas are correct as far as they go, which makes my recommendation to consider all of them.  I would say that too many measurements may result in analysis paralysis.  I would aim for no more than 5 to 10 Key performance indicators.  The rest of your list of measurements are metrics to be used for early warning of problems, performance evaluations, process effectiveness, or prediction of outcomes.

Did you find some neat ideas in this blog? What are the exciting ideas you came up with, and how are you implementing them? Let me know by contacting me at dwfavor@catalystgroupinc.com.

For more information on creating a strategic plan that works, contact cheryl@catalystgroupinc.com

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What is the story on KPIs

I recently had a discussion about KPIs (Key Performance Indicators), where I was asked why I needed to see the vision and the mission statements for the law firm.  The answer I provided was; the key performance indicators are based on the goals of the business, which are defined by the vision and the mission found in the strategic plan.  That got a blank stare, so I tried the more official-sounding explanation. A Key Performance Indicator is a measurable value that demonstrates how effectively the firm is achieving key business objectives. That didn’t exactly go over any better, and I was asked, what is an indicator? Before I drown in this analysis, let’s use the KISS principle.  When I use the term KPI, I think of measurements of performance.  Let me also say I have seen where every single measure is called a KPI. That makes no sense to me as not all indicators or measurements are key – some must be more important than others.

Let’s start at the beginning.  The vision statement defines what success looks like. It should contain all the key elements you want to be successful.  You could start with a simple statement saying the firm is a successful law practice.   What does that mean?  So you change it a little to be, the firm is a profitable personal injury law firm that is known for great client service.  

Now you just defined two potential measurements; being profitable and having great client service.  OK, so far.  If you decide these are key to your business, you just defined two KPIs. Now you develop a mission statement to realize the vision.  The mission could be to provide personal injury legal services.  Not very exciting, so you work on it some.  The mission is to provide legal services for personal injury clients in North and South Carolina.  You quickly find out that a lot of law firms do that, so you try and differentiate your firm.  The mission becomes; we provide timely and compassionate personal injury legal services with the best settlements in the Carolinas.  You have just defined several more potential KPIs. All of this was done before we completed the strategic plan or decided on any processes.

You complete the strategic plan and define some tools, processes, and procedures to meet your goals.  Each of those will have a few KPIs. The point of this discussion is, you will develop a unique set of KPIs based on your strategic plan. Using KPIs is a good way to look at the success of a business.  There is also a balanced scorecard approach. The balanced scorecard asks that you translate the mission statement into specific measures that reflect success. The balanced scorecard looks at the firm from four perspectives – financial, client, internal, and growth.  Within the strategic plan, you would develop measurements relative to each of these perspectives — potentially more KPIs.

One last observation, we all have a different idea of what the measurement focus should be. You can probably guess that I look at the strategic plan as the starting point to define the business.  Someone else may be focused on marketing and another on job performance. I have even seen a focus on process effectiveness.  All of these ideas are correct as far as they go, which makes my recommendation to consider all of them.  I would say that too many measurements may result in analysis paralysis.  I would aim for no more than 5 to 10 Key performance indicators.  The rest of your list of measurements are metrics to be used for early warning of problems, performance evaluations, process effectiveness, or prediction of outcomes.

Did you find some neat ideas in this blog? What are the exciting ideas you came up with, and how are you implementing them? Let me know by contacting me at dwfavor@catalystgroupinc.com.

For more information on creating a strategic plan that works, contact cheryl@catalystgroupinc.com

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What is in a Title

I was recently asked what the difference between a manager, administrator, and coordinator is.  I have seen these roles change and get redefined over the twenty years we have been working with law firms.  The office manager is focused on resources like skills, money, and facilities.  A firm administrator would be focused on systems (processes, procedures, and tools). The office coordinator would be focused on a task like front desk, scheduling, or supplies. These are general definitions we have developed over the years, and often, these roles are merged. Recently we have noticed a reluctance to assign one person to each of these roles.  There is a fear that this would give too much control to one person.  Often this is a trust issue with the owner.  When this happens, we see the task that each role is assigned is farmed out with some being assigned outside of the firm.

The most common title we see in firms these days is the Firm Administrator.  Often, when we see that role, we see the task of oversight assigned to another staff member or an outside vendor. The way I look at it, it is like doing a reconcile on your checkbook; Assign that to someone other than the person doing the checkbook entries.

Did you find some neat ideas in this blog? What are the exciting ideas you came up with, and how are you implementing them? Let me know by contacting me at dwfavor@catalystgroupinc.com.

For more information on creating a strategic plan that works, contact cheryl@catalystgroupinc.com

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A Successful Law Firm

WHAT MAKES A GREAT LAW FIRM

BY

CHERYL LEONE AND DAVE FAVOR

The path to a successful law firm starts at the top. The number one secret of a successful law firm is the realization that this is a business. Successful owners of small law businesses recognize that their first duty is to provide the leadership and direction for the firm. A simple definition is that leadership is the art of motivating a group of people to act towards achieving a common goal. In a business setting, this would mean directing workers and colleagues with a strategy to meet the company’s needs. This gets all tied into the strategic plan which is the foundation for the law firm. Great law firms without exception have as its foundation the following

  • Values to determine the core of decision making
    • Vision to set out the journey the firm must take to achieve success
    • Strategy as to how the firm will realize its vision
    • High-Performance Work Culture which includes:
  • Desirable Work Traits required to work within the firm
  • Defined job Descriptions with clear expectations
  • Training to meet the expectations
  • Defined High-performance teams
  • The tools to enable success

This foundation is called the strategic plan. There is a lot of detail in a strategic plan, besides the vision, and one of the key points is:

  • You must practice the theory that everything you do is for the betterment of your client. You must keep this thought instilled in all your lawyers and staffs’ memory banks to have a successful law firm and to have continued growth.

Often the strategic plan is the easy part.  Once the plan is in place, the pressure of reality often hits. Once you start getting successful, you begin believing your own press. This is when things can go bad.  At this point, if you fail to keep a strategic plan in place with an implementation plan, things begin to slip through the cracks.

That is all high-level thinking, so let’s look at the details. My guess is that this is what you really wanted to know when you asked your question. A law firm is made up of skills (staff), policies, tools, and resources (buildings, money, etc.). A law firm is like an orchestra that sounds good when everyone is on the same page and playing the same tune.  Gone are the days that all you needed was a skill. In today’s competitive environment, you must be a team player.  To become that, you must have the right skills for your job, understand how you fit into the strategic plan, and learn to be a team player.

That is a monumental task.  We start with the strategic plan that documents everything, move to the process documentation that tells us what needs to be done, and then procedures that tell us how to do it.  To get everyone marching to the same tune, we do training.

Leadership is critical in the firm, and there are many levels of leadership from the owner to the attorneys, case managers, and administrative support.  Good firms, no Great firms, have a robust chain of command and everyone knows who the go-to person is.  Without that, there is chaos.

We see leaders who struggle with making decisions. People in the firm want a decision, and they don’t care if it’s the right one or the wrong one. Well, we do, of course, but the important point is the staff wants to know what to do and they don’t want to wait 4 or 5 days for a decision. The key is they just want to know what they need to do next. And if you’re going to be a leader, then you’ve got to make decisions. We understand that bigger decisions do take a little bit of time. But in the day-to-day running of your law firm, you must be decisive.

That is only part of the decision-making process. You have to support the processes, procedures, and policies that have been approved for the firm.  That suggests that to be a leader, you must understand and agree with the vision, values, and strategic plan for the firm.  It is hard to be an orchestra leader if you do not have the music. If your decision is not in agreement with the documented process, consider improving the process. There is no reason to continually violate the process, to use templates that always need correction, or repeat mistakes.  If the process is correct there may be a training issue, if not fix the process. The point is a leader completes the loop. 

Again the owner of the firm sets the vision and the direction and with management creates a strategic plan.  The firm creates an implementation plan that will work and follows it.  It can’t be a convenience thing but a way of life.

Many organizations, like the ABA, would say that the most important tool in our business is software and electronics. That would suggest that one of the key skills the staff of the firm must have is knowledge of the technology. For the Solomon Law Group it would be a variety of tools;

  • Litify
  • MS/Office (Word, Excel, and Office 365)
  • Box

Now we are all on the same page, are trained, and we are eager to go.  The number one rule is: you’ve got to add value to the client’s case. To do that, you must have or acquire the skills needed to use the tools and processes provided.  A successful firm needs a capable and competent workforce that can attend to the financial tasks, technology support, and other professional services you offer. The skills needed will vary depending on the job assignment.

Attorneys should be committed to providing exemplary legal services.  They have the added burden of understanding the law pertaining to the case types we handle. A law firm is a service business, so all staff members must be able to communicate with clients and each other.  The accountability for case accuracy rests with the attorney, and the case managers are accountable to deliver the work needed. 

Anyone in a leadership position (attorney, case manager, etc.) should have the mindset that the law office is a business. Every staff member that wants to be part of the leadership has a duty to market the law firm and be involved in their communities (school districts, youth sports, churches, and PTA).  That brings us back to the strategic plan.

What is it that this business wants to accomplish?  We have heard a lot of different answers to this question. The top two answers are; make money and serve clients.  We can accept both of those answers. The absolute wrong answer is: I don’t know.

Did you find some neat ideas in this blog? What are the exciting ideas you came up with, and how are you implementing them? Let me know by contacting me at dwfavor@catalystgroupinc.com.

For more information on creating a strategic plan that works, contact cheryl@catalystgroupinc.com

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What’s the Process

Most people that I have met do not read process documents. If you give someone a documented procedure, they may read it once and file it away.   Now that is not to say you should not document your processes, you absolutely should.  The documentation of your process allows for incremental improvements in your business process, provides for performance metrics, and provides for training. A good process ensures the right things get done by the right people at the right time. Documenting policies, processes and procedures is a normal progression from strategic planning.

I have seen organizations with a shelf full of processes and procedures.  Each process makes sense, has been approved, and has a rational reason for existing.  Most law firms that I have worked with consider themselves a skill-based workforce.  In this culture you should allow your staff to think for themselves and trust they will do the right thing.  That statement assumes that your staff have read or been trained in your processes. The smart organization will know how to blend process and skill. 

If the business is skill based a good question would be; why do you need any process documentation?  The documentation sets the standard you expect.  If done correctly the process represents the best way to accomplish the task. The documenting of processes will standardize operations making it easier to predict the outcome.

Look for repetitive tasks to document and put under process control. Today there are so many tools out there to automate everything, like case management.  A well-designed process and the right business tool will make it possible for people to participate without the need to understand the bigger process picture, they just need to do the tasks assigned to them, and the process will identify who has to do what, and when. Many case management systems take advantage of documented processes and automate.

For example, let’s say that you wanted to send out a card when a client exits a phase of the case resolution process. You study the process, identify the best place to test for that condition, identify who should do it, and update the process.  Once the process is initiated you can hire someone to send out cards without putting the burden on your legal staff. Let everyone know the process has changed and start tracking the change.  You may find that people need training on the change, the process requires an update to accommodate the change or that everything is perfect. 

A lot is going on behind the scene within any business.  Processes, tools, skills, and training often need to be updated.  Don’t ignore all that is going on.  Have someone outside of the production environment that can administer that activity. People are always going to make mistakes; the thing to do is to recognize and accept that and design your processes with that in mind. Technology, culture and the market all change.  Be ready to recognize the changes and to react to them.

Did you find some neat ideas in this blog? What are the exciting ideas you came up with, and how are you implementing them? Let me know by contacting me at dwfavor@catalystgroupinc.com.

For more information on creating a strategic plan that works, contact cheryl@catalystgroupinc.com

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It’s The Process

My first thought when looking at a new business is, we should not point out what is wrong; we should focus on what works and suggest improvements based on experience.  There will be some rough spots along the way, but no significant breakdowns.  We may have to enforce the use of some tools, policies, or processes along the way. Many years ago, one of my mentors told me that it is seldom the person and almost always the process that caused the problems.  He had a three-fail theory, which is the only time I ever heard him use a negative term.  Anyway, the approach was, document the process, execute the process, correct the process, and then enforce the process.  His enforcement idea was if you fail, the process is examined, and if that is OK, you go back into training.  He would do that step twice.  If you fail the third time and the process is still sound, then you may not be suited for the job.

He had another interesting theory – if you receive the same complaint more than twice and have never changed the process, look again because you probably missed something. There is a common element that jumps out at me when I think about this; it is the process.

So, you have documented your process; you have done training, now you are executing the process.  If there is a failure, look at the process and perhaps send people back to training.  You don’t scrap the process, quit, or have meltdowns. 

What I often see is a clash between business systems.  Most business management systems expect a systematic and somewhat rigid business process.  The business owner usually expects an interrupt-driven business system with a high-level forgiving process.  If we want to provide a solution in this real-world environment, we must figure out how these systems work together. 

If I track the process for a short time, I usually discover two areas of concern: the process is not well documented, and the expectations are mixed. It is expectations that are causing frustration. I’m not saying that you can’t have expectations, just that they have to be realistic. I’m not even saying that you have to lower your expectations, only be aware of how they can affect your day. Every time that an expectation bumps into reality, we have an event. If you remember your self-mastery exercise, you should know what an event kicks off. I believe expectations are subjective, biased, and can differ from person to person. Another note I found in my file was this; don’t put expectations on people, events, and outcomes unless you’re prepared to live with them. Some may expect people to follow the process, and the people, in turn, may expect you to leave them alone. But in both cases, people assume the other person knows this automatically, without ever having a conversation about it. This can only lead to tension. The best approach would be to base expectations on reality and, second, communicate expectations to anyone that needs to be involved in making it happen.  My best guess is that lack of communication is the source of the problem.

The concerns with expectations are enhanced if the process is not understood.  That can be because the process is not documented, it is not enforced, or the process does not match reality. The level of detail in a process, or the need for procedures, is based on the skill level of the user.  In a law firm you usually have a mixture of skill levels from attorneys to process workers.  Make sure that the output of the process represents what you need.  With that verified, document the process so that multiple skill levels can use and understand it. Now communicate the process to everyone that will use it and include your expectations on the degree it is followed and the output.

Have you ever heard what gets measured gets done? The same is true for expectations. That which is expected is what usually happens. The frustration starts when we realize that there are competing expectations.  If you expect that people will not follow the process, you will find evidence of that. If you expect that they will follow the process and you have communicated that expectation, you will find evidence that the process is being followed. Now we have to get into management and leadership.  That is a topic for another day.

Did you find some neat ideas in this blog? What are the exciting ideas you came up with, and how are you implementing them? Let me know by contacting me at dwfavor@catalystgroupinc.com.

For more information on creating a strategic plan that works, contact cheryl@catalystgroupinc.com

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A Team Approach

When we first started working with law firms, the focus was most often on getting the largest settlement.  That is not bad but should not be the only focus.  As the law firms we worked with became larger, the overhead cost started to climb.  Eventually, the law firm owners discovered that profit margins were shrinking.  That is when we got called in.  We found that there was no penalty for overhead because the rewards were still focused on settlements.  I remember the first firm I visited there was a celebration for a million-dollar settlement.  When I asked what the return-on-investment was for that case I got blank stares.  Turns out, they lost money.

When we find a situation like this, our next step is to apply overhead cost evenly to all the cases to determine the efficiency of the case resolution, and the return-on-investment (ROI).  That created an environment where attorneys took advantage of the system.   They would justify using large amounts of resources, knowing that there was no penalty designed into the program.  The overhead was evenly distributed.

There is a balance between a vast list of best business practices and the needs of a business.  I believe that you should look at the culture, size, and complexity of the business to select the best set of practices to use.  A small law firm with less than 20 staff, or less than 500 active cases, is much different than a firm with 750+ active cases and 25+ staff. Based on our experience, the dividing line is around these parameters. 

When you look at the big picture, there is a need for more accountability, better teamwork, and more accurate tracking. The use of a profit center could provide all of that. There are several kinds of centers, profit, cost, and revenue. My experience tells me that a profit center is the best fit.  This would allow for some combination of revenue and cost center elements.  The first step would be to define and collect data on revenue, indirect cost, direct cost, staffing and payroll cost.   We then look at the vision and mission statements to determine what is important to the Firm.  With all that information we can define a balanced scorecard, profit centers, and an implementation plan.

The idea of a profit center has two primary features.  The first is, the overhead would more closely match what was used. The second was that a team was more efficient than a single skill focus.  These features can be further broken down like this:

  • A profit center cost included all the payroll costs for the members, a portion of the burden cost, and the direct cost. You can debate expenses like the cost of a case management system, but most count this as a direct cost. The cost of QuickBooks could be considered as overhead or an indirect cost. The cost of legal staff (attorney’s, paralegals, etc.) are part of production but the cost of administrators or support staff are not. Other expenses, such as rent, utilities, business insurance and the cost of supplies that do not become a part of any products or services are overhead expenses, or in-direct.
  • The team concept caused the workload to be distributed.  There was some redundancy built-in as well. The typical increase in production expected due to a team was also a benefit.
  • Increased productivity: A broader range of skills can be applied to case resolution.  There is also a competitive element that I often see when a team is formed.
  • Skills development: skills were shared. There was a team spirit that promoted the idea of each member of the team was part of the solution.
  • Redundancy: team members tend to backup each other. Once the idea that the success of the team would be rewarded, this idea grows.

The first lesson learned was on the distribution of expenses.  There was a point where the cost of distribution was prohibitive.  Trying to keep track of how many sheets of paper or stables were used cost more in tracking than any benefit realized.  So, the cost of payroll and benefits that were easy to track were passed on.  The cost of supplies, rent, heat, and other burden was distributed by a formula.  Over time we decided to distribute burden cost based on the number of cases.  We eventually modified that by defining a case weight to better distribute. The decision to use cases as the distribution element instead of hours worked or people assigned was because that was easier to track.  A focus on cases also better matched the mission of the business.

The downside, although not a big impact, was this forced a lawyer into a management role.  This had the advantage of awareness but the disadvantage that this was not what lawyers were trained for.  So far, the benefits have always outweighed the negative.

Another interesting observation based on the increased focus on accountability and business metrics. Over time we learned that the real benefit of profit center accountability and/or Firm metrics was in the trend and not in the number.  We decided to use a rolling 12-month trend.  This meant that we had to have at least two years of data to develop any meaningful trend lines.

The strategic plan for any of the Firms we worked with was a combination of values, vision, mission, business metrics, culture, and best business practices.  

Did you find some neat ideas in this blog? What are the exciting ideas you came up with, and how are you implementing them? Let me know by contacting me at dwfavor@catalystgroupinc.com.

For more information on creating a strategic plan that works, contact cheryl@catalystgroupinc.com

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Measuring Law Firm Success

By David Favor

Law Firm Coach Dave Favor

President, Strategic Thinker

Many law firms just measure revenue as an indicator of performance. That metric by itself does not tell you the full story. I once visited a law firm that was celebrating a million dollar settlement. I had to say, that was impressive, but I also had to ask how much was spent to get that million. This put a damper on their celebration, but it is still a valid question. The next day we discussed performance metrics with numbers like return-on-investment, overhead, and burden rates.

Return on investment is the “return” or financial benefit from an action, divided by the cost of that action. The “ROI” for a law firm is not so obvious. My first thought was that it would be the total revenue generated minus the total expenses divided by the expenses. One problem with most law firms is, they make the lawyer’s earnings equal to any leftover profit. This makes the expenses equal to the revenue. My next idea was to assume a zero cost for the lawyer, and that gave me a false view of the true cost. The compromise I came up with was to assign a base salary and make leftover revenue after expenses a bonus. This provided an ROI I could use for trending.

I have found that the number, by itself, is not very meaningful. I can play with the numbers and create any result I want. The best we can do is create a trend using an ROI measure and see if we are doing better. So, is it a good metric or not? I think the trend can be a good indicator. By “trend”, I mean calculating the ROI every month or quarter to see if it is going up or down. As long as the definition of the numbers is consistent you can develop a trend. I like to use a rolling average over a span of two years. When we first look at a law firm, we generally use 30% as a good return on investment. That is a good starting point anyway.

I could see a problem developing. It is relatively easy to discover the revenue, but how do we calculate the dollar amount of the investment that created that revenue? One idea for getting the expense number is to eliminate any expense that did not directly contribute to generating the revenue. The term overhead or burden is usually used to group expenses that are necessary to the continued functioning of the business but cannot be immediately associated with the products/services being offered. Another way to look at this is, any expenses present even if no products or services are sold would be overhead. Expenses like rent, electricity, computer hardware, or licenses. Does that mean it is part of the investment or not? This can quickly turn into an interesting discussion.

Then there are production expenses. For a law firm, we define the salary of the lawyers as production cost. We generally also include the cost of medical records, accident reports, investigators, and depositions. This is an arbitrary decision, so other costs may be bundled into production. For example, you may determine that the cost of the case management system is production cost. It does not affect the measurement much as long as you remain consistent over time because it is the trend that is important.

The burden rate is a ratio or burden cost to production cost. Generally, a burden of greater than 50% will be a red flag, and we will look at expenses to see if we can lower the burden. You would want to keep this low and make sure that the trend is not going up. The tricky part is to agree on what you consider to be overhead. As long as you keep your definitions consistent, you can create a good trend for this number.

Return on Investment, burden rates, and process times can be used to measure internal performance. Eventually, you will develop a well-balanced scorecard tailored to your law firm that can be used to track your performance in several areas. I generally look for 3 to 5 different areas. Client service is usually always there. Internal process measures are often forgotten, and we add them in. So, with the financial metric that completes the three basic measures. Now we can add metrics for staff (retention, development, happiness, etc.), community service, reputation, etc. With a more comprehensive measure of how your business is performing, you can track progress better and prevent surprises.

One of the keys to all of this is a good financial system that can keep track of expense and revenue categories. Once you have that you can drop those numbers into a “bucket,” like overhead. I pull numbers from the financial system into an Excel spreadsheet and calculate any of the metrics I want. What metrics do you like?

Did you find some neat ideas in this blog? What are the exciting ideas you came up with, and how are you implementing them? Let me know by contacting me at dwfavor@catalystgroupinc.com.

For more information on creating a strategic plan that works, contact cheryl@catalystgroupinc.com.

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Don’t Get Distracted!

By David Favor

We are not cool, logical, and efficient decision makers. Instead, we are emotional, reactive, and judgmental processors with biases. The lessons of self-mastery seem to come up all the time in business and personal life. I would always say that I was a logical thinker, but it turns out that my decisions were plagued with emotion and bias, just like everyone else. I have found that no matter how well we think through and document our values, vision, or plans for the day, they can all be overruled by emotions. There is no magic connected to self-mastery. Self-mastery is intended to make you aware of the impact of your emotions and biases.

Our focus this month is on strategic planning and self-mastery; values, vision, and emotions are all active in the first stage of strategic planning, so we must stop to consider each as we plan. While we are talking about strategic planning, it is a good time to mention that there is no magic to that process either. Strategic planning is intended to get you to think through what you want, review what resources you have, and then map all that to the business environment you are in. A strategic plan can be as formal or informal as you are comfortable with.

With all that said, the first step of strategic planning is to discover what is important to you. What are your values, what business principles do you want to adopt? We often use a deck of value cards to establish a starting point when we do strategic planning. The idea is, you list all the values that come to mind and then arrange them by priority. If you have partners or a team, compare the list each has built. The list of values held by each team member may be different, and that is okay. There will be a set of overlapping values that will represent the team, and that will become the values of the business. Before you agree on the makeup of the team, look for values that are not compatible with your set. You need to decide if someone with values outside of your list should be on your team. If the values are different but not in opposition to the main set, that is okay.

Once you define the team and develop your composite list of values, ask the team if they can support this list that will represent the business. If you are in a business association, like a state bar, they will have a list of values that they adopt and expect their members to adopt. Include that list with yours. We are often surprised at the differences we find, even with partners that have been in business together for a while. At this point, the lists tend to merge, and you negotiate what you want the business to reflect. There is no absolute correct list of values, but there will be a list that best fits the culture and audience of your business.

You can do a similar exercise with the vision. Have each partner or team member develop a vision, and then compare what each has developed. You will often get good ideas, and when all the ideas and visions are merged, you will have a good starting point for the business. If the process were followed, the vision would not conflict with any of the values adopted.

We have not started looking at problems to solve yet. For most of our strategic planning sessions, we try to avoid discussion of problems and solutions at this point. A discussion of problems tends to impact the vision and the values being developed. Your vision and values should not be defined based on a specific problem. If you start planning or spending money too early, you can get your team in a bind. You can become a slave to a decision that was made before you understood what you wanted. You create a business plan to support some tool or policy that does not map to your wants.

Once you have a good starting point defined, you can look at things like SWOT (Strengths; Weaknesses; Opportunity; Threats) analysis, prior business performance analysis, and the five W’s (why, what, where, who, and when) study. Having a good starting point tends to keep you on track. There is nothing fixed in any of this, and often changes are made as the team learns more during the analysis phase.

When you have the values, vision, and analysis for the business in hand, you can start to define problems. It is because we are emotional, reactive, and judgmental that we can easily get off the path. Before we know what happened, we are focused on problem resolution and get distracted from the primary goal of implementing a vision.

Did you find some neat ideas in this blog? What are the exciting ideas you came up with, and how are you implementing them? Let me know by contacting me at dwfavor@catalystgroupinc.com.

For more information on creating a strategic plan that works, contact cheryl@catalystgroupinc.com.

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What’s the Purpose?

By David Favor

When people feel like they have no purpose in their life, it’s often because they don’t know what’s important to them, or they don’t know what their values are. Well, what about businesses? I have found the same to be true. Based on my research, I found businesses with a defined purpose (other than making money) were more successful than most.

The businesses I worked with that primarily focused on making money usually had only financial metrics and KPIs to measure performance. That seemed natural to me, so why were businesses focused on a more inclusive purpose more successful?

Over time I discovered some clues. If you are focused on money, you work harder to make more. The world around you is against that focus, so you have to work even harder. Eventually, you are working too hard for too little. Often you get such tunnel vision that you do not see what is happening around you. It is a never ending cycle.

Then I looked at businesses focused on a purpose instead of profits. These businesses did not see their efforts as work. They enjoyed being focused on their purpose. Here is what they did:

  1. They developed a vision – what is the desired future?
  2. Now the mission – what are we going to do?
  3. Strategic plan – how are we going to do this?
  4. Goals and metrics – how well are we doing?

Make no mistake: making money is a requirement if you want to stay in business, but for these companies profits were de-prioritized in the mission and the strategic plan. Their focus was on the vision and the purpose; this gave the business much more wiggle room to adapt to the environment in which they participated. Their measure of success included several metrics outside of financials, much like the balanced scorecard idea developed back in the 70’s.

This idea of a vision and a purpose is often foreign to many of the people I talk with. The idea that we were each born with a mission and it is our purpose to find out what it is, is kind of daunting. This, and many other childhood lessons have fallen by the wayside for me. We are on this earth for an undetermined period. During that time we do things, experience opportunities, have failures, and generally keep busy. Some of that busyness is wasted on dumb ideas, and some are very fruitful. A lot of that wasted time for me was sitting on a couch munching on snacks and wondering what the meaning of life was. I would have better spent that time getting up and discovering what feels right.

Instead of waiting for the answer to appear, experiment. What did I enjoy doing or eating? What caused people to say good things about me. My problem is, I feel safe on the couch. Right now, there is something that I am thinking about doing, but I never do it. I have great reasons why I should not do it, but in the end, I stay on the couch eating snacks. Most of the time, my reason is what I think other people will think. If that is how you feel, that is how you will run your company.

Did you find some neat ideas in this blog? What are the exciting ideas you came up with, and how are you implementing them? Let me know by contacting me at dwfavor@catalystgroupinc.com.

For more information on creating a strategic plan that works, contact cheryl@catalystgroupinc.com.

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