Entrepreneurs all have a goal in mind, but in the frantic world of the construction business founders often forget where they’re headed. For construction professionals the goal is usually in the form of developing their company in the image of a contractor they are trying to emulate like a successful competitor or a dominating regional firm they believe is doing everything right. Turning this mental image of success into a concrete achievable goal is the purpose of strategic planning.
Conceiving
The successful competitor or dominating regional firm is at first a vague model in the mind of the construction professional. To lead his/her fledgling company on a path that emulates the successful company’s accomplishments, construction professionals must convert wishful thinking into more concrete objectives. The process of transforming vague images into actionable metrics is called modeling.
Modeling
A company isn’t just an entity that sells goods. It’s an ecosystem that must have a plan on who to sell to, what to sell, what to charge, and how it will make a profit. The model describes the specific way in which the business conducts itself, spends money, and earns money. The process of business modeling a construction organization is also called business model innovation and forms the basis of your strategic plan.
Planning
The specific metrics that comprise your company’s model based on the successful competitor you are emulating must now be reduced to a plan of action. How can you get all your employees to share your vision of the company’s success and to work together to guide the company in the model’s image? In other words, how do you execute a strategic plan across every department in your company?
Executing
Management by Objectives (MBO) is a management technique that involves setting and measuring goals for employees that align with organizational goals.
In brief, the following three major components of the MBO process are:
- Setting specific, realistic, and acceptable objectives for each department that advance the overall strategic objective of the organization.
- Include each contributor in the goal setting, planning, and controlling process.
- Attach rewards to each specific objective assigned to individual contributors that recognize and respect their motivations.
Motivating
Having a strategic objective that is executed through an MBO program has been proven to be a successful long range management technique. Differences in performance effects, however, have been shown to be associated with the level of top management commitment. In those cases where top management is emotionally, intellectually (that is, top management espouses the value and importance of MBO); and behaviorally (top management uses MBO themselves) committed, the performance effects tend to be the strongest. The weakest MBO effects appear when top management does very little to “talk-up the value/importance of MBO”; and they don’t use the system themselves, even as they implement it for others.
To be truly effective over the long haul, MBO programs must be coupled with reward programs whereby all parts of the organization share the financial gains accrued from the ideas, productivity improvements, and cost savings that stem from employee participation. Based on extensive research into involvement-oriented organizations, it is clear that information, knowledge, power, and rewards are the four key components of an effective and sustainable MBO program.
Next Week
Next week we will offer specific examples of how the system can be utilized in ongoing construction companies. Strategic planning is not an academic business theory or an optional luxury if you can find the time. It is an indispensable management tool that is the only way to guide a growing company on a path to long term success. The ancient proverb –“If you don’t know where you’re going, you’re probably not going to get there,” – applies in spades for the construction industry.
For more information on Management by Objective, read more here: MBO
For a broader view on strategic plans, read more here: STRATEGIC
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