The Secrets of Great Planning

How one company uses strategic planning to set long-term goals and short-term agendas.

Tweet

With chaos the growth-business norm, every company builder wants to plan -- to set long-term strategic goals and short-term agendas -- but few ever do it. Here's how one does

Albert Van Kirk is like a lot of CEOs you meet in these pages.

Forty-seven years old. Early tenure at Xerox. Time as a salesman, then as a manager, at a fast-growth company. Out on his own in 1981 to start King's Medical Co., in Hudson, Ohio, a business that was first a brokerage and is now an owner and comanager of medical equipment. Now has 32 employees.

Van Kirk's attitude toward planning? That used to be typical, too. "My weak point is effective communication. I tell people things in the hall and expect them to get them done," he says. He had a tendency toward planning done midstride. That's how he was raised, after all; his dad had a small business, "and planning wasn't there. Whatever we had at the end of the week bought the groceries."

Fortunately for Al, he's got Bill.

William Patton, 52, is the disciplinarian of King's Medical, the company's ubiquitous planning guru. "The reason a small company survives is planning," he says fervently. "A lot of literature says there are three critical issues to a small company: cash flow, cash flow, and cash flow. I agree those issues are critical, but so are three more: planning, planning, and planning. That's my opinion as an academic, as a consultant to many organizations, and as a businessman." Van Kirk concurs. "My way is not the right way," he says with a shrug.

They both credit the planning process with keeping the company on an even keel during its rapid growth in a capital-intensive and increasingly competitive industry. King's Medical owns and manages magnetic-resonance-imaging (MRI) equipment -- million-dollar-plus machines, used by hospitals, that produce X-ray-type pictures. With 20 sites in 11 states, King's Medical has taken on $27 million in debt while growing some 400% in the past five years, from sales of $2.7 million in 1987 to a projected $13 million to $14 million this year. During the same period, some companies in the industry have gone public and become much better capitalized. Still, Patton and Van Kirk say they're holding their own, and more: they claim 12% to 20% profit margins, whereas in 1991 two of their public rivals showed profits of less than 5%, and another registered a loss.

King's Medical's planning system -- specifically the decision-making discipline and the follow-through it promotes -- is a key to the company's success. Planning is Patton's specialty: he has a Ph.D. in systems planning from the University of Washington. And within King's Medical, Patton is the necessary fanatic who makes planning actually happen. But he's quick to say there's nothing mysterious, complicated, or revolutionary about what King's Medical does. "No one really, in 1992, invents things -- why reinvent schedules or processes? What we have is an eclectic approach, using the best of what others have done over the last three decades." He adds that the process works because Van Kirk is dedicated to it. Without the support of a company's leader, plans quickly become little more than drawer liners, rather than tools that actually shape the way people at all levels in a company approach their daily work. The only thing the people at King's Medical do that is unusual, in fact, is to be relentlessly methodical about creating and following through with plans.

And they've done it since the company was small. The 11-year-old business is about to start putting together its third three-year strategic plan. The last one, developed in 1989, was written when the company had only seven employees and sales of less than $3 million. The lesson here is that even very small companies can and should think about creating and keeping a focus. It takes some time, but it isn't that complicated. And the payoffs can be huge.

"We've got a tremendous paper trail here," admits Bill Patton. Not to mention an equally voluminous vocabulary of planning jargon: action plans, mission statements, long-range objectives, monthly marketing outlines, weekly to-do lists, quarterly staffing evaluations. King's Medical is awash in documents that outline the plans managers hope to execute and that detail when the planned actions should start, when they should finish, how much they'll cost, and who's responsible for seeing them through.

But is the paper trail just paperwork? Patton and Van Kirk -- and many people at different levels in the company -- say they don't think so. Plans, they say, serve two purposes: setting a navigational course once they're in place and, before that, as they're being put together, forcing evaluation and discussion. In fact, the planning process produces two additional payoffs that are as important as any resulting plan: it makes managers see how actions fit into a broader picture, and it involves a cross section of managers in decisions, helping smooth the way from idea to implementation.

Van Kirk may profess not to be a planner by nature, but his years at Xerox did breed some good habits, one of which led to his creation of an initial business plan, back in 1981. "I wrote one," he remembers, "and it was ridiculous. You know, a millionaire in 18 months. I still have it in a notebook -- it was written on a yellow legal pad -- and I look at it every now and then and laugh." Still, it outlined the business-plan basics: the nuts and bolts of the nature of the industry, and the services the company would provide.

Although Van Kirk was the only employee of King's Medical at first, it wasn't a solo venture; he and five friends had been together in a business that "lacked integrity" and wanted to start a company with moral backbone. The other five became investors and board members, while Van Kirk drew on his experience as a salesman at a major MRI manufacturer to run the operations. (Bill Patton, now general manager, is the only one of the five cofounders who has become actively involved.)

In 1986 the company was doing about $1 million in sales with a handful of employees, brokering CAT-scan equipment. Then Van Kirk saw an opportunity. Midsize hospitals, in the 100-to-300-bed range, needed CAT-scan and MRI equipment but often couldn't afford the up-to-$2-million capital cost. King's Medical could buy the equipment, set it up in a site near the hospital (because of their strong magnetic forces, MRIs often need to be in stand-alone modular buildings), and provide an on-site technician. The hospital would use the machine on a fee-for-service basis, with the insurance-paid income from a scan (in the $900 to $1,200 billing range) split between the two. King's Medical would add value by boosting equipment usage, and revenues, through extensive marketing to doctors.

 1 | 2 | 3  NEXT