Develop a Focused Improvement Plan – Essential Element #5
Select, Appoint, Empower and Finalize
Develop a Focused Improvement Plan is the 5th of 8 articles based on:
“Profit Improvement Planning Blueprint: 8 Essential Elements for Underperforming or Distressed Companies” – Post dated Feb 24, 2024
Develop a Focused Improvement Plan – Essential Element #5
Develop a Focused Improvement Plan –
Essential Element #5
With crucial inputs at hand:
- The Baseline Analysis providing the foundation for as-is performance projections development
- Implemented Cost Controls/Pricing Adjustment and Organizational Adjustments providing relief to help fund the program
- Candidate Improvement Opportunities providing quantified options on how to deliver the expected financial performance improvements
The focus shifts to leveraging these inputs and developing the Profitability Improvement/Turnaround Plan
Development of this Essential Element (#5) includes 4 key activities...
- Select the projects (five or fewer)
- Appoint the team, including the overall Program Leader and Teams/Team Leaders for each project selected
- Empower the teams to develop detailed plans inclusive of quantified benefits, costs, timing & risks
- Finalize the Focused Profit Improvement/Turnaround Plan
Activity 1: Select the Projects
In Essential Element #4 – Identify Candidate Improvement Opportunities, many opportunities, likely exceeding a dozen, were identified and assessed. The key now lies in prioritizing and selecting the most impactful opportunities.
The downfall of many profitability improvement efforts occurs when companies spread themselves too thin across too many initiatives, resulting in loss of focus, accountability, and delayed/reduced benefits. It is important to deliver on the benefits of a few prioritized efforts before moving on to the next, lower-impact or more difficult opportunities.
So which efforts should be chosen? Chose the top 3-5 opportunities that offer the:
- Highest Benefit
- Lowest Costs to deliver that benefit
- Shortest “time-to-benefit”
- Lowest Risk
Activity 2: Appoint the Teams
In any endeavor, the who (team composition) is as important as the what (strategy) and the how (execution). Choosing the right resources requires both decisiveness and discernment.
Regarding the overall Program Leader:
- In Turnaround efforts, it is advisable to enlist an external professional. This not only enhances credibility with external stakeholders but also brings fresh perspectives and specialized expertise.
- In underperforming expectation efforts, selecting either an outside professional or an individual respected and trusted within the organization is critical to gaining the necessary internal support and cooperation.
Once the Program Leader is chosen, empower him or her to choose team leaders for the prioritized improvement initiatives and collaborate with those leaders to assemble each team. This approach helps ensure that the selected leaders will feel a sense of ownership in the process, fosters alignment and enhances the effectiveness of the teams in delivering the desired benefits.
Activity 3: Empower Teams to Develop the Individual Implementation Plans
Tasking and empowering individual implementation teams to develop comprehensive implementation plans, complete with tasks, timing, benefits, implementation costs, time-to-benefit, and risks is crucial for fostering team ownership and accountability.
By entrusting teams with this responsibility, they become deeply invested in the success of their initiatives, actively pursuing identified benefits, closely managing implementation costs, following established timelines and proactively addressing risks.
Empowering implementation teams to shape their plans ultimately lays the foundation for successful execution and ensures the realization of identified benefits within the expected timeframe.
Activity 4: Finalize the Focused Profit Improvement/Turnaround Plan
Unlike the first three activities in this article, which must be done sequentially, much of the work associated with this Activity can be begin once Essential Element #1 – Baseline Current Performance is completed,
Step 1: Develop a 6-12 month set of “as-is” projections, leveraging the baseline analysis and incorporating any implemented improvements from Essential Element #2. This will offer valuable insights into company performance without any additional intervening initiatives. Include forecasted P&L, Balance Sheet, and Cash Flow statements. In Turnaround efforts, it is advisable to develop a 13-week cash flow model demonstrating liquidity for the upcoming quarter.
Step 2: Upon completion of the projections, integrate the individual profit improvement plans, including expected benefit and cost timelines developed during Activity #3. This will demonstrate the expected timeline and impact of sustainable changes. benefits.
Step 3: Review the plan holistically and make any modifications necessary.
... at this point, the plan is ready for kick-off, management and delivery of benefits
* * Essential Element #5 Summary from Original Article * *
5. Develop a Focused Improvement Plan
Use the baseline analysis and the candidate opportunities to formulate the profitability improvement/turnaround plan.
Key steps include:
- Prioritize and select a few (less than 5) projects from the candidate opportunity list to be addressed in phase I of the improvement plan. These should be the opportunities with High Benefits, Low Implementation Costs, Low Time-to-Benefit and Low Risk.
- Select a proven, visionary leader to manage the overall profitability improvement/turnaround program. Note: In a distressed environment, it is often recommended to use an outside turnaround professional.
- Identify the teams and team leaders for each sub-project – charging each team with developing plans that include expected timing, resource requirements, benefits, risks and success measures.
- Use the baseline analysis to put together a 6 to 12 month financial performance forecast (income statement, balance sheet, and cash flow), at a 90% confidence level, assuming none of the identified changes have been implemented.
- Adjust the above forecast, adding the timing, benefits and implementation costs of the individual project plans.
Pro Tip: During implementation planning, establish clear success metrics to verify that the changes are delivering the desired and sustainable outcomes.
