Planning for Success

In 1981 David Steel, the then leader of the Liberal Party, was roundly criticised for telling the party faithful; “go back to your constituencies and prepare for government”.  With the benefit of hindsight, it is clear that his prediction was somewhat wide of the mark, but what he did get right is the notion that it is just as important to plan for success as it is to plan for failure.

As the economy begins to emerge from recession, now is the time to start planning for success.  Unfortunately though, our tendency is to only plan for failure! 

Risk is something all companies will plan for.  Most small companies will have “key-man” insurance policies to protect them against the loss of a key member of staff, larger companies may even have a department whose sole purpose is to assess risk.  The HR department will have succession plans for key positions in the organisation and contingency plans in case of widespread infection from something such as Swine Flu.  The IT department will have recovery plans in case of technical failures and larger companies may even have duplicate IT systems in another country – just in case!

In total, British companies will spend billions of pounds every year trying to minimise risk and limit the consequences of failure; but how much are they spending on the risk of success?

For example, thinking about your own business, have you ever considered how you would cope if demand for your product or services increased by 25%?  What you would do if you received a significant enquiry from a country you do not currently supply to?  Or what opportunities might arise if your closest rival went out of business?

But perhaps it is not surprising that people spend more time and effort on risks than opportunities as, after all, falling foul of a serious risk could kill your business, whereas missing an opportunity is unlikely to be quite so serious.

While this is undoubtedly true, the fact is that profit is the reward for risk as, if there were no risk, more and more people would enter your market and drive down the price until profits reached zero.  Risk and opportunity are therefore closely related and should be regarded in a similar way.

For example, in the aftermath following the events of 9/11, demand for airline tickets fell dramatically.  Although the event itself was a complete surprise, many airlines had already prepared contingency plans in case of a major terrorist attack.  They were therefore able to limit their losses by laying off thousands of members of staff and taking aircraft out of commission. 

But one airline had a plan that was quite different. Southwest Airlines in the United States was the only major airline in the world not to make redundancies.  Instead of reducing headcount, they took the view that they would accept a reduction in profits as a consequence of retaining their staff and maintaining their service for those customers that wished to continue flying.  Interestingly, Southwest was the only major airline in the world not to make a loss in the year following 9/11 and, when demand started to return, it did not have the challenge of recruiting and training new staff or of bringing new aircraft into service.  Moreover, its reputation improved amongst customers, employees and investors.  Little wonder that Southwest enjoys excellent relations with its employees and the employee unions while British Airways doesn’t.

In this example, one organisation’s risk was viewed by another organisation as an opportunity.  The risk perceived by most airlines was that income and profits would fall - they were correct, they did!  The opportunity perceived by Southwest was that they could demonstrate that they were true to their philosophy that employees come first, customers second and profits third.

The key question for businesses today therefore is are you planning for success?  It may be debatable as to whether the recession is over, but the fact that some “green shoots” of recovery are emerging is not.  Do you have the wherewithal to spot those green shoots and the ability to capitalise on them if and when you do?  If not, then what are you going to do about it?

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About the Author
Alistair Schofield is Managing Director of Extensor Limited.

  Success or Failure