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September 2004

ANNOUNCEMENTS

“You can’t help them if they don’t want to improve.”
Bus Driver, Rental Car Company, Talking About Problems With The Company.
Denver Airport, August, 2004

My response to the driver: “That says it all.”

Herb Rubenstein Consulting HIRED TO KEYNOTE LIFENET'S MEGASTAFF MEETING IN OCTOBER

One large, entrepreneurial nonprofit in Virginia that is always looking for ways to improve is LifeNet, Inc. Herb Rubenstein Consulting has worked with this organization’s board of directors and the company has recently embarked on a “visioning” exercise that is opening new pathways for employees and company leaders to communicate new strategies to management for improvement of the organization. Herb Rubenstein will be the keynote speaker to LifeNet’s 450 employees at LifeNet’s Annual Megastaff Meeting on October 21, 2004 titled: “Leadership, Entrepreneurship and Working: Three Sides of the Same Coin.” Yes, there are three sides to every coin (when you count the edge as a side, which it is, of course!). Be sure to look at our website at www.growth-strategies.com for a summary of this address coming next month and for all of the new articles and book offerings recently posted on the site.

BASSI INVESTMENTS TO PRESENT PAPER AT SRI IN THE ROCKIES IN OCTOBER

Introduction

Recently, it came to my attention that a well known consulting firm is now charging between $300,000 and $350,000 to write business plans for non-profit organizations. Given the large dollars going into the drafting of business plans and the confusion over the difference between a “business plan” and a “strategic plan”, I wanted to devote this article to explaining the basic elements of business planning and strategic planning and to make some distinctions between the two.

At the annual conference of The Association of Continuing Legal Administrators during a session on “how to write a business plan” a huge debate erupted over what constitutes proper elements of a business plan and what constitutes proper elements of a strategic plan. This article will hopefully inform that debate.

History and Context

At the 1998 Strategic Leadership Forum conference in Chicago, Dan Simpson, then Vice-President for Strategic Planning for Clorox, Inc. and Peter Ellis, then Vice-President for Strategic Planning for Textron, Inc. held a fascinating debate over what constitutes the best type of strategic plan. Dan Simpson held the view that a strategic plan should evaluate the current and expected future capacities of an organization and the future needs of the market, and based on these qualitative and quantitative evaluations, a strategic plan should be in a narrative form that spells out the direction of the company or organization for the next three to five years.

Peter Ellis disagreed. Ellis suggested that at his company, Textron, an employee at any level is not considered to have a business idea worth talking much about unless and until that idea is backed by detailed quantitative spreadsheets outlining every conceivable cost, barrier to entry, revenue potential, profit margin, regulatory and liability issues, competitive analysis, and all quantitative/economic factors regarding the needed inputs into the development, production, quality assurance, marketing, sales, distribution and warranty protection and service aspects of this business idea.

Ellis’s support for the position that a strategic plan must be backed up with voluminous financial data is his view that without these data, exact and verified, one can not make intelligent business decisions about a potential future course of action. Frankly put, without this information, Ellis believes an idea is too premature to put into a strategic planning document.

Who’s right? This paper takes the point of view that as in most clear cut disagreements, the parties were just talking about different things in the first place. There is no doubt that a strategic plan and a business plan must be well informed. At that same Strategic Leadership Forum conference in 1998, Daniel Knight chaired a panel that included Dr. Barbara Lawton, Ph.D., (then V.P. for Business and Quality Processes at Storage Technology Corporation) and representatives from Johnson and Johnson and Hughes Aerospace, that focused on knowledge management as a business imperative. Organizations must have organized methods of gathering, sharing, storing and being able to retrieve knowledge and information that the individuals and groups within the organization acquire and develop on a daily basis. David Packard once said that HP was a 3 billion dollar company. But if HP knew and could access everything that each employee of HP knew, it would be a 9 billion dollar company.

Therefore, the first thing to realize about a business plan or a strategic plan is that it must be based on, and informed by, what the organization and its employees know. While this seems obvious, whenever consultants are brought into the strategic or business planning process (which is often) much of the knowledge of the organization and its employees is never transferred properly to the business plan or strategic plan writer.

Business Plans say "How" – Strategic Plans say "What and Why"

Clearly, Peter Ellis’s version of a “strategic” plan is what most people would call a business plan. Peter’s position is that unless and until one knows all of the fundamental cost and economic prospects for a business idea or strategy, that idea or strategy does not merit inclusion into a strategic plan. Simpson’s view is that strategic plans should be more general and point out the direction for an organization and explain, in qualitative terms (with some quantitative support) why an organization should focus on certain broad new markets, products, services, improvements in innovative engineering or business processes, enhanced customer service regimens, or other breakthrough opportunities.

Big debates are no accident and it is no accident that the business plan/strategic plan debate broke out at a conference of Continuing Legal Education Administrators. First, these dedicated professionals do not regularly prepare detailed business plans. They can never predict how many people will show up for a course, can never know if a new set of courses will take hold in the marketplace and can’t even predict the quality of first time educational providers or instructors. However, these administrators are masters of the art of strategic planning. They can determine, with great qualitative precision, what new areas to teach, new formats for courses, new systems of planning and marketing courses, and they work very closely with State Bar Associations to set the exacting requirements for credentialing new courses. All of these elements are included in the robust strategic plans of CLE administrators around the country. So, in this crowd of people who are primarily strategic planners, not business plan writers, a business plan writing specialist is sure to start a serious debate when discussing drafting business plans.

A few years ago our firm was approached to consider a research and planning project where an popular island off the coast of Virginia was seeking advice regarding whether it needed a new bridge to connect it to the mainland. In order to develop a strategic plan for the island to help them make a decision on whether to repair the old bridge or build a new one, there is a huge amount of technical engineering, environmental, sociological, demographic, economic and physical planning/zoning work that must go into the strategic plan. Certainly detailed cost studies are an important element of this process giving strong weight to the Ellis argument.

But, in this instance, clearly the development of a strategic plan to guide a community does not require the voluminous financial analysis that would be required to develop a business plan for this endeavor. A business plan would have to have great precision on all cost and financing options, all expected revenue impacts, all economic impacts to the community in the short and long run and requires certainty in a way that a strategic plan is not required to achieve. So, Dan Simpson’s argument shows great merit in this situation. The idea of a bridge or road requiring a strategic plan is not new. Today, with roads and bridges often being built and owned by private companies and paid for by tolls, POV’s (Pay occupancy vehicles – one pays a fee to drive in the HOV – high occupancy vehicle reserved lanes), and with transportation dollars in short supply from governments, each major road project needs both a strategic plan to help manage the “conversation” and decision making process leading up to the decision, and a business plan to help actually guide and manage the project.

The Difference is Elementary

One element of confusion in the business plan/strategic plan debate is now non-profits are writing “business plans” where they did not do this often in the past. The primary difference between a for-profit business plan and a non-profit business plan is the metrics and goals in a non-profit business plan will be different. Unlike a for-profit business plan, in a non-profit business plan, many of the metrics used and goals identified will not be financial. These goals and metrics help define and support the mission of the organization and propel the organization to undertake activities that may not prove to be financially rewarding to the organization. A for-profit business plan must include some return on investment analysis for almost every dollar the organization spends. Key elements of a non-profit organization’s business plan would include:

• Creating a revenue model (including a “fundraising model” and income model)
• Assessment of hiring needs to meet current and expected contractual and mission specific demands
• Securing effective public relations support to get its message out
• Accurately assessing the social need for the organization’s services and products
• Development of a marketing plan to seek new revenue and non-revenue generating activities that will allow the organization to fulfill its mission more fully than is allowed under present funding constraints
• Creating realistic expense and revenue budgets
• Building in feedback systems to inform the organization as to the success or lack of success in realizing its business plan and its goals.

Creating a for-profit business plan requires a razor sharp analysis of the market and demand factors, competitive forces, profit margins, cost factors as the company or activity scales, detailed analysis of marketing, advertising and distribution costs, and strong analytical work in the area of human capital and organizational capacity. For-profit business plans must be able to provide clear direction to show the company how to make a profit at many different levels of supply and demand. This is not the case, in large part, in the non-profit world.

The major difference between a strategic planning process and a business planning process is a business planning process builds on a strategic planning process. The business plan is more tactical and is more quantitative/financial in nature. A strategic plan focuses on identifying and clarifying:

1) What your organization intends to accomplish by when
2) State clearly the vision, mission and measurable goals of the organization
3) Performing a gap analysis: A gap analysis has three parts:

a) Identify the present situation with clarity and gain an understanding of the history that has led to the current situation with the goal of refining the mission and vision statements and developing a clear sense of new goals for the next five year period;
b) Identify the desired or expected future with numerical precision and realistic timeframes;
c) Determine how and by when this future can or will be realized and at what cost.

4) What resources are now available to your organization or can be recruited including volunteer, in-kind and related resources and how to account for them financially
5) Determination of the strategic approach to insure how these factors can be best combined to accomplish the organization’s mission
6) What courses of action will be taken in order to direct the organization toward accomplishing these goals including what mergers, acquisitions and strategic alliances will be formed to accomplish your goals
7) What critical issues need to be addressed before rapid growth can be contemplated and planned for. For example, operating deficiencies, governance, board performance, leadership and staff performance, public relations, financial performance, etc.

To develop a strong, implementable business plan, anyone taking on such a project for a company or non-profit must follow these steps, at a minimum.

1) Document review and analysis – Review all previous business and strategic plans, all budgets, all significant internal memoranda, all Public Relations generated by outside sources (newspapers, etc) and internally generated information (ad copy and brochures) about the organization since its inception. Other key documents such as job descriptions, survey results and membership data will also be reviewed, where available.

2) Learn what the entire organization knows and use it in the business plan.

3) Project kickoff meeting – Hold meetings with all key leaders of the organization to finalize the planning of the project, discuss findings of the document review, set schedule. At this meeting a reasonable timeframe, budget and allocation of research, writing and quality assurance responsibilities will be developed.

4) Agree on the Outline – Begin to address the questions listed above and agree on outline for the business plan Deployment of Agreed Upon Strategic Development Planning Tools:

5) Ongoing Meetings with key leaders and key stakeholders:
These meetings will be held weekly or as needed to share information, to update all parties on progress, provide preliminary findings and to refine the scope of the project as necessary to meet current needs.

6) Document Preparation and Review:
Prepare key planning documents and sub-plans on such areas as:
• Operating budgets including revenue and expenses
• Develop revenue/resource model citing the optimal mix of funding from various sources including volunteers and in-kind contributions
• Competitive Analysis
• Identify Appropriate entrepreneurial activities for organization, including

• New products/ services that will help attract and sustain revenue
• Strategic alliances and partnering opportunities to expand offerings
• Create revenue and cost projections for each income producing idea
• Develop Marketing and Communication Strategies and Public Relations, including
• Develop Case statement/Value proposition
• Message development
• Cultivation strategies
• Prepare overall capital, budget and financial plans
• Analyze all Technology requirements
• Analyze all infrastructure requirements
• Develop feedback systems and identification of evaluation measures of organizational success

7) Implementation Planning and Assistance:
Strategic plans and business plans do not stop the day they are written. They are living documents that must change as the organization learns more about its successes and failures. Business plans will include recommendations for tactical strategies to implement the business development plan, and some work and some fail. Developing systems to catch failures rapidly is a key element in promoting the success of a business plan.

A business plan, much more than a strategic plan, must develop the proper timing and sequencing for each activity to be undertaken and each sub-activity necessary to accomplish all major activities in the business plan. “Prioritization” and sequencing are major roles of business plans that are not key elements of a strategic plan. To emphasize this point, we paraphrase Marvin Bower, the former head of McKinsey & Company, from his book, Perspectives on McKinsey:

Any consultant can figure out what needs to be done quite quickly, however few can figure out exactly what order is best for an organization to begin implementing things so that the best result is achieved and the goals of the plan can be reached or exceeded.

Conclusion

Now that some light has been shed on the difference between a strategic plan and a business plan, remember that many people will not make such a clear distinction. There has been a new movement among non-profits, especially, to develop a hybrid document, called the "Strategic Business Plan." At $300,000 a pop for a business plan, it is no surprise that an organization would want to get as much bang for its buck as possible. What is most important in drafting both strategic and business plans for the writer or team assigned to the project is that they understand all of the knowledge, expertise, capacity, objectives and needs of the company or organization, and feed these properly into the plan.

Whether an organization wants to develop a strategic plan first, or skip this phase and go straight to the creation of a business plan, the planning process must be as much a research oriented process as it is an analytical or creative process. Research, analysis and creativity, in that order are the essential ingredients in either a business plan or a strategic plan. Significant resources are necessary to do an adequate job in each of these three categories and to make the plans a contribution to the organization.

Biographical Information

Herb Rubenstein is an attorney and the CEO of Herb Rubenstein Consulting, a leadership and management consulting firm. He is co-author of Breakthrough, Inc. – High Growth Strategies for Entrepreneurial Organizations (Prentice Hall/Financial Times, 1999). He also serves as an Adjunct Professor of Strategic Planning and Leadership at George Washington University, is a founding director of the Association of Professional Futurists, and is the author of numerous articles on futures studies, leadership and strategic planning. He has his law degree from Georgetown University, his Master of Public Affairs from the LBJ School of Public Affairs, a graduate degree in sociology from the University of Bristol in Bristol, England and was a Phi Beta Kappa/Omicron Delta Kappa graduate from Washington and Lee University in 1974. His email address is herb@herbrubenstein.com and he can be reached at (301) 718-4200 in Bethesda, Maryland or (202) 236-7626 in Washington, D.C.

ARTICLE

A New Framework for Conducting a Search for a School Superintendent

Article by Herb Rubenstein, President and Founder, Herb Rubenstein Consulting and
David Smith, Executive Vice President, DHR International, Inc.

Introduction

Public schools are being challenged on many fronts. There are the political battles between Mayors, Governors, school boards and school superintendents over who shall have the authority to run the schools. There is the just concluded search that took place for nearly a year in Washington, DC where numerous candidates backed out in spite of the $450,000 salary and $150,000 benefits package.

Recent research sponsored by the Education Commission of the States by Thomas E. Glass, of the University of Memphis, concluded that a significant number of search consultants involved in the search process for school superintendents believed that:

• The quantity of candidates was decreasing
• The quality of candidates was decreasing
• Retirement system incompatibility was a limiting factor in the superintendent search
• School boards are not properly trained to find qualified superintendents

These findings are alarming, but not surprising. Another study recently found the entire concept of “superintendency” may now be in question since the job requires so many different skills from financial administration, dealing successfully with unions and difficult labor issues, challenging community and stakeholder relations, school board, mayor and governor infighting and increased pressure to increase school test scores.

This article takes as a given that someone must run our public schools. We believe the job of superintendent of schools is here to stay and, therefore, the search process needs to be improved. This article presents a new approach to improving the school superintendent search that will improve the quality of schools themselves and improve the fit between the person selected and the school system.

First, we describe the current system and then our new “SuperSearch” system.

The Current System- Five Stages

Stage T – 2 (T Minus 2):

A school board realizes that over the next several months, or weeks (or days) that its current superintendent will be leaving his or her post. Cisis management sets in regarding the task of replacing the superintendent. The board begins to discuss what type of superintendent it wants and begins to review internal candidates who might fill the bill.

Stage T-1 (T Minus 1)

The school board begins to identify desired competencies, prepares a list of internal candidates, determines a recruiting strategy - which may or may not entail the use of a search firm or outside resources - and gets ready to announce the formal phase of the search process.

Stage T-O (T Minus 0)

The school board announces that a formal search is underway, announces what recruiting strategy and resources will be utilized, and begins to collect resumes from candidates.

Stage T + 1 (T Plus 1)

The school board, in conjunction with a consultant or search firm (if any), actively recruits candidates, reviews resumes, holds interviews, evaluates the candidates, conducts background checks, and tries to reach an agreement on the best candidate from the pool of applicants.

Stage T + 2 (T Plus 2)

An offer is made to a candidate and an agreement is reached for this candidate to become the next school superintendent.
The current process that school boards use to find their next Superintendent is as simple and direct as it is flawed and designed for failure. The search process for a superintendent of schools must include more. The process we outline has nine, not five stages. Each stage is discussed below.

The New “Super Search” Selection Process

Stage T-4: Succession Planning

Actions:

• The School board is always ready for the possibility that the current school superintendent may depart for unexpected reasons and an ongoing contingency plan is developed and put in place to hire a replacement. This plan is called a strategic, succession plan
• The school board is continuously identifying internal candidates who are interested and qualified for promotion to superintendent.
• The school board is continuously alert for quality individuals from outside the district who would be potentially interested in becoming the next superintendent of schools

Stage T-3: School Assessment

Actions:

• The school board on a continuous basis conducts rigorous, statistically based assessments of the management and development of the people that work for the school system, both teachers and administrators.
• Tools like the Human Capital Capability Scorecard TM (www.mcbassi.com) are used to show the school board and current superintendent current shortcomings and strengths in the schools
• Community groups participate actively as stakeholders in the assessment of the schools
• Reports are regularly generated and widely distributed based on the assessments to show what changes are needed over the next several years to improve the schools

Stage T-2: Competency Analysis

Actions:

• Schools use the assessment reports to figure out what competencies that will be needed in the next superintendent
• Schools regularly evaluate the current superintendent and if the superintendent does not have the competencies needed or is failing in the performance on the job, the school superintendent is counseled and/or removed

Stage T-1: School District Realizes That It Needs New Superintendent In The Near Future

Actions:

• The school board learns that a superintendent is leaving and announces the opening
• School board, with input from the school assessment reports and community groups serving as stakeholders, creates and publishes a set of competencies, in priority order, for the position
• School board sets salary, benefits
• School board appoints a search committee
• School board interviews search firms and may select one to assist with the process

Stage T-0: Formal Search Begins

Actions:

• School board/search committee/search firm collects resumes and begins the candidate evaluation process
• Community groups/stakeholders provide input with regard to candidate profile.

Stage T+1: The Search Becomes Selective

Actions:

• Interviews begin with short-listed candidates
• Short-listed candidates are shown school assessment reports and asked to prepare a presentation addressing how each would use the data in the school assessment reports to help guide them in the management and improvement of the schools
• Candidates’ responses to all written questions and the school assessment reports are shared with the search committee
• Preliminary agreement reached with all short-listed candidates on salary and benefits to insure that this will not be an issue later in the process
• Results of behavioral interviews, reference checks, background checks, “future-focused” leadership assessments, writing sample, and personal presentations reviewed and evaluated

Stage T+2: Selection of Superintendents

Actions:

• Search Committee recommends and establishes a “final list” of candidates
• “Finalists” are provided an opportunity to interact with stakeholders – public vetting. Note: some of the best candidates may demand absolute secrecy prior to an actual offer of employment. States with ‘sunshine laws’ can pose unique recruitment challenges
• The school board/search committee considers input received from all sources and makes a hiring decision
• School superintendent selected
• Offer/contract negotiated and signed

Stage T+3: School Superintendent Monitored

Actions:

• At 60 day intervals, a group called the “superintendent review committee” comprised of the school board and community groups prepares and issues a report on whether the superintendent is performing consistently with the approach he or she outlined in response to the school assessment data and reports

Stage T+4: Redo School Assessment and Issue New Report

Actions:

• After each 90 or 180 day period, redo the school assessment study and issue report
• Carefully monitor progress on each factor where the original school assessment report showed the need for improvement

Conclusion

The new school superintendent “Super Search” search process has nine stages. Without a school assessment conducted with statistical precision, showing the deficiencies in the school system, a school board cam not know what type of candidate is needed for the position of school superintendent. Nor can a candidate for the position know if his or her strengths can be best utilized in the new position to fix the school district’s most substantial problems without this knowledge. Only by understanding the school district empirically through valid statistical instruments can a school board and community groups be properly guided to select the candidate with the best matched strengths for the specific challenges a school district faces.

Armed with statistical data pertaining to the district’s performance, and informed by a comprehensive strategic leadership assessment protocol, the school board or search committee is then able to select and hire a highly qualified superintendent who possesses the executive leadership skills necessary to succeed in the swirling maelstrom of 21st Century education.

This “Super Search” process will yield better matches between available talent and a school district’s needs in a superintendent than the current system. The research shows that business as usual is not working in the school superintendent search process. Now, it is time to change this process in a way that not only improves the candidate attraction and selection process itself, but also improves the schools along the way. This is why the school assessment process is such an important element in selecting the right school superintendent.

Biographical Information

Herb Rubenstein is an attorney and the CEO of Herb Rubenstein Consulting, a leadership and management consulting firm. He is co-author of Breakthrough, Inc. – High Growth Strategies for Entrepreneurial Organizations (Prentice Hall/Financial Times, 1999). He also serves as an Adjunct Professor of Strategic Planning and Leadership at George Washington University, is a founding director of the Association of Professional Futurists, and is the author of numerous articles on futures studies, leadership and strategic planning. He has his law degree from Georgetown University, his Master of Public Affairs from the LBJ School of Public Affairs, a graduate degree in sociology from the University of Bristol in Bristol, England and was a Phi Beta Kappa/Omicron Delta Kappa graduate from Washington and Lee University in 1974. His email address is herb@herbrubenstein.com and he can be reached at (301) 718-4200 in Bethesda, Maryland or (202) 236-7626 in Washington, D.C.

David Smith is an Executive Vice President with DHR International, the nation’s 5th largest retained executive search organization. He is a 21-year veteran of executive search having served education, Fortune 100, emerging growth, and nonprofit clients. DHR is the only “Top 10” search firm with a K-12 Practice Group. DHR has forged a first of a kind formal relationship with Duquesne University’s School of Education and the Leadership Institute to inform clients with regard to ‘best practices.’ DHR has also established a proprietary relationship with Dr. Charles Schwann, co-author of AASA’s #1 best selling book, Total Leaders to incorporate his Strategic Leadership Assessment in to the education CEO (superintendent) search process. His e-mail address is dsmith@dhrinternational.com and he can be reached at (412) 261-1492 Ext 16 in Pittsburgh, PA.

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