The Performance Multiplier: A Comprehensive Strategic Approach
Written by Dr. Ralph Williams, Jones College of Business, Middle Tennessee State University
When printing company leaders apply a Comprehensive Strategic Approach (CSA), they implement strategic planning, goal setting, and financial analysis concurrently and effectively. In multiple “Printing Industry Performance & Insights” studies, we have found a positive relationship between printing company leaders’ use of CSA and higher firm performance. Also, we’ve published multiple research papers about CSA in peer-reviewed academic journals, and numerous other professors have cited our CSA work in their research, further validating our findings. That leads to an important question: Based on our findings, what are the actionable implications for printing company leaders?
Printing company leaders, you should strategically plan – both periodically and systematically. Set a time, at least once a year, for you and your team to step back and analyze your external and internal business environment. Examine what’s happening in the macroeconomic environment, what your competitors are doing, and how those external elements might affect your business. In the external environment, you should look for Opportunities and Threats. Looking at your own company internally, subjectively examine your Strengths and Weaknesses? (Are you seeing some “SWOT” here?)
Based on this external and internal review, you must develop a plan for your path forward. Review your mission statement: who is (are) your target market(s), and what value do you provide? Have you made your mission explicit and shared it with your team? Do you have a vision for the future? If so, what are your steps to achieve that vision? Do you have long-term and short-term goals? Take notes on your team’s thinking and your plan and review them in your next meeting.
Also, you must strive to better understand your firm’s financial health. In our last “Printing Industry Performance & Insights” survey examining CSA, we asked printing company leaders whether they monitored the following financial ratios: current ratio, debt-to-assets, net profit margin, return on equity, and sales-to-assets. From in-depth statistical validation, we know that these important ratios contribute to strategic planning by providing a deeper assessment of your business’s health and pointing to improvement opportunities.
Unfortunately, our work revealed that relatively few small business leaders truly understand these ratios. If you’re not familiar with these ratios, you might seek related training seminars or even ask your accountant or banker for help. You might watch YouTube videos about these ratios to enhance your financial literacy.
Don’t look at these ratios just once, but examine them over time. Doing so might help identify trends to address in your strategic planning, such as… Is your net profit margin increasing or decreasing? Are your sales per dollar invested in assets increasing or decreasing? Stated differently, how efficient are your fixed assets? Think of these financial ratios as “key performance indicators” to help form your firm’s strategy and goals. As you do so, you might begin to see the synergy among strategic planning, financial ratio analysis, and goal setting.
We also asked in the survey whether you make goals “known to all managers.” This relates to execution. It is important to carefully craft and clearly communicate the firm’s goals to everyone who plays a role in achieving them. When small business leaders share written long-term and short-term goals with their team, they generally see greater collective organizational commitment to those goals. Also, communicating goals may prompt constructive and helpful feedback… if the leaders are good listeners!
So, we hope that you see value in investing time and resources into applying CSA – strategically planning, assessing financial ratios, and setting goals… together. Strategic planning, financial ratio analysis, and goal setting are all important, but they are synergistic (producing more when done together)! This might seem complicated, but see it as simple… plan, analyze the numbers, and set goals in unison! As stated in our title, together, they are a performance multiplier!
