If you ran a reasonable sized business, how would you organize it?
Think of it in layers. Call them
For a very small businesses all three layers overlap. For larger ones they are more distinct.
Vision and purpose is the role of the business leaders, the executive.
Serious work, and without it the departments will be inefficient or work at cross purpose.
The departmental leaders are responsible for establishing how to achieve the vision given their share of the limited resources. They must work at both efficiency and effectiveness. The manufacturing department may have entirely different techniques and resources than does marketing, finance, engineering or human resources. Each need to know the others exist and generally how to interact.
Departmental leaders establish methods to apply to the problems and opportunities presented to them. Possibly to argue for a change in those if their more detailed study has shown that the vision is inappropriate or incomplete.
The executive layer must supervise the interactions of the departments so that all are working towards the overall goals.
Operations implements what the departmental leaders have decided. Buy a machine, train some people, establish hiring practice and working conditions, comply with the laws, find the customers, convince the customers to buy, establish credit terms, borrow, raise capital in other ways, supervise day-to-day activities, ship, receive and a thousand more.
Departmental leaders supervise operations by comparing to some target. Like a budget.
It is hard to imagine a successful business with any layer missing.
So it is with a financial plan.
The client (vision and purpose layer) with feedback from the departments (financial advisor, accountant, lawyer, doctor, investment dealer, insurance agent) establishes the strategic view.
The departmental leaders take the vision and discover tactics to achieve the goals within the time frame and the resource limit. The executive decides which of the options to implement.
Operations sets out to apply the resources towards achieving the goals. Periodically the outcomes are reviewed and compared to expectations. If necessary, make revisions.
If there is no executive layer, the business will be chaotic. With no overall guidance, the departments will operate to suit their own purposes rather than the purposes of the group. Fundamentally, there is no adult supervision. No leadership. Mayhem follows. Like showing the cat the red laser dot and then shining the dot on the back of the sleeping dog’s head. Unforeseeable outcomes.
In the financial planning model, the client must be the executive. They may not abdicate because there is no other with the knowledge to fill the role.
A competent advisor can keep the client addressing important issues and help with establishing priorities, but they may not take over the role. They are most functional sorting out the How questions.
If you are a client and hear a tactic recommended that is unattached to a strategic goal, find a new advisor.
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Don Shaughnessy is a retired partner in an international public accounting firm and is presently with The Protectors Group, a large personal insurance, employee benefits and investment agency in Peterborough Ontario. Contact: firstname.lastname@example.org