Steve Tsengas learned about strategic planning on the job.
The founder, president and CEO of OurPet’s Co. started out in the mid-1960s as a 24-year-old industrial engineer for Eastman Kodak, where he started to wonder why the company paid employees based on how many rejects they found when the goal was to supply a quality product.
One day, he asked a co-worker what about her job excited her. The middle-aged lady considered his question and told him about the time the department head personally thanked the employees after a successful production push. That incident, she said, had happened 17 years ago.
That incident has helped shape how Tsengas has grown his pet product company to 2006 revenue of about $10 million.
Smart Business spoke with Tsengas about how entrepreneurs can reshape a company to ready it for growth.
Q: How do you achieve business growth?
An example I use is a biplane. It’s great for low speeds, it’s highly maneuverable and you can do all kinds of things with it. That kind of a small company has its advantages. But in about the fifth year, when you reach about $5 million to $6 million, you get to a phase where you are becoming a mid-sized company. You’re dealing with the Wal-Marts and the PetSmarts. The organization continues growing and you need to hire higher caliber people.
Then your growth develops exponentially in the takeoff stage. This is where you need to come out like you’re going through the sound barrier. If you’re still maintaining a biplane, it’s going to start shaking apart.
So you have to change the shape into a plane that looks like a jet. Our goal is to maintain about a 40 percent growth rate over the next three to five years.
You need to go through that phase, then my role keeps changing, becoming more and more administrative and financial and shareholder-related.
Q: What is a major pitfall business owners should avoid?
If you look at the entrepreneur’s personality, your classical hard-driving entrepreneur wants to stay in the decision role. He does not want to let go, has not very high confidence in other people, feels he’s the one who can do it the best which is great in the beginning, but you get to $5 million to $7 million and that’s no good.
The biggest problem occurs when entrepreneurs cannot make this transition. They cannot let go. They still want to be flying the little biplane instead of understanding that the more you let go, the more control you have.
Q: How can a CEO take that step?
It goes back to having participation and involvement of people in your business plan.
The legitimacy of involvement is because it affects the decisions in the organization. They can make a contribution, they can help with the implementation and they can make it work.
That’s a legitimate situation to involve the people, subordinates. The heavy emphasis should be on preparation of a business plan, the development of goals. My role goes from controlling to monitoring and coaching.
At the beginning, you may spend 90 percent of your time on technical and manufacturing problems. By the fifth year, it becomes more and more administrative and financial.
It becomes more about putting systems together for controlling the organization and interfacing with customers. Now my emphasis is measuring the output, through the business plan. As long as the variances are under control, the organization is in control.
Q: How do you develop a vision for a company?
Strategic planning is important not only as a tool for management but as a tremendous tool for team-building in an organization. It draws all the various functions together, to focus and plan a road map on how to get from point A to point B, so everybody understands their role.
And it provides, just like if you’re going on a trip, a road map, you measure at critical points, time points, instances if you need to take corrective action.
So you combine strategic planning along with creating an environment in an organization that involves participation and commitment, those two tied together. You can create some very highly productive organizations.
We get away for one day and open up and start putting together the next three-year business plan. There’s agreement on goals; there’s consensus on how to get from point A to point B.
These goals are kept in front of everybody throughout the year. For example, we get together and look at what we forecast for revenue. Then we look at where we are and adjust.
Everybody knows how we’re doing. It’s all published on a bulletin board so people can see it daily. It’s the development of goals, the feedback of people in the creation of these goals and discussion of performance.
HOW TO REACH: OurPet’s Co., (440) 354-6500 or www.our-pets.com