Master planner Featured

8:00pm EDT September 20, 2006
 Several years ago, Lanny Wilhelm sat down with the senior managers of a newly acquired company.

“To my surprise, a number of their staff people had no idea how much revenue the company was doing,” says Wilhelm, president of Indianapolis-based Liquid Transport Corp., a tank truck transportation company. “I was absolutely stunned when I found that out. You can’t hold people accountable if they don’t know what they’re being held accountable for.”

For Wilhelm, accountability is a function of planning. Lay out a clear plan for everyone to follow, and then compare individual results to those goals to make sure your business stays on track for growth. Using this methodology, Wilhelm has grown Liquid Transport from $75 million in revenue in the mid-’90s to $105 million last year.

“All CEOs should have a good plan where they want to go on a year-by-year basis,” Wilhelm says. “They should have a method where they’re monitoring on a daily and a weekly basis that performance.”

And they need to share that information with the people who are expected to carry out the plan.

“If you have a management staff that works with you and they have no idea of what your goals are for the year, how much revenue you want to do, how much pretax, if they’re not part of that plan, they’re just operating from a blind position,” Wilhelm says. “If you share information with people, they know what the goals are from a corporate level and that their respective departments are going to be held accountable for a certain percentage of growth and profit and safe operations.

“They can work far better and be a lot more productive than those companies that just refuse to give people information.”

The process
Wilhelm has taken a dedicated approach to planning since he joined the company in the early 1980s.

“We felt if we focused ... and had the people that were very focused and shared the same vision, we would grow and be very successful as each year passed, and that turned out to be the case,” he says.

While the plan changes year to year, the guiding principles remain the same.

“In the mid to late ’80s, we sat down and knew we had to grow if we were going to be a survivor,” Wilhelm says. “But we weren’t interested in growing without being able to maintain a level of profitability.

“We’ve always been very conservative in managing Liquid Transport, but we also believed we had to take a certain calculated risk in growing Liquid. We were not going to go out and open up terminals throughout the United States, add expense and do things without first knowing we had good contracts in place, good people, and that these revenue bases we wanted to expand into would support those terminal locations and produce some profit at the end of the day for us.”

For Wilhelm and Liquid Transport, planning starts with the budgeting process during the fall.

“Every year in October, we ask our senior management staff to put together budgets for their individual departments for the upcoming year,” Wilhelm says. “Once those budgets are prepared, the CFO and I review them to make sure there is sound thinking behind those budget processes.”

The company’s goal is to grow revenue by about 10 percent each year. Budgets are compiled and compared to the goal.

“If the budgets fall in line where we’re going to produce 8 percent pretax (profit), then we approve the budgets; if they don’t, then we send them back to those managers and ask them to redo their budget plan,” Wilhelm says.

Discussion on the budgets continues from October into December. In mid-December, the plan is rolled out to the managers.

“One of the things I’ll always tell our people in December when we have our senior management meeting, ‘You tell me right now if this plan is workable. If you’ve got an issue and you don’t think what you’ve put in the plan is going to work, then let’s talk about it and make the necessary corrections,’” he says. “After December, when the plan is rolled out, there’s no turning back. Everybody will be held accountable for it. I do hold people very accountable for goals we set for the year.”

Accountability
Holding people accountable means the company must have systems in place to track performance.

“If you want a good company and to have a successful company, you have to be able to monitor and measure activities on a daily basis,” Wilhelm says. “A lot of companies don’t do that. They think they’re measuring, but they’re really not. They may be benchmarking three or four or five items they feel (are necessary) to make their company successful. They should be benchmarking maybe 15.

“We do a monthly P&L and a budget preparation. We benchmark actual performance against our budgeted performance.”

In a month’s time, things can go too far awry, so many of Liquid Transport’s metrics are measured weekly and sometimes even more often.

“We actually do tracking on a daily basis of certain things,” Wilhelm says. “We have a meeting with our senior staff once a month, and we review the prior month’s activities. We do a budget for every month. If something is skewed a little bit or the numbers come in high, then I ask that manager to tell me what caused that problem. Whatever the case may be, I ask him to correct that and have it back in line for the next month.”

The constant monitoring of the business gives Wilhelm a way to check the health of the operation.

“It enables us to react very quickly if the market changes or if we have a business drop,” he says. “If customers ask us to do special things ... that may cause us to spend more money on projects. We know very quickly how we can adjust our budgets based on what the current needs are. Monitoring that on a weekly basis and reviewing it monthly, we can respond very quickly to the market changes.”

The ability to move quickly is one of the things that allows Liquid Transport to continue growing.

“You may have a great program sitting on the shelf, but if you never get it off the shelf, it doesn’t mean anything,” Wilhelm says. “You have to get your program off the shelf and get it into practical use and hold people accountable for those things.”

There are no surprises. Everyone in the company knows what he or she is responsible for, and they have clear access to the information.

Information is broken down into specific categories. For example, traffic accidents are broken down into categories such as lane changes, rear end or crossing the centerline, so that safety or training initiatives can be targeted to correct trends.

“We do a number of different charts and graphs on a daily basis and a weekly basis — not only our safety performance but our overall performance,” Wilhelm says. “Are we giving our customer timely service and delivering loads on time? Are we not having any particular problems with the customer’s plan relative to equipment leaking and things like that?”

When managers do meet expectations, they are rewarded.

“We have a nice bonus structure for all of our personnel, and that’s keyed directly toward achieving pretax profits,” Wilhelm says. “We take a certain percentage of pretax profits, and everyone knows what that percentage is going to be for the year. If we achieve that level, then that bonus pool is divided up amongst all of our managers.”

Focus on the now
When Wilhelm joined Liquid Transport, the company was doing about $30 million in annual revenue. He set a 10-year target of $75 million. That was the last time he employed a long-term strategy.

“A 10-year plan would actually be worthless to us right now with the business base changing so dramatically,” he says. “We did a crystal ball of where we’d like to be in 10 years. We were pretty much on target. Back then it was easier to. You had customers that you had served for many years. The same people were in those (decision-making) positions.

“They could tell you, over the next three years, ‘We’re going to expand into a certain marketplace. If you folks want to go along with us, that’s fine.’”

That is simply no longer the case.

“Chemical companies are merging and closing,” Wilhelm says. “The business base is changing so dramatically from being (domestic to) a lot of the business base controlled outside of the U.S.”

The manner in which business is conducted has changed as well.

“Everything is done on bids today,” Wilhelm says. “The business used to be more on a personal relationship type business where you built a relationship over the years. That customer knew you very well. In today’s environment, that’s not really the case. People in the transportation functions of these companies change almost monthly. There’s not so much of a relationship basis as there used to be.”

The rapid pace of changes makes any in-depth long-range planning pointless.

“Two years from now, the plan you may have is so antiquated it’s not worth spending effort on it,” he says.

That said, Wilhelm does look beyond the coming year while making the yearly budget, but not with any great detail.

“We try to project for a three-year period, but we don’t go above three years anymore,” he says. “To be honest about it, it’s very difficult other than planning for terminal expansions and things like that. It’s hard to do even a three-year plan in this business anymore.”

While Wilhelm’s main plan focuses on the budget for the coming year, the process touches a lot more than just the numbers.

“No. 1, it’s having a strong base of customers that expand and that provide an additional source of revenue to us at (key) geographical locations around the country,” Wilhelm says. “Secondly, it’s having a good plan on the equipment that you’re going to have come in every year.

“You have to look out and say, ‘OK, we need to order 20 new trailers a year or 40,’ whatever the number may be, then budget those numbers. That’s going to generate that amount of revenue for you on an annual basis. You have to make sure that you’ve got the right people in place and a good source of drivers coming in.”

Having the right drivers is key to making the yearly 10 percent revenue growth plan work and is a factor the planning and budgeting process identified. It costs more than $6,000 to train every new driver, and with some 600 drivers, a high turnover rate could be a huge expense for the company, one that could cut deeply into the goal of earning an 8 percent pretax profit.

The trucking industry averages more than 100 percent turnover every year, while Liquid Transport’s turnover is only 37 percent. Because the success of the budget is so dependent on keeping drivers, Wilhelm has created training and development programs to keep turnover to a minimum.

“It’s a very difficult job driving a truck today,” Wilhelm says. “Those companies that don’t respond to the needs of their drivers and all of their employees are going to continue having a difficult time keeping those people.”

And it all stems from the plan.

“Start early in a process, really understand and analyze what you want to do as a company,” Wilhelm says. “Make sure you have a very good game plan in place. Know exactly what you want to do and when you want to do (it). So often you see where companies announce they’re going to do certain things — roll companies together, enter a new marketplace — and they really haven’t thought the process out very far. They don’t really understand the economic consequences of what they’re doing.”

HOW TO REACH: Liquid Transport Corp., (317) 841-4200 or www.liquidtransport.com