Mary Dean

Tuesday, 28 June 2005 20:00

Target your planning process

Often, presidents and CEOs rush to create a business plan to help their bankers understand the company's direction, but a business plan suited to communicate with banks and other external parties is almost never the kind of tool needed by management to help guide critical business activities.

Outside parties and company managers have fundamentally different needs. The solution is to create two different tools -- one for external audiences, the other for internal needs.

A plan for bankers

Outside parties such as banks usually prefer brevity. Business plans suited to outside audiences generally start with short narratives and expand into detailed financial projections, which can comprise as much as two-thirds of the document.

Bankers tend to flip to projections first. Because the financial projections are so important to a banker's decision-making process, all key assumptions receive a lot of scrutiny. Lenders often set loan covenants based on company projections, so external projections should be conservative.

For the narrative portion, outsiders look for a quick history of the business and an overview of management, key customers and product/service mix. External business plans usually provide a general idea about what is envisioned for the future, but not all the detailed action steps for getting there.

A plan for managers

Company owners and managers benefit from a strategic plan that not only paints a picture of the intended future but also helps them monitor day-to-day execution of the plan. A valuable strategic-planning tool possesses four features that aren't normally found in business plans drawn up for outsiders.

  • Brutal honestly about strategic considerations. The business plan created to impress and inform outsiders will not put prominent focus on the full range of potential strategic threats and company weaknesses that might need attention. The inside strategic plan needs to consider various what-ifs and alternative future paths.
  • Meaningful direction statements. The foundation for a solid strategic plan is a set of direction statements, commonly labeled vision, mission, core competencies and business definition. Combined with information on external factors such as market trends and competition analysis, direction statements provide a framework for evaluating options and setting future strategies.
  • Idea-driven plan, not numbers-driven. While outside business plans tend to be numbers-focused, inside strategic plans should revolve around six to 12 strategic objectives that collectively describe the long-term direction.
  • Detailed short-term initiatives. A well-designed plan translates long-term strategic objectives into short-term initiatives. Each short-term initiative should be assigned to specific individuals or teams and have defined completion dates.

Adapt your process to the situation

A business plan created for outsiders is a technical task that can be completed by a small team -- even one or two people. By contrast, a well-run strategic planning process brings forth wide-ranging ideas and can be a tremendous forum for creating a shared picture of where the company is going and the providing background to understand why. The more people included, the better.

An effective process will provide key employees a context to appreciate the importance of the short-term initiatives, which is the best way to harness the energies of all the talent within the company and win buy-in to the company's strategic direction.

As much care should be paid to the process as to the content of the strategic plan. Because each company is different, a strategic planning process should be customized to meet unique circumstances, rather than following a canned approach.

A seasoned consultant can find the best way to ensure healthy discussions, determine ways to improve your process each year and offer a fresh, nonbiased perspective on strategic options.

Jonathan Dean, certified public accountant and certified valuation analyst, is director in charge of Doeren Mayhew's corporate finance and strategic services group. Doeren Mayhew, located in Troy, Mich., is a regional accounting and consulting firm that provides a wide range of professional services to middle-market companies, including business plan and strategic plan development. Reach Dean at (248) 244-3256 or


Monday, 22 July 2002 09:45

The INCENTIVE in incentive trusts

The economy has been good to you, perhaps so good that you’re thinking of creating a trust fund to preserve your wealth for your heirs.

But many entrepreneurs who have boot-strapped their way to the top chafe at the idea of giving their heirs the proverbial silver spoon. That’s where incentive trusts come in.

Incentive trusts allow you to create certain incentives that must be upheld to receive payment. Incentive trusts can influence a beneficiary to act in a certain positive way or to refrain from a specific negative behavior.

They include incentives to encourage a child to pursue an education, to work hard or to render community service. Or, an incentive trust could be created to discourage excessive consumption, laziness or self-destructive behavior.

But there is more to creating incentive trusts than meets the eye.

Oh, so popular

Americans have greater wealth now than possibly at any other time in history. While a few lucky people have inherited their wealth, the majority have earned it through hard work and long hours. The psychological impact of inheriting wealth vs. earning it is worlds apart.

For many who have earned their wealth, the attitude of, “I did it the hard way and so should you,” often prevails. Even those who don’t insist that their children share their work ethic have concerns about how their wealth will impact their children and grandchildren.

Incentive trusts let you set the rules. If your goal is to promote education and hard work, you could direct your trustee to distribute funds to your child only after he or she successfully completes each year of college and, after graduation, as he or she achieves certain career benchmarks. You could, for example, elect to reward your child with one dollar for each dollar that he or she earns on an annual basis.

The disincentives

Incentive trusts are, by their very nature, mechanisms of control. Not every child has the desire to go to college or perhaps the intellectual ability to successfully complete college. Perhaps you have a child who is extremely bright and would prefer to start a business.

What if one child is a highly paid physician while another is a lower-paid public school teacher? This is where the incentive trust gets complicated.

It probably would not be your intention to reward one child to a greater degree than the other on an earn-a-dollar, receive-a-dollar basis when both are contributing to society.

What if one of child develops health problems, which interfere with his or her ability to work? Your incentive trust could inadvertently penalize a child as a result of that.

Discretion, objectivity and structure

How would these contingencies be handled? In a word: discretion. As grantor, it’s important to give your trustee as broad a discretionary flexibility as possible in determining the amount to be distributed to a particular child.

Often it’s best to have a nonfamily member to serve with a family member trustee to make these determinations objectively. You also will wish to protect your trustee as much as possible from potential lawsuits that could be brought by an unhappy beneficiary.

Before you establish an incentive trust, consider other legal structures, such as a family limited partnership or a limited liability company, to achieve your objectives. Identify your goals and consider how the transfer of your wealth to your children and/or grandchildren may affect them and their plans for the future.

Mary Frances Dean heads estate administration at the law firm of Houston Harbaugh. Reach her at (412) 288-1846.

Tuesday, 31 January 2006 06:37

M&A success

Far too often, merger and acquisition endeavors lead to disappointing outcomes. Many M&A attempts simply crash and burn before reaching closing, after consuming lots of time and money. Then, according to a Harvard Business Review report, only one in six completed transactions ultimately achieve the hoped-for financial benefits.

Why do so many acquisition transactions fall apart during negotiations, produce under-performing results or, worse yet, wind up causing disastrous consequences? Such setbacks are frequently rooted in the absence of a tailored M&A strategy. Many transactions get underway without the acquirer having established a clear picture of what kind of acquisition might truly make sense.

Also often lacking is a planning road map that addresses how to overcome obstacles to a smooth integration, and that lays out steps to quickly capitalize on opportunities created by the acquisition.

On hearing of a company for sale, entrepreneurial-minded executives are naturally inclined to spring into action. “I really want to buy this company. Let’s go investigate, find out what it’s worth and find a way to get it.”

Responding to their leader, who appears enamored with the idea of doing a deal, the buyer’s team members immerse themselves in myriad transactional details. From that moment forth, tight timeframes preclude stepping back to reconsider basic questions, such as, Why are we doing this acquisition, and what do we hope to get out of it?

Clarify fundamental aims
Acquisitions are much more likely to be successful when a fundamental M&A strategy has been well thought through. Each distinct M&A strategy necessitates raising a different set of questions during the acquisition process, and requires divergent courses of action after the deal is done.

Formulate acquisition criteria
Having a clear M&A strategy provides a solid foundation for establishing detailed acquisition criteria that will serve to keep the strategic focus in the forefront. M&A criteria can be used to quickly screen acquisition opportunities and even prioritize them. They add discipline to the acquisition process and help eliminate wasting time on deals that appear interesting — maybe purely for financial reasons — but that don’t fit the strategy.

  • Business compatibility. A complete set of acquisition criteria includes many questions related to basic compatibility. Are the target company’s values and culture similar to the buyer’s? How are important business decisions made? How is performance measured? How are employees incented? Are customer expectations, service requirements and pricing structures well aligned between buyer and target?
  • Anticipated impacts. Filtering questions should also address implications for customers and company management. If the target operates within a complementary market segment, will existing customers embrace the expanded product offerings? Will the acquirer’s key people have to go through a steep learning curve to understand the target’s business? Will the buyer’s traditional business suffer due to management splitting its focus?
  • Ingredients of success. Some screening questions should revolve around the viability of meeting essential economic thresholds. Are we sure we possess the capabilities and resources needed to fully capitalize on the acquisition and scale up the acquired business? Do we really understand the target company’s competitive position within its market? Is its segment growing, stagnant or shrinking?

Stay true to strategic focus
Sorting out the appropriate M&A strategy helps the potential acquirer delineate between truly compelling reasons for making an acquisition and those that amount to rationalizations. Tightly defined acquisition filtering criteria help to bring well-suited M&A candidates to the forefront and rapidly eliminate poor fits.

With solid criteria in hand, it becomes possible to proactively expand M&A efforts to target desirable candidates with attributes that match key criteria — including companies that might not be on the market — rather than being limited to those known to be for sale. Finally, when everybody understands the precise goals of an acquisition, the post-closing integration process has much improved chances of success.

Jonathan Dean, Certified Public Accountant and Certified Valuation Analyst, is director in charge of Doeren Mayhew’s corporate finance and strategic services group. Doeren Mayhew, located in Troy, Michigan, is a regional accounting and consulting firm that provides a wide range of professional services to middle-market companies. Contact Dean at or (248) 244-3256.

Friday, 30 May 2003 06:53

Sideline assistance

Did you know that the cost of replacing an employee is 70 percent to 200 percent of that employee's annual salary?

As U.S. business managers struggle to lead employees and deliver results in an uncertain economy, many are turning to experienced behavioral health professionals for guidance on how to lead employees through challenging times.

Businesses are wary about the economic recovery, and many are delaying serious hiring and reducing staffing levels. Managers don't always have the time to hunt down and then adopt best practices for their workplace.

The net effect is to further increase pressure on managing teams -- not just demanding more from stressed employees.

Mental health counselors hear about workplace stress every day from employees accessing their companies' Employee Assistance Program. These efforts may be enhanced with the help of professional coaches, who encourage managerial behavior that may help alleviate employees' job stress.

CIGNA Behavioral Health is one company that offers employers access to independent coaches for individual or group meetings with managers. The program includes periodic coach-manager meetings to review progress against specific goals. It's a tool for managers to anticipate and resolve employee productivity problems before they become a serious threat to business.

Through face-to-face or telephonic options, coaching programs assist managers and provide additional guidance and motivation to keep employees focused and productive. These types of programs focus on performance, not personnel issues; on action, not feelings; and on results, not excuses.

Coaches work with managers to help identify specific coaching goals and expected business results, then complete a thorough assessment. After that, active coaching includes problem solving, modeling, didactic instruction and goal setting. Ongoing maintenance and support is also offered.

Although coaching isn't the same as behavioral health counseling, coaches should have qualifications and credentials, which ensure that professionals with direct experience or specialized training in coaching deliver services, and that each coach has the skill set needed to provide real value, not just cheering from the sidelines.

Is the investment worth it? Consider the fact that 100 executives from companies which utilized professional coaching claimed an ROI of six times the cost of coaching. Most wanted help on how to better engage employees as team members, focusing employees on narrower, more achievable results. Others wanted to resolve unique workplace cultural conflicts and barriers to success.

In a world where it's more difficult and expensive than ever to recruit and keep the best employees, coaching programs can help ensure key personnel remain content, challenged and contributing members of the team. Brian J. Dean ( is vice president, sales and customer relations at Cigna HealthCare. CIGNA HealthCare is one of the nation's leading providers of health-benefit programs, with managed care networks serving 45 states, the District of Columbia and Puerto Rico. CIGNA HealthCare provides medical coverage through managed care and indemnity programs to more than 13.3 million people, including more than 250,000 in major Ohio markets. Reach Dean at (412) 747-7482.