When the dot.com bubble burst, the market for human resources information services, CDG’s specialty, flat-lined as large companies froze their capital budgets and software companies began providing their own consulting services. Many of Driskill’s competitors folded. Driskill launched “Red-to-Black,” a company-wide program to return to profitability. She also decided she needed help in learning how to do strategic planning. After all, she’d only been running her company for 20 years.

Working Without a Net
Although it sounds absurd, what Driskill had been doing—operating largely without a plan and a disciplined planning process—is more the norm for privately held companies than the exception. Lanny Goodman, a management consultant in Albuquerque, New Mexico and author of the forthcoming book The End of Management: Creating a Self-Managing Company, has been advising entrepreneurs for 25 years. “As a class, entrepreneurs tend to be highly opportunistic. In the early years, that’s very appropriate,” he notes. “Entrepreneurs get past [the startup stage] often because of their reactivity and their enthusiasm. The problem is when you come back 20 years later, long after it’s necessary or appropriate, and they’re still working too many hours, still keeping everything strung together with Scotch tape and bailing wire.”

Operating without a disciplined planning process leads to many results, none of them good. Not only is it bad for the company—an organization that relies too heavily on a single executive is a weak business—but it also burns out the founder, emotionally, mentally and physically.

Driskill and her executive team, which included her daughter Deborah, found their way to an executive education program called Gazelles, Inc., in Ashburn, Virginia. The Driskills finally began doing real strategic planning. It wasn’t that they hadn’t tried in the past, says Deborah Driskill, today the company’s CEO. “We’d have these huge plans and they’d just sit in binders on a shelf,” she says. Working with Verne Harnish, CEO of Gazelles, they developed a long-term goal (Jim Collins, author of Good to Great and Built to Last, calls this a “Big Hairy Audacious Goal,” or BHAG), clarified their core values and began tracking their progress with well-defined metrics that range from the practical—measuring profitability by organizational subgroups—to the once-ephemeral—measuring increases in passion, using independent surveys performed by an industrial psychologist.

Today, Deborah Driskill credits that planning process with helping CDG weather the toughest period in the company’s history. By 2003 it had returned to profitability. Today the company employs 20 people and is on a fast-growth path. It still ranks among the largest women-owned companies in Texas (Driskill won’t reveal revenues). And its audacious goal? To be such an excellent service provider that others teach CDG’s methods.

Many management gurus today agree that disciplined strategic planning is what separates successful from unsuccessful companies. That belief hasn’t always been widely held. In fact, during the dot.com boom, strategic planning went out of fashion, says Harnish: “The strategy during the go-go years was just ‘go.’”

So what does strategic planning as practiced by progressive companies look like today? It has several characteristics.

1. It’s a mix of visionary and practical
A good plan clarifies both a BHAG and the measurable shorter-term strategies and tasks that will help the company achieve it. Coming up with a BHAG can be hard, but announcing it to the world can be harder still for all but the most outspoken of CEOs. David Miles, founder and CEO of real estate branding company Milesbrand, in Denver, Colorado, instituted open-book management (OBM) in 2001 and started strategic planning in 2004. “Our vision is to become recognized as the leading real estate branding firm in the world,” Miles says. “Because this is a grand vision, we usually reserve it for internal use only. We don’t want to sound egotistic or grandiose. But it is a vision we believe is achievable and we intend to pursue it relentlessly.”

How? Miles worked backward from that vision to figure out what he wants the company—and his life—to look like over the next 20 years, and set measurable milestones. He’d like to work full-time in the business for the next 10 years, in the meantime creating such a sustainable organization that it will experience “the really big years” after he scales back. That goal determined he should make professional development of his employees a priority, so that there will be a highly professional team in place that can succeed him. Last year, for the first time since he founded the 40-employee company in 1986, he rewarded two good employees with partnerships.

So strategic thinking means long-term planning—five, 10 and even 20 years out. But on the other hand it also means greater and more intense scrutiny of a variety of metrics, critical numbers or key ratios.

2. Strategic planning and thinking are continuous
Milesbrand uses an annual plan and reviews it at least quarterly. But team members—and that’s practically everyone in the open-book company—review financial and creative goals in weekly staff meetings. The company began scrutinizing its productivity and efficiency when it adopted organizational behavior management—a tactic that transformed the business from one that barely met its payroll to one that consistently makes 20% profit margins, an industry standard goal in the ad agency world, Miles says. By paying attention to process, Milesbrand has lowered expenses, increased revenue and accelerated cash flow.

For example, a typical job used to traverse the agency about 11 times for proofreading, because people weren’t giving proofing their full attention. The creative department prioritized reducing the task to no more than five proofing cycles—an easily implemented tactic that saved time and money. The company also discovered that its customers were amenable to being billed weekly instead of monthly, which sped cash flow from 90 to 120 days to an average of 30 days.
“All this led to some pretty tight processes and procedures that are part of our culture now,” according to Miles.

3. The best strategies encourage “fit”
In a famous 1996 Harvard Business Review article entitled “What is Strategy?” Harvard professor Michael Porter concluded, in part, that a competitive strategy is one in which a series of linked activities “fit” together to create a competitive position, a whole that is stronger than the sum of its parts. When activities fit together well, each improves on the profitability of the other. When they fit together poorly, they hurt each other.

Century Sign Builders, an Albuquerque maker of signs that facility owners use to meet Americans with Disabilities Act requirements, both designs and manufactures the Braille-coded signs. After a new round of hires in the art department, a production department employee noticed that the layouts designers were giving him couldn’t be manufactured. So he came up with a contest by which employees could submit their ideas for solving the problem. A new process of teaching artists the company’s manufacturing process did the trick. Voila! That good “fit” improved the quality of the end product and thus both the customer’s satisfaction and the company’s profitability.

4. Strategic planning has become more collaborative
At CDG, Deborah Driskill invites all 20 of her employees to help set strategic goals. In addition, Driskill tracks a variety of critical numbers on a weekly basis and shares them with all of her employees. The numbers include average consulting billing rate, the number of hours each consultant worked, profitability, cash and receivables. Sharing critical numbers has not only made the company more efficient, it’s helped it become more respectful of its employees and less “parental,” observes Driskill, by implementing what she calls “self-managed paid-time off”— essentially, letting employees choose when and for how long they will take vacations and personal days. Rather than requesting time off, employees inform her of their upcoming absences.

By sharing responsibility for key numbers with her employees on a weekly basis, CDG was able to get enough perspective on its operations that Driskill felt comfortable offering such a revolutionary approach to scheduling. And achieving these short and medium-term goals are steps on the way to CDG’s five-year goal: Driskill wants the company to appear on Fortune’s list of 100 Best Companies to Work For.

5. When you share the responsibility, you have to share the rewards
At Milesbrand, for instance, David Miles shares 50% of the company’s profits with employees, a sum that amounts to 12% to 18% of an employee’s compensation. “We never had profit sharing before OBM because we weren’t very profitable,” Miles says ruefully.

But recognition and implementation of employees’ ideas are powerful motivators as well. At Century Sign Builders, president Roxanna Meyers instituted a version of the age-old suggestion box called “Bright Ideas.” Every employee who submits a good idea gets an annual chance to win two airline tickets and two extra days off—but better than that, gets to see his or her idea in action. That simple program has paid off with dozens of helpful innovations. One of Meyers’ favorites: an employee-created a web-based production scheduling program. “I could be in Botswana and tell you exactly what jobs are going on and when they’re going to get done,” she adds.

6. Changing demographics dramatically alter strategic planning
“Never before in the history of business have so many owners been thinking about succession planning,” says Jack Stack, owner of SRC Holdings in Springfield, Illinois and co-author of the bestselling book The Great Game of Business, which popularized OBM. With waves of baby boomers soon to retire—Stack himself is 58—it’s critical to build sustainability into your strategic plan, he says. “Is your company looking at this thing from a sustainable point of view, or are you a flash in the pan?” asks Stack. “If you are sustainable, what are you going to do to build a model that’s sustainable over time? Look at your weaknesses. Where are you losing value?”

For the past three years, Stack has been engaging his employees, who own the company through an Employee Stock Ownership Program (ESOP), in a strategic planning process to determine what path they want to take to ensure that the company is as financially healthy during the next 25 years as it has been for the last quarter century. Adding to the complexity of such long-term planning for sustainability is the knowledge that the next generation of workers is smaller than the population of retiring baby boomers: for every three retiring boomers, Stack says, only one new employee will enter the workforce.

“People are beginning to see the necessity of strategic planning and coming to the alarming conclusion that it’s the most difficult thing to teach and the most difficult thing to learn,” Stack concludes. “But, without disciplined business planning, you simply can’t compete.”