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Setting long-term landing zones helps drive business growth

Landing zone planning
Setting long-term goals helps clarify short-term objectives

Landing zones help define what the success of a company looks like in the long-term – providing focus for the management team and helping drive motivation at every level of an organisation.

It can often be difficult to bridge the gap between short-term strategic targets and the long-term view. Landing zones help deal with this by codifying what a business wants to achieve. Leaders use these goals to anchor annual objectives, improve communication and set management priorities.

Defining a long-term hypothesis

Leaders build businesses based on a theory about value creation. These ideas are often expressed in terms of a customer problem or a belief about the way a technological advancement will impact a sector.

The process provides the grounding for codifying a landing zone. FreeAgent founder Ed Molyneux believed that all of the systems used for financial management, such as tax returns and bookkeeping, should be integrated. A problem identified during his time freelancing.

“You end up creating this entire theory about the business in relation to the value chain. Thinking about all the parts that make up an industry like accounting services and financial services in general. Who supports those bits? How automated and integrated is it?” explained Molyneux.

Ed Molyneux recently achieved a lucrative business exit

It took FreeAgent eight years to build a system for sole traders to file their self-assessment and even longer to start to allow companies to file corporation tax. Annual goals and fundraising milestones provided touch points as the company moved towards its long-term ambition of integrating these services.

The £53m acquisition of FreeAgent by RBS in March 2018 is an extension of this thinking, argued Molyneux. Partnering with a high street bank provides access to infrastructure and its customer base.

Molyneux’s goal has already taken 11 years. The book “Built To Last: Successful Habits of Visionary Companies” introduced a name for this kind of long-term vision – a Big Hairy Audacious Goal (BHAG) – and helps explain why it’s so compelling.

“A true BHAG is clear and compelling, serves as unifying focal point of effort, and acts as a clear catalyst for team spirit. It has a clear finish line, so the organisation can know when it has achieved the goal – people like to shoot for finish lines,” said authors James Collins and Jerry Porras in their 1994 book.

CEO role in long-term goal setting

Dale Williams launched Yolk Recruitment at the start of the 2008 recession when he was 23 years-old. The business has achieved a decade of year-on-year turnover growth despite the cyclical nature of the sector. Williams highlighted the role CEOs have in looking beyond short-term goal setting.

“In my capacity as CEO, it’s about the end goal and what we’re doing this for. That’s slightly behind doors, rather than putting that pressure on people. How does this translate to the acquisition strategy or exit strategy and so on,” he said.

Dale Williams Yolk
Dale Williams sets three company-wide objectives each year

The leader’s role as managing director focuses on identifying opportunities for growth, including mergers and acquisition. While the rest of the management team cover organic growth and operational matters.

Yolk has just launched a joint venture and is close to completing its first acquisition. The company’s annual turnover has recently reached £5m, a key landmark. Organic growth and acquisitions will be used to reach its next target of £10m.

FreeAgent looks at annualised revenue. Growth is important in itself, argued Molyneux, because the scale of what you can deliver is the multiplying factor for the impact you have.

However, both Molyneux and Williams don’t set financial landmarks that stretch beyond three years because of how quickly the situation can change.

“It’s a step-by-step thing,” said Molyneux. “Is it helpful to say ‘one million customers’ if you know it’s going to cost you £50m to get there and don’t have £50m? It might be, but we’ve always taken it a year at a time.”

Communicating landing zones to staff

Sharing a company’s long-term objectives helps motivate employees. Landing zones are an easy way to communicate this because they’re succinct.

However, it’s important to follow up conversations about landing zones with an explanation of how employees can make an impact. Without making this connection, long-term goals can feel like abstract concepts that aren’t relevant to their job role. Models such as objectives and key results provide a framework for this process.

Yolk Recruitment sets three company-wide objectives each year that relate to the long-term performance. These address a weakness or strength, such as increasing retention, regional dominance or headcount. Objectives cascade into every staff member’s personal delivery plan, with progress assessed on a monthly basis.

Improving management focus

An effective landing zone helps leaders decide what opportunities to pursue. They offer an overarching structure to evaluate and prioritise strategy.

FreeAgent’s Molyneux believes focus is the hardest thing business leaders have to get to grips with.

“Focus is the key is because you can’t do everything. The real temptation is to pursue every opportunity and go after every customer. What you learn is that you end up doing nothing very well. You have to tell yourself it’s a good thing. Setting goals with clarity is about giving yourself permission to say ‘no’ to everything else,” he said.

Yolk now has 45 employees operating in six markets, and Williams faced similar considerations to Molyneux when expanding.

“Focusing on what you’re good at is important. It’s too easy to diversify very early on. To get bored with one product and try another space. We’ve had divisions that have worked out brilliantly and others where we’ve moved too quickly. There’s a lot to be said for focusing on your strengths and what you’re good at,” he said.

Short and medium-term goals are fundamental to performance. Companies normally set annual targets and many have two to three-year strategic plans. This provides operational clarity and accountability. However, it’s crucial to back this up with a long-term view of the business’ evolution. Landing zones to aim for that can be clearly expressed to different stakeholders.

It’s difficult to predict how a company is going to operate in ten years’ time. But this process codifies business leaders’ long-term bets about where the industry is heading and why their company can create value for its customers.

Want help defining your landing zone. Use our benchmarking tool to gain an understanding of the importance leadership and future planning play.

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