Planning for the future - and the present

Planning.  I love it!  Who doesn’t?  (Oh, lots of people?  Okaaaaay…….)

Planning and organizing is somewhere deep in my DNA.  Clearly a genetic trait in my family, as I now have a bevy of nieces – all successful career women in their own right – who have inherited the Gardner Family planning-and-organizing gene.  Whether we’re planning a girl’s weekend, vacation, game night or other event, you know someone’s built a multi-colored spreadsheet. Are we even a bit competitive about it? Maybe. Also: YES. It warms my cold, analytical heart.

Planning is also an important function within a corporation and, as with many workstreams in a company, it culminates in Finance putting those plans into numbers.

There are also many clichés about planning.....

The early bird gets the worm

Fact check: Mostly True. Often times early adopters are rewarded with lower cost to entry, more available options, etc. Of course, early adoption comes with risk. What if your assumptions were wrong? What if circumstances changed? (well, that’s always a risk).

This blog was inspired by a snippet I saw in CFO Brew about Steve Madden, Ltd., the shoe and apparel company. Steve Madden CEO says company will shift from China to avoid potential Trump tariffs.  This isn’t a discussion about the potential tariffs themselves.  But Steve Madden, literally 2 days after the US election, was in a position to announce that they are shifting away from Chinese sourcing because of the threatened tariffs. (For the entire earnings call transcript, go here: Steven Madden, Ltd. (SHOO) Q3 2024 Earnings Call Transcript | Seeking Alpha )

Why were they so quick to react?  They planned.  For years.  They were ready to make the pivot when necessary. Why? Because two-thirds of their business is based on imports into the US. And of that, 70% currently comes from China. The tariffs will have a substantial impact on their costs and having to increase costs to their customers.

I don’t know anyone at Steve Madden.  But if I had to guess, they’ve been planning this since the last time there were broad tariffs on Chinese goods in 2018. During that time, many companies were in Washington D.C. fighting against the tariffs, while simultaneously planning around them. But these changes don’t happen overnight. Changing your entire supply chain takes years. Years of planning and negotiation. Years of testing. Years of relationship building.

I’ll also point out that they seem to be taking a prudent approach – moving aspects of their supply chain to “…Cambodia, Vietnam, Mexico, Brazil, etc.”.  They are diversifying. They don’t want to get caught again with too many eggs in the same basket. And if at some point the tariff target changes to, say, Mexico, they’ve still diluted the risk going forward.  Smart.

Some of you might be saying “the tariffs aren’t enacted yet! Why move so quickly?” Lots of reasons:

1. In this example, the cost of not doing something appears to be very significant, given this company's concentration of revenue in the "import from China into the US" bucket

2. By making the decision early, they will already have arrangements and contracts in place (or close to): First choice of vendors. Probably better pricing. Maybe guaranteed capacity? Now consider the influx of companies just starting this process - they’re already behind. Prices will go up; capacity will go down.  Frankly, if you haven’t been planning for this since the 1st Trump Trade War with China, you’re already way behind.

3. Again, I know no one at this company but I can make an educated guess that this new plan works before consideration of the tariffs.  Meaning, their costs (sans tariffs), quality and timelines will all likely be as good if not better than their current situation. Diversification and risk mitigation was as much the goal as was lessening the impact of the tariffs.

The Plan is The Plan until it’s not The Plan

At my previous company, we always had The Plan of Record.  Whether it was the strategic plan, a plan for M&A or even just our planned staff meeting schedule for the year, it was always important that:

1. We had a Plan

2. Everybody knew The Plan

3. Everyone was working off the same set of assumptions when building their part of The Plan

4. The Plan was The Plan until it was no longer The Plan 

   
   

Our CEO was brilliant in a lot of ways, but using The Plan – whatever it was – to lower anxiety of the unknown and keep folks focused on the goals was one of his superpowers.

The thing about plans is, they almost never work out exactly as you thought. Take a budget. The only thing I could guarantee about our budget was that as of Day 1 of the Fiscal Year, it was wrong. When did you ever hear of a company exactly meeting every line item on their budget?  Doesn’t happen. But you wouldn’t ever suggest not putting together a budget (well, some people might….).

The budget is important so that everyone is working towards the same goals, with the same set of assumptions. And others can use it to plan as well, whether its cash flow planning, human capital resource planning, audit planning, the list goes on and on.  And smart companies make sure that incentive-based compensation plans align with the goals of the plan/budget each year.

And then, during the year, as circumstances change and you get more information, you update your forecast. And guess what? That’s likely wrong too. But if you have to change course, you do it together. And you have the same set of facts and same set of underlying assumptions to use when deciding to change course.

So, if it’s always “wrong”, why bother planning? 

First: To give you a benchmark or measurement tool. Yes, everything might not go exactly to plan, but are you pretty close or completely off the rails? This helps you decide where to spend your time and effort.  And second: To control the things you can control. Knowing what levers you can pull when you need to.

I spent much of my career in Corporate Tax, specifically in Compliance (a.k.a. prepping tax returns.) For many years, Compliance was viewed as the “necessary evil” and Consulting – now that’s where it’s at! Sexy, exciting, something new all the time. Totally not my bag.  😂

But people underestimated the value of the Compliance function.  Sure, there’s the obvious “let’s not go to jail” stuff. But there were two other important aspects to it: (1) all the tax planning in the world was meaningless if it didn’t get reported on the tax returns properly, and (2) if your staff spent too much time on compliance, they wouldn’t have time for planning projects. 

So, control what you can control.  We could control and optimize our tax return preparation cycle. We couldn’t control what tax law changes got passed, when the company wanted to do an acquisition, when we were putting in a new ERP, etc. So, we controlled what we could control (tax prep timelines) to afford ourselves maximum flexibility to absorb the unknowns when they came up.

And finally……

“Everybody has a plan until they get punched in the mouth.”

– Mike Tyson

Self-explanatory.