Great strategic plans provide clarity and direction and can have a dramatic impact on profitability. The strategic planning process itself can tease out new opportunities and problems, challenge old assumptions about how things are done, and map out a process of internal change leading to efficiency and effectiveness.
Plans come in many forms, and there are many different processes with which to approach strategic planning. The following are a few considerations to ensure the approach you take is right for your organization.
DISTINGUISH BETWEEN SHORT-TERM AND LONG-TERM PLANNING
A short-term plan typically addresses the next year or two. It will have considerable detail and clarity on what will be undertaken, simply because the short horizon offers good visibility of what will influence the company over that timeframe. A long-term plan establishes a vision for the future and for the changes that are intended to take place over a five- or ten- year period. For example, a manufacturer may intend to begin exporting and to have
a customer base established in at least one foreign country within five years. The long- term plan will set goals that are necessary to achieve that vision. The company might have its first customer in year three, and repeat sales in year four, and regular orders in year five.
Clarity on where the company is going in the long term will influence short-term decisions. For example, the manufacturing company will need to become ready to export. It will require staff with international experience, it will need to adjust internal systems and processes to do business abroad, and it must evaluate potential international markets and adjust its product line to suit at least one of them. Decisions in all areas of the business will be affected. Hiring decisions may need to address broadening the skill set of the workforce. Marketing and sales will need to adapt to an entirely new customer base. Any investment in the facility and equipment must consider the nature of the product and the volume of international orders that is expected to materialize three years from now. Capital investment and shareholder dividend decisions will need to account for financing plans related to this long-term growth. Dividends may need to be reduced to fund expansion.
DRAW OUT GREAT IDEAS
Fantastic ideas for new opportunities and improvements can come from anywhere, including suppliers, customers, and employees from all areas of the company. Timing is important. If your company faces uncertainty in areas such as its competitive landscape, customer preferences, or options for growth, start by asking key people for input. Alternatively, once the strategic planning process has started and problems are identified (e.g., an increasing volume of customer complaints) it may be appropriate to collect information before making any decisions.
If you want genuine insight into what can be improved, you need to expose yourself to constructive criticism. This is easy in an organization where the best idea is always celebrated. But if nobody ever questions the owner, it can be challenging to encourage employees to mention dissenting opinions. This situation can be addressed in ways such as having an outside facilitator conduct confidential interviews, but it is still difficult.
Employees can provide valuable input into understanding both opportunities and problems that need to be addressed. Work with these people early in the process. Ask them for specific input in their area of the business. Salespeople can provide wonderful insight into customer trends. Production staff will have hands-on insight into inefficiencies on the production floor.
PROPERLY EVALUATE OPPORTUNITIES
The hardest thing about strategy is choosing what not to do. One common pitfall is planning to expand in all possible ways. But it’s simply too much to pursue new products, new markets, and a greater share of your current customers’ business at the same time as you are making core operational changes such as adopting new software, changing corporate culture, and revising systems and processes. Not only will people go through radical change but there is usually a shortage of talent to implement the workload. Certain initiatives will not be given proper focus.
You have to make trade-offs. That means choosing not to go ahead with an opportunity because you need the budget or focus applied elsewhere.
Most entrepreneurial companies could benefit from a more robust process to evaluate opportunities. There are many ways to do it, but there is value in applying some rigor to the way you shape your understanding. The process I’ve used when working with clients is to evaluate each opportunity against specific criteria. That enables us to compare apples to apples. The criteria differ for each client, but the following are some common considerations:
What is the core problem to fix or opportunity to pursue?
How will addressing this influence the company (e.g., customer satisfaction, product quality, revenue, expenses)?
What are the costs associated with doing nothing, or with making the change?
What is the financial benefit of making the change?
Do we have the ability to make this change?
What assumptions are we making that we must verify before going ahead?
Decisions in your plan will be made through a combination of gut feel and formal analysis. The right combination depends on your company’s corporate culture and management style. But good information results in good decisions. Take the time to understand your situation.
CHOOSE THE RIGHT METHOD: FACILITATED SESSION OR WORKING DOCUMENT
There are various processes for developing a strategic plan. Typically, the process is either a one-day facilitated group planning session or a series of meetings during which a working group develops a strategic planning document. Each has its place, depending on the situation.
A facilitated session is typically suitable when a group has a fairly high degree of clarity around their operating situation (e.g., trends, competitive landscape, stakeholder opinions) and an idea of the direction the organization will take over the next few years. You will need to coordinate various ideas that are actually fairly similar. Valuable discussion and debate will help people learn and consider the validity of their current opinions and will generally bring the group to a working consensus. It’s the process typically used by non-profits run by boards of directors, but it can be just as effective in a private company with a management team in a similar situation.
The contrasting alternative, a working document, is perhaps better when an organization has a high degree of ambiguity or complexity. One problem with a facilitated session is that the group may not have the information it needs to make important decisions that day. Such a session also does not allow for the introspection and further idea-generation that often comes when people consider ideas or analyze information over time. It does not allow for faulty assumptions to be critiqued.
In contrast, with a working planning document a series of management meetings where discussions are limited to specific agenda items gradually shapes the management team’s understanding of the situation (including opportunities and problems), of key issues to address, and of options related to decisions they must make. A collective view in areas such as the company vision, goals, and specific strategies will develop over time. Information and decisions are documented in a working draft of the plan. By the time the plan is complete, the management team knows what they are doing, and the plan is simply a summary of the completed work.
Any process that leads to appropriate levels of dialogue, analysis, consideration of opportunities, and deeper understanding of the situation will result in a plan that genuinely represents the right course of action for the organization.
BUILD A PLAN YOU CAN IMPLEMENT
For a strategic plan to be effective, it must be implemented. That fact has led to misguided comments by business leaders and consultants that implementation is more important than strategy. But imagine an army dropping soldiers into a war zone and saying, “It doesn’t really matter what you do once you are there, just do something and do it well.” Obviously having a goal and a good understanding of how to make it happen is crucial. You need both sound strategy and good implementation. In fact, you can’t have one without the other.
Recognize early on the appropriate level of detail needed to execute the plan. In some situations, that means department managers will have their mandate and key metrics to implement. In other situations, that means you will need a higher level of detail, such as mapping out the research and development roadmap during the strategic planning process so related decisions can be made in areas such as marketing, human resources, and finance.
Ensure the details included are helpful to those responsible for achieving the initiatives. A detailed plan can be highly valuable. For example, instead of just stating the strategic initiative “improve production floor efficiency,” clarify what you expect this effort to involve.
What are we trying to do? (e.g., Stay within budgeted production labour hours.)
How will we measure it? (The variance between actual and budgeted labour hours.)
What activities are involved? (Adopt a new production scheduling system; provide incentives to production staff to meet the budget.)
What processes will change? (Scheduling, compensation, how supervisors work with production staff.)
How behaviour will change? (Better communication, proactive efforts to identify opportunities for efficiencies.)
Who is involved? (Production staff, supervisors.)
What can management do to support this? (Training and mentorship of supervisors.)
Results will emerge when the plan is appropriate for the organization. Each company is in a unique situation. The strategic direction you set for your organization needs to be built around the demands of your own industry and company. It needs to consider what background information and analysis is appropriate to move ahead with a decision. The right people should have a role in making decisions and should provide clarity to employees responsible for implementing subsequent actions.
First published in the June 2019 edition of The Business Advisor.