Strategic Planning – Looking at the Future – Still Relevant?

Is your Strategic plan still relevant?

Your specific plan may have lost some relevance but strategic planning has not.  A plan from 2 years ago is less useful than it might have been in less volatile times.  Naturally we have questions about taking the time to do complex planning when the external environment is changing so rapidly in unexpected ways.  Not only must businesses take the time away from day-to-day matters to catch their breath, but strategic thinking and planning is more important in uncertain times.

What is fundamental – hasn’t changed?

The eight key elements in the strategic planning process have not changed:

  • Visioning statement
  • Mission statement
  • Organizational values, philosophies and standards
  • Internal strengths and weaknesses
  • External strengths and weaknesses
  • Human Resources projection (new to some companies)
  • Financial projection
  • Strategic goals

Each company’s project is unique but the overall process and outline of the strategic plan will be similar.  Not every company includes a specific financial projection or a human resources/talent management projection but these are fundamental to sustained success. Certainly there’s renewed interest in a few specific strategic goals: financial sustainability, monitoring the external environment and perhaps strengthening each program, product or service area to meet solid profitability goals.  If your company hasn’t made efficiency a priority, you are either in a lucky market with a high profit margin or you haven’t paid attention to economic indicators. Companies will be crafting goals to take a closer look at all aspects of operational efficiency: policies and procedures, business processes, better automation, and staffing.

Human Resource management component

Leaving human resources out of the company strategic planning process can have negative consequences.  There is a powerful temptation to run with very lean staff in uncertain economic times but managing this way creates the need for astute human resource management.  Looking at the effect of operating over-leanly for long periods points out the issues. First: employee fatigue and burnout leads to quality problems.  Tired employees make more mistakes. Second: Tired employees may move to other jobs or simply quit if they perceive that their company isn’t listening to their needs.  Third: tired employees are more likely to turn into disgruntled employees. Counteracting these conditions requires a pro-active, sensitive approach to employee relations.

Financial modeling the effect of potential business actions/decisions on staffing levels and then on revenue generation can be complex.  There are times when cutting staff results in real savings but staffing cuts can also reduce revenue when there is strong connection between job activities and revenue generating activities.  In addition, when laid off employees qualify for unemployment benefits in a self-insured company, costs will decrease by only a portion of the salary level.

High growth companies experience challenges of another kind.  Shortages in skilled labor, specialized degrees, or difficulties recruiting staff to a particular geographical area can slow growth in sales or operation functions.  When calculating return on investment for expensive capital purchases, unrealized staffing projections can affect a company’s ability to meet ongoing obligations.  If financial planning does not consider the true HR costs, future plans may be assembled on faulty assumptions. These are examples of how the talent management and long-range thinking HR experts bring to the planning “table” can promote sustained quality and success.  HR staff is an important companion to financial management staff.

Finally, decisions to discontinue one product or service in favor of something new creates a training and development opportunity for current staff that is generally less expensive than recruiting and orienting brand new employees from scratch.  If you consult staff development experts in the planning process and invest in current talent you may save money and achieve the essential new competencies within a shorter time frame.

Sharp market analysis

Market conditions – what can you control?

You will need sharper market analysis during the project planning phase.  Many key product components or factors (markets, expenses, staffing, etc.) are still controllable.  If you can’t control certain market factors, you can model different assumptions on a continuum that reflects a range of potential market scenarios.  A simple analysis of the proportion of factors that you can control compared to the proportion of factors you cannot control is useful for preliminary decisions about which product or service lines should be eliminated or retooled. If 50% of critical market factors cannot be controlled and it’s assumed they are trending in the wrong direction over time, take a hard look.

Another piece that was important in more certain economic times but is crucial and needs more attention today is financial modeling.  Sound planning must now include long-range 5 to 10 years) financial models to determine vulnerabilities if things stay the same or if things get worse.  In addition, every product line should be at least break even.  Depending upon your profit margin, loss leaders may not work for you unless they reliably drive customers to higher margin offerings.  Finally building cash reserves; proper product and service pricing; accurate cost of goods sold assumptions; and market reliability must be carefully analyzed to ensure the capacity to weather various “storms.”

More up front project planning

The planning process will be similar to that of better economic times but because companies need sharper market analysis additional time might be devoted before the retreat. This places pressure on a savvy strategic planning steering committee to map out the data points needed before brainstorming takes place at a retreat. If no one person has expertise in this area, develop small collaborative groups spending sufficient time to roll up data and a range of options for a decision-making group to consider.

Who should participate?

A full planning group will create the vision and direction for the organization at a retreat.  This group has shifted solidly away from just partners, boards or senior leadership towards a more inclusive variety of stakeholders who can offer useful perspectives.  In larger organizations, subcommittees focused on certain functional areas are still needed.  The larger the organization the more time must be spent in project planning, research assignments and delegating certain data gathering.  Smaller organizations are inviting key influential or knowledgeable community partners who may have specialized information about a particular function or aspect of the organization’s mission.

What time period?

Most organizations are limiting the duration of their strategic plan to two years whereas the norm has tended toward three to five years.  Market forces change too rapidly to leave strategic planning to every two years.  This means you should think about strategic planning initiatives every other year.  Planning more often will force you to get better and more efficient in your project process.

Strategic plan configuration and structure

It has always been a part of my own consulting process to ensure the plan is formatted or assembled in a way that makes implementation a natural part of how the organization functions.  This is more important today because companies operate with leaner staff.  Complicated plans with goals that overlap divisions or departments are inefficient. I like the model where divisions take the companies’ plan and develop complimentary plans for each program as well as the functional departments: Marketing, Finance, HR, and Technology, etc.  This not only helps everyone pull in the same direction, it will streamline progress reporting, enable sharp analysis and make efficient use of management time. The strategic plan becomes the activity of departmental meetings because each group has its own goals to track. Monitoring and reporting out becomes a normalized function for every supervisor and does not fall to an administrative “planning” position.

Better use of “real-time” input when the plan is underway

An increasingly popular strategy is using technology to ensure that information about the external environment is coming into the organization during “off” planning years as a means to:

  • Notify leadership where assumptions were right
  • Notify leadership where assumptions were wrong
  • Notify leadership of the signs of impending significant changes
  • Notify leadership of emerging opportunities and threats

More importantly, I would like to see an ongoing dialogue by a wide range of employees when the plan is underway.  There are a number of ways to do this.  I’ve pitched using a closed LinkedIn or Facebook group but haven’t convinced my clients to try it yet. With the right IT person and enough interest I think this is achievable. We have used more conventional databases to accumulate and organize information or email bulletins which have to be compiled but these feel “old school.”  As more companies try new ways, we will see creative innovation and great real-time dialogue.

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