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Planning is our way of preparing for the future, and what's best for us. Strategic planning is a the process of defining anÂ organization's long term goals, and defining strategies to achieve those goals. However, an organizationÂ must decide to use strategic planning at the right time. Strategic planning involves certain steps that cannot be ignored or skipped. These are time consuming and sometimes the crisis at hand cannot wait for a strategic plan to solve the problem.Â Another pitfall of Strategic planning is that due to changes to the environment the plan may not operate as well as it was supposed to in the first place.
A good strategic plan cannot be written just once. It must be reviewed and revised until it is completely focused on the goals of theÂ organizationÂ that must be achieved. It should be the stepping-stone for the next plan.
An effective strategic plan must contain
A vision statement
A mission statement
Business information explained
Detailed Strategic plan and implementation
A key role of a CEO's is to communicate a vision and to guide strategic planning. Those who have successfully implemented strategic plans have often reported that involving teams at all levels in strategic planning helps to build a shared vision, and increases each individual's motivation to see plans succeed.
Clarity and consistent communication, from mapping desired outcomes to designing performance measures, seem to be essential to success. Successful leaders have often engaged their teams by simply telling the story of their shared vision, and publicly celebrating large and small wins, such as the achievement of milestones. To ensure that the vision is shared, teams need to know that they can test the theory, voice opinions, challenge premises, and suggest alternatives without fear of reprimand.
Implementing strategic plans may require leaders who lead through inspiration and coaching rather than command and control. Recognizing and rewarding success, inspiring, and modeling behaviors is more likely to result in true commitment than use of authority, which can lead to passive resistance and hidden rebellion.
CREATING STRATEGIC PLANS
The senior management team must come together to review, discuss, challenge, and finally agree on the strategic direction and key components of the plan. Without genuine commitment from the senior team, successful implementation is unlikely.
Strategic group members must challenge themselves to be clear in their purpose and intent, and to push for consistent operational definitions that each member of the team agrees to. This prevents differing perceptions or turf-driven viewpoints later on. A carefully chosen, neutral facilitator can be essential in helping the team to overcome process, group dynamics, and interpersonal issues.
A common way to begin is to review the organization's current state and future possibilities using a SWOT (strength, weakness, opportunity, and threat) analysis. This involves identifying strengths and core capabilities in products, resources, people, and customers. These are what the organization is best at, and why it is in business. Many organizations have responded to this review by spinning off ventures that were not related to their core business. For example, Chrysler sold its interests in Maserati, Lambourghini, and Diamond Star and then concentrated on developing "great cars, great trucks." This sent a clear message to employees and other stakeholders, and triggered the company's renaissance.
Using SWOT, once strengths and core capabilities are defined the next step is to identify weaknesses or vulnerabilities. This is usually the most difficult for organizations and leaders to assess. The identification of gaps is often threatening. In some organizations it is not considered safe to admit to weakness; but an honest appraisal can make the difference between success and failure. Again, reviews should include a look at products, services, resources, customers, and employees. Do the right skills exist in the current staff? Are there enough resources to invest in areas of critical need? Are the appropriate systems and structures in place to support the needs of the team? Does the culture reinforce and connect with the mission and vision of the organization?
Now the review moves to the external environment. What opportunities exist for development and growth? Do these opportunities correspond to the organization's strengths? What are the critical changes the market faces over the next one, three, and five years? How well is the organization positioned for the anticipated market changes? Additional points for debate include the greatest innovation or change that needs to occur for the organization to be successful, and the values that will drive these changes.
Next, using the SWOT assessment process, threats in the current and future market are identified. How is the competition positioned relative to the opportunities for growth that have been identified, and how are they positioned relative to the organization's strengths and weaknesses?
With this information, organizations can finalize their strategy by defining the vision, creating a mission statement, and identifying their competitive advantages. The communication of the strategy will require a clear, consistent message. It is an ideal time for the leadership to operationally define each critical area of the plan to ensure agreement and commitment. Key stakeholders should be included in the process. Soliciting their input is often a valuable aide in implementation.
Finally, organizations should review each of the gaps that have been identified. Do the necessary resources exist to invest in shoring up the gaps? Are these resources allocated properly? It is usually not possible to address all of the gaps at once. Organizations should create a priority list for action so plans are realistic and focused on the greatest areas of need. These priorities will become a key focus of implementing the plan.
Once the senior leadership team has completed the top-level strategy, the next step is to break that overall goal down into functional areas or core strategies. Typically this will include service/operations management, technology management, product management, supplier management, people management, and financial management, or some variation on these areas. Each identifies how they contribute to achieving the overall strategic plan. They can model the steps taken by the senior team and conduct a SWOT analysis from their vantage point. Once the core strategies are defined, the senior team must ensure that the overall strategy will be achieved; that is, that the sum of the parts (functional strategies) will add up to the whole (overall strategy).
Strategy communication continues to be critical, so operational definitions should not be overlooked. Each functional area should create their own definitions to ensure agreement and commitment. A common source of problems in implementation is that divergent functional perspectives may not be aligned with the overall strategy. Unless these issues are addressed, each area may interpret the plan with a lens of "How does my area win?" rather than "How does the organization win?"
Key stakeholders can be engaged in different ways. Aside from events, publicity, and personification of the vision and strategy by key leaders, stakeholders can be engaged by soliciting their input on the current state of the organization and the vision (similar to the SWOT analysis described earlier). Involving stakeholders in this manner should be done seriously, with an intent to use their distinct perspectives; this can add to the soundness of the analysis. Asking for opinions and then ignoring them can arouse distrust and resentment.
As the strategic plan and performance measures are being created, the organization must make sure that they are aligned with the systems, structure, culture, and performance management architecture. The best plans may fail because the reward systems motivate different behaviors than those called for in the strategy map and measurement design. For example, if a team approach to business development is outlined in the plan, but sales commission remains individual, organizations will be hard pressed to see a team focus.
The career development, performance management and reward systems must be reviewed to ensure linkage to and support of the strategic intent. Many organizations have found they needed to link their strategic plan to their internal systems and structures to ensure overall alignment and to avoid confusion.
IMPLEMENTING STRATEGIC PLANS
Once strategies have been agreed on, the next step is implementation; this is where most failures occur. It is not uncommon for strategic plans to be drawn up annually, and to have no impact on the organization as a whole.
A common method of implementation is hoopla-a total communication effort. This can involve slogans, posters, events, memos, videos, Web sites, etc. A critical success factor is whether the entire senior team appears to buy into the strategy, and models appropriate behaviors. Success appears to be more likely if the CEO, or a very visible leader, is also a champion of the strategy.
Strategic measurement can help in implementing the strategic plan. Appropriate measures show the strategy is important to the leaders, provide motivation, and allow for follow-through and sustained attention. By acting as operational definitions of the plan, measures can increase the focus of the strategy, aligning the workforce around specific issues. The results can include faster changes (both in strategic implementation, and in everyday work); greater accountability (since responsibilities are clarified by strategic measurement, people are naturally more accountable); and better communication of responsibilities (because the measures show what each group's primary responsibility is), which may reduce duplication of effort.
Creating a strategic map (or causal business model) helps identify focal points; it shows the theory of the business in easily understood terms, showing the cause and effect linkages between key components. It can be a focal point for communicating the vision and mission, and the plan for achieving desired goals. If tested through statistical-linkage analysis, the map also allows the organization to leverage resources on the primary drivers of success.
The senior team can create a strategic map (or theory of the business) by identifying and mapping the critical few ingredients that will drive overall performance. This can be tested (sometimes immediately, with existing data) through a variety of statistical techniques; regression analysis is frequently used, because it is fairly robust and requires relatively small data sets.
This map can lead to an instrument panel covering a few areas that are of critical importance. The panel does not include all of the areas an organization measures, rather the few that the top team can use to guide decisions, knowing that greater detail is available if they need to drill down for more intense examination. These critical few are typically within six strategic performance areas: financial, customer/market, operations, environment (which includes key stakeholders), people, and partners/suppliers. Each area may have three or four focal points; for example, the people category may include leadership, common values, and innovation.
Once the strategic map is defined, organizations must create measures for each focal point. The first step is to create these measures at an organizational level. Once these are defined, each functional area should identify how they contribute to the overall measures, and then define measures of their own. Ideally, this process cascades downward through the organization until each individual is linked with the strategy and understands the goals and outcomes they are responsible for and how their individual success will be measured and rewarded.
Good performance measures identify the critical focus points for an organization, and reward their successful achievement. When used to guide an organization, performance measures can be a competitive advantage because they drive alignment and common purpose across an organization, focusing everyone's best efforts at the desired goal. But defining measures can be tricky. Teams must continue to ask themselves, "If we were to measure performance this way, what behavior would that motivate?" For example, if the desired outcome is world-class customer service, measuring the volume of calls handled by representatives could drive the opposite behavior.
STRATEGY IMPLEMENTATION ISSUES
Strategy implementation almost always involves the introduction of change to an organization. Managers may spend months, even years, evaluating alternatives and selecting a strategy. Frequently this strategy is then announced to the organization with the expectation that organization members will automatically see why the alternative is the best one and will begin immediate implementation. When a strategic change is poorly introduced, managers may actually spend more time implementing changes resulting from the new strategy than was spent in selecting it. Strategy implementation involves both macro-organizational issues (e.g., technology, reward systems, decision processes, and structure), and micro-organizational issues (e.g., organization culture and resistance to change).
ROLE OF TOP MANAGEMENT
Top management is essential to the effective implementation of strategic change. Top management provides a role model for other managers to use in assessing the salient environmental variables, their relationship to the organization, and the appropriateness of the organization's response to these variables. Top management also shapes the perceived relationships among organization components.
Top management is largely responsible for the determination of organization structure (e.g., information flow, decision-making processes, and job assignments). Management must also recognize the existing organization culture and learn to work within or change its parameters. Top management is also responsible for the design and control of the organization's reward and incentive systems.
Finally, top management are involved in the design of information systems for the organization. In this role, managers influence the environmental variables most likely to receive attention in the organization. They must also make certain that information concerning these key variables is available to affected managers. Top-level managers must also provide accurate and timely feedback concerning the organization's performance and the performance of individual business units within the organization. Organization members need information to maintain a realistic view of their performance, the performance of the organization, and the organization's relationship to the environment.