5 Key Principles That Ensure Strategic Planning Leads to an Effectual Strategy
A leader's day can be consumed with completing templates and attending planning sessions during a strategic planning cycle. In turn, top-performing personnel who are not members of the C-suite may spend an inordinate amount of time working behind the scenes just to have an idea heard by a potential sponsor. Consequently, some of the best alternatives may never see the light of day. Even if an idea receives air time, it might be overlooked due to leaders' efforts to quickly complete the planning process so they can return to the real business of business.
Just 45 percent of nearly 800 executives recently surveyed rated their company's planning processes as effective, where effective may mean creating a strategy that reflects bold company objectives, can be adapted to market changes and offers guidance to management and front line alike. Of these same executives, 79 percent said they were satisfied with their planning processes even though they determined the processes led to a mediocre strategy. Thats worrying!
In contrast, researching the highly successful companies reveal five principles in their strategic planning process.
Principle 1: Separate strategic planning from budgeting.
It’s amazing the number of organisations that consider the budget to be the strategy.
Whereas strategy reflects a company's ambition grounded in operational reality, a budget signals the strategy's practical implementation. Consequently, the best strategic ideas should determine the areas in which the company should invest to support growth. In turn, budget targets should be created that support the anticipated growth.
Separate strategic planning and budgeting processes can improve the strategy that leadership develops, as well as its implementation, in a number of ways. For instance, separating planning from budgeting best ensures that leaders will give adequate attention to customer needs, business conditions and competitive dynamics during the planning process. The strategy and budget planning processes are, however, linked to ensure the budget results from a well-thought-out strategy and not vice versa.
By focusing on the strategy and then the budget, leadership can spend the first part of the planning cycle on strategy development and the latter months on the rational development of budgets and operational plans. In so doing, company leadership can train their sights on market changes and emerging opportunities and the preferred strategic responses to same, rather than prematurely debate the costs of those responses.
Principle 2: Create a strategy that elaborates on customer preferences, and also reflects operational capabilities.
In many cases, to create a strategic plan, planners and analysts set an agenda and C-suite executives consider alternatives and decide which alternatives the will implement in the coming year. But this approach limits the opportunity for customers or operations personnel to influence those decisions as front line personnel are excluded from the process. The result is a strategy that fails to reflect customer requirements and company capabilities.
More effective strategies are developed if the planning process includes opportunities for planners to hear customer voices and those of employees who work on the front line and communicate with customers. Only when this interaction occurs, does a fully formed strategy adequately reflect customer wants and needs and establish requirements that operations personnel can actually execute to achieve desired business results.
Principle 3: Allocation of resources based on current strategic plan requirements, rather than past resource allocation.
Allocating based on the past is a sign of either plain laziness or incompetence.
To minimise the effort required to create an implement a strategic plan, some leaders adopt a prior year's plan as the basis of a current planning year's strategy. As an alternative, planners might spread strategic investments in a separate but equal fashion with little, if any, regard to current opportunities. Also, planners might divvy up resources to reward prior performance, which ignores a current operating environment.
But a strategy that effectively supports a company's growth and other critical objectives, must allocate resources according to very specific and current growth opportunities. After all realities may be significantly different in the current year!A company must direct the largest share of its strategic investment dollars, as well as personnel, toward critical opportunities and objectives.
Principle 4: Support year-round, free-flowing debate about strategy and strategic decisions.
Many companies restrict strategy debates to a preordained annual planning period. But the most successful strategies and tactics might originate with informal, rather than formal discussions. When strategy discussions are limited to the annual planning period, some issues or opportunities may never be considered due to the many issues that must be discussed and resolved during the annual planning process.
When company personnel adheres to a rigid strategic planning process schedule, this approach inevitably results in some leaders and operations personnel making critical decisions in an ad hoc fashion. Sometimes these decisions are negatively influenced by people who speak the loudest, rather than those capable of developing the most feasible plan. So it's best that timely and high-stakes decisions be made based on need, rather than a planning calendar, using an issues-based agenda that runs throughout a planning year. Only then can issues-based discussions take place as need be to consider strategic alternatives and urgent actions.
Principle 5: Simplify a leader's agenda by focusing on issues other than "business as usual" considerations.
The comfort zones lie in familiarity. The ‘pull’ is very strong to stay focused on issues of core strength. These may be to approach the strategic meetings from a point of view of ‘budgets’ or ‘operations’. This is a limiting approach and may neither address the opportunities nor the challenges in entirety.
Leaders must redefine their agenda and approach to primarily deal with issues that are indeed strategic. The first step may be to realise what Strategic Planning is not
Strategic planning is not a box of tricks, a bundle of techniques.
Strategic planning is not forecasting.
Strategic planning does not deal with future decisions.
Strategic planning is not an attempt to eliminate risk.
While there are techniques in competitive strategy as there are in manufacturing, they work very differently. Competitive techniques always depend on the big picture. As opposed to "a bundle of techniques," strategy is better approached as "analytical thinking and commitment of resources to action." It may even be foolish to predict future as it is of little use to an organisation who is trying to change it through innovation.
Strategic planning is the continuous process of making present entrepreneurial decisions systematically and with the greatest knowledge of their future impact and sustenance; organising systematically the efforts needed to carry out these decisions; and measuring the results of these decisions against the expectations through organised, systematic feedback.