Strategic planning — it can be painful. It can be frustrating. But it can add tremendous value.
And there are ways to increase its value.
We often hear how our clients have put in so much time, effort and research in the strategic planning process only to not get much of an impact.
So how can managers improve strategic planning? Answer these 5 questions:
1. What are the issues?
How can you anticipate big challenges and spot new trends? We have to start with the right questions and make sure we are focusing on the challenges and the trends that will impact our business (and what we can do about them).
2. Do you have the right team together?
Bring in the most relevant people to the discussion. You need to have the planners involved. You also need the people that will carry out the strategy in the development of the plan.
And make sure these key people have operational and financial information in hand BEFORE the meetings.
3. Are you using a planning cycle that meets business needs?
Do you need to create a strategic plan every year? Maybe but maybe not. If your business is in a volatile industry, maybe. Otherwise, you may be able to make small changes instead.
You will need to make sure you are addressing any changes in the external environment. For example, you will need to address changes if you have a major merger in your industry.
4. Do you have a management system in place?
We see it time and time again that many companies fail to execute the chosen strategy. We see companies tracking budgets and operating reviews. But they lack the overall focus of the strategy.
You need other metrics in place to help ensure you are executing your strategic plan. Transparency is achieved through regular reviews and the use of financial as well as non-financial metrics.
Well designed strategic management systems can give an early warning of problems with strategic initiatives (financial measures may only provide lagging indicators). An effective system enables management to step in and correct, redirect, or even abandon an initiative that is failing to perform.
5. Are HR systems integrated into the strategic plan?
Simply monitoring the execution of strategic initiatives is not sufficient. You need to hold managers accountable by basing their evaluation and compensation on the execution of the plan. The problem we see with this is most companies emphasize short term, financial targets when strategy development is really a long term plan.
Not only does it make sense to adopt both short and long term approaches, it’s also important to mix the performance targets. So the employees are not just measured on revenue, they are measured on other aspects of the strategic plan (example retention, cross department sales). The main benefit is that managers are motivated to flag any problems early in the implementation of a strategic plan. (they are incented to do so).
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