Strategic planning is an iterative activity; you might begin the strategic planning process with one mission and end with another. It really depends upon what your findings are during the process.1
Strategic planning is an organizational management activity that is used to set priorities, focus energy and resources, strengthen operations, ensure that employees and other stakeholders are working toward common goals, establish agreement around intended outcomes/results, and assess and adjust the organization's direction in response to a changing environment. It is a disciplined effort that produces fundamental decisions and actions that shape and guide what an organization is, who it serves, what it does, and why it does it, with a focus on the future. Effective strategic planning articulates not only where an organization is going and the actions needed to make progress, but also how it will know if it is successful.2The Importance of Strategic Planning3
Three Reasons Why Corporate Strategic Planning Is Important
1) Strategic planning provides clarity, direction, and focus for your organization: The primary purpose of strategic planning is to connect the organization’s mission and vision by addressing these three questions:
- What is our purpose? (Mission)
- What do we want to achieve? (Vision)
- How are we going to get there? (Plan)
Perhaps the most obvious reason to engage in corporate strategic planning is that it provides direction and focus by way of a written document. Having a clearly articulated mission and vision enables the company to develop a strategic plan that is a literal roadmap for success. Confusion and day-to-day business fires are often reasons why strategic planning yields little results, but these risks can be mitigated by having a plan that is written down, with clear assignments, dues dates, and deliverables, so that employees know what must be executed by when.
2) A strategic plan drives organizational alignment: A strategic plan isn’t just a document to keep everyone on track. Having everyone participate in the strategic planning process fosters collegiality and creates an opportunity for discussion on the direction of the organization, which is why strategic planning often results in cultural transformation. In addition, the process promotes the open and creative exchange of ideas, including resolving disputes and working out effective solutions. Most organizations have hard-working employees who put their best efforts into areas that have no effect on strategic success or accomplishing important goals and objectives. Having employees involved in the strategic planning process not only ensures everyone is on the same page when the execution phase of the planning process begins, but also that employees will be able to make better decisions and execute in the best interests of the plan and plan goals. This is why corporate strategic planning serves as the vehicle for answering the question, “How can we better align all our resources to maximize our strategic success?”
3) A plan communicates your message: Even if you have strong mission and vision statements, most leaders walk around with a virtual strategy locked in their heads. The CEO inherently knows the organization’s strategic direction and the tactics that need to be executed. Unfortunately, if the strategy isn’t down on paper, or if only a small handful of people know the priorities articulated by the strategy, then the likelihood that the strategy is executed effectively is greatly diminished. This is why strategic planning is so important – serves as a communications vehicle for what must be done to create short- and long-term sustainability.The Principles of Strategic Planning4
There is no one formula or process for strategic planning. There are however, principles and required steps that optimize the value of strategic planning. The steps in the process on strategic planning are presented below:
Anchors of Nonprofit Strategic Planning (see figure below)5
- Current Situation Analysis: The early step in the process of strategic planning can best be described as building a foundation. The importance of situation analysis is similar to the need to drive the pilings of a skyscraper all the way down to bedrock. This analysis prepares the organization to tackle the work of completing a useful and valuable strategic plan that provides a competitive advantage.
- Segmentation Analysis:The purpose of this process is to match the company’s current or prospective products and services with the market’s potential. The alignment of the company’s products with the market potential helps focus the strategic planning activities of the company in areas of highest volume potential and highest financial return.
- Strength, Weakness, Opportunities, and Threat Analysis: SWOT(Strengths, Weaknesses, Opportunities and Threats) analysis is a valuable, proven, effective tool to use in the discovery and evaluation stage of strategic planning. It is an audit of the organization and the environment around the company. The SWOT analysis is most productive when it involves the input of a cross section of key managers in the process. Since SWOT analysis is an exercise dependent on judgment, the input from multiple sources provides an opportunity to assure all of the points of view and important issues are considered.
- Core Competencies Analysis: Core competencies are a set of unique internal skills processes and systems that provide competitive advantage in the market. A good way to think of core competency analysis is to list the values of both product and services from the point of manufacturer or distribution to consumption. Core Competency Analysis provides an opportunity to insightfully look at the skills, processes and systems of the company. Core Competency Analysis provides a review format useful in identifying the need for improvement in key strategic activities, practices and systems. When completed the core competency analysis separates those strategic functions best done inside the company and those that are candidates for outsourcing.
- Key Success Factors: Key Success Factors are those functions, activities or business practices, defined by the market and as viewed by the customer, that are critical to the vendor/customer
relationship. Key Success Factors are defined by the market and by the customer, not by the company. They revolve around skills, processes and systems. Outstanding performance in those areas results in “order winners”.
- Business Unit Strategy / Business Plan: Depending on the scope and complexity of the business, this step is to develop a Strategic Statement or statements for multiple elements of the business. Those elements of the business include the overall business, each operating division of the business and each key functional area of the business. So there would be an overall company Business Strategic Statement, a Division Strategic Statement, and Functional Strategic Statements. The Functions might be Manufacturing, Marketing, Logistics or Supply Chain, Human
Resources or other functions important to the success of the business.
- Balanced Score Card: In business “score” is kept to report results, to effect behavior, to reward and to recognize performance. But, it is also kept to determine progress against the long-term goals of the Strategic Plan and the short-term goals of the Annual Business Plan. Traditional financial measures alone do not adequately report results of the more complex, competitive business environment of today. So the scorecard of the past becomes the “Balanced Scorecard” of today. The measured results today move beyond the traditional goals of income, cash flow and financial ratios. They add process performance measurements around issues like continuous improvement, supply chain management, and customer satisfaction.
- Evaluation: The evaluation process needs to be on going and continuous. The evaluation process provides a clinical check-up on the progress of the business compared to both the near
term Business Plan and the long-term Strategic Plan. The evaluations process provides a timeframe to determine if the hurdles set up through the scorecard are being met. In addition, the evaluation process provides a time to determine if results are still meaningful and do they add to the goals of continuous improvement for the company and add real value to the customer?
The premise for nonprofit strategic planning is that it is different than planning in for-profit businesses. While sales and profits underscore the bottom line for commercial enterprises. nonprofit organizations are driven by social impact, they work in an increasingly complex and inefficient financial capital market, and they are required to demonstrate, through evaluation, outcomes that are consistent with their mission. This type of planning requires more than textbook solutions to strategic planning. A true understanding of nonprofits demands a strategic planning process anchored to five practices.
1. Develop a strategic planning approach: Strategic planning does not have to be as complex, and many books, models, and online PowerPoint slide presentations make it out to be. In essence, creating a strategic planning approach boils to developing a team, a timeline, structured process, and jumping into the process. Strategic planning is thinking about where you are today, where you want to be tomorrow and creating a plausible roadmap to get there.
2. Discover where you are today: Strategic planning begins with a clear understanding of the context in which your organization operates. An assessment is taking a systematic look at your nonprofit organization’s internal and external environments to identify themes, data, and trends that may influence your current and future plan. The purpose of the assessment is to create a shared information base that can inform your strategy development. Assessment is concerned with what is the same, what is different, and what is coming at you (trends). Discovering where you are today also means wrestling with the direction of your nonprofit growth.
3. Build an Impact Model: Elsewhere I have written about social impact and logic models (here & here). I mention it again because it is an critical concept. Every organization must be based on a clear model of how the programs, services, and capacity create change. Start with the compelling need your organization seeks to address, your vision of a different tomorrow, and then fill in the “white space” in between the need and vision. The central question is “What are the organization’s mission, programs and services, operating capacity and outcome measures that create change?” Developing a visual impact model is an anchor for all strategies & priorities associated with your strategic plan. Yet in one annual survey, of nonprofit leaders in the Northwest, less than 10% of survey respondents report having a written theory of change to guide their organization. Indeed, I have argued that understanding your theory of change is a core competency of nonprofit organizations.
4. Create a nonprofit revenue and capital model: In the context of how programs and services are managed over the course of the strategic plan, every organization needs to develop a sustainable revenue model. Balancing, autonomy, reliability, diversity and creating an intentional strategy will increase your chance of building a sustainable revenue and capital model. I have written extensively about nonprofit revenues
5. Plan for Impact: The final anchor to a strategic plan framework is to build a framework for evaluation and performance. This is where the rubber meets the road. Delivering on a strategic plan is predicated on being able to demonstrate not only your outcomes and impact (more on evaluation: see here & here) but also the degree to which you can build your evaluation capacity and to increasingly develop stronger impact data.Benefits of Strategic Planning6
Strategic planning serves a variety of purposes in organizations, including to:
Challenges to Strategic Planning7
- Clearly define the purpose of the organization and to establish realistic goals and objectives consistent with that mission in a defined time frame within the organization’s capacity for implementation.
- Communicate those goals and objectives to the organization’s constituents.
- Develop a sense of ownership of the plan.
- Ensure the most effective use is made of the organization’s resources by focusing the resources on the key priorities.
- Provide a base from which progress can be measured and establish a mechanism for informed change when needed.
- Listen to everyone’s opinions in order to build consensus about where the organization is going.
- Provide clearer focus for the organization, thereby producing more efficiency and effectiveness.
- Bridge staff/employees and the board of directors (in the case of corporations).
- Build strong teams in the board and in the staff/employees (in the case of corporations).
- Provide the glue that keeps the board members together (in the case of corporations).
- Produce great satisfaction and meaning among planners, especially around a common vision.
- Increase productivity from increased efficiency and effectiveness.
- Solve major problems in the organization.
Strategic planning is a much maligned endeavor, subject to the usual (and frequent) criticisms: too much time, too much money, and too little action. There are many reasons strategic plans fail, but the following challenges are among the most common:
Strategic Planning vs. Strategic Thinking8
- Lack of leadership: If the leaders of the institution, school, program, or department do not support the plan, it will fail. This point seems obvious, but far too often leaders talk about the importance of the strategic plan as the planning process gets underway, only to show little interest down the line.
- Lack of consensus: It is often said that the process of strategic planning is what matters, not the product. Of course, the process itself is vital; yet if an institution is serious about implementing the plan, then an excellent product is imperative. Strategic planning is about consensus building. Done correctly, the process promotes communication, participation, and collaboration. It provides a structured forum for airing conflicts, dealing with the inevitable political struggles, and negotiating the purpose and meaning of an organization and one’s place in it. While a true consensus about all issues among all stakeholders is unrealistic, engaging everyone through interviews, focus groups, surveys, open forums, and the like is essential if leaders expect them to implement the plan
- Too ambitious: The problem of too many goals is exacerbated by implementation planning. More often than not, strategies and goals are deconstructed into literally hundreds of specific objectives. Even if an organization has full-time staff devoted to strategy and planning, such plans become unwieldy, demoralizing, and ultimately unhelpful as an actionable guide.
- Failure to integrate the plan into the culture, operations, and budget: Failures often occur because the strategic plan is divorced from the daily life of an organization. Leaders must model the plan, and that includes talking about it—often. Every public venue and most closed venues are opportunities to stress the vision, mission, and values of the organization.
- Lack of momentum in the short term: Even with a shorter time frame, an annual (or sometimes biennial, depending on the environment), systematic assessment of the plan is necessary for course corrections. The planning process itself should create momentum but if the process takes too long, then those involved begin to lose their enthusiasm. Thus the timeline is important; staying with an aggressive timeline sends the message that the planning is a serious endeavor. Ideally, during the planning process itself, an organization will discover areas for growth and make important changes. To ensure that the strategic plan does not fall stillborn from the printer, institutions should act as quickly as possible. This means identifying those steps that can be taken in the short term and moving forward to implement them. Equally important is making sure that stakeholders know the institution has moved deliberately and decisively to act on the plan. Thus leaders must communicate their actions often and through a variety of media. Momentum in the short term conveys the message that the planning process was a serious undertaking and that the resulting strategic plan is a living document.
In this period of rapid change economically and business wise around the globe, strategy in business is moving away from the basic ‘strategic planning’ to more of ‘strategic thinking’ in order to survive the crowded and competitive global environment. To remain competitive requires organisations to keep their strategic management process dynamic, continuously learning and adaptable and taking advantage of emerging opportunities. Strategic thinking thus becomes a key competency for leaders and managers responsible for the design and deployment of business and functional strategies. Strategic thinking needs to be at the centre of the entire strategic management process, constantly re-evaluating, re-visiting and re-defining mental models of the business. Henry Mintzberg (1994), in his article, “The Fall and Rise of Strategic Planning,” states that the label strategic planning should be dropped because strategic planning has impeded strategic thinking. Mintzberg’s point of view is as follows: Strategic planning is about analysis while strategic thinking is about synthesis. Strategic planning in this case means breaking down a goal into steps, designing how the steps may be implemented, and estimating the anticipated consequences of each step while strategic thinking is about using intuition and creativity to formulate an integrated perspective, a vision, of where the organization should be heading. In practical terms strategic thinking should help to analyze, explore, understand and define a complex situation and then develop planning actions that will bring the greatest possible positive impact towards a pre- defined goal, hence it is justifiable to conclude that strategic planning is subordinate to strategic thinking. Thus, strategic thinking is important as it helps in developing strategic plans. Strategic planning positions a business in a certain level based on the goals and possible positive changes they intend to achieve. This is why most companies require executives and managers to have a strategic mindset because this obviously sets them from those who think in a conventional manner. hinking strategically also helps predict the future of a company. With this it is easier to develop steps on how to get into what has been planned for the future and stay away from paths that may lead to business failure. Moreover, through this kind of thinking, a business is able to become more adaptable to change. The distinction of ‘strategic planning and strategic thinking therefore leaves many confused on which one to prioritize on. It is a reality in business today that strategic thinking and execution of strategic planning is proving to be a challenge among many leaders. Therefore a clear understanding of the value and the benefits of strategic thinking are indispensable.Strategic Planning vs. Financial Planning9
Simply extending financial statement projections into the future without consideration of the competitive environment is a form of financial planning or budgeting, not strategic planning. In business, the term "financial plan" is often used to describe the expected financial performance of an organization for future periods. The term "budget" is used for a financial plan for the upcoming year. A "forecast" is typically a combination of actual performance year-to-date plus expected performance for the remainder of the year, so is generally compared against plan or budget and prior performance. The financial plans accompanying a strategic plan may include 3–5 years of projected performance. McKinsey & Company developed a capability maturity model in the 1970s to describe the sophistication of planning processes, with strategic management ranked the highest. Stages 3 and 4 are strategic planning, while the first two categories are non-strategic or essentially financial planning. Each stage builds on the previous stages; that is, a stage 4 organization completes activities in all four categories. The four stages include:
The Seven Deadly Sins of Strategic Planning10
- Financial planning, which is primarily about annual budgets and a functional focus, with limited regard for the environment;
- Forecast-based planning, which includes multi-year financial plans and more robust capital allocation across business units;
- Externally oriented planning, where a thorough situation analysis and competitive assessment is performed;
- Strategic management, where widespread strategic thinking occurs and a well-defined strategic framework is used.
1. The staff took over the process. This situation arose partly because CEOs created new staff components to deal with a new function, partly because the staff moved in to fill a vacuum created by middle management's indifference to a new responsibility, and partly because of arrogance and empire building. As a result, planning staffs all too often cut executives out of the strategy development process, turning them into little more than rubber stamps
2. The process dominated the staff. The process's methodologies became increasingly elaborate. Staff placed too much emphasis on analysis, too little on true strategic insights ... . Strategic thinking became equated with strategic planning .... Jack Welch, the chairman and CEO of GE, described the outcome graphically: "The books got thicker, the printing got more sophisticated, the covers got harder, and the drawings got better." ...
3. Planning systems were virtually designed to produce no results The main design failure lay in denying, or diminishing, the planning role of the very executives whose mandate was to execute the strategy .... The attitude of many was typified by the angry retort of one executive. "The matrix picked the strategy—let the matrix implement it!" The other design fault was the failure to integrate the strategic planning system with the operations system, resulting in a strategy that did not drive action.
4. Planning focused on the more exciting game of mergers, acquisitions, and divestitures at the expense of core business development. This problem stemmed in part from the temper of the times. But it also resulted from the inappropriate use of planning tools ....
5. Planning processes failed to develop true strategic choices . . . . Planners and executives rushed to adopt the first strategy that "satisfied" (i.e. met certain basic conditions in an acceptable manner). They made no real effort to search for, or analyze, an array of strategy alternatives before making a decision. As a result, companies all too often adopted strategies by default rather than by choice.
6. Planning neglected the organizational and cultural requirements of strategy .... The process focused, rightly, on the external environment, but it did so at the expense of the internal environment that is critical in the implementation stage.
7. Single-point forecasting was an inappropriate basis for planning in an era of restructuring and uncertainty.... Companies still tended to rely on single-point forecasting. Scenario-based planning was the exception rather than the rule... . Plans that relied on single-point forecasting suffered increased vulnerability to surprises. . . . (Moreover) because planning assumptions spelled out a single future, one that was almost always some slight variation of an extrapolation of past trends, there was an inherent bias in favor of continuing a "momentum strategy." .. .
See AlsoCorporate StrategyBusiness StrategyIT Strategy (Information Technology Strategy)Strategic AlignmentStrategic Alignment ModelStrategic VisionStrategic Alignment Maturity ModelStrategic ManagementStrategic Planning Cycle