Strategic planning is like golf. Most people have tried playing golf. As much as some look forward to it and others dread it, there are very people who play it well.
The same could be said of strategic planning. Many people have tried it, but few do it well. It’s perhaps no wonder that so many businesses don’t hold regular strategic planning sessions. And those that do, gripe about it long afterwards.
They complain that they’re too busy running the day-to-day operations … the strategic plans look good on paper but never get implemented … we do just fine without it … we can do other things that are more productive … the plan may not be relevant a week or even month from now … we don’t have the money or people to create a “wish list” of ideas, so why bother?
Indeed, why bother at all?
The academic research is split on whether strategic planning leads to better organizational performance. Yet, most companies will admit that they don’t do it well. One study found that companies typically realize only about 60% of their strategies’ potential value because of poor planning and execution – and only 15% of companies go back and track performance against the plan, according to Michael Mankins and Richard Steele of Marakon Associates whose article on the subject was published in the Harvard Business Review.
The question should not be: Why bother with strategic planning? The question should be: How can we create more value from strategic planning? The good news is that you don’t have to be the Tiger Woods of strategic planning to find value in the process.
The question should not be: Why bother with strategic planning? The question should be: How can we create more value from strategic planning?
We get hung up on the actual plan and lose sight of what is most important – the process of determining where to spend our time and limited resources to achieve organizational goals that would have the biggest impact on the business. Few would argue that planning and setting goals are NOT important. More than 1,000 peer-reviewed studies show goal-setting affects performance positively. And 16% of entrepreneurs are more likely to achieve viability by planning, according to findings published in Harvard Business Review.
Studies have shown again and again that the 4 most important ingredients for an effective strategic plan are 1) clear vision, (2) goal-setting to achieve the vision, (3) key financial ratios tied to the goals to ensure you are measuring performance, and (4) flexibility.
Everything begins with a clear vision for the organization that is based on the purpose and values of the people leading the company. Put simply, your purpose is why you get up in the mornings and come to work every day as you strive to achieve your vision for the organization five, 10 or 15 years from now.
Secondly, define the goals or milestones needed to achieve your vision. Your goals are those things that are critical this year or next that must be achieved. Challenge yourself and your team.
One question we have been asking more often among clients that is having a profound impact is this: How can you make a difference in the lives of those you serve that will truly create value for them? The answers are often powerful motivators that challenge organizations to think beyond sales or profit goals but aim for a higher purpose that gets employees – and customers – excited about your business.
How can you make a difference in the lives of those you serve that will truly create value for them?
The third criteria for effective strategic planning is measuring performance using key financial ratios. This shouldn’t be complicated. Let’s say your team determines that the best way to create value for customers is to launch a new product. Set a launch date and your goal for sales and profitability within one, three and six months from the launch date. Then track your performance against your goals.
Lastly, and this is most important, allow for flexibility in your strategic plan. Markets change. Competitors move in and move out. New opportunities come along. Anticipate the fact that what is true today, may not be true a month from now. For example, perhaps you need more time to launch a new product. Make the adjustments as needed to your planning, your goals and financial ratios and let everyone know that the strategic plan didn’t fail them because if it wasn’t for the planning process the idea for a new product may never have been born.
Whether you meet all the goals in a strategic plan is not what is most important. The value of strategic planning is in the process itself. As Winston Churchill famously said years ago, “Plans are of little importance, but planning is essential.”