Whatever your goal, whether in life or in business, your odds of achieving it increase dramatically if you have a plan. That’s the case whether you want to learn another language, lose weight or increase your company’s profitability.
That's why it’s more than a little surprising that the lion’s share of businesses do very little actual strategic planning. According to OnStrategy, for example:
- More than 85% of C-suite executives work on strategy less than 1 hour a month
- More than 90% of businesses fail to execute their strategic plans successfully
- About 60% of businesses don’t align their budgets with a strategic plan
- More than 95% of workers don’t know what their company’s strategy is
WHY DO SO MANY STRATEGIC PLANS FAIL?
Those are some dire metrics, but what they don’t say is “why?” Why, if planning is so critical to business success, do so many businesses seem to take such a cavalier attitude towards planning?
There are several reasons. First, many companies know that planning is critically important, but they’re not quite sure how to do it. Second, good planning requires accountability, and some business leaders prefer a freewheeling style, one that doesn’t tie them to clearly defined actions and goals. Finally, and perhaps most important, strategic planning can be hard — it can be easier, in other words, to avoid protracted problems, toss the dice and hope for the best.
The reticence to engage in strategic planning is understandable when one considers that so many plans fail to achieve their principal goals, and for a variety of reasons. According to Forbes, those reasons fall into 4 major categories:
- The business isn’t ready to change: planning necessarily results in change, and that can be challenging. Doing things in new ways means new accountability, some of which employees at all levels are unwilling to embrace. Said differently, you shouldn’t begin planning until your business, from top to bottom, is prepared for change.
- The plan becomes overly complex: strategic planning entails change, but that doesn’t mean you need to change everything about the way you do business. It’s important to prioritize goals and focus on the most important. The simpler your plan, the easier it will be to execute, and the more likely it will be to succeed.
- People aren’t willing to address problems: every business has problems — perhaps marketing and sales don’t get along, or a manager lacks effective leadership skills. Airing those problems can lead to infighting, and that can stop planning efforts in their tracks. To succeed, you need to address problems head on, but in the spirit of healthy debate, not contentiousness or argument.
- Planning is confused with budgeting: strategic planning and budgeting are related processes — but they’re not the same thing. In high-performing organizations, planning is a vehicle to identify ways in which a business can invest innovation and opportunity. In other words, budgeting is a subset of planning, not the other way around.
WHAT IS STRATEGIC PLANNING?
To avoid these planning boondoggles, businesses need to understand both what strategic planning is, and what are the best tactics to ensure that theirs succeeds.
So, what is strategic planning? Obviously, every business is different, with different goals and challenges. For most however, strategic planning is a careful set of steps the goal of which is to clarify their current position, articulate their goals, and settle on the best ways to achieve those objectives. At its best, strategic planning becomes a springboard for innovation, unleashing creativity and new ideas that wouldn’t have surfaced in the absence of planning.
As The Balance notes, for example:
“A strategic plan is a document that establishes the direction of an organization. It can be a single page or fill up a binder, depending on the size and complexity of the business and work. Most managers can benefit from having a strategic plan. The process of developing a plan helps the manager (and the team) step back and examine where they are, where they want to go, and how to get there. In the absence of a plan, work still gets done on a day-to-day basis but often lacks a sense of purpose and priority.”
WHAT’S THE BEST WAY TO CREATE YOUR STRATEGIC PLAN?
As noted above, no two businesses are the same, which means of course that the strategic planning process will be different for each. That said, most businesses succeed at strategic planning by taking the following 4 steps:
1. BEGIN WITH A SWOT ANALYSIS
Identifying your company’s strengths, weaknesses, opportunities and threats is crucial to planning success. It should never be a perfunctory exercise, but rather one grounded in careful research and thoughtful analysis. For example, you should consider business strengths and weaknesses across a wide continuum, from staffing to product viability, customers and market position.
Business opportunities could include new markets, products and services, revenue streams and potential partnerships. Finally, consider both internal and external threats — everything from a potential economic downturn to new competition, reduction in cash flow and the loss of key employees.
2. NAIL DOWN YOUR MISSION AND VISION STATEMENTS
Your company’s mission and vision statements should never be isolated from the central work of your business. Rather, they should touch everything you do and be understood by every employee.
The mission statement defines (briefly and compellingly) your company’s reason for being. Think of IKEA’s “To create a better everyday life for the many people.” Your vision statement articulates where you want to take your company, what in other words it will look like when you realize your mission. A good example is Nike’s “Bring inspiration and innovation to every athlete* in the world. (*If you have a body, you are an athlete.)”
3. CREATE YOUR GOALS
Once you’ve defined where your business is now (through SWOT), clarified what your business does (better than your competitors) and where you want it to be in the future, you’re ready to create goals. These goals should be SMART — in other words, they should be specific, measurable, attainable, realistic and time-bound.
Begin by defining broad company goals, things like specific changes in company culture, large-scale financial, profitability and productivity goals and new product or service offerings. After you’ve defined these top level goals, it’s important to create lower-level goals that support your big goals in individual departments.
4. CREATE A BUDGET THAT SUPPORTS YOUR PLAN
This is where the rubber meets the road in strategic planning. You need to assign (realistic) dollar figures to each of the changes articulated in your plan. If you need to expand your IT team, how much will that cost? If your marketing team can improve effectiveness with CRM or marketing automation software, you need to find a way to pay for it.
It’s not uncommon to discover at this stage that your plan, although smart and thoughtful, will cost more money than your business has. If that’s the case, you’ll need to either find new revenue streams to fund it or amend the plan so it aligns with your budget.
In a business world where increasing competition is the norm and innovation has become a critical component of success, strategic planning is crucial to the health, profitability and longevity of your business. But it can also be both complicated and confusing, one of the reasons an increasing number of businesses are turning to experienced firms who can give the guidance and advice they need to succeed.
To learn more about the ways our accounting, HR payroll, benefits administration and talent acquisition services can support your company’s strategic planning, drive innovation and help you achieve your principal business goals, contact us today.