In an article earlier this year, I wrote about the fact that setting strategy is a year-round opportunity. The message being, don’t wait to take action. For those of you who waited it is definitely time to get moving. The end of the calendar and perhaps fiscal year is rapidly approaching and planning for next year needs to begin.
So what does an effective strategic planning process look like?
Strategic planning is actually the easy part of the two-part process for business success – strategy and execution. Let’s discuss a couple of key thoughts about strategic planning starting with; it needs to be a repeatable process. This process should be one that can be used continually, without changing major elements based on management whims or MBS (Management by Best Seller).
Here are the key steps in strategic planning:
1) Step Back – Take a look around. We need to look at where we have been before we can decide where we want to go. Companies rarely track performance against long-term plans: less than 15% of companies make it a regular practice to go back and compare the business’s results with the performance forecast for each unit in its prior years’ strategic plans according to the Harvard Business Review. So the Step Back process should include a consistent method for reviewing external factors (i.e., economic influences, competitive trends, governmental requirements…etc.) as well as internal factors (i.e., achievement of current year goals, key performance measures, stakeholder satisfaction surveys, completion of a SWOT analysis) plus a process to prioritize a long list of actions into a reasonable, achievable list. I recommend using what we call the 100-Point Exercise to boil down the list to the top items. The 100-Point Exercise allows each participant in the planning meeting to apply up to 100-points (I like increments of 20 points) to the items on the SWOT or brainstorming list they see as the most impactful on the business or organization in the coming year. Then you add up the scores for each item across all participants and the highest scoring items are the winners. It makes a big list manageable and something you can actually work on and complete versus trying to work on a list of 10 or 15 items which is virtually impossible to complete.
2) Decide What’s Important - The process must include a predictable, repeatable method for assessing your organization’s mission, shared values, vision, strategic position, and vital few objectives (a.k.a. goals). In this step we are setting or renewing the vision. Vision is the picture of “where” we want the organization to go in the next ten years. It is defining our destination. It is also the step that helps us determine “what” we need to do to get to that destination. These are referred to as our Vital Few Objectives (VFOs). It does not happen by accident, well it might, but then that would be an accident.
3) Set Goals that Lead - Also important is a process to determine and set goals that are measureable, allowing us a way to develop clear targets and deadlines. Nothing loosey-goosey here – hard numbers, revenue dollars, margin percentage, dates, units. Real goals have real outcomes by which we can measure our progress. Also, this is where we need to define the projects or initiatives that will help us get to our goals. If our Vision (where) is to have “regional geographic presence” and our VFO (what) is to “open five offices in the next five years” then our initiative/project is “how” to open the first “new office in 2010”. These initiatives are intended to change the trajectory of the business. We do many things to run the business but what do we need to do to change the business. These are the items that drive activities of “every person, every day.” Now that I know “Where”, “What” and “How” the next is “Who” will do the work.
4) Work the Plan – This is the execution phase of the strategic plan. And this is the biggest failure point for organizations. The execution phase is setting the stage for “who” will do the work. This is where we must assign the work that needs to be done to help the organization achieve the goals to arrive at the destination. Set real tasks with real deadlines and real outcomes.
To recap, strategic planning is not an annual event – it is an on-going process. While most organizations conduct strategic planning annually, that’s not enough. It needs to be revisited on a quarterly basis in order to measure progress, align resources and implement necessary adjustments. If you are not measuring, observing, and adjusting, the likelihood for success decreases rapidly. Just like driving a car on the highway, you need to pay attention to the key dashboard indicators and look out the windshield. You must continually adjust based on various internal and external inputs like the speedometer, the roadway, traffic, visibility, etc.
Let’s not forget, however, that strategic planning is only HALF of the equation. While the CEO and leadership team “own” the strategic plan and are accountable for it, they cannot be completely responsible for its proper execution. Even the most well-crafted strategy is subservient to superior execution. And, most successful business leaders agree, they’d rather have a “B” strategy and an “A” execution, than the other way around. In fact 90% of organizations fail to execute their strategies successfully according to a survey by the BSC Collaborative.
The tougher, more critical side of the strategy/execution equation is making it work - getting it done, measuring progress along the way, finding what doesn’t work early enough to make course corrections and aligning resources (people, technology, policies, processes, and measures) continually so that initiatives can support the vital few objectives (VFOs).
It’s the delicate balance of both strategic planning and execution that separates good organizations from great organizations.
In my next article, I’ll focus on this other half of the equation: Execution.