
Business practice shows the need for strategic planning. Without it, the company's management would not be able to develop and implement ideas for the future. It is a complex and lengthy process that requires a lot of knowledge and skills of people with different competencies.
Every organization should work with a view to the future, which means that it is necessary to follow its strategic plan.
How is a strategic plan prepared? What are the steps in strategic planning?
What is a strategic plan?
Let's start with the definition of the strategic plan:
The strategic plan is a document used to communicate in the organization about its main goals, the necessary actions to achieve them, and other key elements developed during planning.
The strategic plan should be seen as a detailed roadmap for the direction and ways the organization chooses to follow over time.
For this reason, its preparation is critical to the success of any organization and usually, the development of a strategic plan is handled by the top management of the organization.
With the help of the strategic plan, the following is achieved:
- Chaos is organized and all good ideas are arranged in one place.
- The organization is preparing for the upcoming growth.
- The strategy is communicated to employees.
- Employee engagement is increasing - they have a clearer sense of direction to follow.
- The competitive advantage of the organization is built.
- Focus and clarity are created on what the immediate actions are.
7 stages of strategic planning
There are different approaches to strategic planning, but one of the most established is related to seven stages and has become a standard in practice.
The seven stages of strategic planning are:
- Mission;
- Strategic goals;
- Tactical goals;
- Strategies;
- Actions and tasks;
- Control;
- Reward.
Let's take a closer look at the seven stages of strategic planning.
1. Mission
Defining the mission of the organization is the first stage of the strategic planning process.
The mission of an organization is the meaning that makes it exist and its fundamental goals.
For this purpose, it is useful for each organization to have the so-called. "Mission statement" - a written description of why it exists as a business or activity. The mission statement should be a short, clear, and powerful message addressed to both the members of the organization and the people outside it.
2. Strategic goals
Defining the strategic goals of the organization is the second stage of the strategic planning process.
Here it is necessary to determine what long-term strategic goals the organization pursues given its mission.
Strategic goals have a longer period and we can even talk about planning large, hairy, bold goals - vision-oriented goals with a time horizon of 10-25 years.
3. Tactical goals
Defining tactical goals is the third stage of the strategic planning process.
These are practically the so-called "Sub-goals" of strategic goals. They should be, concretely, and measurably formulated so that they can be controlled.
One of the best ways to formulate goals is by the SMART rule. According to him, for a goal to be "smart", it should be:
Specific;
Measurable;
Accepted by the people who will work to achieve it;
Realistic;
With a deadline for implementation.
4. Strategies
The choice of strategies to achieve the goals is the fourth stage of the strategic planning process.
A basic rule in defining a strategy is that each organization should focus on those areas of its activity in which it has a distinctive competitive advantage in the target market.
In other words, the strategy is not only a matter of desire but also an opportunity to define the strengths of the organization concerning the competition.
The three main competitive strategies are:
Expenditure leadership;
Differentiation;
Focus.
5. Actions and tasks
Clarifying the actions and tasks for the implementation of the strategies is the fifth stage of the strategic planning process.
At this stage, it is necessary to determine the steps that departments, teams, and people should take to implement the strategy and achieve the tactical goals.
This requires that all actions and tasks be properly identified and differentiated according to their priority and the impact they would have on the organization. Tools such as the Eisenhower and Covey Time Management Matrix, the Priority Matrix, or the MoSCoW Method for setting priorities are useful in this regard.
6. Control
Control is the sixth stage of the strategic planning process.
It is necessary to develop a system to compare current results with pre-planned results. Immediately, when the system finds that there are deviations from the set goals, corrective actions should be taken to correct the poor results.
Also, the control system must allow changes in the strategic plan if there are changes in the external environment.
7. Reward
Determining an award is the seventh stage of the strategic planning process.
In the successful implementation of the strategic plan, the contribution of all those involved must be noted. These are departments, teams, and people in the organization, whose work has contributed to the realization of the mission and vision, as well as to the achievement of strategic and tactical goals.
Fair remuneration is an important part of human resource management in the organization, which directly affects people's motivation.
Top-down or bottom-up?
When preparing a strategic plan, two main approaches are possible - top-down or bottom-up.
The top-down approach assumes that senior managers will lock themselves together somewhere, invite several experts who have the necessary competence, and in a week will draw up a strategic plan without having contact with anyone else.
In such a situation, the role of middle management is to adopt the strategic plan and, without asking questions, to proceed with its implementation. For this approach to work, the strategic plan needs to be actively promoted among staff to involve as many people as possible in the work involved to achieve it.
The bottom-up approach assumes that data will first be collected from the staff at each level in the organization, after which senior managers and experts involved will use them to create the strategic plan.
The role of middle management is to collect, analyze and summarize the most useful information before passing it on to the strategic plan team. In this way, it is more certain that the implementation of the plan will be realized, as the staff feels that their views have been taken into account.
A strategic plan or business plan?
Sometimes managers do not make enough distinction between strategic and business plans. From a practical point of view, the boundaries between the two plans can be blurred and the organization can operate either only with a business plan or only with a strategic plan. Read more: What is a business plan? Complete instructions on how to write one
The business plan is a document that covers the main goals of the organization and contains detailed analyzes, plans, and budgets showing how the goals will be achieved. A business plan contains an analysis of the environment, the market, the competition, including a marketing plan, management plan, operational and financial plan.
The strategic plan is also a document that covers the main goals of the organization and contains a description of the mission, strategic and tactical goals, strategies, activities, and tasks, as well as methods of control over them.
As you can see, there are similarities between the two plans. What are the differences?
Simply put:
The business plan focuses more on answering questions such as "who" and "what".
The strategic plan focuses more on answering questions such as "how" and "when".
From the perspective of the future, the business plan and the strategic plan have similar perspectives. However, a business plan can often be created over a shorter time horizon, such as financial forecasts for the first three years. With all the conventions, the strategic plan can look a little further into the future, for example, three to five years.
Summary
The strategic plan is an important document that publishes the main goals of the organization, the necessary actions to achieve these goals, and other key elements developed during the planning.
The strategic plan is prepared by senior management and may follow a seven-stage process of strategic planning, as follows:
- Mission;
- Strategic goals;
- Tactical goals;
- Strategies;
- Actions and tasks;
- Control;
- Reward.
The four levels of the strategic plan
Every high-ranking manager (manager or CEO, for example) should be able to draw up a strategic work plan for their company.
The preparation of a strategic plan is critical to the success of any organization and is related to managerial competence and in particular to the managerial role of "Strategist", which every manager needs to know and perform well.
What exactly does this mean?
What is a strategic plan?
First, what is NOT a strategic plan?
A strategic plan is not a piece of paper (or two) on which (out of nowhere, for example, because others do) at the beginning of the year (or at any other time) some ideas or goals for the development of the company are written (of a desirable nature).
So, what is a strategic plan?
The strategic plan is a detailed roadmap for the direction and ways that the company (or division, directorate, department) chooses to follow for a certain time. It is a consequence of the chosen strategy, and the strategy itself is a set of appropriate management actions to achieve specific deadlines.
Why is it necessary to prepare a strategic plan?
The answer to the question of why it is necessary to prepare a strategic plan is given in a well-summarized form on the MyStrategicPlan website.
In particular, the strategic plan achieves the following:
- Chaos and all good ideas are organized
- The company is preparing for the upcoming growth
- Employee engagement increases - they have a clearer sense of direction
- The competitive advantage of the company is built
- The strategy is communicated to employees
- Financial needs are prioritized
- Focus and clarity are created on what the immediate actions are
- What are the levels in preparing and implementing a strategic plan?
The levels in the preparation of a strategic plan may vary depending on the source that recommends them, but in general, should be oriented to the following:
- Basics;
- Strategic differentiation;
- Organizational commitment;
- Organizational transformation.
Let's take a closer look at each of the four levels of the strategic plan.
1. Basic provisions
Highlights include such important (and massively underestimated) things as mission definition, vision, values, goals, and key performance indicators.
These are very important things that require serious time for reflection and are practically the foundations of any company.
The key positions, without which any strategic plan would be more or less invented in a vacuum, are the direct responsibility of senior managers and are not tasks that can be delegated to be done by someone else.
2. Strategic differentiation
Strategic differentiation is also a fundamental issue. The strategic plan should focus on providing value and uniqueness to fight for market positions and win the battle for the hearts and minds of customers.
The definition of strategic differentiation depends on the needs of the market and the competitive environment, and in this regard, the ideas of Porter's five competitive forces, as well as the three competitive strategies for market behavior of the company can be useful.
3. Organizational commitment
Organizational commitment is the moment when the strategic plan is put into action. For this purpose, it is useful for everyone to have an idea of what exactly the plan is, why it is such and what is his role in its implementation.
It is important for people here not only to know what they are expected to do but also why it is important to do it and how all this is in line with the principles of their company and their vision of their workplace. This is necessary because if there is such an understanding, people will be more willing to get involved voluntarily in the implementation of the strategic plan, and this is the key to intrinsic motivation, which often distinguishes between good and mediocre performance.
David Meister talks about this in great detail in his article "Strategy and the Heavy Smoker". The moment of commitment is really important, because without commitment there is no implementation, and without implementation any plan is useless.
4. Organizational transformation
Organizational transformation is the moment when the strategic plan is already being implemented and as a result, many problems, dilemmas, and issues arise.
It is important to realize that all of them could be resolved appropriately if there is an understanding among the people about the mission, vision, values, key indicators, strategic market behavior, and other things mentioned above. In this case, the company will make decisions, take action and develop in line with its principles, which will ensure its proper transformation (because nothing is static, everything is dynamic) on the way to achieving goals.
Leadership is especially important here because, with the help of appropriate leadership, the organizational transformation could "run" much smoother and the desired changes can happen faster and more efficiently.
Practical application
What is the practical application of the model with the four levels of the strategic plan?
First, the model outlines the need for goals and strategy. Because to make a strategic plan, you first need a strategy. It is a function of goals - the strategy is created to achieve certain goals.
It is good when a company has goals and strategies. The benefits are clear. But why do so many companies operate without clear goals and strategies?
The answer to this is convincingly given by David Master in "The Courage to Have a Strategy":
"Many companies (and people) do not dare to stick to the plans and goals they have set for themselves. They lack courage in their own beliefs."
Or, we rely on beliefs. These are the few mystical and not always clear concepts such as "mission", "vision" and "values". Every strategy, every goal, and every strategic plan starts from them. These are the basics.
For small and medium-sized companies, as well as for large companies, the development of a strategic plan is associated with a clear definition of all these things - mission, vision, values, principles…
In the past, I've read about the practice of companies in the United States organizing special workshops for their top managers (executives, deputies, heads of departments, branches, etc.) spending two, three, four, or even more days. to be alone in a luxury villa on the shores of a beautiful lake and to talk about their vision for development, what are the values that unite them, what are their key symbols…
When I first came across such examples, I had thought about the serious costs of doing such a thing and how responsible it is to look at it all. "Well, that's nonsense!" I had heard a man say on the occasion, "What's the point of holding such meetings to discuss such issues?" These are some American inventions!”
However, this is a practice not only for American companies but also for European and Japanese companies. it is not about something significant.
Example of human resource management
Take, for example, human resource management in a company. How should this management be approached? Are there universal ways to manage people in the context of HRM activities - planning, recruitment, selection, evaluation, remuneration, training, development, etc.? See BVOP Certified Human Resources Manager.
And yes, but no!
There are undoubtedly universal principles and rules in human resource management, but there is also a context in which these principles and rules are applied and which outline the true face of human resource management practice.
What is this context?
Mostly the main points from the above, ie. the first level of the strategic plan.
In particular:
If the company does not have clear goals and vision, then the recruitment/selection of employees will be vague and chaotic, people without special principles will be hired, not so important requirements of the positions will be given importance, and other requirements will be ignored. they are needed.
If the company is not clear about its principles and values, which it adheres to and from which it is united, this will be directly reflected in the way it is evaluated and rewarded - again unprincipled and regardless of the actual individual, group, or team contributions.
Or, imagine that the owners of a company are unscrupulous people whose sole purpose is to make a profit, whether they are paying salaries or fulfilling certain commitments to groups of people, society as a whole, or the law. Read more: Ringelmann effect: Studies of group size and group performance
Imagine that a human resources manager starts working in such a company and tries to apply modern and ethical practices for working with staff as an important part of the strategic development and behavior of the company.
Do you think that such good intentions of this manager can be realized given the values of the owners, which, as it has already become clear, are limited to dishonesty, arrogance, and strong selfishness?
Many other examples could be given in which one or another good idea, which was part of the strategic plan of a particular company, can not be realized not because of anything else, but because of a weak foundation (first level of the strategic plan).
Or because of the vague market orientation (second level of the strategic plan).
Or due to insufficient involvement of managers and employees (third level of the strategic plan).
Or because of the slow and cumbersome organizational transformation (the fourth level of the strategic plan).
You can see for yourself that the strategic plan is far from just a piece of paper on which to write some wishes for the company's development in the next year, two or three.
Creating a strategic plan is a key managerial skill inherent in Thinking type managers, and in particular in the managerial role of Strategist. Read more: Skills and roles of the manager
This is one of the main tasks of the manager in general - to create a real whole, which is greater than the simple sum of its parts, as noted by Peter Drucker himself. With the help of a strategic plan, which does not remain just a plan, but becomes a realized plan, this task is achieved.
- Previous article OSCAR coaching model of Gilbert and Whittleworth
Related posts:
- How to improve your negotiation skills and conduct successful negotiations
Many people see the negotiations as an unpleasant, stressful moment that should be avoided at all costs.
- What is Parkinson's Law and how to overcome it?
Parkinson's Law explains why it happens that a job takes much longer than planned.
- Ringelmann effect: Studies of group size and group performance
Under the name Ringelmann effect, there is a tendency according to which there is an inverse relationship between the number of a group of people and its productivity.
- What is strategic planning and how to write a strategic plan?
The strategic plan is a document used to communicate in the organization about its main goals, the necessary actions to achieve them, and other key elements developed during planning.
- OSCAR coaching model of Gilbert and Whittleworth
The OSCAR coaching model was developed by British coaching experts Andrew Gilbert and Karen Whittleworth in 2002.
- What is Ethical Leadership: How to be an Ethical Leader
What is Ethical Leadership? We are constantly witnessing unethical behavior on the part of a business or political leaders around the world.
- Creating a company culture that encourages creative thinking
Creating a company culture that encourages creative thinking and curiosity can provide employees with the boost of inspiration they need.
- How to attract and retain the best employees? Employee retention tips for everyone
Employee retention continues to be one of the biggest challenges facing businesses in recent years.