A 5 Step Road Map for Successful Strategic Planning
“Only 23% of companies use a formal strategic planning process to make important strategic decisions. In 52% of companies, these decisions are made by a small senior group.” – McKinsey & Co.
To succeed in the complex, competitive and uncertain economic environment, organizations must always be looking forward, evaluating their options, and determining their next step.
As we get deep into the 4th quarter of the calendar year and the 4th quarter of most fiscal cycles, organizations need to start looking towards next year, and building their strategic plans. The planning process is a time for reflection on the past, and a time of excitement about the future. Successful strategic planning requires that organizations understand what they have done poorly in the past and what they have done well. They must also understand where they want to go in the future, what are the risks and opportunities associated with their plan, and how they will handle both as they move forward.
For most organizations using the following 5 strategies can help drive a successful planning process which will result in better performance going forward.
1. Take Stock of the Past
As the old saying goes, you have to know where you have come from to know where you are going. Nothing is truer in the planning process. You have to try and objectively look at what has gotten you to where you are. What worked, what didn’t and why. This sounds easy, but for most organizations this is a difficult process. People don’t like to admit mistakes, and it’s hard to be objective about something in which you are actively involved. A key to this process is to look at the previous year’s plan and walk through it step-by-step. What were the previous goals, risks, opportunities, etc. How did you perform against them? What worked which surprised you, and what didn’t work when you were sure it would? There are a thousand questions to be answered, but each helps inform the future, and helps you better understand your capabilities, strengths and weaknesses.
2. Set Clear Goals for the Future
Seems obvious, but many organizations fail to set clear goals. They set goals, but they are not clear. I have always liked the S.M.A.R.T. model for goal setting – Specific, Measurable, Attainable, Realistic, Time-Based. If your goals and objectives don’t have these components it will be hard to judge if you have hit them, and it will be hard to communicate them to the team in a way people can understand. Setting goals takes guts. Not the guts to set a goal that is too high, but the guts to set one that is realistic.
We all want our firms to be amazing, drive amazing results, and be leaders. This should be our focus. But for most companies, that is a journey of many years, and goal setting should be about, knowing your abilities, knowing your markets, and setting aggressive, but attainable goals which move you forward. If you set a quota for a salesperson which can’t be hit, you run the risk of demoralizing them, and actually going the wrong way. This is true for all goals.
3. Analyze the Risks and Opportunities in your Goals
Risk management is an important part of the strategic planning process. Once you know your goals, you have to determine what stands in your way. This is one of the most critical parts of any planning process, and something too many organizations don’t spend enough time on. It’s not good enough to just come up with a list of top risks and then pat yourself on the back for “doing risk management”, that’s called “risk admiration”. An effective risk management structure involves the whole business, and is not afraid to ask tough questions, assign clear accountability and hold people to their performance promises.
As much as you need to identify your goals and objectives, you must also define clear plans to manage risks, identify more risks, uncover opportunities and keep the business informed at all times. Just as strategic planning is an entire business process, so is risk management. You plan to drive value through your goals and objectives, and Enterprise Risk Management (ERM) done properly is a value creation engine. It helps you understand where you have a gap, but it also helps identifies areas for improvement, and expands your ability to take smarter risks.
Every business leader knows that taking risks is a fundamental part of success. The key is to take smart risks. Start simple, What are the key/material risks to your goals? What are you doing, and will you do about them? How will you determine if what you are doing is working? Answer these three questions for each of your goals, and then move out from there. If you don’t know where to start with your risk process, then check out our free ERM readiness guide for practical advice, hints and tips.
“95% of employees do not understand their company’s strategy. (How are they supposed to execute a plan if they don’t understand it?)” – Harvard Business School
Communication is all about keeping it simple and making it personal. Increasing the level of involvement of employees ensures that more of them better understand the strategic plan. It increases their level of commitment. This helps make sure that the strategy is successfully executed because they understand how their work and the tasks they are completing on projects plays a role to help the organization to realize some or all of its key strategies.
5. Be Fearless
This is a tricky economy. But remember, in every down economy, in every tough market, when all seems bleak, organizations are thriving. The ones who succeed are relentless in their pursuit of their strategy. They have formal, institutional methods of risk identification, management and reporting. They can identify and execute on opportunities. They have leaders who continually ignore the naysayers and keep pressing on.
As you start your strategic planning process this year, ask yourself… how can we take smarter risks which will help us achieve our goals?
Download our free guide on “How to Embed a Risk Culture” to create the right environment in your organization to identify and assess risks and opportunities in your strategic planning cycle.