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Strategic Planning   2

 

Strategic Planning – Making it a positive exercise in any business 

In some forty years experience in applying strategic planning as a process in businesses as a CEO, chairman, NED and as a consultant, I have been saddened by how many of my colleagues have adverse reactions to the concept based on prior bad experiences of the process.  In many cases when we have been working in medium sized to small public and independent businesses, the aversion to strategic planning had related to very bureaucratic approaches seen by the individuals in large organisations or others importing large company planning processes into small businesses, without suitable adaption. 

Experience is that a Strategic Planning process (also referenced as LRP; Long Range Planning – or Plan), properly adapted to the scale and nature of a business can make a very positive contribution even when first applied.  In later years the process can become slicker and regularly effective.  It is crucial to carry out strategic planning on a scale proportionate to the business.  Such projects have been effective for companies down to a scale of only three employees, including the executive directors. In 2008/9 we have been buffered by major shifts in economies and in markets.   Most such changes will not have been projected in earlier planning BUT an effective plan which considered contingency situations along side the core plan and scenarios for the future will have provided supporting contexts for those having to face major rapid change. 

 

STRATEGIC PLANNING

This topic is covered in two papers.  The first paper, addresses the context, benefits and overview of Strategic or Long Range Planning.  The second paper, below, addresses the process itself.

 

Strategy Paper 2        Strategic Planning Process, an Overview

Any one with practical experience of planning will recognise the nature of cycling back in the process of setting an objective, data collection, analysis, opening options, evaluation, selections and integration into a plan.  For this paper I take such re cycling as the nature of the process but; 

A)        It is clearer to describe the core process as linear (accepting there will be some recycling)

and 

B)        Always seek to apply the process in a way that minimises such recycling – the business has to proceed to decision making in the planning process as in day to day operations. 

An effective LRP Process is thus a mix of 5 broad types of activity 

*          Initiating and planning time and resources for this LTP cycle 

*          Collating and analysing relevant available information and predetermined new information 

*          Mind opening to consider new scenarios that may impact the business or new objectives and strategies for the business 

*          Option closing though evaluations and decision making on the options – including assigning scenarios for contingent consideration – e.g. disaster planning 

*          Integrating the work into a plan and gaining approval 

The base work in the planning process can usually be addressed by Individuals (or sub teams) preparing position papers or presentation – analysis, option opening or recommendation;

Core Group discussion and review best progresses the key decision making in the process but the group dynamic can open new ideas  - and more recycled planning;

and

Individuals (or sub team) most economically document the conclusions, dotting Is and crossing Ts.  In small to medium business the Core team is probably the board and a few other relevant senior executives. 

Broadly the LRP process can fit into 3 main phases in the annual calendar as indicated above: 

*        Market and business analysis,

*        Planning and setting the direction

*        Collating into a plan and final board approval 

If we look at the more detailed core sequence of activities in the most common small/medium sized company LRP process one would expect to see the above reflected in 6 visible steps as follows.  These are described in terms of the basic tasks/objectives of each step.  It is a separate matter to separate preparation, papers, discussion meeting and follow up refinements

Step 1 – LRP initiation - Agree planning objectives, context and constraints - Driven by the board

The work may be that of the Chairman/CEO/ executive director.  The conclusions need to be endorsed or modified and agreed by the board following discussion. Activities/outputs are: 

*    Determine any gross changes in context, objectives, resources or strategies that need to be addressed in the LTP Process.  These may be proscriptive or for consideration. (e.g. increase revenue at 20% pa over the period; consider current growth rates circa 14% pa v driving them up to 20% pa) 

*    Set any objectives/tactical plans to improve the LRP process

*    Set the time table for key events in the process, divide activity between preparations (by individuals or sub teams ) and group presentations, discussion and review.  Be clear on the differences between “mind opening" sessions and those needed to close down to decisions. 

*    Define final outputs not already proscribed in a defined LRP process

This approach seeks to ensure that the strategy developed is owned and directed by the board/management team concerned, with other staff and any consultant contributing to the process and debate to maximise leverage and transfer from the wider contribution.

At times in small businesses the process can be focused solely as a sounding board and input to the CEO’s own thinking.

Step 2  Strategic Planning – Market and Business Analysis

Separating the main LRP cycle into distinct phases of activity helps by separating those activities that need to be analytical and essential door / mind opening from those concerned with driving down to specific plans.  Also allowing a significant period – a few months – between this step and later steps.  This provides time for the preparations needed for later steps, arising from the output of this step.

This step has two parts:

1.       concerned with collation of information, analysis and understanding of the market you serve and may serve in the future

and

2.       concerned with self inspection both as a business and against the market analysis.

Clearly understanding of the market starts with defining the current and prospective boundaries of your market covering: products and services; nature of the prospective customers; and geographic boundaries.  Within such analysis it is important to both consider current clients and those that make up the prospective market.  Many of the established market analysis techniques can apply here.

In analysing the business it is worth assessing strengths and weaknesses (perhaps SWOTs) as the business is today, as well and against possible future markets and competitive developments.

Apart form informing those who participate in this process – which includes the core planning team – the conclusions (including open ended suggestions) need to be documented together with statements as to follow up work needed before the next main step (meeting)

Step  3 Vision, Mission and Positioning + Objectives

Vision, Mission and Positioning Statements have detractors and disciples. Many detractors srise because sometimes too much emphasis has been placed in their past experience on agreeing the statement and not enough recognition of the benefits of the process. 

For this paper we use the three terms as follows: 

Vision:            A short succinct one or two sentence statement on the nature of the company.  For some companies this may be an objective (i.e. not yet full achieved).  The breadth of publication of such a statement is situation dependent – preferably it should be publishable to all staff and published or not it should not be a surprise if seen by staff unless prepared for a major change of direction. 

Positioning Statement:           Effectively a public version of the Vision for communication to all staff, the market and suppliers.  It may be identical to the Vision.  Equally it may more reflect the current reality rather than aspirations in the Vision  

Mission Statement:               A set of internal value objectives that fit within the Vision.  This may cover 5-7 sub topics and should be no more than ½ a page in length. 

Objectives:        A set of objectives that need to be delivered to achieve the Vision and Mission.  These can be developed alongside and/or after the Vis0on/Mission statements and help bridge to the later Strategies.  Objectives are what to deliver while Strategies will be about how to deliver.

Each of these statements have a value in their own right in communication within the business but their first purpose is to set a framework for this years LRP.  The separation between Vision and Positioning Statement enables a team to focus debate on the Vision – what they want the business to be - without concern (at this stage) on how that would read publically, e.g. that’s for the Positioning Statement.  As the LRP process proceeds each decision should explicitly or implicitly be validated against fitting with the Vision and Mission.  Where there is a significant miss fit the plan/strategy needs change (or the base Vision /Mission needs to be re challenged). 

The table below illustrates a set of such statement form a few years back.  The business was subject to rapid growth.

VISION

To be a leader in the provision of integrated business systems solutions - European wide - setting the standard for effective contributions to the client’s business in the fields of logistics and manufacturing. 

POSITIONING STATEMENT - External 

A leader in the provision of integrated systems solutions to distribution and logistics enterprises enabling change for business benefit.  We aim to set the standard for effective contribution to the client's Europe wide and local businesses in distribution, logistics, manufacturing, finance and management.

MISSION STATEMENT

Customers 

To focus on customers through

Delivering products and services to implement integrated systems solutions that meet the customers  needs matching corporate wide and local requirements.  The focus is achieving business benefit through the implementation of package software. 

Concentrating on markets where we have in depth business experience, such as manufacturing, distribution, logistics, and associated finance and management. 

Continually enhancing our standards of service, quality and responsiveness to customers.

Marketing to UK based or orientated organisations, with measured development of sales to other European countries.

Staff 

To provide a stimulating and challenging work environment within which our people can develop to the satisfaction of themselves, their families and our customers. 

To create staff recruitment and development programmes to match our overall staff missions.

Products and Services 

To become a full suppler of consultancy and implementation services in our chosen markets, where our people provide strategic and management consultancy, implementation support and development services, often working on the client site. 

To add extra value to our people through the use of enabling technology and standards, procedures and checklists. Develop a packaged approach to our services to both improve delivery and to assist in sales and marketing. 

To build, develop and exploit  special skills in SAP, SSA, and Oracle and to widen those skills to related products and markets.  

To develop a packaged/product approach to our services to both improve delivery and to assist in sales and marketing.

Shareholders 

To hold our profit margin circa 20% and to grow absolute profit through the through the overall growth and profitability of the business.  The ultimate measure is our contribution to the growth is the equity per share.

Quality 

To be regarded as pre-eminent within consultancies in out ability to implement systems with total quality control.  From a quality viewpoint this applies both internally and externally.

Community 

To recognise and support the legitimate aims of the communities in which we work.  With the continued growth of the business this will become a significant objective.

A major positive feature of many Vision/Mission debates has been significant progress in the participants appreciating the position of their colleagues.  In one case a board was wasting a lot of time debating whether to expand into continental Europe or not with strong opposing positions.  The Vision debate first brought out a clarity of opposition and then identified that the concerns were solely on conditions precedent and timing and not on direction.

For the planning period Objectives may need to be set that do not fit into the above statements such as related to timing and scale - or simply be implied.  These are often better reflected under a supplementary Objectives statement.  E.g.,  Launch a 2nd line of products by year 2.  Achieve 15% growth PA.  Keep in the first two by scale in the sector.  Generally the move from an agreed Visions/mission to setting strategies is to set out all the objectives implied by the Vision/Mission statements and those sought but not covered directly by the statements per se.  For each Objective the strategies evolve from consideration of how to deliver the objective.  More than one strategy may be needed for each objective.

For the example vision/mission statement above we need objectives re the European vision.  Possible example might be: win £1 European revenue for every £3 UK revenue by year 5;  Grow total revenues by 30% pa over next 5 years  (actual was over achieved); establish a continental European office in year 2 with delivery capability in year 5; have regular revenues in at least 3 of the largest continental European counties by year 5.

Step 4 Strategies and Actions

Having set the broad direction, the next step is to determine the strategies for the business to deliver those overall objectives.  Strategies in this context can be both market oriented in terms of future offerings and into which markets, improving competitiveness, internally oriented such as staff recruitment and development, improving efficiency, cost savings etc and supplier oriented such as new sources, better purchasing etc.

Once broad strategies are determined then for each the implementation plan, main resource implications and key progress points and milestone dates need to be determined as well as responsibilities for progressing the strategy.  In a Strategic meeting new strategies may cross organisational boundaries so responsibilities cannot be taken for granted.  This is Long Range Planning so not every detail needs to be planned but the base for integration in people, financial and other resource plans needs to be set.

Most Strategies in a LRP will have some activity in the rest of the current budget year and next year.  It is important that actions needed with that year and a bit are clearly recorded at this stage as well as responsibilities for these actions within that period in each strategy.

There is no doubt that this progression from broad objectives through visions and missions, strategies and their objectives, implementation plans, to year 1 actions, responsibilities and resource implications will generate some incompatibilities.  These need to be resolved at the then current level of debate and on occasions will need a loop back to challenge earlier assumptions.  In Step 1 the initial planning of “this year’s LRP” needs to take a view of the quantum of change likely and hence the need to allow for such cycling in the process and staff work at each step.

Step 5 Completing the Plan

The implicit assumption is that the planning process involves sub steps of preparation, presentation and debate, decision making (agreeing current assumptions), follow up and recording the conclusions and the plan.

One of the major follow up actions is to integrate the output of the previous steps into a resource plans (all resources) including outline P&Ls and balance sheets over the planning period.  Following the last main planning session there is generally a high volume of staff work – best allocated to a few individuals - to pull all the material together into a final plan.  That document is then ready to submit to the board for approval.

Step 6  Approval

While most of the directors will have been party to the preparation of the plan it is valuable for them to formally approve as a board.  It also is a safety valve to enable some aspects to be discussed where not appropriate in a wider planning meeting.

Across the Steps

It has been noted above the the process breaks down into many sub steps and by implication different people at different times.  The following is a sample set of activities at the sub step level with indications as to who may be involved.  Functional allocations are not covered here and staff can include directors.

LRP initiation proposal                               CEO

LRP Initiation approval meeting                   Board

Market and Business analysis                    Allocated by topic to individuals and teams (+ papers and presentations)

Market and Business analysis meeting       Board Plus selected managers plus presenters

M & B analysis follow up                            Allocated staff

Main LRP meeting preparation                    Allocated staff (+ papers and presentations)

Main LRP meeting - Vision, Strategies etc   Board Plus selected managers plus presenters

LRP follow up and documentation                Allocated staff

Plan approval                                              Board

Overall the chairing of sessions in the planning meetings needs to clearly differentiate between those seeking to open and create new ideas and those where there is a need to close down to a decision.  In many business planning sessions and away days contribute the most if plenty of time is allowed in coffee and lunch breaks for spontaneous discussions between the participants.   This is contrary to many business meeting these days where a premium is place on a tight timetable.  Who ever is chairing the planning meetings can always tighten the time table, through the day, if useful small group discussions are not occurring in the breaks.

 

Click here for Paper 1

 

David Tebbs

David Tebbs Associates

+44 (0)845 644 7020

email David Tebbs

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