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5 Steps For A Successful Strategic Plan For Your Business

My 40-plus years in the business world has demonstrated that effective planning is the most important function in establishing and maintaining a growing organization, whether it is profit-oriented, non-profit or not-for-profit. Effective management begins with effective planning. Planning is disciplined thinking based on the present and oriented to the future. Plans begin with an assessment of the way things are, followed by a projection of the way you want things to be in the future. Quite simply, it is a “Game Plan,” a description of where the organization is going and how it is going to get there—a concept everyone can understand.

Owners of small businesses are often so busy running the operations that they push planning to the sidelines. Chances are you feel too busy dealing with day-to-day problems to spend much time on planning. Yet planning gives direction and purpose to these daily activities, and without it such activities become aimless and uncoordinated. And as the owner of a small business, you should plan more intensively than a larger organization because you may not have the financial resources to recover from a serious mistake—poor planning can put you out of business. The importance of planning cannot be over emphasized.

Planning is not easy; it requires serious thinking, and thinking is hard work compared to doing something of a physical nature. Thinking requires lots of concentration and mental effort. And it’s not uncommon to be suspicious of planning because it has to do with the future, not the present, and the future is unpredictable; so they think, why bother?

Furthermore, many of us have not been taught how to plan and don’t know how to proceed. It requires self-discipline and confidence which may be lacking. Perhaps you have difficulty thinking on a perceptual level and mastering the art of establishing priorities. Whatever the reason, planning is often deferred indefinitely into the future.

Types of Plans:

Longer-term Master Plans are established by top management to give overall direction to the company’s activities. They should be strategic in nature and capable of dealing with a changing environment. They should identify high-level factors critical to the success of the business longer-term (Critical Success Factors – CSF), and the longer-term goals that must be achieved to support the CSFs.

Operational Plans identify shorter-term objectives to support the longer-term goals and define the day-to-day work details and tasks. Care must be taken to link the shorter-term objectives and work plans to the longer–term goals and CSFs.

Single use Plans are formulated for specific situations, problems and projects. These too, must support the higher-level goals and objectives and be linked to them so that the entire organization is moving in the same direction toward the same purpose.

Standing Plans are set up as policies and procedures for repeated use over a longer period of time. They generally serve as guidelines for both management and employees and convey a level of solidarity, uniformity and dependability to the company’s operations. These policies and procedures exist in all functional areas of a well-managed organization—design, production, pricing, sales, marketing, distribution, personnel, finance and the like.

Budgets are also plans that result from translating the other plans into dollars and cents. They become standards for management action as well as targets to shoot for as the plans are carried out. They include production and inventory budgets, sales budgets, manpower budgets and capital expenditure budgets. Good budgets are essential to direct internal activities and to assign responsibility and accountability.

A Step-by Step Approach to Planning

Although planning is difficult, it is not complicated; in fact, it is quite simple if done properly. My experience has led me to adopt a five-step process as described below.

Step 1: Analyze the Current Situation:

This is perhaps the most important step because the results become the foundation on which the rest of the plan is built. The current situation analysis usually includes: 1) a S.W.O.T. analysis (Strengths, Weaknesses, Opportunities, and Threats), and 2) a Core Competency Analysis. The process usually involves one or two brainstorming sessions, best led by an outside independent third party facilitator. These sessions must include senior management and as many of the middle managers and staff as feasible. It is important to give the people an opportunity to participate in the decisions that affect their work.

Step 2: Define the Vision / Mission, Critical Success Factors and Value Proposition:

Develop or revalidate the longer-term Vision/Mission. This is usually a simple statement that defines the business model, its main areas of focus and the unique characteristics that sets it apart from competition. By omission, it also identifies areas of focus that will be excluded.

Critical Success Factors are the broad general functions or factors critical to the success of the business. There should not be more than four or five CSFs. Examples might include specific talents or skills necessary to develop unique products, the unique characteristics of the customer services that differentiates the business from competition, the need for continuous sources of funding to do R&D, the methods of sales, marketing and distribution that are necessary to meet customers’ expectations, the level of quality, etc.

During this phase it is important to define the Value Proposition; i.e. a promise of value to be delivered and a belief from customers that value will be received. A value proposition can apply to an entire organization, or a business unit, or customer accounts, or products and services. Creating a value proposition is an important part of business strategy and should identify how the products and services are differentiated from competition. A value proposition is developed from a review and analysis of the benefits that an organization can deliver to its customers.

Step 3: Develop the Goals, Objectives and Key Performance Indicators (KPIs):

The goals (longer-term) and the objectives (shorter-term) identify what must be accomplished to support the CSFs. They should be S.M.A.R.T.—Specific, Measurable, Achievable, Realistic, Timely. The results of the brainstorming sessions should identify areas for improvement, and the goals and objectives should be written to focus on these areas. Objectives should also be written to develop new core competencies and to strengthen existing competencies.

The only effective way to manage an organization is to identify specific quantitative performance indicators (KPIs) that allow management to know what is going on and make course corrections when performance gets off track or external forces result in the need to adjust behavior. They should be primarily quantitative and in all cases measurable. One way to achieve this is with the help of a KPI management tool, enabling you to manage your metrics with dashboards and reports, so you can visualize your performance to improve outcomes.

Step 4: Execution is the Secret Ingredient:

The goals, objectives and individual work plans provide all employees with a clear understanding of what’s important and how their work contributes to the overall success of the business. Remember: “What gets measured gets done!” And the corollary of that statement is that activities not measured routinely generally do not get done well. Results that are routinely tracked and scored become important to the team. If management does not monitor and measure progress using KPIs, the team correctly concludes that the work must not be important and therefore there is no need to care much about it. Of course, they will go through the day-to-day motions of doing their tasks, but they will not feel like an important part of the team, and there will not be the ownership, the passion and the commitment to change, to improve and to win.

Step 5: Governance:

There are many variables that affect the outcome of the plan, many of which are uncontrollable, including the economy, the demographics, political policies, competitive changes, etc. As the plan unfolds there will undoubtedly be internal changes as well. Therefore, it is important to make adjustment as these deviations occur so the plan continues to reflect the current situation.

In summary, it always takes a winning coach to have a winning team, and winning coaches always have a “Game Plan;” they assign individual responsibility to execute the plan, and keep score and communicate continuously to their team to provide encouragement, motivation and feedback on performance.

— Maurice Marwood

Marco Polo
Marco Polo is the admin of sparebusiness.com. He is dedicated to provide informative news about all kind of business, finance, technology, digital marketing, real estate etc.
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