Gain knowledge and understand what is required to improve your organization strategic planning process. Reflect on the main dimensions of the strategic planning capability and develop a roadmap for continuous improvement.
Strategy planning ranks second (21%) after building a performance culture in terms of challenging top management responsibilities (26%). (The KPI Institute, insight collected at conference Future of Strategy Execution Roadshow 2017)
Only 16% of organizations do not have clear KPIs associated to their strategic objectives.
35% of organizations structure their strategy around the Balanced Scorecard perspectives, and 32% of organizations choose a different approach customized to their particularities.
64% of organizations claim to have an Office of Strategy. (The KPI Institute, State of Performance Improvement and KPIs, 2016).
80% of managers admit they are using SMART objectives and have all necessary funds to execute strategy.
59% of managers feel that they cannot rely in colleagues from other departments to deliver on their commitments.
only 24% of executives consider they adapt effectively to market changes in terms of relocating people, funds and terminating unsuccessful initiatives in due time.
! 51% of managers would like to secure resources outside the strategic objectives to be able to pursue attractive opportunities not captured by the strategic plan. (Harvard Business Review, 2015)
From Sun Tzu’s Art of War, one of the first known recordings on strategy, to the multitude of contemporary studies on the topic, strategy management has been evolving for centuries. In 1912, Harvard University was the first higher education institution to offer a course focused on how business executives could improve their practices to achieve better results. However, the acceptance of strategy management as an essential skill and knowledge of every business professional came about only in 1959, under the pressure of Ford Foundation. In 1980, two significant events marked profoundly the strategy management field: the creation of Strategy Management Journal and Michael Porter’s book “Competitive Strategy: Techniques for Analyzing Industries and Competitors”.
The pursuit of organizational clarity and alignment towards a common strategic direction, which has preoccupied researchers and practitioners for several decades, is still a challenging battle despite all the social and economic advancements the business environment has achieved. Nowadays, most corporations even have a dedicated department, such as Office of Strategy Management (Strategy Office), to ensure rigorous planning. Strategic planning is, however, only the initial step in the process of coordinating an entire organization towards achieving common goals.
Strategic planning should be regarded as a recurrent process that sets the entity on the right track and recalibrates “what I want to do” with “what I am doing”. Most commonly, this process takes place every six or twelve months and depending on the maturity of the organization, its needs and the context, it can be structured differently.
1.Forming or restructuring an organization – in this scenario strategic planning includes the following stages: a. define organizational identity, b. environmental scan and internal analysis, c. identify value drivers, d. formulate objectives, e. establish the KPIs and targets associated, f. communicate strategy.
2.Regular strategic planning – biannually or annually the process can be reiterated but only from the objectives formulation stage. Organizational identity (vision, mission, values) can be reviewed every 3 to 5 years, if no need has been outlined in this concern to require an unexpected reassessment. Environmental scans and internal analysis (e.g. SWOT analysis) can take place annually, even twice a year if there is sufficient agility to perform these activities cost effectively. The in-depth of the analysis may be different given the frequency with which is deployed.
In many organizations strategy fails to deliver on its promises and although, there may other various reasons for this, a common trap is the misalignment between the strategic plan and the key performance indicators or the metrics the company tracks. Strategic planning and performance management rely heavily on each other, as no matter how good the planning is without the direct feedback provided by KPIs, the company fails to adapt to market demands.
In the modern business environment, so dynamic and constantly changing, many executives are questioning whether strategic planning still makes sense. Does strategic planning improve company performance? For sure that a traditional and rigid strategic planning process will not improve the bottom line of the organization. As organizations and markets become more complex, executives must become creative in adapting management processes. Key characteristics of modern strategic planning processes include:
Increased review frequency – annual strategic planning may be ineffective if it does not include intermediary strategy review sessions (quarterly, biannually). Adapting to changing is vital, without frequent review adjusting in due time is not possible.
Improved strategy focus – the agenda of top management is filled with meetings, executives spend tens of hours in meetings every month, but how much of the talks are actually about strategy matters? Most of the concerns relate to operational stuff which makes managers lose sight of the medium and long term perspective. Strategy should appear more often on the meetings’ agenda. Moreover, the establishment of a dedicated team such as Office of Strategy Management (Strategy Office), contributes significantly to maintain focus on strategic matters and to recalibrate the tools and processes in this area.
Simplified strategy – simple, but not simplistic, the strategic plan should indicate clearly the goals of the organization, how they are measured and specific actions required to achieve the targets set. A well-structured strategy can easily be captured in one page documents such as Strategy Maps.
Improved strategy communication - one of the most common cause of strategy failure is due to poor communication. Employees are not fully aware or they do not understand what the company wants to achieve, therefore all the small decisions taken daily, but in opposite directions are creating inefficiencies and value losses. Better communication will firstly rely on the aspect previously mentioned: simplify strategy and creativity in terms of interacting with employees. Examples of good communication practices include the usage of strategy map posters, videos, posting on internal online platforms, social media interactions on strategic matters (e.g. informing on the progress of strategic initiatives), internal awareness sessions, workshops (for top management), even active engagement of internal and external stakeholders in strategy formulation can be seen as communication technique.
Make strategy everyone’s job – concerns about what can be done to achieve strategic objectives should not be limited to the Strategy Office, previously mentioned, or to top management. Each individual should have in mind the medium and long term business perspectives. In this manner, opportunities can be better spotted, attitudes and decisions are more aligned with organizational goals and even personal satisfaction increases when the employee sees his contribution to a greater purpose.
Focus on people, not on tools – a 2015 research study published by Harvard Business Review, indicates 80% of managers claim their objectives are clear, limited in numbers, specific, measurable and that they have the needed tools and funds to achieve the. In spite this favorable scenario, in reality, the desired results are not delivered and the main cause is the inability to coordinate human efforts and different departments. This reveals the imperious need to work more on the social aspect which impacts both strategy planning and strategy execution. If we don’t engage properly managers from the beginning in strategy formulation, they will not be committed. If they do not manage to work well as a team despite coordinating different functional areas, all the investment in tools and technology is useless. Engaging executives nowadays, means investment in developing team work skills, leadership abilities, system thinking, nurturing their talents and effective succession management.
Regarding strategy planning tools, they should enable fast data collection to inform strategy formulation, clear structuring of the strategy message and effective communication of organizational priorities and targets. One of the most popular and effective tools use in practice are presented below.
SWOT Analysis - the origins of this instrument date back to the 60s - 70s, when this 4 perspective matrix (Strengths, Weaknesses, Opportunities and Threats) emerged as a framework to analysis various companies and identify root causes for corporate planning failure. Nowadays, still widely used, the SWOT analysis enables organizations to identify its strong points to build on and favorable trends to exploit, as well as weak areas and potential risks. In brings together two important perspectives for strategy formulation – internal and external.
Value Drivers Map - value drivers are key elements that can must be consider for the organization in order to be relevant for its customers/stakeholders. They represent features of the service/product offered or characteristics of internal processes and resources that are essential so for the competitiveness of a company. The identification of value drivers is important in formulating the strategy plan and key performance indicators, because it enable strategy focus on what generates added value for the company. Mapping value drivers refers to identifying potential correlations between different elements of added value and the level at which they occur.
Strategy Plan - the planning usually includes the following key components: strategic directions/goals, strategic objectives, KPIs, targets and the strategic initiatives or actions that need to be implemented. The strategy plan is the reference document to depict the desired state of evolution of the organization.
Strategy Map - as strategy plans can be quite extensive in content, communication among stakeholders can be facilitated by the usage of a strategy map. This one page documents provides a comprehensive overview on the organizational strategy by highlighting the strategic directions/goals and objectives, as well as the interdependencies between them. Designed well, it creates a strong visual impact and strategy can be grasped in a matter of seconds.
Performance Scorecard - this tool is used both for strategic planning and performance management. It brings together the strategic objectives, key performance indicators, the targets established with the actual performance results. It enables performance management by indicating the extent to which the targets were achieve on monthly, quarterly or annual basis (depending on the KPIs included). Scorecards are not only used at corporate level, they are also valuable instruments which translated strategy at operational levels.
Strategy Communication Plan - the level of employees’ awareness and understanding of strategy and their role in strategy execution is highly important. To ensure that awareness levels are high, a communication plan should include all stakeholders (internal and external - in some cases), it should identify exactly the type of information that needs to reach them and the communication channels and initiatives. For improved effectiveness in communication, the messages should be tailored to the stakeholders’ interests and informational needs, as well as to use a variety of transmission channels (email, printed materials, videos etc.)
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