Strategic planning is an important tool of strategy execution that translates strategy into operations. Operations are where execution takes place, resulting from thousands of decisions and actions by the employees. Linking strategy to operations becomes essential in getting the strategy underway and in maintaining focus. However, strategic planning deals with information and issues that are often vague and risky, making executives uncomfortable. It is unlikely for management to look back six to twelve months later and say that strategic planning truly had an impact on the way business is run. Based on experience, we describe five best practices that can get the strategic planning process off to a great start and significantly improve the odds of successful strategy execution.
FIVE BEST PRACTICES
We have identified five best practices of the strategic planning process to get execution quickly underway and make strategy perform greatly from the start. These best practices are sequential, culminating with locking in performance commitment by the execution team.
Best Practices of the Strategic Planning Process
1. Build Company Wide Consensus. Companies that are strong in execution recognize that even with the best-laid plans, not every contingency is foreseeable. With company-wide consensus, however, managers and employees can prioritize their actions, make effective tactical decisions, exercise the right value judgments on competing resources, and act in alignment with the company’s business strategy.
2. Move Beyond SWOT Analysis. SWOT Analysis is a strategic planning tool used to identify a company’s strengths, weaknesses, opportunities, and threats. In its basic form, it appears trivial and limited and can even blind side the company. Digging deeper through a SWOT Assessment, however, can lead to significant strategic insight and offer more value than meets the eye.
3. Get Your Critical Success Factors Right. Critical success factors (CSFs) are the activities necessary for the business to succeed. Knowing your organization’s CSFs is extremely important because it allows managers to devote the resources of the firm to the capabilities that matter. Focusing on the right CSFs is fundamental to strategy execution and to planning strategic initiatives. So, get the CSFs right and your organization will succeed. If not, the business strategy will fail.
4. Harness the Power of Strategic Initiatives. The problem with strategic initiatives is that all too often they are not strategic. What they aim for is not always clear. The strategic planning process gives organizations an opportunity to change this by evaluating the true critical success factors necessary to make the strategy work and designing effective strategic initiatives accordingly. The laser-like focus of few key SMART’ER initiatives gives the organization a tremendous boost.
5. Lock in Performance Commitment. The crowing component of the strategic planning process is the Performance Commitment, an agreement that represents the actions that will be taken, the strategic outcome to be expected, and the financial implications. The Performance Commitment is essentially a promise that the executive team makes to the company leadership, the board. Prior to resource allocation, the executive team promises to execute the business strategy and the supporting strategic plan as shared and agreed and to deliver the expected results – in exchange for funding.
These best practices get to the core of what companies need to do to excel in the strategic planning process. They do not to replace in any way the vast amount of valuable information in the literature about strategic planning. Rather, they serve as a complement. Their most important benefits include the following:
- With consensus in place, executive management can take confidence that strategy execution will not be an isolated affair. In fact, the strategy will gain wider support during its execution.
- Going deeper beyond SWOT Analysis puts the core issues of strategy execution squarely in the cross hairs of the analysis, and also helps the planning team to converge quickly on strategic initiatives that are practical and immediate.
- With the correct CSFs in place, all subsequent activities get set on the right track, including strategic planning, performance management, capital budgeting, monitoring and strategic reviews.
- The laser-like focus of few key SMART’ER initiatives gives the organization a tremendous boost moving forward.
- Locking in performance commitment provides accountability, open dialogue, and the board’s ability to take corrective action if needed.
Successful companies in strategy execution usually take advantage of these best practices, as they go a long way to increasing the odds of success in executing a company’s business strategy.