The Typical Strategic Planning Process
If you’ve ever been involved with strategic planning, you know the drill with the annual cycle and all of its milestones, upward and downward communication of expectations, information exchanges, discussions, competitor analysis, desired projects, financial planning, and much more. Over the course of five to eight months, all of these efforts magically culminate in beautifully strategic planning documents.
These documents contain three-to-five-year financial plans for each division and the company overall, which will be presented to the board and to analysts on Investor Day or at industry conferences. During the months of preparation, planning teams are filing templates, collecting data, and holding strategic and operative discussions at all levels of the organization.
Sometimes M&A activity can disrupt all of this work, which is a nightmare for every strategic planner as it upsets the usual “last year plus x% growth, or y% minus costs” targets, which are set top-down by management and then used to develop the SPP by the organization.
Known and Lesser-Known Benefits
Most people assume that the multi-year plan that comes out of the SPP is the true goal. Yes, it’s the official one, but the actual objective is more subtle.
The real benefit is less about the exact output and more about three items:
- a strategic discovery process
- internal communication
- external communication
These benefits are achieved both during and after the process of developing the plan. In fact, I would argue that once the SPP is written, it’s safe to recycle all the paper and beautiful strategic decks at once, but save the summary of each unit’s goals and initiatives, plus some financials needed for comparison of planned vs. actual performance.
Months of joined work across the organization create value. The SPP allows all parts of the organization to take some time outside the daily crunch to look at the company’s competitors, strategy, financials, and performance. It also frees up some time for organized and structured discussions about the future of the firm. By working together, employees set in motion an annual discovery cycle, even if many of them feel it’s just an exercise in paperwork. Ideally, the knowledge of the organization is harvested and made transparent during the SPP. This knowledge can become part of the strategic plan, either tabled for future use (e.g., bold ideas whose time has not yet come) or translated into more tacit organizational knowledge that manifests itself in daily decisions and behavior (e.g., focus on a new competitor that was discovered as threat).
Inside the organization, from the C-suite to the trenches in all departments, employees get in contact with one another and learn about the way forward, especially once the plan has been communicated. They might collaborate with new or different colleagues for the first time, sparking relationships that might prove valuable in the future. Overall, the SPP is a big rallying cry for all, like a flag the troops gather around. Does it really matter whether the plan says 10 percent annual growth vs. 12 percent? Absolutely not.
Various outside stakeholders also learn about the firm’s future endeavors. Elements of the SPP can be used to create a narrative to share with the world. Equity analysts love narratives, which in turn might help get the company “buy” ratings and potentially a higher stock price. The shared narrative also helps customers, service providers, and other suppliers to better understand what your company is about and where it’s going.
In summary, developing a strategic plan has many benefits beyond the target numbers and initiatives it generates. Unfortunately, the SPP often carries a high price tag because of its shortcomings, some seen, some unseen. In the next articles in this series, I will take closer look at perceived shortcomings and what various participants in the SPP can do to make the process both more effective and efficient.