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STRATEGIC PLANNING
© Joel Johnson & Associates
The following information is provided as a simple guideline for strategic planning. A final plan would include all segments discussed in the company vision statement as prepared by management.
Strategic planning, in simple terms, is a well-defined road map for achieving success in business. Similar to planning for a long vacation, a business plan will need to some extensive research to decide on what, where, when, why and how you going to take the trip. If you don’t know where you are going you will surely arrive, but where? An excellent question!
Strategic planning is similar to developing an architectural drawing, where every detail is discussed and implemented. You would not build a building or a home without a good plan and a strong foundation. Why would you attempt to build a great business without a good plan for achieving success?
Traditional strategic planning can be broken down into four sequential steps:
· Market research
· Strategy formulation and planning
· Implementation
· Measurements and controls
As you formulate the vision for your company, try to visualize every single step involved. Be honest with your assessment of where the company has been, where it is now and what level you want to take it and why. Make your vision large enough that you will be stretched to accomplish it, but realistic enough that its attainment is possible.
Create a mission statement that is short, to the point and easy for everyone concerned to understand and buy into.
Create a statement of core values. What will guide the work you choose to do and the way you do the work?
What are the current critical obstacles that would keep you from achieving you goals? How will you overcome the critical obstacles that are in your path?
What will you do in year 1, year 2…? What are your short-term goals and objectives?
How will you know if you are successful? What are the indicators of success/benchmarks?
What infrastructure is needed to carry out the work in this plan? How much will you need to invest?
What will you do in the next 3 months, 6 months, year 1, year 2, year 3…?
How will the plan be disseminated and to whom? How will the plan be implemented?
How will you monitor the plan and assess your progress?
EXAMPLE:
HISTORY: (Where have we been) Manufacturing: 2007 Sales $2.3 - Mil. - 2008 Sales $2.8 Mil. - 2009 Sales $2.7 Mil. (Include complete P & L results and other details)
CONTEXT: Current 2010 sales $2.5 mil. Gross margins are 21%. Net profit/(loss) are (1.5%). Employ 39 people. Current Acid Test 0.79. (Include complete P & L results.)
VISION: XYZ, Inc. is a quality manufacturer of custom designed parts serving the Oil & Gas Machinery Industry. Its management, staff and employees are the highly qualified and self-directed to take XYZ to greater heights. By the year 2021 XYZ, Inc. will own 15% market share in five states.
MISSION: XYZ, Inc. is the leading manufacturer of high quality custom designed Oil & Gas Machinery parts, serving customers throughout the world in a safe and secure facility located in Somewhere, USA.
VALUES: XYZ, Inc. realizes it must partner with its customers to create a mutually beneficial future. The Company does not compete in the volume/price market. It creates customer centered and designed parts that require precision and high quality in order to protect its customers interest and its own. The Company seeks relationships with customers with mutual interest quality and service. XYZ does not give its work away, realizing it cannot achieve success without financial control, but remains competitive within its model, while maintaining its required gross margins on work provided. Quality and Service are vital to repeat business. XYZ will not low ball bids or cut quality in order to obtain work. Competitors who choose to do this set themselves up for massive liability issues, returns and less repeat business.
CRITICAL OBSTACLES: (1) Competitive pricing squeeze. Bidding hampered by competitors willing to give work away. (2) Materials increasing in price due to imports and freight (3) Accounts Receivable average 60 days. (4) Accounts payable average 45 days. (5) Cash flow crunch. (6) Having difficulty paying current obligations on time. (7) Need stronger managers. (8) Lack of skilled labor and retention due to lack of benefits and training. (9) Current Bank credit line in jeopardy. (Add other details)
STRATEGIC, LONG-TERM GOALS/DIRECTION: Revenue will grow at a 25% growth rate with sales projected to reach $18.6 Mil. Planned gross margins will meet or exceed 28% of gross revenue. Operating expenses will not exceed 18% of gross revenue, leaving a net profit, before debt service and taxes of 10%. Materials, freight, plant overhead and labor (excluding Administrative and misc. expenses) will be included in cost-of-goods sold that will not exceed 72% of gross sales.
SHORT-TERM GOALS AND OBJECTIVES: The Company will recruit and hire the best management talent that can be found to occupy the Vice President of Operations, Vice President and Chief Financial Officer, CPA, VP of Human Resources, VP of Sales, Accounts Receivable Manager, Accounts Payable Manager, Purchasing Manager, Plant Forman and Manufacturing Team Leaders positions. Each manager will be responsible in their area for carrying out their portion of The Company Strategic Business Plan.
Human Resources will recruit and hire only top skilled labor, develop an in-house training program, employee benefits package, and pay wages equal to abilities. The Company will develop a retention program that will increase employee retention and reduce overall costs involved in dismissing unqualified employees. All employees will be required to pass a background check for criminal activities, drug abuse and fraud.
Accounting will do a better job of collecting overdue accounts receivable and will monitor customer paying history for future consideration. In addition, The Company will borrow short term funds equal to current obligations, pay off current debt, increase its credit line not to exceed 80% of current accounts receivable and will pay all its future current obligations within 30 days.
The Company will not accept an acid test of less than 1.50 ($1.50 available in current assets less inventory to pay each dollar in current obligations). It is vitally important to pay all obligations on time and keep its agreements with vendors in order to maintain strong relationships for future growth that will benefit The Company and its vendors.
INDICATORS OF SUCCESS/BENCHMARKS: For every action step a time line and measurement indicator must be in place. Management will monitor and report on progress for his/her area at each by-weekly meeting. Adjustments to the plan will be made where necessary.
NOTE:
Effective company goals have four common characteristics which, when followed, will make achievement more likely and planning more precise. These characteristics are:
1. The goal must be specific. The more specific the goal is, the more likely the organization is to achieve it.
2. The goal must be measurable. There must be a way to determine whether or not the organization is making progress toward the goal, and there needs to be a way to clearly define the moment when the goal is achieved.
3. The goal must be targeted. Will the goal lead to the desired outcomes? Does the goal accomplish the mission of the organization, or at least contribute meaningfully to the mission?
4. The goal must be time specific. Tying a goal to a deadline is critical. It allows the objectives, which flow from the goal to address both direction and speed. Goal achievement is usually based on a specific time frame, and accountability for achieving the goal is significantly enhanced when it is linked to a deadline.
Putting your energies into developing effective goals that link to values that are measurable, specific, targeted and time sensitive will pay huge dividends as you work to achieve your strategic plan.
In summary, in order to determine where it is going, the organization needs to know exactly where it stands, then determine where it wants to go and how it will get there. The resulting document is called the “strategic plan.”
Follow the sample template, though not the only one available is a good example of a working layout of strategic planning. Each item should be detailed.
SAMPLE
XYC, INC.
SOMEWHERE USA
STRATEGIC PLAN
2011 – 2016
KEY BUSINESS DRIVERS:
1.0 Effective Leadership
1.1 Strategy: Develop a leadership philosophy statement that will focus on customer requirements, stakeholder interests and efficient operations.
ACTION PLAN: Accomplish the following action steps to implement this strategy for XYZ, Inc.
Action Steps:
1. Recruit and hire qualified management, staff and skilled employees. Budget 11% of gross revenues.
2. Write a leadership statement that reflects the philosophy of the
XYZ leadership.
3. Obtain all management and staff input, both full and part time, to gain buy-in.
4. Integrate the statement into all elements of center operations.
Responsible Party: John Doe, VP Operations.
Start Date: November 15, 2010.
Completion Date: December 31, 2010.
Resources: VP Operations, VP Human Resources, staff time and effort.
Measurement: (1) Management and staff matrix (2) Statement document. (3) Written input and sign off. (4) Integrated statement document within Policy & Procedure Manual. Send a copy of all required documents to all employees.
Status: Scheduled □ In Progress □ Completed □ Ongoing □
1.2 Strategy: Develop a professional development plan in support of the leadership
system, customer needs and staff needs.
ACTION PLAN: Accomplish the following action steps to implement this strategy for XYZ, Inc.
Action Steps:
1. Respond to Board tasking and participate fully in the
training needs survey when required.
2. Ensure that all selected staff attends the training that is provided.
3. Provide other professional development opportunities for
all employees when available and affordable.
5. Monitor opportunities and make appropriate recommendations.
Responsible Party: VP Human Resources
Start Date: January 1, 2011 to cover FY 2011 to 2016.
Completion Date: On going
Resources: General training budget— approximately $1,500 annually. Director of Human resources and staff time and effort.
Measurement: Completed professional development plan document with scheduled training dates and completed budget.
Status: Scheduled □ In Progress □ Completed □ Ongoing □
1.3 Strategy: Follow Management guidance for integrating requirements into an effective work system.
ACTION PLAN: Implement all Management guidance for completion into XYZ operations manuals and directives.
Action Steps:
1. Respond to all Management guidance and requirements that are forwarded for action.
2. Revise/amend all operational procedures to reflect the required
actions.
Responsible Party: VP of Operations and Director of Human Resources
Start Date: January 1, 2011
Completion Date: Management Directive date
Resources: Funding required will require board approval.
Measurement: Management guidance documentation and signed completion forms.
Status: Scheduled □ In Progress □ Completed □ Ongoing □
It is important to develop a strategy for achieving every single item on your list of what, who, where, why and how to do.