Strategic Planning is about creating the action plan(s)
required to achieve objectives which change the current
performance or structure of the organisation. The objectives can
vary from achieving simple but real savings in expenses to major
restructuring, involving acquisitions or the disposal of
businesses. Essentially Strategic Planning is about managing the
changes required to achieve the stated objectives.
- THE BASIC APPROACH
- To ensure that the Strategic Plan is compiled in
accordance with the
Economic
Assumptions,
Strategic Policy Statement
and Business Goals.
- To establish current "Normal"
performance by the removal "Abnormal elements" in the current
performance.
- That without
Action Plans,
current performance can only be
adjusted in accordance with the Economic Assumptions
regarding the market and other trends.
- That variations from the adjusted normal current
performance are only included in the
summarised plan as a result of a documented Action Plan
which complies with the Strategic Policy Statement and
Business Goals.
- GOAL SETTING
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- Before embarking on strategic planning, be clear about
personal goals. Make sure the goals set are the true goals.
For example is the goal to become a successful business person
to create a busy life style, providing both social and
business contacts, or to provide financial security which
allows provision for family and the development of other
social activities? Related Article:-
Business Planning - Goals, Targets and Objectives
- Convert the relevant personal goals into business goals.
- Separate the business goals into short term and long term.
- Incorporate the business goals into the strategic policy
statement.
Related Article:-
Business Planning - Goals
- ECONOMIC ASSUMPTIONS
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The assumptions should be objective and realistic. They should
cover such items as:-
- Market trends and expectations of the product range(s).
- Inflation
- Exchange Rate movements
- Finance costs.
- Wages Costs.
- Any other items considered particularly relevant to the
Company.
- STRATEGIC POLICY STATEMENT
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- The Strategic Policy Statement lists the policies that are
considered necessary to achieve the business objectives. It
states the basic policies and targets for the planning period,
without evaluating these, that will create variations from the
current operating performance, such as:-
- Customer service objectives
- The introduction of new products
- Rationalisation of the product range
- Market share increase or decrease
- Pricing policy and anticipated real changes in prices
- Changes in product specifications
- Changes in working practises
- Introduction of new technology
- Working capital efficiency
- Financial facilities and constraints
- Dividends
- The statements in the policy document must be realistic
and have substance justifying their inclusion as changes which
can occur.
Related Article:-
Business Planning - Policy Statement
- ADJUSTMENT TO "NORMAL"
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The first step is to establish the "Normal Performance" for the
Company for the current year by:-
- Estimating the result for the current year.
- Removing from that result any abnormal "One off" factors
such as, reorganisation costs, the results of activities sold
or discontinued during the year.
- Adding to that result, the adjustment necessary to
establish the full year affect of activities bought or
commenced during the year.
- ADJUSTMENT FOR ECONOMIC FORECASTS
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- The "Normal" results are then adjusted for the Economic
Assumptions forecast to be prevalent to during the planning
period.
- The adjusted "Normal" results now illustrate the likely
progress and results resulting from a hypothetical management
policy to maintain the status quo. Any further adjustments can
only be included in the Plan as a result of a documented
Action Plan.
- DOCUMENTED ACTION PLAN
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- A separate Action Plan should be produced for each
specific project.
- The documented action plan can be compiled and reported in
any format which suits the particular plan. It should list the
things that have to be done to implement the plan, in a
realistic timetable.
- The Action Plan should then be evaluated in terms of
costs; benefits and finance requirements. Try to do this
separately for each element of the Plan then summarise it into
the affect it will have on the Company's Profit and Loss A/c
and Balance sheet for each year of the plan.
- The Action Plan report and valuation should be for the
duration of the Plan to a "Normal" result (that is to
completion) even if this exceeds the planning period.
- STRATEGIC PLAN SUMMARY
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- Add each of the evaluated individual Action Plans to the
"Normal Position" established earlier. Compiling the result
for each year by adding the contribution each Action Plan
makes to that year.
- The summary of each year will show clearly how each of the
Action Plans affect the Company's position during the course
of each year of the Strategic Plan. The final year shows the
position the Company has achieved at the end of the planning
period.
- Should the Company not be in a position to implement all
projects in the initial timetable. It is a simple matter to
prioritise the projects and adjust plans accordingly.
- ADVICE ON COMPILATION
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- Construct a business plan, on the principle that any
change, requires an action plan to achieve it. That is; the
Plan is a Strategic Plan, in that its implementation is
intended to change some aspects of the Company, in order to
achieve the stated objectives.
- To compile a plan on the method outlined above will not be
onerous provided there is realism applied in determining what
is practical and the time scale. Implementation is made easier
because the "things to do" are in the separate Action Plans.
- Chose a planning period that is considered manageable. It
could be as short as one year or as long as five. As a "first
time" exercise, a two year period is recommended.
- Think of the simple things first. For example, expense
savings, better working practices, alternative sourcing of raw
materials and product, etc., etc. Some action plans of this
type may only require a few words and an evaluation. Then move
on to the more difficult but more productive task of planning
to expand sales in real terms to achieve profit goals.
- Using experience and knowledge of the business, select the
actions plans you consider will give the Company the most
benefit for least change and create a separate Action Plan for
each chosen item.
- Make sure Action Plans are logical in terms of risk to
likely reward and are practical in terms of time scale.
- Always assess a plan in the "Best", "Probable" and "Worst"
scenarios. In the event of failure ensure a plan will not be
anything more than a set back that can be recovered.
- When making the Economic Assumptions, get the help from
published information and experts (e.g. the economist of the
Company's bank) to advise you. They are usually more than
happy to help.
For more information on strategic planning, go to the page, Strategic Planning section
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Reproduced with Permission
Copyright Len Bainbridge (Unregistered)
