Building a Better Strategic Plan
It’s no wonder so many family business owners and managers are dissatisfied with the process of strategic planning. It’s expensive. It’s takes a great deal of time. And all too often, it produces little more than a string of financial targets and a budget, giving no real direction for initiatives or other action items. It’s easy to understand that when strategy planning sessions actually play a significant role in the development of real and usable strategy, satisfaction with the planning process dramatically increases. The key, then, is to make that happen. But how?
We know that having a formal process to start with helps. According to a McKinsey executive survey, 51% of respondents whose companies had no formal planning process in place were dissatisfied with the companies’ strategy development, compared to only 20% dissatisfaction among executives with a formal process. But having a formal process is not enough. The process must include the right mix of people and discussions in order to help your family business develop strategy that can truly be valuable.
Start Before the Planning Session
Weeks, or even months, before your scheduled planning session, begin interviewing managers and key contributors at all levels of your family business. Find out what issues they face, what their priorities are, and what initiatives they’d like to see implemented. Collect as much data as you can, and then boil what you’ve learned down to a digestible summary. Distribute that summary to those who will attend your strategic planning session. Laying a little groundwork (or a lot) in advance of the planning session will help contributors feel more prepared to dive in and will equip them with the data and information they need to launch immediately into meaningful discussion and strategy development.
Invite the Implementers
Developing strategy without input from those who will actually carry out the strategy is simply asking for trouble. Don’t leave the strategic plans in the hands of only your strategic planners. Involve decision makers, division managers and other key contributors to make sure that the strategy being developed is appropriate and realistic. That being said, invite only those key leaders that you absolutely need. Including too many people in your meeting can reduce its effectiveness because the discussion can tend to be more political and less intimate and candid in larger groups.
Begin with Priorities and Challenges, not Financials
By beginning your planning session with discussions of issues and priorities, you can delve into what will affect your family business and its performance in the most profound way. Discuss challenges and obstacles facing not only the family business as a whole, but also those facing individual units or departments. Review not only priorities from each unit or department but also how acting on those priorities will affect your business. Eric D. Beinhocker and Sarah Kaplan, authors of “Tired of Strategic Planning?” in the McKinsey Quarterly also suggest that the team should resist the temptation to discuss budgets in this meeting and instead actually hold that discussion at a separate time. Otherwise, your discussions may be taken over by financial details.
Think Long Term
When you conduct a strategic planning session thoroughly and thoughtfully, it’s likely your family business will not have the need to do that level of extensive planning on an annual basis. Instead, focus on long-term plans that encompass a 24- to 36-month period. Annual planning sessions can still be conducted, but will be more of a review to see if the family business is still on target and a discussion of initiatives that will complement the long-term plan.
Utilize a Mix of Metrics
Family businesses, like all businesses, are tempted to use financial metrics to measure success in reaching goals set by strategic plans. However, not all worthwhile initiatives can be measured in dollars and cents. As you set specific goals, also consider non-financial measures of success, such as number of repeat business transactions, satisfaction levels and the like.
Track and Incentivize Strategically
Once you’ve developed your strategic plan, be sure to track its progress throughout the year and implement incentive programs based on both your financial and non-financial metrics as well as a balance of short-term and long-term goals. By using a mix of metrics by which managers are compensated, they’ll have extra incentive to stay on target and solve problems before their compensation is affected.
Try New Things and Commit to Change
While some say “don’t fix what isn’t broken,” even the most successful family businesses can get stuck in a rut. In your strategic planning, don’t be afraid to set new goals, use new metrics and launch new initiatives. Change can be good in plan development, but it doesn’t stop there. One of the hardest things to do after even the most productive strategic planning sessions is to actually take what you’ve learned and what was developed and then act in a different way each day in accordance to that plan. Many family business contributors go back to their busy schedules and feel they don’t have time to consider how they must change what they are doing on a daily basis. But it’s a must. Only by changing what we do and how we respond to challenges can we truly grow as professionals and as a family business.
Contributing Sources: http://www.mckinseyquarterly.com/How_to_improve_strategic_planning_2026;