The Importance of Strategic Planning

Proper Strategic Planning is the Most Important First Step for Any Organization

Strategic Planning is a structured and systematic process, where leaders of an organization establish the vision of the organization’s future and then develop and implement the actions necessary to achieve that future.  This article expands on the strategic planning concepts addressed in Think Big, Take Small Steps and is designed to help you achieve success in your strategic planning process.

You hear a lot of rhetoric these days about the importance of strategic planning, but seldom can anyone provide any concrete return on investment data from such planning.  The reasons often presented; however compelling, leave the business owner asking, “So what?”

On the surface, these are some of the typical reasons why hundreds of books and articles say strategic planning is important:

• Improves performance
• Provides direction
• Provides high quality services
• Optimizes resource allocation
• Meets accreditation and regulatory requirements
• Maximizes chances for success

Let me start by saying that “effective” strategic planning will have a positive effect on any organization, but it is not the answer in all situations or to all the organization’s problems.  Do not think that strategic planning is a “magic pill” your business can take to get better; however, businesses without strategic planning tend to fare far worst than those with.

Many companies, large and small, choose not to develop strategic plans.  M.C. Morningside highlights seven of these traditional reasons in his article.  Lee VanAmee, in his article, highlights why some organizations may feel strategic planning is a waste of time.  The bottom line is there are three very big reasons why all organizations should have robust strategic planning.  These three reasons clearly demonstrate why strategic planning is important.

Failing to Plan is Planning to Fail

According to the Department of Commerce and the Small Business Administration, 7 out of 10 new employer firms survive at least 2 years, half at least 5 years, a third at least 10 years, and a quarter stay in business 15 years or more.  In the book Small Business Management, Michael Ames cites eight primary reasons for small business failure: lack of experience, insufficient capital (money), poor location, poor inventory management, over-investment in fixed assets, poor credit arrangements, personal use of business funds, and unexpected growth.  All of these problems and many more could be mitigated with an effective business strategic plan.

You would not build a house without laying a strong foundation first, so why would you start a business without ensuring that it had a solid foundation as well.  When the soil shifts under your wonderful new home, cracks start to appear in the walls, doors do not close correctly anymore, and eventually the house could collapse entirely.  A business started without a strong plan, which addresses the primary small business threats, could end up in the same heap of failure.

If it is so important for a small business to have an effective strategic plan, what makes the large firm that has been around for 20 years any different?  They face the same challenges as a small business, just on a grander and broader scale.  Going in the wrong direction in a business that deals in millions versus thousands can cause any large organization to fail just as quickly if not quicker.

Direction and Inspiration to the Workforce

Have you ever worked in a company where you had no idea what the company did or how you fit into it?  This is more common than you may think.  One of the largest intrinsic reasons employees’ demonstrate strong organizational commitment is that they feel like their work matters.  Everyone wants to be part of a winning team — look at the fans of winning sports teams.  However, what really keeps fans coming, even in a losing season is that they feel like their support matters to the team.  This organizational purpose is highlighted and defined in the organization’s mission statement — a very important part of the framework of a strategic plan.  This mission reminds the organization, its leadership, and its employees of the organization’s direction and purpose.

Inspiration is what drives and motivates employees even in the dire times.  This inspiration is provided through a well-designed vision statement — another key element of the strategic plan.  Lofty and unmeasurable vision statements like, “Being the best,” may look good on paper and give leaders a warm feeling, but seldom inspire employees.  The fact is if the vision seems impossible to ever achieve, then it will probably work to demotivate employees.

As highlighted in the five primary reasons strategic plans fail, in Think Big, Take Small Steps, not developing an effective strategic framework hamstrings your strategic plan before you ever try to implement it.  If you want to provide direction and inspiration to your workforce, take time to develop a purposeful and everlasting mission statement and an inspiring and far-reaching vision statement.

Responsiveness to Change and Elimination of Rework

Picture getting in your car for a cross-country trip to visit friends.  Would you plan what you needed to pack, the route you would take, where you would stop along the way, and how much money it would take?  Of course — if you did not, chances are you would run out of money, get lost, and be wearing the same clothes you started in with never arriving at your intended destination.  To understand the value of strategic planning, you must understand the impact without it.

The value of strategic planning is related to time.  You reduce your time through proper planning — only thinking a few weeks or months out — otherwise costs escalate exponentially because of last-minute actions and constant rework that occurs due to mistakes based on quick decisions.  Strategic planning is like planning for that cross-country drive — it gets you “ahead of time” and saves you loss of productivity and money in the long run.  Failing to plan can spell disaster for an organization that goes in the wrong direction.

Many organizations will find a plethora of excuses why they think they should not plan.  Literature by the droves tells us strategic planning is important; however, if you want your business to succeed, if you want to drive organizational commitment in your workforce, and if you want to operate effectively and efficiently well into the future, strategic planning is for you.

Looking to learn more about strategic planning?  The Association for Strategic Planning (ASP) is a non-profit professional society whose mission is to help people and organizations to succeed through improved strategic Thinking, Planning and Action.

Related Links (find three links related to the topic of the article):

1.  http://www.strategyplus.org/

2.  http://www.sba.gov/

3.  http://managementhelp.org/strategicplanning/index.htm