Strategic Planning in Operations Management What is Strategic Planning? Strategic planning is an organizational management activity that is used to set priorities, focus energy and resources, strengthen operations, ensure that employees and other stakeholders are working toward common goals, establish agreement around intended outcomes/results, and assess and adjust the organization’s direction in response to a changing environment. It is a disciplined effort that produces fundamental decisions and actions that shape and guide what an organization is, who it serves, what it does, and why it does it, with a focus on the future. Effective strategic planning articulates not only where an organization is going and the actions needed to make progress, but also how it will know if it is successful. What is a Strategic Plan? A strategic plan is a document used to communicate with the organization the organizations goals, the actions needed to achieve those goals and all of the other critical elements developed during the planning exercise. Strategic planning vs. operational planning A strategic plan outlines your mission, vision, and high-level goals for the next three to five years. It also takes into account how you’ll measure those goals, and the major projects you’ll take on to meet them. An operational plan (also known as a work plan) is an outline of what your department will focus on for the near future—usually the upcoming year. Simply put, your strategic plan shares your vision for the future, while your operational plan lays out how you’ll get there on a daily to weekly basis. Both concepts describe your company's plans for the future, but in different contexts. Below we've called out five major differences between them that you can use as guideposts to ensure you're using these two concepts the right way. Strategic Planning Vs. Operational Planning: The 5 Main Differences 1. Time Period Your strategic plan outlines long-term goals for the next three to five years. What you’ll be doing to achieve those goals in the shorter term (typically the next fiscal year) is outlined in your operational plan. 2. Goal Focus The goal of your strategic plan is to outline the company’s long-term vision and how all departments should work together to achieve it. The goal of your operational plan isn’t company-focused—it is department-focused. There can be overlap between departments, but that’s the exception rather than the rule. Large departments may require multiple operational plans. 3. Plan Generation Your organization’s high-level leadership team—the executive team or city council, for instance—is responsible for creating the strategic plan. Once it’s created, the strategic plan will be pushed forward by cross-functional teams who work together to ensure the strategy is successful. Every department should have a leader or team of leaders responsible for creating their operational plan. Although each operational plan is designed for a single department, its successful implementation will lead to organization-wide success. For example, your marketing team has a set of activities they use to increase visibility. These activities should translate to more sales opportunities and ultimately more revenue for the organization (both of which could be goals in your strategic plan). 4. Budget The budget for your strategic plan comes from your strategic budget, not your operational budget. Your organization may implement a Strat-Ex budget that aligns part of your budget directly to your strategic projects or initiatives. This is a different approach than putting a budget against each of your divisions or departments. The budget for your operational plan comes from your department’s annual budget. If your annual department budget needs to be cut, consider which elements don’t align to your strategic plan and cut those first. For example, if your strategic plan defines a marketing goal of establishing a strong online presence, your trade show budget should receive budget cuts before blog writing does. 5. Reporting When you report on your strategic plan (typically both annually and quarterly), your strategic planning committee or executive team will want to look at how your company is performing on its chosen measures. Depending on the meeting, these discussions should remain fairly highlevel so you don’t get bogged down on details. Your operational reports, on the other hand, outline hundreds of projects or tasks people in the department are working on. Monthly operational reporting meetings give the leadership—and the rest of the department—an indication of each project’s status. Unlike your strategic report, updates on operational projects can be anecdotal or qualitative (as it’s often difficult to quantify actions that aren’t tied to measures). Some organizations have a running text commentary either in an Excel field or a Word document. This commentary is updated weekly or monthly, even if there are no direct measures for that part of the operational plan. Steps of Strategic planning: 1. Environmental Scanning Environmental scanning is the process of gathering, organizing and analyzing information. In addition, it’s a process that surveys and analyzes relevant data to identify opportunities and threats. The goal is to gain a clear understanding of your industry’s current landscape in order to better inform future decisions and achieve your long-term vision. How a company goes about this process depends on many factors, including longterm goals and size. A large company may decide to form a smaller committee comprised of cross-functional team members, while a small company may limit it to the executive team. Depending on a company’s objectives, this can entail gathering internal and/or external data. For example, if one of your company’s primary objectives is to improve overall company culture and internal communication, you may want to explore how other successful companies have achieved this — have they adopted new software, integrated more common areas into the office design, or sent out quarterly employee surveys? By identifying existing processes, challenges, and potential solutions, you can begin to formulate a winning strategy. 2. Strategy Formulation Based on the information gathered during environmental scanning, you should hopefully have a clear picture of what needs to be addressed in order to accomplish your business goals. You can also build on things you found are working well to date. From there, you can begin prioritizing your objectives and formulate individual strategies to address each one. This is also an important time to identify what internal resources and/or funding you may have at your disposal, as well as what resources you may need to budget and plan for. By the end of this process, you should have a list of measureable goals and objectives and a series of steps designed to accomplish each one. Simply put, strategy formulation is the process an organization uses to reach the most appropriate and plausible course of action to achieve its goals. 3. Strategy Implementation The most important part of implementing a strategy may be communicating it clearly to begin with. The entire company should be engaged and made aware of the company’s long-term vision. Each individual should understand how their role contributes to the bigger picture. Once everyone in the organization — and in particular, stakeholders and owners of specific action items — are aligned, it’s time for “a little less conversation, a little more action.” All the steps outlined during the strategy formulation process should be put into motion during strategy implementation. 4. Strategy Evaluation Every organization should strive for continuous improvement, and so part of the strategic planning process is taking a moment to monitor and adjust as needed. By implementing checkpoints into your overall plan, business leaders can identify what’s working and what’s not, and pivot accordingly. Strategy evaluation involves setting and adjusting benchmarks as needed, gathering feedback and measuring performance. The results of strategy evaluation can help establish best practices and inform future strategies.
