Have you ever wondered, “Why is strategic planning important?” It might help to imagine taking a vacation without knowing where you are going or how you are going to get there. With some luck, that vacation could be fun and maybe even productive, but generally speaking, it would be a generally risky proposition.
Strategic planning is used to define and manage an organization’s strategic missions and initiatives, and it allows you to drive high-level objectives and strategies into more detailed elements like resource demands, financials, dates and benefits. Many businesses will become bogged down with operations, creating an environment that is reactionary in nature. Strategic planning helps firms prepare proactively and address issues with a more long-term view, and plans enable a company to initiate influence instead of just responding to situations. Let’s review some benefits of strategic planning.
Strategic planning helps formulate better strategies using a logical, systematic approach.
Taking the time to sift through the company’s strengths, weaknesses, opportunities and threats will help determine some strategies to enhance the organization. In fact, studies show that businesses who perform this function perform better, regardless of the outcome of any specific strategy deployed.
Strategic planning encourages enhanced communication throughout the organization.
Communication throughout the strategic planning process is crucial. Hold an all-hands meeting and make sure to explain the “why” behind the organization’s goals. No one likes to be left in the dark, and communicating the organization’s strategic goals allows individuals to understand how their contributions impact the organization’s future.
Learn more about strategic financial planning in this related blog: “How to Develop a 5-Year Strategic Financial Plan”
Strategic planning empowers individuals working in the organization.
Strategic planning is a team effort, and inclusion is key to making it work. Including employees and management in the effort to determine the strategic plan allows for open communication lines. Everyone is a part of creating the organization’s goals, which makes buy-in that much more achievable. Ensuring communication throughout the entire process will allow employees and management to work together to achieve the same goals.
OK, I understand why strategic planning is important, but how are the above benefits achieved?
The strategic planning process requires considerable thought and planning on the part of a company’s upper-level management. However, the planning process can produce positive results that can be executed in a cost-efficient manner with a high likelihood of success, while avoiding undue financial risk.
There are three crucial steps to the strategic planning process that should be employed:
This is the hardest step. First, a business needs to perform an internal and external audit by utilizing a SWOT (i.e., strengths, weaknesses, opportunities and threats) analysis. What sets your company apart from others and where can you improve? This takes a deep understanding of your current state to develop strategies for the future.
After formulating the plan, the action steps need to be communicated and resources need to be allocated to each step. This is where communication is key, and buy-in is imperative. The only way to implement the plan is to have those who are required to execute understand why and what they need to perform.
All smart businesses understand that they need to review and evaluate their plans on a continual basis. Setting KPIs (i.e., key performance indicators) to be evaluated quarterly will help you keep on track and see when adjustments may be required.
All three steps should occur within each organizational level (upper management, middle management and operational). Continual communication will ensure that each area functions with the same goals in mind.
Learn more about KPIs in these related blogs:
- Building a Balanced Scorecard & Using SMARTER KPIs
- KPIs & Scenario Planning: Tracking the Right Business Metrics for Modeling
- SaaS KPIs: Benefits of Recurring Revenue Analysis
Overall, strategic planning, no matter how difficult it may be, is a must in any successful organization. Taking the time to plan deliberately, include all levels of the organization, communicate effectively and measure success can provide stability and flexibility for your future.
If you need to bolster your strategic planning efforts, we have a team of 90+ accounting and finance professionals who can offer assistance in a project leadership or support capacity. Just contact us to start a conversation.
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Categorized in: Financial Planning & Analysis