An Introduction to Strategic Planning for Service Organizations

Transcription

1 A Jolt Consulting Group White Paper An Introduction to Strategic Planning for Service Organizations April 2011 PO BOX 1217, SARATOGA SPRINGS, NY PAGE 1 of 9

2 Table of Contents Strategic Planning Challenges... 3 What is Strategic Planning... 3 Strategic Planning Frameworks An Overview... 4 Goals Based Strategic Planning... 4 Issue Based Planning... 4 Alignment Model... 5 Scenario Planning... 6 Balanced Scorecard Approach... 6 Benefits of Strategic Planning... 8 PO BOX 1217, SARATOGA SPRINGS, NY PAGE 2 of 9

3 This paper will examine the role of strategic planning within service organizations and describe the high level steps necessary to implement and monitor an effective strategic plan. Strategic Planning Challenges The main objective of strategic planning is to translate a desired vision or outcome into a series of actionable steps that can transform the long-range view into a reality. One of the very best tools executives can use to transform their organization and realize dramatically improved business results is through the use of strategic planning. Yet despite the potential improvements strategic planning can offer, a limited number of senior service executives actually carve significant blocks of time in their busy schedules to focus on strategic planning. In fact, numerous management surveys indicate that nearly 85% of executives spend less than one hour per month on strategic planning. Service executives are especially susceptible as they are continually drawn into customer fire-fighting mode, which consumes their ability to block out time and focus on the long-term. The result is that, despite intentions to plan strategically, service executives are forced to continually de-prioritize strategic planning to focus on issue resolution. This becomes a vicious cycle and ultimately results in point problem solving by management versus true strategic planning. What is Strategic Planning By definition, strategic planning is a process that helps organizations align their people, processes and financial objectives over a pre-determined period of time in order to achieve an end objective. The objective can be market share related, customer loyalty related or any other objective important to the organization. Stated differently, strategic planning helps organizations: Determine how it wishes to transform itself over a defined period of time How it intends to achieve that transformation Know whether it is on the right track to achieving its objectives while in the midst of the transformation In achieving those three objectives, the focus of the strategic plan is usually on the entire organization and is a living, dynamic plan that evolves over time. This differs from problem solving or business planning which tend to focus on a specific product, issue or service until a solution is deemed to have been identified and put in place. As a result successful strategic plans are working documents that explain where an organization is headed and establishes a healthy foundation of change to enable the organization to achieve its objective. PO BOX 1217, SARATOGA SPRINGS, NY PAGE 3 of 9

4 Strategic Planning Frameworks An Overview. There are numerous models, perspectives and variations to strategic planning frameworks and no one model is considered perfect or a fit for every organization. Effective planning involves the adaptation of defined strategic planning frameworks to suit the particular needs of an organization. In practical application therefore, organizations start with a basic framework (discussion follows) and modify it over time to meet their leadership styles, cultures, organizational size, marketplace complexity and the level of expertise within the organization to actually implement a strategic planning methodology. Goals Based Strategic Planning Goals based strategic planning is the simplest of all approaches and is most commonly used by small to medium sized service organizations, generally in stable markets. This strategic planning approach begins with executive leadership establishing an organizational purpose, vision and/or value statement. Once established, goals to achieve the desired state need to be identified together with metrics to track progress. The goals are generally statements about what the organization needs to do in order to achieve the desired purpose (mission). The third step in this process is the identification of the strategies or approaches to achieve the desired purpose. These strategies are often delegated to department levels, often in the form of focus groups, and identify the specific activities that the department needs to achieve in support of the desired purpose. It is important that these strategies are clearly defined so that individuals within the organization can relate to their meaning and also be able to easily establish metrics with target values for each strategy. The final phase of this model is to create metrics and follow up plans to monitor the progress against the stated goal. If the plan was to increase service profitability, metrics focused on revenue, cost and profit would be appropriate. In order for the approach to ultimately be effective, however, it is imperative that regular, routine reviews of both the metrics as well as the implementation plans occur. It is the failure to implement these routine reviews that most often causes organizations to fail when implementing goals based planning process. As a result, executive management leadership of the process is imperative. Issue Based Planning Issue based planning is most commonly used within organizations in dynamic and competitive marketplaces and seeks to understand the specific issues facing the organization. Within the service industry, those issues can be financial (lack of service contract profit), competitive (service offering differentiation), staffing (aging workforce) or any other issue challenging the organization. Due to the complexities associated with fully implementing this approach, it is generally used by larger organizations with a broad range of experienced personnel. PO BOX 1217, SARATOGA SPRINGS, NY PAGE 4 of 9

5 The issue based planning approach is initially based on conducting a 360 degree assessment to identify the major issues facing the organization. Thorough strength, weakness, opportunity and threat (SWOT) analyses coupled with external interviews (customers, partners, etc.) are the most common tools used to conduct the assessment. Once the major issues are identified, strategies to address those issues along with target metrics must be defined that will serve as the basis for future plans. These strategies and target metrics are typically intended to be carried out over a multi-year period (generally 2-4 years). Due to the potential complexity of the issue planning approach, the following brief synopsis is intended to provide a simple overview of the implementation steps. It in no way is intended to minimize the volume of work necessary to successfully complete each step. The steps include: Alignment Model Creating or amending the organizational vision, mission statement and values Establishing tactical action plans (who, what, where, when, how) Capturing all planned activities and metrics in a written document known as a strategic plan document Developing yearly plans with incremental target values for the desired metric(s) and recording those in the strategic plan document Establishing a formal cadence for reviewing progress on yearly plans and amending the strategic plan document, as appropriate Alignment based strategic planning is most often used by organizations facing internal issues or inefficiencies that are impacting their external performance. The purpose of this model is to align the overall organization around a mission statement so as to improve overall effectiveness. This approach is most useful for organizations that need to fine-tune their approach or uncover the root cause(s) of the challenges they are facing in the marketplace. The alignment model is centered on the creation of a service organization mission statement. The mission statement must be clear and define an end objective that articulates that vision of executive management. With a clearly defined mission statement, leadership must then identify the programs, resources and needed support in a perfect environment necessary to achieve the mission statement. With the desired outcome defined, organizations then follow a process of identifying what is close to the ideal and conversely what areas need improvement. Tools such as SWOT assessments, organizational assessments, external interviews, etc can be used to help identify the organizational strengths and weaknesses. Once a clear understanding of the areas not meeting expectation has been identified the next step in the process is to identify how to go about making the necessary adjustments to bring about the desired change. Again there are numerous techniques that can be used to accomplish this task and there is no one correct approach; organizations should use what best fits their style. The final step in the alignment process model is PO BOX 1217, SARATOGA SPRINGS, NY PAGE 5 of 9

6 to incorporate the identified changes into the strategic plan. These changes will become the basis for action plans within the organization. Scenario Planning Scenario based strategic planning is the least process oriented method, but can often yield the greatest input to a strategic plan for an organization. Scenario planning is often used by organizations that are operating effectively and are looking for ways to accelerate growth or preserve a market position. Due to the nature of scenario planning, it would be most often used by service organizations that have already employed another strategic planning approach and are seeking a way to deepen their planning process. Scenario planning begins with the identification of several external forces that may have an impact on the service organization. The changes may involve pending regulatory changes, new market entrants, economic or demographic shifts, technological advances or more global events. Keeping abreast of industry trends, reading trade publications and monitoring global news feeds are all excellent sources of trend information. For each external factor identified, scenario planning involves identifying and discussing three different future organizational scenarios that may result from the external factor. The three scenarios should include a bestcase scenario, worst-case scenario and middle of the road scenario in terms of their impact on the business. For each scenario, scenario planning requires the organization to suggest potential approaches for handling each change. For example, what could the organization proactively do to achieve the best case outcome? What could it do to prevent the worst case outcome? Examining potential responses to each external factor often yields a common theme that then becomes the basis of strategic action. In addition, examining the worst case outcomes often spur the organization into action and create the necessary momentum to ensure routine follow up. Since scenario planning is often used in conjunction with other planning approaches, there are no special approaches to metrics and follow up, other than to ensure they are done. Following any of the other models, especially the balanced scorecard approach will ensure proper implementation of the scenario planning model. Balanced Scorecard Approach The balanced scorecard model was developed in 1992 by Drs Robert Kaplan of the Harvard Business School, and David Norton, a business consultant. It is perhaps the most popular strategic planning methodology used today as more than half of the Fortune 500 corporations in the US use this model. The basis of the model is rooted in the belief by Kaplan and Norton that What you measure is what you get. Their belief was that if you measured organizations from a more holistic perspective, the financial metric most desired by organizations (profit, market share, etc.) would be more readily achieved. However, since not all service PO BOX 1217, SARATOGA SPRINGS, NY PAGE 6 of 9

7 organizations today are not tasked with generating profits they must apply strategic principles to a different bottom line. For service organizations, that bottom line is most likely measured by customer loyalty (a broader metric than customer satisfaction). The balanced scorecard model drives organizations to view themselves from four critical perspectives and to establish metrics, gather data and analyze the information from those perspectives, which include: 1. Learning & Growth Perspective 2. Customer Perspective 3. Balanced Business Perspective 4. Financial Perspective Implementing the balanced scorecard as a strategic management tool requires translates the performance measures and targets across these four perspectives into action initiatives for the group. Kaplan and Norton describe the innovation of the balanced scorecard as follows: "The balanced scorecard retains traditional financial measures. But financial measures tell the story of past events, an adequate story for industrial age companies for which investments in long-term capabilities and customer relationships were not critical for success. These financial measures are inadequate, however, for guiding and evaluating the journey that information age companies must make to create future value through investment in customers, suppliers, employees, processes, technology, and innovation." The following picture is representative of the balance scorecard methodology: Robert S. Kaplan and David P. Norton, Using the Balanced Scorecard as a Strategic Management System, Harvard Business Review (January-February 1996): 76 PO BOX 1217, SARATOGA SPRINGS, NY PAGE 7 of 9

8 Because the balanced scorecard forces service organizations to examine their overall performance, versus a single area, it quickly drives leadership to focus on the changes that can have the biggest impact on the end metrics. Since all organizations are bandwidth constrained, only a vital few initiatives can be tackled and it will often be those business processes that will have the biggest impact on the organization and yield the greatest results that are addressed first. In addition, since the balanced scorecard approach examines all aspects of the service company, it requires all employees to take an active part in improving its results, a powerful outcome for any organization. The process for implementing the balanced scorecard approach within any organization is complex and lengthy and will not be covered in this paper. However, for those organizations seeking step-function improvement in their results and have not taken the time to examine the balanced scorecard, it is well worth the investment of your time and energy. Benefits of Strategic Planning Regardless of the size of your service organization, implementing some form of strategic planning process makes terrific business sense. Creating a focus on the key metrics for your business and stepping out of fire fighting mode will serve your organization and more important your customers in the long-run. By implementing a strategic planning process, you will be more likely to identify, understand and correct the issues that are creating the very environment forcing you to fight fires. As a result, organizations are likely to see the following benefits: 1. The establishment of realistic goals and objectives consistent with the organizations mission in a well-defined time frame and within the organization s capacity for implementation. 2. The communication of goals and objectives important to the organization. 3. A sense of ownership of the plan across the organization. 4. Effective utilization of resources by focusing the resources on the key priorities. 5. Establishing a foundation from which progress can be measured and establish In the context of the service organization, the likely end result is improvements in customer loyalty. As you contemplate whether to introduce for the first time or modify an existing planning process, service executives should not feel pressured to pick the perfect model for their particular organization. As was stated earlier, effective strategic planning results in a true strategic plan a plan that is living, continually evolving and reflective of the challenges facing the organization. Just as the strategic plan will evolve, it should be expected that the process used to develop that plan will also evolve. As greater competency in strategic planning is developed within the organization, you will gain more comfort in adopting the aspects of other planning approaches or even making a wholesale change to your process so that it better suits your culture and style. In addition, there are numerous resources available, including publications, industry experts, PO BOX 1217, SARATOGA SPRINGS, NY PAGE 8 of 9

9 consultants, etc. that can aide anyone in achieving better results through strategic planning, regardless of where you are in the strategic planning lifecycle. Your best next step is simply to begin. Good luck and may you achieve your vision. Jeff Oskin is the president of Jolt Consulting Group, an industry expert with 20 years of service experience and a featured industry speaker. You can reach him at Jolt Consulting Group, All rights reserved. PO BOX 1217, SARATOGA SPRINGS, NY PAGE 9 of 9