Implementing the Strategic Plan

We have established our overall strategies forfuture. We need to make it official by having the Strategic Plan approved. Approval may involveBoard of Directors, Executive Management, and others who need to lend their support to getPlan implemented. By having key decision-makers approveStrategic Plan, it signals that it's OK to implement Plan. Implementation is managed throughdevelopment of an Operating Plan.

An Operating Plan is a step by step plan for implementingStrategic Plan. Operating Plans depend upon good strategic plans. If there are fundamental problems withStrategic Plan, then successful implementation will be extremely difficult. Additionally, since operating personnel must implementStrategic Plan, some level of involvement prior to this point should have taken place.

Operating Plans are prepared for the short-term (usually one year). One major function of Operating Plan is to allocate resources for gettingplan implemented. If resources are not available or there is an excess of resources, thenStrategic Plan should be re-evaluated.

Operating Plans need to coverfunctional areas which are required for implementation - marketing, research & development, financing, operations, technology, etc. Each functional area will submit detail budgets and plans for inclusion withinOperating Plan. Detail functional plans addressfollowing:

- Plans for establishing organizational size, structure, and staffing.
- Plans for asset deployment and investment.
- Plans for promotion, pricing and marketing of products and/or services.
- Plans for production changes and scheduling.
- Plans for management development and training.
- Plans for raising capital.

Generally, functional plans should be prepared by Managers overfunctional area. They should not include areas outside the control of the Manager. key task forManager is to remain focused on the Strategic Plan and not get lost in the detail. best operating plans tend to minimize the detail and flow fromStrategic Plan.

Also consider the following points about Operating Plans:

- Operating Plans usually assign responsibilities and defineroles people will play in accomplishingStrategic Plan.
- Operating Plans are routinely changed as you learn more and gain experience. An incremental, trial and error approach is oftenbest approach.
- Operating Plans need to be tight enough to meet strategic objectives, but loose enough to allow for creativity and flexibility.
- Operating Plans usually will include a timeline or deadline for completing tasks.
- Operating Plans should be communicated to everyone held responsible for doingtasks. If outside groups will assist, then include them incommunication.

Evaluation and Control

Successful implementation requires monitoringprogress of action steps within the Operating Plan. Evaluation should be done on a regular basis (monthly, quarterly, etc.) with an emphasis on the following:

- How much progress has been made in accomplishingtask?
- What is preventing us from moving forward?
- Is there a need to go back and revisestrategic objective?
- What adjustments should be made to the Operating Plan?

One way to evaluate and control an Operating Plan is to include budgets. Budgets are used to allocate resources and coordinate how assets are deployed. Budgets compare actual results with performance standards. Budgets usually cover short-term (one year or less) and they cover several functional areas - marketing budget, production budget, technology budget, etc.

Budgets should be prepared based onfollowing criteria:

- Budgets should be simple and easy to understand.
- Use budgets for those areas that need to be monitored.
- Budgets should not dominate decision-making. They should be used as a tool for managing, not a way to manage.

All of the budgets for an organization are combined intoFinancial Plan. Financial Plan is part of the Operating Plan.

Note: For more information onFinancial Plan, take Short Course 2 on Financial Planning and Forecasting. One of the problems with budgets is that they tend to be financial in nature. Strategic Plan covers many functional areas not related to finance, such as marketing, customer service, production, and human resource management. Therefore, we need a measurement system fornon-financial areas. performance measurement system used for measuring non-financial areas is calledBalanced Scorecard. Balanced Scorecard is designed around the Strategic Plan. Additionally, Balanced Scorecard will include critical financial measurements. Therefore, the Balanced Scorecard becomesprincipal system for evaluation and control of the Strategic Plan. Like the Strategic Plan, best Balanced Scorecards tend to be simple and manageable.

Contingency Plans

Because change is so much a part of planning and decision making, it is often useful to include contingency planning withinOperating Plan. Contingency Plans provide direction to operating personnel if unplanned events occur. For example, lower-level managers can prepare several budgets - expected budget, budget if growth rates are 10% below expected, 20% below expected, etc. These alternative or contingency plans provide guidance based on "what if" type analysis.

Contingency Plans are prepared similar toOperating Plan. They cover the short-term and outline specific action steps to be taken. However, level of detail is kept to a minimum, providing enough information to set a new direction.

Larger companies will use simulation models to prepare contingency plans. For example, if market growth is 5% less than expected, impact on cash flow and earnings will be _____. Since more quantitative data is available atoperating level rather than the upper levels of the organization, simulation is more appropriate for developing operating plans than strategic plans.

Updating the Plan

final step in this entire process is to repeatprocess; i.e. update the Strategic Plan. process needs to be dynamic since the operating environment is changing. As a minimum, strategic plans need to be updated yearly by going throughbasic process of assessment, critical issues, objectives, etc. This will involve new staffing, new projections, and new implementation steps. Additionally, you may need to change your approach to strategic planning. If a stable environment has become extremely dynamic, then a shift from a goals approach to scenario playing may be appropriate.

Summary

Strategic planning is a dynamic process of continuously looking at your current situation and plotting your next move. This requires a solid understanding oforganization as well as an understanding about the environment thatorganization operates in. best organizations are always engaged in some form of strategic planning. There is no right way to do a strategic plan. best approach is to find a process that fits withorganization. This requires a fit with the mission statement, strengths and weaknesses of the organization, and the opportunities and threats confrontingorganization. If there is a fit, then start the process by getting organized. Organization involves putting together a team or committee, collecting information about current plans, and outlining howStrategic Plan will be developed.

Situational Analysis is the next step inprocess. Situational analysis is an assessment of strengths, weaknesses, opportunities, and threats related to the organization. Significant critical issues (no more than eight) are listed. Critical issues are addressed by developing overall strategies or objectives. combination of mission, objectives, principles, and other components becomes the formal strategic plan. final layer inprocess is implementation ofplan. An Operating Plan is used to plot specific actions or tactics for gettingStrategic Plan implemented. Operating Plans consist of budgets, functional plans, financial plans, contingency plans, and other specific plans. Throughout this entire process, changes and updates can take place. Therefore, strategic plans and operating plans must be flexible and open to revision. At least once a year, Strategic Plan is re-evaluated for changes.

Recommended Workbook: Strategic Planning Workbook byWilder Foundation, 919 Lafond Ave, St. Paul, MN 55104-2198, Ph: 1-800-274-6024 or 651-659-6024 or visit www.wilder.org.