Can Strategic Planning Really Help My Biz

What is Strategic planning?

Strategic planning is an organization's process of defining its strategy, or direction, and making decisions on allocating its resources to pursue this strategy. In order to determine the future direction of the organization, it is necessary to understand its current position and the possible avenues through which it can pursue particular courses of action. Many organizations view strategic planning as a process for determining where an organization is going over the next year or—more typically—3 to 5 years (long term), although some extend their vision to 20 years.

Can Strategic Planning Really Help My Business

Generally, strategic planning deals with at least one of three key questions -

1. "What do we do?"

2. "For whom do we, do it?"

3. "How do we excel?"

Benefits of Strategic Planning

Able to set more realistic objectives that are demanding, yet attainable.
A need for better information for decision-making may be recognized.
Growth can be accelerated and improved.
Poor performing areas can be identified and eliminated
Gain control of operational problems.
Develop better communications with those both inside and outside of the company.
Provides a road map to show where the company is going and how to get there.
Develops better internal coordination of activities.
Develops a frame of reference for budgets and short – range operating plans
Gives a sense of security among employees that comes from better understanding of the changing environment and the company's ability to adapt.

Strategic Planning has Three Attributes

1. Strategic Vision

2. Strategic Mission

3. Strategic Objectives and Goals

What is Strategic Vision?

A strategic vision is a broad term used to describe one of the essential elements of an overall strategic planning endeavor. Essentially, a vision is a global concept; it paints a picture of the social enterprise’s direction and future. An effective vision statement succinctly communicates an uplifting philosophy that energizes social enterprise stakeholders to embrace challenges in order to successfully accomplish its goals. Within this context, the strategic vision helps to set the parameters for the development of planning specific steps to go about making that vision come true, since it establishes the general direction that the business will pursue. A workable vision clearly looks beyond where the company is today and determines where the owners want the company to be at some point in the future.

Definition by Kotler “description of something (an organization, corporate culture, a business, a technology, an activity) in the future”
Definition by Miller and Dess “category of intentions that are broad, all-inclusive and forward thinking”
Warren Bennis and Burt Nanus described the role of vision as follows “To choose a direction, a leader must first have developed a mental image of a possible and desirable future state of the organization…………. which we call a vision. Vision articulates a view of a realistic / credible, attractive future for the organization………. with a vision, the leader provides the all-important bridge from the present to the future of the organization”.

In order to properly craft a strategic vision, several key elements must be considered in order for that vision to be truly viable. One of those elements is that the vision must be realistic. This means that vision must be somewhat specific rather than a vague idea about the future. Example, setting a vision to become the largest pencil manufacturer in the world may be a bit broad, whereas a vision to capture five percent of the pencil market within a given country within the next ten years does have focus and has the potential to be workable. A vision statement should remain relatively constant well beyond the life of your involvement as an international organization or intermediary in the social enterprise. The normal life span of a vision statement is 10 to 20 years. It articulates the ultimate long-range goal for your social enterprise. The time to revisit your vision statement is the point when your enterprise either has achieved its vision or has substantially moved away from it. For example, Microsoft’s corporate vision since 1975 was “to put a computer on every desk and in every home.”

In March 1999 Microsoft drafted a new company vision that focuses on the power of the Internet, “offering people and businesses the ability to be connected and empowered anytime, anywhere, and on any device.”

The three elements of a strategic vision

1. Coming up with a mission statement that defines what business the company is presently in and conveys the essence of “Who we are and where we are now?”

2. Using the mission statement as basis for deciding on a long-term course making choices about “Where we are going?”

3. Communicating the strategic vision in clear, exciting terms that arouse organization wide commitment.

What are the components of an effective business vision?

Davidson identifies six requirements for success:

1. Provides future direction

2. Expresses a consumer benefit

3. Is realistic

4. Is motivating

5. Must be fully communicated

6. Consistently followed and measured

How to develop a strategic vision

1. The entrepreneurial challenge in developing a strategic vision is to think creatively about how to prepare a company for the future.

2. Forming a strategic vision is an exercise in intelligent entrepreneurship.

3. Many successful organizations need to change direction not in order to survive but in order to maintain their success.

4. A well-articulated strategic vision creates enthusiasm for the course management has charted and engages members of the organization.

5. The best-worded vision statement clearly and crisply illuminates the direction in which organization is headed.

Advantages of Strategic Vision

1. They foster experimentation

2. Vision promotes long term thinking

3. Visions foster risk taking

4. They can be used for the benefit of people

5. They make organizations competitive, original and unique

6. Good vision represent integrity

7. They are inspiring and motivating to people working in an organization

What is Mission Statement?

A mission statement is a brief description of a company's fundamental purpose. It is typically focused on its present business scope – “who you are and where you are going.” and “Why do we exist?" Mission statements broadly describe organizations present capabilities, customer focus, activities, and business makeup the mission statement articulates the company's purpose both for those in the organization and for the public.

Definition by Mintzberg “A mission describes the organization’s basic function in society, in terms of the products and services it produces for its customers”.
Definition by Hynger and Wheelen – “purpose or reason for the organization’s existence”
Definition by David F. Harvey – “A mission provides the basis of awareness of a sense of purpose, the competitive environment , degree to which the firm’s mission fits its capabilities’ and the opportunities which the government offers”

For instance

1. The mission statement of Canadian Tire reads (in part): “Canadian Tire is a growing network of interrelated businesses... Canadian Tire continuously strives to meet the needs of its customers for total value by offering a unique package of location, price, service and assortment.”

2. The mission statement of River corp., business development consultants in Campbell River, B.C., is: “To provide one stop progressive economic development services through partnerships on behalf of shareholders and the community.”

As you see from these two examples, mission statements are as varied as the companies they describe. However, all mission statements will "broadly describe a business makeup"

Elements of Mission Statement

1. A Purpose

Why does the business exist?
Is it to create wealth for shareholders?
Does it exist to satisfy the needs of all stakeholders (including employees, and society at large?)

2. A Strategy and Strategic Scope - A mission statement provides the commercial logic for the business and so defines two things:

The products or services it offers (and therefore its competitive position)
The competences through which it tries to succeed and its method of competing

3. Policies and Standards of Behavior - A mission needs to be translated into everyday actions. For example, if the business mission includes delivering “outstanding customer service”, then policies and standards should be created and monitored that test delivery.

4. Values and Culture - The values of a business are the basic, often unstated, beliefs of the people who work in the business. These would include:

Business principles - e.g., social policy, commitments to customers
Loyalty and commitment - e.g., are employees inspired to sacrifice their personal goals for the good of the business as a whole? And does the business demonstrate a high level of commitment and loyalty to its staff?
Guidance on expected behavior - a strong sense of mission helps create a work environment where there is a common purpose.

Mission Statement

Why organization should have mission?

To ensure unanimity of purpose within the organization.
To provide a basis for motivating the use of the organization’s resources.
To develop a basis, or standard, for allocating organizational resources.
To establish a general tone or organizational climate, for example, to suggest
To serve as a focal point for those who can identify with the organization’s purpose those who cannot form participating further in the organization’s activities.
To facilitate the translation of objective and responsible elements within the organization.

The benefits of having a vision and mission statement are discussed below:

Above everything else, vision and mission statements provide unanimity of purpose to organizations and imbue the employees with a sense of belonging and identity. Indeed, vision and mission statements are embodiments of organizational identity and carry the organizations creed and motto. For this purpose, they are also called as statements of creed.
Vision and mission statements spell out the context in which the organization operates and provides the employees with a tone that is to be followed in the organizational climate. Since they define the reason for existence of the organization, they are indicators of the direction in which the organization must move to actualize the goals in the vision and mission statements.
The vision and mission statements serve as focal points for individuals to identify themselves with the organizational processes and to give them a sense of direction while at the same time deterring those who do not wish to follow them from participating in the organization’s activities.
The vision and mission statements help to translate the objectives of the organization into work structures and to assign tasks to the elements in the organization that are responsible for actualizing them in practice.
To specify the core structure on which the organizational edifice stands and to help in the translation of objectives into actionable cost, performance, and time related measures.
Finally, vision and mission statements provide a philosophy of existence to the employees, which is very crucial because as humans, we need meaning from the work to do and the vision and mission statement provide the necessary meaning for working in a particular organization.

Mission vs. Purpose

Mission is the societal reasoning while the purpose is the overall reason
Mission is external reasoning and relates to external environment. Purpose is internal reasoning and relates to internal environment.
Mission is for outsiders while purpose is for its own employees

Business Objectives

Business organization translates their vision and mission into objectives. As such the term objectives is synonymous with goals, Objectives refer to the ultimate end results which are to be accomplished by the overall plan over a specified period of time Objectives are organizations performance targets the results and outcomes it wants to achieve.

They function as yardstick for tracking an organizations performance and progress.

Definition of Business Objective

According to George Terry “A Managerial objectives is the intended goal which prescribes definite scope and suggests direction to efforts of a manager”.
According to D. E. McForland “Objectives are the goals, aims or purposes that organizations wish to achieve over varying period of time”.

Features of Business Objectives

Ultimate goals: Objectives are the aims, goals and the destination where the organization wants to go Objectives differentiate one company from others. Every organization must have a clearly defined objective, e.g., a marketing objective of an organization may be to increase its profits by 5% or increase its market share by 3%.
Future Oriented: Objectives are future destinations which the organization wants to reach. However, these objectives are finalized after considering the past trends and the past performance of the organization. This is necessary in order to formulate realistic objectives.
Guides: Objectives, whether economic, social or human guide the organization in taking relevant and quick decisions. Objectives guide in formulating the policies, the Programmes and the plans which in turn guide the employees while implementing the plans in order to achieve the objectives
Complex: Business environment is very complex. Change in one environment may have different impacts on the other environmental factors. Moreover, these environmental factors are uncontrollable. Objectives have to be modified continuously in order to suit the changed environment. Thus, dynamic environment makes setting of objectives difficult.
Qualitative: There are certain objectives which are of qualitative nature, especially advertising objectives. Advertising objectives can be creating awareness, changing attitudes, perceptions, enabling recognition of the brand etc. Qualitative objectives are therefore difficult to measure.
Quantitative: Quantitative objectives are those which can be measured in volume or value terms. Marketing objectives are generally of quantitative in nature. Some of the common marketing objectives are increasing sales, increasing market share, increasing profits etc.
Hierarchical: All objectives may not be equally important at a given moment of time, for instance if the organization is new, its objective generally is survival, rather than growth or achieving prestige and recognition. However, since many groups are involved like shareholders, creditors, employees etc. identifying proper hierarchy is difficult.

Importance of Business Objectives

Identity to the organization: Every organization must have an objective. In fact it is the objectives that justifies an organization's existence. Outwardly all organizations may be similar but what differentiates one organization from another is its objectives.
Facilitates co-ordination: There are various departments in an organization. Success of any organization depends upon the achievements of each department, which in turn depends upon the proper co-ordination between people and functions of different departments. This would enable the different department to work as a cohesive unit.
Guides decision-making: The top management has to take number of decisions in different areas everyday. Decisions can be relating to extending the product line or changing the pricing structure or the place of sale. Decisions depend entirely upon the objectives of the organization. So, it is the objectives that guide individual as well as group decision making.
Motivation: Motivation is the simulation to work with zeal and enthusiasm. When objectives are clear, the employees know what is expected of them and the reward which they would earn on achieving those objectives. So clear definition of business objectives motivates employees to put in their best efforts as they are aware as to what to achieve.
Ensures planning: It is said that most people don't succeed in life because they don’t know what they want to achieve. One can plan properly only when one knows what one wants to achieve. Moreover, implementation would be effective only if it is planned properly. Therefore, objectives ensure proper planning.
Reduces wastage: Objectives facilitate preparing Programmes and schedules for achieving the predetermined goals. Men, money, materials etc. are scare. Success of a business organization depends upon the effective utilization of the resources. So to the extent possible wastage of resources should be avoided

Characteristics of Objectives and Goals

They should be facilitative towards achievement of mission and purpose.
They should provide the basis for strategic decision-making
They should provide standards for performance appraisal.
Objectives should be understandable.
Objectives should be concrete and specific
Objectives should be related to a time frame
Objectives should be measurable and controllable
Objectives should be challenging
Different objectives should correlate with each other
Objectives should be set within constraints

Areas for setting objectives

Profit objective – or performance objectives
Market objective - increase in market share
Productivity objective – cost per unit of production
Product objective – product development, product diversification, branding, etc.
Social objective – tree plantation, provision for drinking water, setting up of community center, etc.
Financial objective – relates to cash flow, debt equity ratio, working capital, new issues, etc.
Human resource objective – described in terms of absenteeism, turnover, number of grievances, strikes and lockouts, etc.

Difference between objectives and goals

The goals are broad while objectives are specific
The goals are set for a relatively longer period of time
Goals are more influenced by external environment
Goals are not quantified while objectives are quantified

FAQs

What is Business vision?

Business vision: Vision is a descriptive image of what a company wants to be or want to be known for. Vision reminds us of what the goals are. Without vision performance of the business are likely to be affected. A vision is a statement for where the organization is heading over the next five to ten years. It is the statement that indicates mission to be accomplished by the management distant future.

What is Business Mission?

A Business organization cannot set objectives without mission statement. Therefore, it is of utmost importance to frame a mission statement. Many organizations define the basic reason for their existence in terms of a mission statement. An organization’s mission includes both a statement of organizational philosophy and purpose. The mission can be seen as a link between performing some social function and attaining objectives of the organization.

What is Business purpose?

The organizational purpose defines the activities that the organization performs or intends to perform and the kind of organization that it is or intends to be. The establishment of an organization’s purpose is vital, as without a definite statement of purpose, it is virtually impossible to develop clear objectives and strategies. An organizational purpose must be defined not only at its inception, but also must redefined during both traumatic times and successful periods.

What is the Importance of Objective and Goals?

1. Objectives provide yardstick to measure performance of a department or SBU or organization

2. Objectives serve as a motivating force. All people work to achieve the objectives

3. Objectives help the organization to pursue its vision and mission

4. Objectives define the relationship of organization with internal and external environment

5. Objectives provide a basis for decision making.