Course 10: Strategic Planning
Prepared by: Matt H. Evans, CPA, CMA, CFM
What is Strategic Planning?
The essence of management includes the ability to plan. As you work your way up the organization, planning moves from operational to strategic. Strategic Planning is one of the principal responsibilities of upper-level management. Once management decides on the Strategic Plan, lower-level managers implement the Strategic Plan through an Operating Plan.
Strategic Planning attempts to answer a very fundamental question: Where do we want to be one year from now, two years from now, three years from now, etc.? Strategic Planning requires that an organization develop a vision of itself - how do we see ourselves in the future? Strategic Planning looks at the big picture from a long-range perspective whereas the Operating Plan represents the specific tactics for carrying out the Strategic Plan year to year. Strategic Planning is a process whereby an organization makes choices about: Why do we exist?
What are the major goals of this organization?
What resources do we need for a successful future?
Who will be our customers?
Why do Strategic Planning?
Strategic Planning helps management understand the current situation. This in turn allows management to plan for the future. In a world of rapid change, it is becoming imperative for management to think strategically (plan for the future). And since the rate of change seems to be escalating, the importance of strategic planning continues to grow. In fact, the bestmanaged companies tend to engage in continuous strategic planning. Some organizations have intuitive thinkers who almost seem to see into the future. Therefore, strategic planning is a way of preparing for the future by attempting to simulate the future.
Strategic Planning has a tendency to force people to think about the future. This is extremely important since many organizations are inward thinking, focusing too much on the short-term. Strategic planning looks at the long-term which is how organizations survive and thrive. It has been proven that organizations that focus on the long-term through strategic planning outperform organizations that lack long-term planning. Consequently, one of the benefits of strategic planning is long-term performance and growth. Another benefit of strategic planning is communication. Strategic Plans communicate the intentions of management to employees, shareholders, and others.
Limitations of Strategic Planning
Strategic Planning should not be viewed as a guarantee to future success. Strategic Planning has limitations, such as the following:
1. Strategic Planning is not a way of making future decisions. There is no way anyone can predict the future. Strategic Planning provides overall guidance and direction based on what we think will happen.
2. Strategic Planning is not a blueprint for the future. There are too many changes taking place - marketplace is changing, customer preferences are changing, new competition, new technologies, new opportunities, declining financial condition, etc. Strategic Planning is a dynamic process, which is receptive to change.
3. Strategic Planning cannot resolve critical situations threatening the organization. Strategic Planning will not get you out of a crisis. The organization should be stable before engaging in strategic planning.
4. Strategic Planning should not replace good intuitive judgements. If an organization is lucky enough to have good intuitive thinkers, then exercise extreme care before embarking on formal strategic planning. You do not want to destroy intuitive thinking within the organization.
5. Strategic Planning will not identify all critical issues related to the organization. Strategic Planning attempts to identify the most significant issues that will confront the organization. By focusing on major issues, strategic plans minimize the detail and thereby improve the chances...
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