PART ONE THE STRATEGIC PLANNING PROCESS

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1 PART ONE THE STRATEGIC PLANNING PROCESS

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3 1 WHAT IS STRATEGIC PLANNING?

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5 Chapter 1 What is Strategic Planning? P eople who think of plan as a noun tend to write a nice neat document, tuck it into a three-ring binder, and let it gather dust on a bookshelf while they make their day-to-day decisions and react to events with little or no thought to a long-term direction. Think of plan as a verb instead something you do all the time, tending to it at regular intervals a process that never ends an ongoing part of your proactive approach to the marketplace and to running your business. The best strategic plans share these attributes. Simplicity Clarity Measurability EVERY COMPANY HAS A PLAN Every firm has some kind of strategic plan. Some firms document their plans, some don t. In a company led by a strong entrepreneur, the plan may be in the owner s head. But that plan is not as effective as it could be: if it were openly shared, everyone would know where the firm was going and could no doubt make a stronger contribution. WHAT A STRATEGIC PLAN IS, WHAT IT S NOT A strategic plan is your carefully considered written description of where your firm is going and how you will gain competitive advantage by capitalizing on the unique capabilities of your firm. It accomplishes the following: PSMJ 5

6 STRATEGIC PLANNING Identifies what you bring to the marketplace to provide value for clients. Presents a specific vision of what your firm will look like in the future. Establishes measurable firm-wide and operational long-term and interim goals. Defines the strategies that will achieve your goals. Assigns responsibility and accountability for making it happen. A strategic plan is not A budget An operational plan A list of tactics A one-time event WHAT CAN STRATEGIC PLANNING DO FOR YOU? A well-managed planning process helps you run your business in several valuable ways. It: Lets your employee know where you want to go in the marketplace. Determines how you will devise and sell products and services to reach your goals. Helps you plan for the resources you ll need in the future. Provides a check against making day-to-day decisions in the heat of battle that will throw you off your long-term course. Involves your people in setting goals and priorities in such a way as to win their support and act as a motivator. Helps create an adaptive organization that can take advantage of unexpected changes, inside or outside the company, without being thrown off balance. 6

7 Chapter 1 What is Strategic Planning? Helps you make things happen. Identifies contradictions between your daily operations and your desired direction. Helps to make you a proactive, not reactive, player in the marketplace. Provides a framework for continuously asking, and answering, the key questions about who you are and where you re going. Clarifies the firm s vision of the future, so various members can define their own contributions and reconcile their own goals with those of the firm. Provides the foundation for generating specific annual operations plans and financial plans. HOW FAR AHEAD SHOULD YOU PLAN? It used to be safe to plan for ten years into the future. Hardly any firms do that now; the world is changing too fast. Some firms plan five years out, some three years, and some two. PSMJ generally recommends a three- to five-year planning horizon. Look at the specific markets you serve. If your markets, your clients, or your clients demands are changing very quickly, plan for a shorter time. If you re in a slow-moving market, you can plan a little further out. Regardless of the time horizon, it is desirable to review or rework your plan every year so you can make the mid-course corrections that will invariably be needed. Also, look at the specific parts of your plan. Some may require longer time frames than others. For example, the best time to start planning for ownership transition is the day you set up the firm. That s not realistic for most people, of course. But ownership transition planning should start at least 10 years before an owner plans to leave the firm. (For detailed information on how to accomplish a change in PSMJ 7

8 STRATEGIC PLANNING leadership/ownership, see PSMJ s Complete Guide to Ownership Transition.) HOW DO OTHER FIRMS DO THEIR STRATEGIC PLANNING? PSMJ recently performed a survey of 85 design firms who conduct regular strategic planning retreats. The following are the results of that survey. MEETING LOCATION MEETING DURATION OFF SITE 80% 1 DAY 24% IN FIRM S OFFICE 20% 2 DAYS 56% >2 DAYS 20% ATTENDEES AT MEETING DAYS OF MEETING PRINCIPALS 100% WORKDAYS 48% DEPT. HEADS 52% WORKDAYS/WEEKEND 40% ADMIN MANAGERS 40% WEEKENDS 12% PROJECT MANAGERS 32% AGENDA FOR MEETING STRATEGIC PLAN UPDATE MARKETING PLAN ANNUAL BUDGET ANNUAL BUSINESS PLAN TECHNOLOGY PLAN 8

9 Chapter 1 What is Strategic Planning? THE STRATEGIC PLANNING PROCESS As shown in Figure 1.1, strategic planning is a four-step process. Each step leads to the next, with the fourth step leading back to Step 1 in the next scheduled strategic plan update. Figure 1.1 PSMJ s Approach to Strategic Planning 1 Where are we now? 2 What do we want to become? 3 What will we do to get there? 4 How will we assure that it really happens? STEP 1 WHERE ARE WE NOW? This step is important because you cannot develop a coherent strategy for the future until everyone has an accurate understanding of the present. In small firms, this step is relatively easy; every principal can easily see the current state of the firm. However, as firms grow, key managers become more removed from parts of the company that they are not directly responsible for PSMJ 9

10 STRATEGIC PLANNING STEP 2 WHAT DO WE WANT TO BECOME? Most design firm employees have no clue as to the direction of the company they are working for. This is sometimes a result of the company leaders not knowing their direction and sometimes because of the leaders inability to articulate their vision. In this step, the firm s leaders select a specific target date (usually three to five years in the future) and develop a detailed description of the kind of company they want to have by that date. This is not a forecast of what the leaders believe will occur, it is a vision of what they wan the future to be. This vision should answer the following kinds of strategic questions: What markets will you serve? In what proportions? At what office locations? With how many people? How much revenue? How profitable? What ownership structure? Under what kind of leadership? The answers to the above questions must be quantitative. For example, if you are a multi-office firm, identify how many people you want to have at each office and, if possible, what types of people they will be. When you have completed your vision statement, ask these questions to assess how well you have developed it: Is it specific? How rigid is it? Is flexibility included? Is it a bold idea of where a firm wants to go? Is there a clear message to employees? Is it exciting and compelling for your employee and owner? Are the architects of this strategy going to be there long enough to get the rewards or pay the consequences? Of course, the vision statement must be in synch with market realities. This requires some market research in the form of client interviews, 10

11 Chapter 1 What is Strategic Planning? official projections, and published market forecasts. It also needs to be in synch with what your employees want if you want their help in achieving the vision. STEP 3 WHAT WILL WE DO TO GET THERE? Once you have figured out (1) what kind of company you are now and (2) what kind of company you want to become, the next step is to develop a set of strategies that will begin you down the desired path. These strategies must include: Specific activities and deliverables The person with overall responsibility for each (even though it may involve multiple other people) The target date for completion STEP 4 HOW WILL WE ENSURE THAT IT REALLY HAPPENS? Many otherwise excellent strategic plans have failed because they lacked this step. There must be a defined process for finalizing the plan, communicating it to the troops and following up on the action items. This step should include a series of regularly scheduled meetings (usually held monthly or quarterly) in which each person responsible for an action item presents the implementation status of that item to his/her colleagues. And if someone repeatedly fails to meet his/her commitments, the task should be formally abandoned or given to someone else who will do it. This approach imposes considerable accountability to the assignments as a result of peer pressure PSMJ 11

12 STRATEGIC PLANNING ESTABLISHING THE SCOPE OF YOUR STRATEGIC PLAN PSMJ has developed a model we call our Strategic Planning Wheel (see Figure 1.2). This model identifies the key arenas that should be addressed in a strategic plan, as described below: Figure 1.2 The PSMJ Strategic Planning Wheel Ownership Transition Purpose and Culture Leadership Transition Business Model Human Resources Marketing and Business Development Finance Organization Information Technology Project Delivery PURPOSE, CULTURE AND BUSINESS MODEL What s your business all about? What s special about it? What specifically are you trying to accomplish? What culture do you have? What culture would you like to have? Are you a niche firm? A commodity firm? Or some of both? What overall business strategy will you adopt? 12

13 Chapter 1 What is Strategic Planning? MARKETING AND BUSINESS DEVELOPMENT Is there a market for what you want to sell? Who are your clients and potential clients? How do your competitors and potential competitors approach the market? How will you gather market information? How will you sell your products or service? ORGANIZATION How are you currently organized? Is that the best structure for what you are trying to do? What kinds responsibilities should key people have? PROJECT DELIVERY How are you delivering your products and services to your clients? How do you want to deliver them in the future? How are your projects managed? How should they be managed? INFORMATION TECHNOLOGY How is your information technology supporting your business strategy? How will it need to change in the future? FINANCE Are your financial systems supporting your business strategy? How do your financial results stack up against other similar firms? If they are deficient, what should you do about it? HUMAN RESOURCES Will you focus on quantity or quality of your staff? How can you develop a high-performance organization? How will you develop your people to their maximum potential? What will you do about mediocre (or worse) performers? How will you recruit top-notch talent? PSMJ 13

14 STRATEGIC PLANNING LEADERSHIP TRANSITION What are your criteria for future leaders? How will you develop the next generation of leaders? How will you eventually replace yourself? OWNERSHIP TRANSITION What is your philosophy on stock ownership? Will you eventually sell stock internally or externally? How should you value the stock? It takes a great deal of time to successfully answer these questions far more time than is usually available during a strategic planning retreat. So prioritize these issues before the meeting in order to identify and deal with the most important ones. PSMJ has developed a self-audit questionnaire for each planning retreat participant. (See the work sheet at the end of this chapter.) Tally the results to determine your highest priorities, then set the agenda for your retreat. ESTABLISHING LINKAGE As shown in Figure 1.3, the strategic planning process requires input regarding market needs, the desires of the owners, and the desires of the employees of the firm. Once the strategic plan has been developed, it must flow down to each business unit in the form of specific business objectives. It must then flow down to form project objectives and, ultimately, must be the basis for the personal performance objectives of each employee. 14

15 Chapter 1 What is Strategic Planning? Figure 1.3 Strategic Planning Process Company Objectives Business Unit Objectives Project Objectives Market Needs Owners Desires Employee Desires Personal Objectives Σ Personal Objectives = Business Unit Objectives Σ Business Unit Objectives = Company Objectives THE IMPORTANCE OF CONSISTENCY Your goals, strategies and actions in each strategic arena must be consistent with those in each of the others. Your firm will achieve its full potential only when you re moving in the same direction in all the arenas. Study the following page, which illustrates goals vs. consistency PSMJ 15