Components of strategic planning

There are five key components of strategic planning that, if carried out effectively, can help reduce risk and dramatically improve long-term performance of your organisation.

Five essential components of strategic planning

Make sure that any system of strategic planning that you use, or strategic planning process that you follow, has formal, clearly documented and communicated, simple steps for these five essential components of corporate strategic planning.

  1. Engaging commitment
  2. Setting long term strategic objectives for improved performance of the organisation
  3. Generating strategic options
  4. Evaluating and deciding on strategies
  5. Monitoring implementation of the strategies against the long term objectives.

I call these components the engager, aimer, option generator, strategizer, and monitor.

The vital handful of components of strategic planning

1. Engager
It may seem like a blinding flash of the obvious, but strategic planning is something people do! Yet in many descriptions of the elements of strategic planning processes people don’t get much of a mention. The descriptions and the process flow diagrams seem more like machine wiring diagrams than a process of strategic planning involving interactions among people.

By contrast I believe that engaging commitment from those people who will be affected by the plan is one of the most vitally important components of strategic planning. The first of the key elements of strategic planning should be a means of engaging the right people at the right time in the process of strategic planning.

These people include primarily the Chief Executive Officer and their immediate reporting managers, and the layer of staff or management at one remove from the Chief Executive Officer (CEO). In turn the CEO must engage with the governing body, who in turn engage the beneficiary groups they are there to represent. Other stakeholder groups may possible be affected by the implementation of the strategic plan in the operation of the enterprise. Their interests must be respected. For more detail on who these people are, and how they may be engaged in the process see strategic planning process.

It must be remembered that the processes for engaging people operate in various way in all the other components of the planning process.

2. Aimer

The second of the vital components of strategic planning is a means of setting long term strategic objectives for improved performance of the organisation

Every organization, whether private company or nonprofit organisation (NPO), should set out to benefit one clearly defined group of beneficiaries, and a single, long term, verifiable, target figure should be set to reflect what it is trying to do for them. If it cannot set such a target, the organization should be reformed until this becomes possible.

The intended beneficiaries must be defined as one homogeneous group; in the case of the business enterprise it is the owners or shareholders.

The benefit offered must also be homogeneous and capable of definition in just a few words. In the business context, the proposed benefit is something like ‘increased wealth’.

The benefit must be capable of being targeted and of empirical verification- essentially then, it must be quantifiable.

It must be of perceived significance to the beneficiaries, e.g. the benefit resulting from the point of view of the shareholders is ‘improved prospects for an acceptable mix of capital gains and dividends within a risk profile that is tolerable’. For more information go on how to set the long term strategic objectives for any organization go to Corporate Objectives.

3. Option generator

Formal planning calls for the generation of alternative strategies. Generating strategic options is one of the central components of strategic planning.

This strategic planning element of generating options requires homework on the key factors; factors that will shape the feasible options available and in the strategic situation the organization is facing. Only then can the planning team engage in requisite strategic choices. The relevant strategic factors include all those unearthed from the strengths, weaknesses, opportunities, and threats analysis, or SWOTs.

Alternative strategies generated in this component of strategic planning can improve the adaptability of the organization in two ways.

First, by explicitly examining alternatives, it is likely that the organization will find options that are superior to the current approach.

Second, the organization will inevitably encounter environmental changes; if alternative, or contingency plans have been considered for these changes, the organization can respond more quickly and effectively.

For processes of finding all the relevant significant strategic factors go to SWOT analysis, and for generating the alternative strategies see business strategy or strategic planning for non profits.

4. Strategizer
Having engaged the right people, set targets and forecasted to be able to calculate the size of the performance gaps to be closed, and brainstormed an array of relevant strategic options, the next of the components of strategic planning that comes into play is the activity of strategy making.

This strategizing component of strategic planning involves evaluating and deciding on ahandful of specific strategies. You are looking for the strategies most likely to achieve the long term risk managed performance improvement being sought over the next few years.

It is all too easy to go with the bright ideas that emerge from brainstorming strategic alternatives. After all this fun comes some really challenging hard work, in leading to the final decisions around the set of strategies to which the organization will commit itself.

Having planned the work of implementing the strategic plan, you need a system in place for working the plans as they get implemented.

The plan should provide for formal reporting at agreed intervals. To allow for corrective action, the monitoring system, as the last of the components of strategic planning, should be designed to address the same objectives and factors determined as significant throughout the planning process.

All of the components of strategic planning should align well with one another in their focus of the ultimate goal of delivering some clearly defined benefit to the intended beneficiaries of the organization.

In this approach, I am using '"components of strategic planning" to describe key aspects of a process. Others may use this description to refer to the key elements of the product of the process, such as 'vision', mission', 'strategies', and so on. For a contribution along these lines, aimed at small and medium enterprises, see Strategic Planning and Reality of External Environment of Organizations in Contemporary Business Environments.

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