Operational and
strategic planning

We need to keep operational and strategic planning clearly distinct in our thinking and discussion of planning in organizations.

Operational and strategic planning are linked decision processes, which should be designed to inform and support one another for effective management of strategies to improve overall performance of the organization, whether business or non profit.

At Simply Strategic Planning strategic planning refers to a systematic, formally documented process for deciding the handful of key decisions that an organization, viewed as a corporate whole, must get right in order to thrive over the next few years.

In contrast, operational planning or tactical planning is a short-term, highly detailed plan formulated by management to achieve tactical objectives. Operational or tactical planning involves a systematic determination and scheduling of the immediate or short-term activities required in achieving the objectives of strategic planning.

Clearly the time horizon of the decisions involved is a key difference between operational and strategic planning. However, the difference between operational and strategic planning is more than a matter of short or long term planning horizon.

Operational and strategic planning differ
according to the decisions involved

In my view the number, scope and time span of the decisions involved are at the heart of the definition of strategic planning. Operational and strategic planning are distinguished primarily by the number, kind and time span of the decisions involved, as summarized in this table.

If you see something that purports to be a strategic plan, and it has a list of 40 objectives for only one year with no overall corporate performance indicator to guide evaluation of the overall implementation of the plan you are not looking at a corporate strategic plan, and it is probably some kind of operational plan.

You can think of a strategic plan as a written long-range plan, which is founded on an enduring corporate purpose, and including a small set of corporate strategic objectives. A corporate strategic plan includes brief statements of a handful of strategies indicating how to achieve the corporate strategic priorities. Strategic planning also provides the indicators for assessing and controlling performance of the organization as a corporate whole.

We define operational planning, on the other hand, as the setting of short-term objectives for specific functional areas such as finance, marketing, and human resources. Performance is monitored and controlled using management performance indicators (MPI) or Key Performance Indicators (KPI) rather than Corporate Performance Indicators (CPI) or Beneficiary Performance Indicators (BPI). This latter is a tool unique in the Argenti Strategic Planning Process.

Strategic plans tend to be more general, and have longer time horizons than do operational plans. Strategic plans normally cover a three-to-five-year and longer planning horizons, while most operational plans usually cover periods of something less than a year. Operational and tactical plans are more concrete and expressed in practical day-to-day terms. Operational plans might include written manufacturing capacity plans, inventory, and sales forecasts; and financial, human resource, and advertising budgets, for monthly or quarterly periods.

Operational and strategic planning are linked

Despite the clear distinctions we are making it is also important to understand that operational and strategic planning are interrelated and complementary decision processes, which must link to each other, inform and support one another for effective management of strategies.

Operational planning is the day-by-day, week-by-week, and month-by-month planning for a myriad of local and functional activities; strategic planning sets the overall direction of your organisation as a whole, its destiny if you will. The decisions that constitute the strategic plan include what the enterprise is not currently doing, but should be doing. The choices of what to do imply other things that the organization deliberately chooses not do. The strategic plan embodies very big decisions with major consequences for the overall performance.

Strategic and tactical planning are different in kind. The two forms of planning must be linked, and integrated, and must not be confused.

Avoid confusion between operational and
strategic planning

Summarizing - strategic planning is not a lot of things it is often confused with:

  • It is not marketing, product planning, market research, marketing strategy, business model designing, IT strategy, or planning for any other particular part or function.
  • It is not long-range planning, business planning or budgeting.
  • It is not forecasting.
  • It is not finance planning, cash flow planning, human resources planning, production planning, project planning
  • It is neither co-coordinating nor operational planning.
  • It is neither sophisticated nor advanced. It is essentially simple. However, that does not mean is it easy!

Regrettably, I believe that much of the usual commentary on operational and strategic planning falls into one or more of these unhelpful answers to the question ‘what is strategic planning?’ They are misconceptions, and they sometimes arise from a deliberate tactic by academics, writers and consultants in this field — people like me, in other words!

Our problem is that, correctly defined and properly practiced, corporate strategic planning is an embarrassingly small subject area. In practice, a strategic plan, crucially important though it is, is a modest document of just a few pages.

It is easy to see why academics and consultants need to expand the definition of corporate strategic planning in their books and assignments. They need to throw in anything remotely relevant, such as business planning, marketing and product development, strategic management, portfolio analysis, research into new markets, financial planning and raising capital, acquisitions and mergers planning, action plans, restructuring the management, managing the research function.     

Catch me at Trafeze

Many of these may need to come at the end of the corporate strategic planning process. This is how the strategic plan gets translated into action. Operational planning and strategic planning link in this practical fashion; to include them both into a definition of strategic planning is quite misleading.

Operational and strategic planning are linked as a guide to action which flows from a way of thinking. The key elements of the strategic plan should govern the behavior of everybody responsible for operational planning. It enables organisations to think through and document what they are doing, for whom they are doing it, and why.

Operational and strategic planning contrasted

A corporate strategic plan, then, consists of a very few but momentous statements about the long-term future of the organization as a whole.

'We will merge with a competitor' is a message of the utmost simplicity but of huge importance for any business - if they do merge life will never be the same again. Notice the stark simplicity of this statement; contrast its half-dozen words with, say, a hundred-page report on a new product.

Contrast it, too, with the alternative: 'We will not merge.' Surprisingly often the issue in corporate planning seems to boil down to deciding between diametrically opposite strategic directions. A parting of the ways; the company at a crossroads; the horns of a dilemma; reassessment of its roots; diversify or, on the contrary, trim back to the core; cut manufacturing costs or, on the contrary, increase them to add value; gain share in the home market or, on the contrary, go for exports; go public or stay private.

You may be surprised how bluntly these choices can be presented to managements when they really get down to fundamentals. Issues that executives used to fight over, sometimes for years, problems that have been examined by committee after committee, pale into insignificance when the real strategic problems - the truly elephant sized corporate issues - are finally identified, simply and starkly. The focus of the top managers' thinking switches abruptly into the true area of concern.

Every company of every size and type occasionally has to make a big decision, the sort of decision that affects its entire destiny for years or even decades into the future, decisions which change not just parts or departments or sections of the company but which alter its whole structure and the very nature of the company itself. They are the sort of decisions that the company and its employees will look back on in years to come and say, 'that was the year when …’

 By contrast, operational planning may involve many detailed calculations. Working out the capacity needed to produce a new line of products using materials different to ones previously employed, with the associated transport, storage and other logistics implications can be a very large complex and taxing effort.

However, we hope that the decision to go with this new line of products has been taken at the right level where its organization wide implications could be assessed. That is the job of the strategic planning process.

To find out more about the unique features of strategic planning look at the Argenti Process.

For a nonprofit overview on strategic and operational planning try this help sheet.

Go back from Operational and Strategic Planning to Definition of Strategic Planning.

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The Argenti Strategic Planning Process can improve the Performance of Your Organization by helping you to find Strategic Elephants!

Argenti Strategic Planning is a process which, for more than forty years, has been used by over 2000 companies and NPOs around the world. Many of them have since become world class performers.

One key lesson from all this experience is that the starting point for a successful strategic plan is categorically not to announce a Mission or Vision Statement. Instead your planning team must move carefully through the ‘Argenti Purpose Sequence©’.
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Another key lesson from the Argenti Strategic Planning experience is that, throughout the process, you must avoid being caught in the details. Ignoring this rule can derail your entire planning process. The Argenti Strategic Planning Process shows you how to concentrate like a laser on the ‘The Strategic Elephants’.

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