A “proper” planning process

In over 30 years’ experience in advising clients on planning I believe very strongly that there is a correct process to follow when you are preparing your strategic or business plan.

At the same time, I have also seen many attempts at different ways to prepare strategic or business plans by consultants who have never had to live through the implementation phase of planning, when client staff go “Huh? What exactly are we supposed to do here?”

I have just spent some time with a client who has prepared their plan exactly in that way. While I was advising them on the financial aspects of their business, their Chief Operating Officer was internally preparing their strategic plan, which I had a chance to look at since it would obviously have an impact on their financial strategy and budget. It was not my role since, as a gun-for-hire consultant I can only do what I am contracted to do. However, for the benefit of my client I felt I had to provide some warning about what I felt were the shortcomings of the planning process to the CEO.

As a consultant you have to approach these situations carefully. You do not want to seem critical so that you look like you are touting for more work; you do not want to insult internal staff and put them off side in case you have to work with them on other issues – yet, I always feel a responsibility to provide an independent view of what I see that may affect their business.

Here, for nothing, is a list of what I thought was wrong with the process and the resulting planning document.

1. There was a lack of consistency – where goals, objectives, strategies and key performance indicators were listed, they seemed interchangeable from one section to another. What were listed as goals in one section were repeated as “areas of strategic focus” in another; what was an objective in an earlier section became KPI’s in the detailed sections. I can foresee that the implementation – and measurement of success – was going to get confusing.
2. I could not see a single clear strategy. What were listed as strategies were in fact, in my opinion, a list of actions to be taken. This is what I see as the difference: a strategy is a broad direction to be taken to resolve a goal. For example, A strategy may have been written as “Provide our team with the training to grow and act independently”. This is different from an action however, which may be “Identify skills required and diarise formal training”.
3. Their strategic plan ended up with over 70 KPI’s! How on earth are you going to do any work if you have to measure that as well? I always say to people who try to draft KPI’s – remember these are performance indicators that are key to your performance. Not everything is key to your performance.
4. Despite having KPI’s there were no performance measures – KPI’s are indicators of your performance, but you need to ensure they are measurable. For example a KPI might be “increasing our client base” while the performance measure is “add 15% more clients per annum”. If you cannot measure a KPI it is not a good enough KPI – rephrase it. I have seen some KPI’s where people include the performance measure, for example “increase our client base by 15% per annum” – fair enough.
5. The list of goals came from nowhere. In the old days I used to sit in on weekend management planning conferences where the participants started with agreeing on a set of goals – that came from nowhere but which seemed like good things to try to achieve. The old lists used to contain similar things – increase sales, reduce costs, bring new products to market. I have since learned the error of my ways! Your goals must be goals for a reason – I believe they are either required to address your strengths, weaknesses, opportunities and threats, or they are required to address some key strategic issues. If you do not create goals that address these issues, how do you know that your goals are relevant? For example how do you know that “increasing sales” is actually required? Perhaps your manufacturing cost-structures are unbalanced and indeed, increasing sales might actually start to make a loss for you! If you had done the analysis first, and discovered that a weakness was your manufacturing unit costs increasing with more units produced, or that a key strategic issue for you was poor purchasing power, your more informed goal may have been to “attain a better profit margin per unit production”. Increasing sales can wait – let’s make sure we can make a profit first.
6. All their goals – in a 5 year strategic plan – were going to be completed within 12-18 months!
7. The planning was done after one weekend’s general discussion with managers, by the Chief Operating Officer. Despite the COO complaining that not many managers provided feedback on the draft, in my view this is the definition of “top-down”. I’m actually surprised anybody did provide feedback. What do you think are the chances that the managers will buy into the plan, understand what they have to do, or even care about their supposed responsibilities as written in the plan by the COO?
8. At the same time the planning was going on, the Company Accountant was asked to prepare next year’s budget, and did so separately without any input from the COO until it was finished. It is no surprise to see that the budget did not reflect the plan, and the plan had no consideration of resources required to carry out the goals/strategies/actions.

At the end of the day, what came out was a very well graphically-designed wish list.

Okay, so what is the process for preparing your plan? After 30 years of practice and synthesising different methods, this process works!

1. A plan is about getting to where you want to go from where you are. So start with either a current situation analysis or a vision quantification, then, do the other. Let’s say you start with (my preference) quantifying the vision. Start with analysing the vision from four perspectives and ask these questions:-
   1. Once we have achieved our vision, what will our customers say about us in terms of our products and service?
   2. Once we have achieved our vision, what will our people, our management and staff, say about what they gain and experience working here?
   3. Once we have achieved our vision what will our shareholders and other stakeholders say about their association with us in terms of their rewards and benefits?
   4. In order to achieve our vision, what key business processes must we excel at?
2. Answering the above four questions in relation to the description of your vision should provide you with a list of descriptives that quantify the vision, rather than leaving it as a set of inspiring words. These descriptives are also measurements on how far you are getting towards attainment of your vision – this is where you want to get to.
3. If you started with vision-quantification as above, then the next step is to conduct a current situation analysis. Undertake a detailed SWOT exercise looking at strengths, weaknesses, opportunities and threats surrounding your business, your staff, your markets, your products and your systems. Sometimes, when people are too grounded in the minutiae of their day-to-day existence I ask them to conduct a PESTLE analysis – what is going to come and affect your business from the point of view of Political changes, Economic changes, Societal changes, Technological changes, Legal changes and Environmental changes. This step tells you where you are now.
4. Next, analyse all that you wish to achieve against all that you have found about your current situation. You should be able to identify any gaps – for example a key business process to achieve the vision may be the speed of after-sales service, but a weakness is your contracted-out maintenance service in which you have no control over response.
5. Take each identified gap and analyse why it exists – ask yourself “why” at least 6 times until you get to the root cause. For example:-
   1. Why is there a gap between the after-sales service we want and the service from the contractors? Because we cannot control their response times;
   2. Why can’t we control their response times? Because their staff are not capable of fixing the problems within an acceptable time;
   3. Why can’t their staff fix problems within an acceptable time? Because they are insufficiently updated on the requirements of our newer products;
   4. Why aren’t they properly updated on our new products? Because we don’t roll out induction training for them. From this example you can see that an issue identified is then not “we have crap contractors” – the first tempting response – but “The need to keep all our staff and contractors up to date”.
6. The above exercise should provide you with a list of substantial issues that are causing the gaps between where you want to be and where you are now. Analyse this list to group issues that are largely the same, or where some of these issues cascade into others, or where in solving an issue you solve 2 or 3 others at the same time. The list you end up with are “strategic issues” i.e. the big issues causing the gap. You then need to analyse these strategic issues to finally end up with a list of “key strategic issues” – the big issues that are the key to closing the gap, that you have to resolve to get to your vision.
7. Then finally, within the context of the strategic planning medium term window, say 5 to 10 years, you can start to formulate goals based around the key strategic issues – at this time the goals you draft may be re-wording the key strategic issues into goals, or depending on what they are you may be formulating goals that resolve the key strategic issues:-
   1. An example of a rewording exercise is where a key strategic issue may have been “The need to keep all our staff and contractors continually up to date with the development of our products”. The goal may be “To ensure that our staff and contractors are continually kept up to date with the development of our products”; or
   2. An example of the resolution of a key strategic issue may be where the key strategic issue was “our financial management systems and our customer relationship management are out of step”, and in this case the goal may be “To implement an up to date and synchronised Enterprise Resource Planning system”.
8. With your list of goals, you can translate them into objectives. Goals are a broad description of what you want to achieve, objectives are how you will achieve them. For example the goal of “To ensure that our staff and contractors are continually up to date with the development of our products” might have the following two objectives:-
   1. To conduct a major training session once a year; and
   2. To conduct monthly update sessions for technical staff and contractors.
9. Finally, after you have identified key strategic issues and drafted goals and objectives that cascade from them, you can formulate strategies. Where objectives are descriptions on how you will achieve your goals, strategies are the broad actions you need to take. For example the goal of “To ensure that our staff and contractors are continually up to date with the development of our products” and its two objectives may simply have a strategy very similar to the goal such as “Design and implement technical training sessions that will keep our staff and contractors up to date with latest developments”. On the other hand, the goal  “To implement an up to date and synchronised Enterprise Resource Planning system” may have a couple of strategies such as “Provide resources and capital to investigate the most appropriate ERP system and purchase it”, and “Create an integrated ERP reporting system that provides managers with up to date financial results per customer”.
10. How do strategies differ from actions that may appear in a business plan? Actions are very detailed steps you will take to “action” your strategies. For example the strategy of “Provide resources and capital to investigate the most appropriate ERP system and purchase it” may have a number of detailed strategies:-
    1. “Research and identify the most appropriate ERP system”
    2. “Identify the physical and HR resources required, cost the resources and seek funding”
    3. “Plan for the milestones in implementation”
11. Once the strategies have been agreed, each manager can then be asked how their areas can assist in the implementation of the strategies. They will be asked to list the actions they will undertake to implement the strategies, what resources they have to do so and what resources they will need in addition. They will be asked to provide timelines and milestones so that they can be measured – this stage may end up being documented as the business plan for the year – hence providing the short term actions from the medium term strategic plan. This stage is also crucial in making sure each manager has ownership of their actions and bids for resources. At this point KPI’s and their measures can be negotiated and agreed.
12. Once all the actions carrying out the strategies are agreed, the Company Accountant can then review the planning and outline the budgetary requirements.

The above process should involve everyone from the outset, but the vision, goals and objectives are for senior management (and the Board) to decide. However once the strategic direction is set out, in order to provide for buy-in, the line managers are asked for their plans to carry out the strategies.

What would have happened if my client’s COO had followed this process? They would have arrived at a logical plan where goals cascade from the identified gaps between the vision and the current situation, not just out from nowhere. Strategies would have cascaded from their goals and the description of how those goals were to be achieved. Their differences between their goals, objectives and strategies would have been clear and not interchangeable. Line-managers would have been able to buy into the process, and their budgets would have reflected their desired actions.

Oh, and their KPI’s those pesky 70-plus KPI’s would have been clear, accountable, and probably down to no more than 10 or 12, and everyone would have been clear about what exactly they had to do.

I’d be interested in what processes you have used to prepare your plans. Were they clear and useful? How would the application of this process helped?

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