WHAT IS IT?

Strategy is a plan of action designed to achieve an overall or long-term objective.  A strategy is also referred to, in some contexts, as:  a master plan, grand design, game plan, plan of action, plan, policy, proposed action, scheme, blueprint, approach, schedule or a set of tactics.

Strategic Planning is an organization’s process of defining its strategy, or direction, and making decisions on allocating its resources to pursue that strategy.

Strategic Management is the strategic planning and risk management process combined with the policies, systems and control mechanisms that guide the implementation and monitoring of the strategy over time.

Strategic Assurance is a strong feeling of confidence about your organisation’s management of its objectives and the means of achieving them, including its structures, policies, procedures, systems, controls and reporting processes – and the associated risks.

VALUE PROPOSITION

The principal features that drive the value added by strategic assurance services are the ASSURANCE, INSIGHT AND OBJECTIVITY provided to the governing body which has the duty and responsibility to plan and oversee the organisation’s activities and achievements.

These services are essential to you because it is not feasible for the governing body itself to meet all of the strategic requirements associated with an organisation or to perform the detailed analysis and interpretation required to document and monitor the organisation’s strategic focus on an ongoing basis.  This is work for a highly qualified specialist with a relevant university degree and strong experience and knowledge in the field.  The need for such skills is not generally full-time in smaller organisations or it may be temporary during a vacancy in any organisation.

Irrespective of whether or not the role is full-time, part-time, performed by employees or outsourced, the value added by effective strategic planning and monitoring is substantial – in at least three areas:

• Assurance (for the governing board and senior management) is derived from governance, risk management and control processes which are supported directly by strategic management activities.

THE STRATEGIC MANAGEMENT PROCESS

In my view, it is essential that the strategic management function of every organisation is overseen directly by the CEO so that reports to the governing board are based on first-hand knowledge of the key facts rather than third or fourth-hand reports from staff at various levels.   Of course, it is vital that staff across the organisation are involved in developing draft plans, implementing the approved plans and reporting on their results – outputs and outcomes.

The CEO is typically responsible directly for the following aspects of strategic management:

• Overarching initial scope discussions with governing board members and other stakeholders with respect to the broad direction of a strategic plan;
• Leading the preparation of draft strategies and plans by key staff members;
• Organising and overseeing a consultation process with key staff and other stakeholders to gain acceptance of the broad direction of the plan and provide assurance about its completeness and the realism of its priorities;
• Developing a small number of key performance measures and targets to support monitoring and assessment of progress against the plan;
• Creating a process for regular reviews and updates of the plan;
• Preparing periodic reports for the governing board about progress against the plan and recommendations for updates of the plan;
• Leading a marketing process to stakeholders who need to understand and support the contents of the plan, including an education programme for all staff, with more in-depth learning and involvement at executive level; and
• Consulting with executive staff to link the achievement of particular strategies with the performance evaluation and remuneration at the individual, group and organisation-wide levels.
• At the end of each financial year, preparing information to support the governing board’s evaluation of the CEO’s performance in delivering the strategies mandated by the governing board.

In smaller organisations, the CEO can be expected to become more involved in the detail of the steps listed above.

ISSUES IN STRATEGIC MANAGEMENT

Planning Issues

• Defining the planning period – usually three or five years, based on financial years for convenient reporting;
• Identifying planning assumptions about the environment in which the plan will be rolled out, based on an ‘Environmental Scan’ and ‘SWOT’ Analysis at the beginning of the planning period;
• Identifying the strategies needed to meet the organisation’s overall objectives;
• Identifying and assessing the risks arising from the strategies chosen and the treatments proposed in the context of the organisation’s ‘Risk Appetite’;
• Evaluating the realism of those strategies in a competitive operating environment which is the subject of constant (and often rapid) change over reasonably short periods;
• Quantifying achievement of each strategy – what to measure and how to measure it?
• Setting objective key performance targets for each strategy with which to monitor progress and take remedial action if required;
• Identifying the human and financial resources required to implement the plan, by preparing a Workforce Strategy and a Financial Management Strategy and Integrated Financial Model;
• Identifying approval processes for the plan and updates, especially where third parties such as government ministers are involved;
• The organisation structure and reporting lines required to implement the strategies in the plan; and
• Intellectual property required to support the delivery of the strategies chosen.

Supporting Strategic Management Plans

The following plans should also be prepared to support an organisation’s strategic plan:

• Workforce Management Strategy;
• Financial Management Strategy Plan and integrated Financial Model;
• Marketing Strategy;
• Production and Distribution or Service Delivery Strategy;
• Information Technology Strategy;
• Property, Plant and Equipment Management Strategy;
• Investment Strategy; and
• Capital Funding and Debt Management Strategy.

Monitoring and Reporting Issues

• Setting objective key performance targets for each strategy with which to monitor progress and take remedial action if required;
• Measuring activity levels to compare with throughput targets;
• Compare volume and monetary budgets with actual outcomes and obtain explanations of significant variances;
• Reporting of pertinent key financial performance indicators (‘KFIs’) and comparisons with industry benchmarks; and
• Impacts of chosen strategies on liquidity and future financial viability.

Change Management Issues

• Business cases supporting analysis of options for outsourcing, relocation and rationalisation of products and/or services;
• Consideration of privatisation options;
• New service options;
• Introducing new systems and/or procedures;
• Product or service diversification; and
• Growing market share.

Risk Management Implications

• Processes to translate risks from the planning process to operational management and treatment; and
• Quality assurance processes to support operational service delivery.

Compliance Matters

Impacts of proposed strategies on:

• Key contracts with employees, customers, suppliers and service providers all have financial implications requiring understanding, recording and monitoring and may include onerous provisions and clauses governing and/or restricting transfers of assets or changes in operations or locations;
• Monthly financial reporting to the governing board and its committees (if applicable);
• Taxation compliance with respect to income tax, Pay-As-You-Go and other withholding requirements, Capital Gains Tax, Goods and Services Tax, Fringe Benefits Tax, Payroll Tax (if applicable) and Superannuation Guarantee levies;
• Requirements of the Victorian WorkCover Authority and its legislation;
• Supporting compliance with environmental licences and pollution protection requirements; and
• Compliance with industry-based legislation and related regulations and standards.

Quality Assurance – Accreditation and Support Mechanisms

• Processes you use to provide a high level of assurance that the service delivery outputs and outcomes will be at or above the required standards; and
• The Plan-Do-Check-Act Cycle.

Contingencies

• Contingent liabilities requiring consideration for financial management, insurance and reporting; and
• The impact of capital expenditure committed to contracts but not yet spent.

RESOURCES AND TOOLS

• Legislation applicable and the likelihood of any reform initiatives;
• Consultation framework and plans for board members, staff and other stakeholders;
• ‘SWOT’ Analysis;
• Cause and Effect Analysis (‘Fishbone Diagrams’);
• Root Cause Analyses;
• Porter’s Five Forces Analysis;
• Determining the Critical Success Factors of the organisation;
• The Plan-Do-Check-Act (‘PDCA’) Cycle;
• Models and tools for analysing likely competitor behaviour;
• Analytical models for evaluating change management options;
• Industry research and statistics; and
• Action plans, responsibilities, completion dates and performance targets.

FREQUENTLY ASKED QUESTIONS

1.   Why bother preparing a strategic plan?

Experience shows that the organisations that take the trouble to research and document a strategic plan arrive, at the end of the period, much closer to achieving or exceeding their objectives that those that operate without a documented, formal, approved plan.  It also makes the task of leading all levels of staff and other stakeholders easier because the governing board has identified a set of specific goals and strategies it wishes to pursue.  Complete success may not be certain but it’s a much higher probability.

 2.    How can I plan effectively over a number of years when so much about the future is changing, unknown and/or uncertain?

I like to gather together what I think will happen in relation to an organisation and some basic ideas about where the organisation wants to be at the end of the planning period – all of that is within our control and we can specify it.  Then, with some research, we can make soundly based forecasts about many variables along the road to the future.  These include macroeconomic variables such as inflation and interest rates, wage rates, the likelihood of price rises and other revenue growth, how many people at what levels and where we expect to need, etc.  Before we know, we have a reasonably comprehensive coverage of the main things we need for a three to five-year plan.  Those ‘assumptions’ can also then be quantified and included in the integrated financial model.

3.     What if the strategic plan does not work out in practice?

A strategic plan is a dynamic document which needs regular reviews and updates because circumstances will change over time, often unexpectedly.  Those changing circumstances provide the opportunity to recalibrate elements of the strategies it is pursuing and, in extreme cases, change its future direction completely so that the overall objective of growing the organisation’s wealth, for example, can be optimised.

4.      What should be included in a Strategic Plan?

At least the following items should be included so that the governing board has a coherent set of strategies to approve based on detailed analysis of financial and service delivery matters:

• Strategic Purpose or Objective;
• An environmental scan of the present position and likely environment during the planning period;
• Strategic Goals;
• Measurable Targets for the Strategic Goals;
• A Strategy Statement – or Mission; and
• A Strategy Map linking the organisation’s Vision, Key Results Areas or Critical Success Factors with [not more than 10] overarching Strategic Directions.

Preferably, the Strategic Plan should not be lengthy and it should be phrased in accessible language for all stakeholders.  More detailed considerations required to implement the Strategic Directions should be set out in each annual business plan prepared during the planning period.

5.      How Confidential is an organisation’s Strategic Plan?

Ideally, it is pitched at a level that can be used publicly for promoting the organisation’s reputation, products, services and funding needs.  But the extent to which it can be made public depends, among other things, on the competitive environment in which the organisation operates and any applicable regulatory restrictions.

6.      Where can I get expert help with my organisation’s Strategic Plan?

Simply .  .  .

Call me on:  +61 417 373 589

Email:  peter@strategicassurance.com.au

Visit (by appointment only):  Level 7, 470 Collins Street MELBOURNE VIC 3000 | ABN 62 064 547 275