Why small companies should do strategic planning

Size is not a factor when it comes to strategic planning in small companies

small companies, strategic planning

Contributed by Thomas Stamatis

When you hear the terms, “strategic planning” and “strategic plan” you often think of the chore as developing a lengthy business plan covering an extended period of time, typically five years. The purpose is to map out a long-term business growth plan under some company mission statement and vision, with specific goals and objectives. So it can be thought of as a plan to fulfill the company’s overall reason for existence. Developing it usually requires a time-consuming process engaged in by a few company leaders, with inputs from their staffs in the organization. It often becomes a plan written by these executives without reflecting the necessary commitments of those in lower management who do not engage in its development but are needed to execute it. Therefore, dooming it to failure in implementation. Unfortunately, these kinds of “traditional” book plans when done at all, by small companies (and even much larger companies) sit on a shelf, collect dust and are ignored. Until the next plan is done, if any is thought important enough, or required by some company stakeholders to be put together.

It’s rare for any business to produce such a long term written plan and consistently execute it, without changes in tactics over the years, if not also in major “course corrections” the long-term strategies themselves. So it is no surprise that doing such a plan is often viewed by most small business principals, owners, founders, CEO’s as just a paper exercise that no one has the time or interest to do, or much less follow. In the minds of many small company owners, CEO’s and presidents doing such long term plans is essentially useless because too many uncontrollable external economic and internal business events, actions, and conditions occur yearly to prevent a company from consistently performing to any long range plan.

Notwithstanding these common impediments, there is still reason enough for doing long term planning. The important goal is going through the thinking process and truly engaging a long term “buy-in” from all in the company who must execute it and be responsible for the results. The significance is the process and learning, not just producing a “book,” which are the key elements lost in most usual long range planning. It must become a roadmap to the future for all to embrace and pursue if it is to happen at all. To be a successful process you have to LINK the strategic plan to an actual annual operating plan that implements it and is used to measure achieving the long-range goals.

You Are Never Too Small to Plan

For the small company, the strategic plan process can definitely be made much more simplified and tailored to its resources and needs to make it a practical and relevant business process that is truly followed.

Granted most small companies do not have access to staffs of business planners, high-priced consultants, or the resources or time, or desire to do such plans in a formalized manner, as do larger companies. Nonetheless, the process should still be culturally fostered internally in a simplified way as best as feasible. As the late President Eisenhower once put it, “Failure to plan usually results in planning to fail.”

Strategic planning should not be just a once a year “paper exercise” to produce a plan document that is not even recognized, nor executed upon in future years by employees in a small company. Planning when successful, becomes a way of thinking, correcting, and adjusting to business conditions to achieve long term goals, without losing sight of the overall business mission and its strategic goals. It’s a cultural mindset that should be fostered and taught as best as practical in the small company even given their constrained resources.

Strategic Planning Process Linkage

The ability to think long term and link that thinking to short-term plans as a process will usually produce a better, more realistic operating guideline to run the business, versus just going through a typical business document oriented “book planning” or a canned “template” approach. As stated above, such annual exercises often have no real “buy-in” or commitment from the people responsible for producing the results long term. Marrying long term goals, performance objectives, and the strategies to achieve them with the annual company budgets, short-term goals and performance targets is generally not done in most small companies, and many larger ones also. There is no current operating plans’ linkage to achieve and sustain important long-range goals year after year.

It is necessary for a company’s culture to develop and have a sense of shared accountability by everyone in the organization for not only achieving annual budget goals and performance milestones but also achieving the long-term strategy for the company. The message for what exactly are the long-term goals and strategies for the company must absolutely be transmitted, shared and committed to by all company employees. Not just through verbal pronouncements and speeches by management at company meetings, but in an ongoing effort to educate the “doers” in a business of what they are working toward and their livelihoods depend upon. Executing short-term annual goals must RELATE to a longer-term set of goals that will drive the company for growth over three to five years.

Most long term goals developed for the typical 3 to 5-year business horizons seldom link to short-term performance goals and actual execution plans of activities and resources needed to achieve them. In other words, a short-term one-year program may have performance budgets and some accountability, but in developing these annual plans, assuming they are done at all in most small companies, there is little or nothing linking them to the overall company mission and a long-term strategy. How effectively daily operations follow achieving the annual plan AND also the longer term company goals by measuring achievements under their specific game plan to reach those goals isn’t realistically practiced. Too often such strategic plans are thought to be “big company” kinds of ideas, not relevant to how a small business is run. No accountability is held for achieving results against goals throughout an organization that verbally “buys in” to the plan in the beginning, but easily ignores it, or doesn’t even remember it, during the ebbs and flows of daily and monthly business cycles.

Yura Bryant, an Entrepreneur Strategist at The Symmetry Firm, an entrepreneurial development and business strategy company, outlines it in his Huffington Post article, “Why Entrepreneurs Should Use the Strategy Plan Instead of the Business Plan.” This is “food for thought” for your small business to better understand why and how adopting strategic planning thinking and its process first, is important, before writing a long term strategy plan is important for your company.

You don’t need the sophistication and time-consuming “strategic plan” process of the Fortune 500 to make “planning” a more relevant tool for your company. There are myriads of business plan templates and software available to do this process, but often many are not designed for the typical small company entrepreneur to truly understand and incorporate as a “process” in his/her day to day business operations. True planning and executing is a longer term “learning and doing” process, not accomplished by filling in a plan template approach.

Thomas Stamatis has worked with both publicly traded and private companies, having over 30 years of financial planning and financial management experience in a variety of consumer products, manufacturing, environmental technology and information technology firms.

 

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Comments

  1. Well done. You did such an amazing job. Keep it up.

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