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why do organizations need a strategic plan

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Why Is Strategic Planning Important?

Above view of team creating a strategic plan

  • 06 Oct 2020

Do you know what your organization’s strategy is? How much time do you dedicate to developing that strategy each month?

If your answers are on the low side, you’re not alone. According to research from Bridges Business Consultancy , 48 percent of leaders spend less than one day per month discussing strategy.

It’s no wonder, then, that 48 percent of all organizations fail to meet at least half of their strategic targets. Before an organization can reap the rewards of its business strategy, planning must take place to ensure its strategy remains agile and executable .

Here’s a look at what strategic planning is and how it can benefit your organization.

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What Is Strategic Planning?

Strategic planning is the ongoing organizational process of using available knowledge to document a business's intended direction. This process is used to prioritize efforts, effectively allocate resources, align shareholders and employees on the organization’s goals, and ensure those goals are backed by data and sound reasoning.

It’s important to highlight that strategic planning is an ongoing process—not a one-time meeting. In the online course Disruptive Strategy , Harvard Business School Professor Clayton Christensen notes that in a study of HBS graduates who started businesses, 93 percent of those with successful strategies evolved and pivoted away from their original strategic plans.

“Most people think of strategy as an event, but that’s not the way the world works,” Christensen says. “When we run into unanticipated opportunities and threats, we have to respond. Sometimes we respond successfully; sometimes we don’t. But most strategies develop through this process. More often than not, the strategy that leads to success emerges through a process that’s at work 24/7 in almost every industry.”

Strategic planning requires time, effort, and continual reassessment. Given the proper attention, it can set your business on the right track. Here are three benefits of strategic planning.

Related: 4 Ways to Develop Your Strategic Thinking Skills

Benefits of Strategic Planning

1. create one, forward-focused vision.

Strategy touches every employee and serves as an actionable way to reach your company’s goals.

One significant benefit of strategic planning is that it creates a single, forward-focused vision that can align your company and its shareholders. By making everyone aware of your company’s goals, how and why those goals were chosen, and what they can do to help reach them, you can create an increased sense of responsibility throughout your organization.

This can also have trickle-down effects. For instance, if a manager isn’t clear on your organization’s strategy or the reasoning used to craft it, they could make decisions on a team level that counteract its efforts. With one vision to unite around, everyone at your organization can act with a broader strategy in mind.

2. Draw Attention to Biases and Flaws in Reasoning

The decisions you make come with inherent bias. Taking part in the strategic planning process forces you to examine and explain why you’re making each decision and back it up with data, projections, or case studies, thus combatting your cognitive biases.

A few examples of cognitive biases are:

  • The recency effect: The tendency to select the option presented most recently because it’s fresh in your mind
  • Occam’s razor bias: The tendency to assume the most obvious decision to be the best decision
  • Inertia bias: The tendency to select options that allow you to think, feel, and act in familiar ways

One cognitive bias that may be more difficult to catch in the act is confirmation bias . When seeking to validate a particular viewpoint, it's the tendency to only pay attention to information that supports that viewpoint.

If you’re crafting a strategic plan for your organization and know which strategy you prefer, enlist others with differing views and opinions to help look for information that either proves or disproves the idea.

Combating biases in strategic decision-making requires effort and dedication from your entire team, and it can make your organization’s strategy that much stronger.

Related: 3 Group Decision-Making Techniques for Success

3. Track Progress Based on Strategic Goals

Having a strategic plan in place can enable you to track progress toward goals. When each department and team understands your company’s larger strategy, their progress can directly impact its success, creating a top-down approach to tracking key performance indicators (KPIs) .

By planning your company’s strategy and defining its goals, KPIs can be determined at the organizational level. These goals can then be extended to business units, departments, teams, and individuals. This ensures that every level of your organization is aligned and can positively impact your business’s KPIs and performance.

It’s important to remember that even though your strategy might be far-reaching and structured, it must remain agile. As Christensen asserts in Disruptive Strategy , a business’s strategy needs to evolve with the challenges and opportunities it encounters. Be prepared to pivot your KPIs as goals shift and communicate the reasons for change to your organization.

Which HBS Online Strategy Course is Right for You? | Download Your Free Flowchart

Improve Your Strategic Planning Skills

Strategic planning can benefit your organization’s vision, execution, and progress toward goals. If strategic planning is a skill you’d like to improve, online courses can provide the knowledge and techniques needed to lead your team and organization.

Strategy courses can range from primers on key concepts (such as Economics for Managers ), to deep-dives on strategy frameworks (such as Disruptive Strategy ), to coursework designed to help you strategize for a specific organizational goal (such as Sustainable Business Strategy ).

Learning how to craft an effective, compelling strategic plan can enable you to not only invest in your career but provide lasting value to your organization.

Do you want to formulate winning strategies for your organization? Explore our portfolio of online strategy courses and download the free flowchart to determine which is the best fit for you and your goals.

why do organizations need a strategic plan

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  • Business Essentials

The Importance of Strategic Planning

why do organizations need a strategic plan

Every successful business has a plan and knows where it is heading in the future. Setting a plan with goals, target dates, and a purpose should be finalized before embarking on a business. Taking the time on an ongoing basis to review the company's past performance, and predict its future performance, gives it a road map to follow.

Without strategic planning , which is knowing the current state of your business and where you want it to go, most businesses will fail. A strategic plan allows you to see what is important, how to get there, the pitfalls to avoid, and the noise to ignore. Below we discuss some of the reasons why strategic planning is important and how to implement it.

Key Takeaways

  • Strategic planning is crucial for a business as it creates a map for a business to follow and course correct when need be.
  • The first part of a strategic plan is the business plan, which outlines the purpose of the business, budgets, goals, and the mission statement.
  • Making time to evaluate your business on an ongoing basis will allow you to determine how well your results are adhering to your plan. This will allow you to make adjustments or double-down on how the business is being run.
  • Communicating your strategic plan to your employees is critical so that everyone is on the same page and working towards the same goals.
  • Reviewing and following up on your business will highlight strengths and weaknesses in your business so that you can continue with what works well and eliminate what is hindering the growth of your business.

Making a Business Plan

The very first strategic planning most businesses do is a business plan . When you first start your business, you will likely have prepared a mission statement , a budget, and a marketing and promotion plan. The business plan is a good first step, but it needs to be reviewed and updated as the business continues and grows. If you shove it in a drawer and let dust gather on it, it won't serve as the foundation of your business, as it was meant to.

Using Goal-Based Planning

How you go about conducting strategic planning will depend on many variables, including the size of your business, the time frame included, and your personal preferences. The most common style of plan is goals-based. In this type of plan, you set goals for the business (financial and non-financial) and map out the steps needed to meet those goals.

For example, if your goal is to have $100,000 in revenues next year, the steps to get there might include bringing in five new clients a month and attending three trade shows. Whatever the goals you set for your business, they should be concrete and measurable so that you know when you reach them. Another method of strategic planning is mission-based.

When you first started your business, you likely developed a mission or values statement, outlining the purpose of your company and its overall reason for being. A mission-based strategic plan ties each part of the plan into the mission, to ensure that the company is always operating in the service of that mission.

For example, if your mission statement is to be recognized as a leader in the financial services sector and to help families become financially independent, your strategic plans should address how you will meet those goals.

Making Time

It can be difficult to find the time to plan your business. Other, more pressing priorities, like trying to bring in revenue , may grab your attention; however, carving out time regularly will help you keep on top of your business.

Blocking off a few hours a day or week to focus on your plan should be part of your business operations. During that time, you can examine the prior week's financial performance and update any marketing initiatives to make sure that your business is on track with your initial plan. If it's not, then you'll need to make adjustments to get back on track.

Regardless of how often you plan, make sure that you set it in stone in your day planner. Block off the time and don't let anything else get in the way. Turn off your cell phone and, if at all possible, go somewhere away from your office to plan in order to minimize distractions.

Promoting Communication

As a business owner, you will most likely have employees. It is critical to inform them of your strategic plan so that they are on the same page and working towards the same goal as you.

Including your staff in your strategic plan will instill a feeling of responsibility in their jobs that will help ensure productivity.

For example, if you have a sales team and your strategic plan involves bringing in five new clients a month, your sales team needs to be aware of this so that they know the goal to achieve. If they don't, perhaps they would be under the assumption that bringing in two new clients a month is excellent, when in actuality, it is only 40% of your goal. Without clear communication to your employees, your business will be a boat set adrift without any course to follow.

Following Up

A critical part of the planning process is reviewing your previous plan and comparing it to your actual results. Were you able to bring in five new clients last month? If not, why not? Tweak the plan going forward to account for changes in your business or the general economic climate. The more experience you get with the planning process and with the operational side of your business, the more accurately you will be able to plan.

Once you have had your business running for a while and block out time to follow up on your strategic plan, you will be able to determine where the strengths and weaknesses in your business lie. This would allow you to correct course, perhaps changing your business plan and goals slightly to focus on your strengths, while allowing you to eliminate your weakness, making your business stronger and increasing the likelihood of achieving your goals.

The Bottom Line

Planning out the future of your business is the best way to ensure success. Creating an initial plan and communicating that plan to your employees will ensure that everyone is working towards the same goal.

Taking out time to review your business's results and comparing them to your plan will help ensure that the right policies and procedures continue whereas those that are not benefiting the company will be removed. It may seem awkward and difficult at first to create a strategic plan, but with practice, you will be able to move your business in the right direction.

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  1. Why Is Strategic Planning Important?

    This process is used to prioritize efforts, effectively allocate resources, align shareholders and employees on the organization’s goals, and ensure those goals are backed by data and sound reasoning. It’s important to highlight that strategic planning is an ongoing process—not a one-time meeting.

  2. Strategic Planning: Why is it Important?

    Competitive Advantage: A strategic plan allows organizations to foresee their future and to prepare accordingly. Organizations that plan strategically are better equipped to predict the market, anticipate changes, understand competitors, and make decisions that keep them ahead. Looking to get started? Download our free Strategic Planning Templates

  3. Why Is Strategic Planning Necessary?

    Retaining and re-engaging customers Building brand awareness Through the strategic planning process, small business owners can identify goals like the ones above and develop actionable strategies to achieve them. Increased Organizational Alignment With a properly made strategic plan, everyone in your business can be on the same page.

  4. The Importance of Strategic Planning

    Strategic planning is crucial for a business as it creates a map for a business to follow and course correct when need be. The first part of a strategic plan is the business plan, which...