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What are the right ways and wrong ways companies use strategic planning?


Topic Expert
Patrick Dunne
Title: Chief Financial Officer
Company: Milk Source
(Chief Financial Officer, Milk Source) |

I have done this many different ways. The best was one year where we had the full commitment of a CPG organization. In going through a segmentation of our products, customers and markets, the organization "bonded" over developing new products and how/where we could be successful. I would say based on this, getting everyone to buy in on the process will allow everyone to see how the financials get built.

I have seen other companies where the strategic plan was essentially book shelf material and nothing else. A process where key managers aren't engaged to work the entire process will not result in a plan that is "living and breathing" for years to come.

Topic Expert
Regis Quirin
Title: Director of Finance
Company: Gibney Anthony & Flaherty LLP
LinkedIn Profile
(Director of Finance, Gibney Anthony & Flaherty LLP) |

Patrick's experience will yield the most effective plan. I have seen very thin plans which I would categorize as Strategic Statements. A plan should start with the Statement and then provide all of the backing as to why it is the appropriate direction for the company. Include a budget to support the plan as well as identify how you can deterimne if the approach is successful.

Topic Expert
Keith Perry
Title: Director of Global Accounting
Company: Agrinos, Inc.
(Director of Global Accounting, Agrinos, Inc.) |

Echoing Patrick and Regis, with a caveat: leave numbers out of it as much as possible.
Not because the ops don't get the numbers, but because (very often) they don't know what the numbers mean.

Example 1: CEO doing a 5 year plan, that had detail down to unit sales, prices down to the penny, changing month to month. I simplified it (dramatically, from 100+ spreadsheets to 4), and the CEO fought back and refused the simplified version as s/he knew the costs and price 5 years out and therefore the "simple" version was innaccurate.
Example 2: In the other direction, I laid out a 3 year plan based on product 1, product 2, etc. CEO immediately refused to even discuss the model as I had a price and a cost for a product that hadn't been developed yet. I literally had to delete the parts of the model that *allowed* for inclusion of new products.

These are extremes; my point is, once you get to the numbers, base it on what they are *willing* to discuss, and base it on understandings of the plan that was discussed before numbers got involved. In the second example, for example, had I gotten buy in to model that before building the model (intended as a strawman), it wouldn't have been so contraversial. Rolling it out as a model first made it sound like I was making a proposal as opposed to a strawman.

Topic Expert
Christie Jahn
Title: CFO
Company: Prime Investments & Development
(CFO, Prime Investments & Development) |

The very first plan we put together was our CEO's laundry list of tasks he wanted completed in the year. He ended up implementing most of them himself because they were all these thoughts he had in his head. The next year we hired a facilitator and it has been better, but still tweaking. Tagging on what Keith says. We have KPI's in ours but what has happened is we end up spending the entire meeting discussing those and never moving on to anything else. This became very real recently and we are now making another shift to plan.

It takes work, dedication and transparency. Everyone on the team needs to be on the same page and working towards the same goal. I have had conversations with a lot of folks who have implemented a plan and never executed it. When stuck in the day to day it's easy to let the plan slip by. We have created a static monthly meeting and stick to it.

Mark Matheny
Title: VP - FInancial Planning and Analysis
Company: Novolex (formerly Hilex Poly)
(VP - FInancial Planning and Analysis, Novolex (formerly Hilex Poly)) |

I heard a quote once. "Why is it we never get to the fifth year of our five year plan?" I think one of the big issues is the timeline and the associated assumption base. Either companies build detailed plans that have assumptions that have so much variability into the future it makes them virtually worthless or they take their next year's annual budget and factor it at a high level. The good strategic plans that I have been involved with are when the key managers get together, offsite, and talk about the issues being faced and possible reactions. This then becomes the guidepost for how the leadership of the company makes tactical decisions. It doesn't have to be about numbers. It is more about establishing a common set of "rules of engagement."

Len Norten
Title: Chief Financial Officer
Company: Performance Mobility
(Chief Financial Officer, Performance Mobility) |

A strategic plan, and the process, is very different than a budget or business plan. It should be used for three primary purposes:

1) Building consensus among an executive team on future direction of an organization. In essence acting as a compass to provide focus when evaluating future actions, investments and opportunities;
2) Providing high level goals and KPIs to measure performance and drive accountability;
3) Communicating organizational direction to employees and other stakeholders.

The planning process consists of identifying your organization's competitive advantage, or as Potter describes "strategy" which I also call your "secret sauce", SWOT analysis, high-level goals both financial and non-financial, and accompanying activities to achieve your goals. The process should also include a regular review, say annually, to track performance and identify any changes.

This may sound relatively easy but there are a number of potential pitfalls that can make this challenging starting with the level of trust and teamwork among the executive team. There is a great book by Lencioni called "Five Dysfunctions of a Team" which describes how to develop trust and honest communication within a team to achieve results.

Last, the process requires leadership by the CEO and CFO to support strategic planning. If there is no support at this level, the process will die.

If executed properly, strategic planning can be a great tool that can help an organization achieve its goals and build a framework for participation and accountability.

Tony Ard
Title: Director, Solutions Engineering
Company: Axiom EPM
(Director, Solutions Engineering, Axiom EPM) |

Len makes a great point about how the process of creating a strategic plan is quite different than the process of creating annual budget. However, let’s not lose sight of the fact that annual budgets and plans are where the strategy will come to life. And, especially relevant for this group, finance can be a key enabler of that organizational alignment. As the custodian of the long range plan or the set of corporate KPIs and metrics, Finance has an important role to play in translating the big picture into digestible initiatives, target metrics and plans to be consumed and enacted upon by the entire organization.

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