What is the five 5 step approach of the strategic planning process in terms of strategic impact of the project?

Strategic plans help identify what an organization is striving to achieve and maps out the necessary steps needed to be successful.

Table of Contents Show

5 Step Process for Developing a Strategic Plan
Step 1: Write a Vision Statement
Example Vision Statement
Step 2: Write a Mission Statement
Example Mission Statement
Step 3: Perform a Gap Analysis
Step 4: Write SMART Goals
Example Goal Document
Step 5: Monitor Progress
Strategic Planning Process
Benefits of Strategic Planning
Additional Resources

It used to be that strategic plans would go out for ten years but organizations today typically look 2-3 years down the road – some industries just plan year by year.

Developing a strategic plan is a multi-step process and one step builds off of the other.

To begin the process the organization needs to have a passion for what it does and a clear idea of what it hopes to achieve.

This clarity is what makes development of the strategy possible.

5 Step Process for Developing a Strategic Plan

Step 1: Write a Vision Statement

A Vision Statement is a statement (typically 2-3 sentences) that gives the reader (and more importantly, the organization) a mental picture of what the organization hopes to become or what the organization hopes to achieve.

It is important to understand where an organization is going before it can develop a strategic plan for how to get there.

The value of a vision statement is that is gives leadership and employees a shared goal.

To facilitate a visioning session:

Get the visionaries in a room.

Ask them to close their eyes and describe the mental picture they see when the organization has reached its optimal state.

Document thoughts that describe the picture on a flip chart.

Come to agreement on all that is described.

Take some time to wordsmith or play with the wording until it describes the thoughts accurately.

Example Vision Statement

“ABC Dry Cleaners will be the premier professional laundry
of the metropolitan area by providing unmatched customer
service and cleaning services that exceed the competition”.

Step 2: Write a Mission Statement

A Mission Statement is an explanation of why an organization exists and the path it will take to achieve its vision.

Mission statements are typically shorter than a vision statement but not always and are organization specific.

This is a statement that describes what the organization is passionate about and why it exists.

To facilitate the mission statement process:

Have the group look at vision statement and begin the process to brainstorm a mission statement.

Go around the room and have everyone give a brief description (5-7 words) describing their thoughts and document their answers on a flip chart.

Once everyone has put their ideas down, look for similarities and usually a natural statement will flush itself out.

Reword and refine the statement until everyone agrees that it reflects the mission of the organization.

Example Mission Statement

“We exist to “help our customers care for
and extend the life of their clothes investment”.

Step 3: Perform a Gap Analysis

A gap analysis is a process an organization goes through to identify the gaps between its current state and what it hopes to achieve – its vision.

To do a gap analysis, simply look at where the organization is and compare it to where it hopes to be.

This process typically involves a step of researching data outside the organization as well as taking a good hard look at data within the organization.

Examples of gaps an organization might look at would be:

Example of organization’s current state:

Customer Satisfaction scores of 65;
Profit margin 1%
10% of market share
10% return on poor quality cleanings

Step 4: Write SMART Goals

Write SMART goals for 2-3 years out (some organizations choose to go shorter or longer depending on the organization).

Example Organizational Goals:

By 20xx ABC Dry Cleaner will have a customer satisfaction score of 85
By 20xx ABC Dry Cleaner will have a profit margin of 5%
By 20xx ABC Dry Cleaner will have a 25% market share
By 20xx ABC Dry Cleaner will have less than 2% return for poor quality cleanings

Now, this is where the rubber meets the road.

Goals are a wonderful thing to have but unless they are implemented, and someone is held accountable through a structured performance management process, they are nothing more than words on a piece of paper.

To give goals some teeth, they need to be taken down to the department and ultimately the employee level. This means identifying who will get it done.

Example Goal Document

Step 5: Monitor Progress

Goals should be monitored at least on a quarterly basis.

This can be as simple as asking the responsible person to give a status update on their goals for the quarter.

It is very important that this is done because all organizations are so busy today that the day-to-day responsibilities can sometimes get in the way of completing long-term goals.

Once a year the strategic plan and goals should be reviewed and updated to reflect current market conditions and changes to ensure that goals are focused on the current state of the organization.

Use the goal document to keep track of goal completion status.

Talk about goals at every staff meeting to ensure everyone understands its priority.

Many organizations don’t create a strategic plan because the process intimidates them.

However, any size organization can map out a plan if they solicit the help of a trained facilitator and commit the time and resources to doing it.

Does your organization have a strategy and plan?

The art of formulating business strategies, implementing them, and evaluating their impact based on organizational objectives

Strategic planning is the art of creating specific business strategies, implementing them, and evaluating the results of executing the plan, in regard to a company’s overall long-term goals or desires. It is a concept that focuses on integrating various departments (such as accounting and finance, marketing, and human resources) within a company to accomplish its strategic goals. The term strategic planning is essentially synonymous with strategic management.

The concept of strategic planning originally became popular in the 1950s and 1960s, and enjoyed favor in the corporate world up until the 1980s, when it somewhat fell out of favor. However, enthusiasm for strategic business planning was revived in the 1990s and strategic planning remains relevant in modern business.

CFI’s Course on Corporate & Business Strategy is an elective course for the FMVA Program.

Strategic Planning Process

The strategic planning process requires considerable thought and planning on the part of a company’s upper-level management. Before settling on a plan of action and then determining how to strategically implement it, executives may consider many possible options. In the end, a company’s management will, hopefully, settle on a strategy that is most likely to produce positive results (usually defined as improving the company’s bottom line) and that can be executed in a cost-efficient manner with a high likelihood of success, while avoiding undue financial risk.

The development and execution of strategic planning are typically viewed as consisting of being performed in three critical steps:

1. Strategy Formulation

In the process of formulating a strategy, a company will first assess its current situation by performing an internal and external audit. The purpose of this is to help identify the organization’s strengths and weaknesses, as well as opportunities and threats (SWOT Analysis). As a result of the analysis, managers decide on which plans or markets they should focus on or abandon, how to best allocate the company’s resources, and whether to take actions such as expanding operations through a joint venture or merger.

Business strategies have long-term effects on organizational success. Only upper management executives are usually authorized to assign the resources necessary for their implementation.

2. Strategy Implementation

After a strategy is formulated, the company needs to establish specific targets or goals related to putting the strategy into action, and allocate resources for the strategy’s execution. The success of the implementation stage is often determined by how good a job upper management does in regard to clearly communicating the chosen strategy throughout the company and getting all of its employees to “buy into” the desire to put the strategy into action.

Effective strategy implementation involves developing a solid structure, or framework, for implementing the strategy, maximizing the utilization of relevant resources, and redirecting marketing efforts in line with the strategy’s goals and objectives.

3. Strategy Evaluation

Any savvy business person knows that success today does not guarantee success tomorrow. As such, it is important for managers to evaluate the performance of a chosen strategy after the implementation phase.

Strategy evaluation involves three crucial activities: reviewing the internal and external factors affecting the implementation of the strategy, measuring performance, and taking corrective steps to make the strategy more effective. For example, after implementing a strategy to improve customer service, a company may discover that it needs to adopt a new customer relationship management (CRM) software program in order to attain the desired improvements in customer relations.

All three steps in strategic planning occur within three hierarchical levels: upper management, middle management, and operational levels. Thus, it is imperative to foster communication and interaction among employees and managers at all levels, so as to help the firm to operate as a more functional and effective team.

Benefits of Strategic Planning

The volatility of the business environment causes many firms to adopt reactive strategies rather than proactive ones. However, reactive strategies are typically only viable for the short-term, even though they may require spending a significant amount of resources and time to execute. Strategic planning helps firms prepare proactively and address issues with a more long-term view. They enable a company to initiate influence instead of just responding to situations.

Among the primary benefits derived from strategic planning are the following:

1. Helps formulate better strategies using a logical, systematic approach

This is often the most important benefit. Some studies show that the strategic planning process itself makes a significant contribution to improving a company’s overall performance, regardless of the success of a specific strategy.

2. Enhanced communication between employers and employees

Communication is crucial to the success of the strategic planning process. It is initiated through participation and dialogue among the managers and employees, which shows their commitment to achieving organizational goals.

Strategic planning also helps managers and employees show commitment to the organization’s goals. This is because they know what the company is doing and the reasons behind it. Strategic planning makes organizational goals and objectives real, and employees can more readily understand the relationship between their performance, the company’s success, and compensation. As a result, both employees and managers tend to become more innovative and creative, which fosters further growth of the company.

3. Empowers individuals working in the organization

The increased dialogue and communication across all stages of the process strengthens employees’ sense of effectiveness and importance in the company’s overall success. For this reason, it is important for companies to decentralize the strategic planning process by involving lower-level managers and employees throughout the organization. A good example is that of the Walt Disney Co., which dissolved its separate strategic planning department, in favor of assigning the planning roles to individual Disney business divisions.

Wrap Up

An increasing number of companies use strategic planning to formulate and implement effective decisions. While planning requires a significant amount of time, effort, and money, a well-thought-out strategic plan efficiently fosters company growth, goal achievement, and employee satisfaction.

Additional Resources

Thank you for reading CFI’s guide to Strategic Planning. To keep learning and advancing your career, the additional CFI resources below will be useful: