6 Reasons Why Every Organization Needs a Strategic Plan

To move forward, sometimes we must take a step back and refresh or relearn the basics of why something is done or is important.

Although leadership should always be thinking about the future, many organizations will soon begin  (or have already begun) their formal strategic planning for the next 1, 3, or even 5 years, especially now with summer winding down and kids returning to school.

While there are corporate leaders who have mastered this process from top to bottom, the vast majority struggle to develop, much less execute, an actionable strategic plan. A survey conducted by Bridges Business Consultancy shows that 48% of all organizations fail to meet at least half of their strategic goals.

There are even a significant number of organizations that have no strategic plan at all, which can be disastrous, especially in today’s environment.

Before getting into the reasons why having a strategic plan is important, there are a couple of misconceptions to clear up.

The first is the common mistake of confusing strategic and annual planning.

Business strategy, or its strategic plan, can best be described as big picture goals and formal plans for the future, or, as Dr. Carol Poore explains in her book Strategic Impact: A Leader’s Three-Step Framework for the Customized Vital Strategic Plan:

Strategy is the process of making choices about the business you’re in, what you’re delivering, as well as what your organization has no intention of providing. Strategy is a framework for making decisions about how goals will be accomplished and deliver value and competitive edge, for which customers or service clients are willing to pay.

On the other hand, annual planning details specific steps business departments will take to achieve the goals outlined in the strategic plan.

The next common misconception many organizations have is they mistakenly believe a strategic plan has to consist of a list of 10-20 goals.

Unless we’re talking about those few rock star organizations out there, the vast majority of companies who do this will end up getting lost in the weeds and accomplish nothing. As I mention in a previous article published in Carrier Management, it’s okay for a strategic plan to consist of just one goal (2-3 being the ideal), especially if you’re rather new to this. (In fact, I strongly recommend starting out with a basic annual plan if your organization has no planning experience whatsoever.)

With that out of the way, let’s jump into the six reasons why every organization needs a strategic plan.

#1. A strategic plan provides direction.

Not having a strategic plan is similar to a ship at sea without a compass or any other navigational aids. If a ship leaves port with no idea where it’s going, there’s no telling where it could end up.

The same can be said for an organization with no strategic plan.

One fundamental purpose of having and executing a strategic plan is to ensure that various business areas are all moving in the same direction and that company resources are being allocated properly.

Without this direction, departments throughout the organization will simply focus on their pet projects without any concern for the bigger picture. There will be no rhyme or reason for how financial and human resources are allocated. At best, this can lead to recurring problems or issues that require leadership’s attention rather than managing the organization for success.

The departments’ activities shouldn’t appear as convoluted as Atlanta’s famous “Spaghetti Junction,” right?

#2. A strategic plan encourages fact-based discussions of politically-sensitive issues.

Some conversations around goals and what the organization will focus on can be very touchy. Specific departmental “pet projects” or society-driven topics can be challenging for managers and executive decision-makers to discuss publicly or in a larger group.

Developing a strategic plan helps diffuse issues like this since it provides departments and the company at large with specific guidance on where leadership wants to go. The final strategic plan is not the work of just one person in the organization, but rather a team effort involving leadership, business managers, and even certain subject-matter experts.

Having this guiding document in hand helps ensure the organization doesn’t find itself getting torn apart from useless turf battles and the like.

#3. A strategic plan creates a framework for allocating resources.

Working hand-in-hand with reason #1 above, the strategic plan serves as a basis for how human and financial resources are allocated in the organization.

When it comes to money, the strategic plan provides a measuring stick against which the organization can determine a proper budget. Knowing what the organization as a whole wants to focus on is critical for understanding how much money needs to be allocated to achieve a particular goal. The strategic plan helps the organization understand whether a certain dollar amount is enough or if pursuing a goal is too expensive and needs to be broken into smaller parts or delayed.

The strategic plan also helps managers and executives be more efficient with the organization’s human resources. Perhaps one area doesn’t need as many people and can reallocate this talent to other roles where they can play a more direct role in helping the company, whether expanding into new markets, developing a new business or product-line, or establishing a new internal department/function.

#4. A strategic plan provides a proper context for evaluating employee performance.

When an organization develops specific goal(s) and objectives in the form of a strategic plan, one of the benefits is the ability to cascade those corporate-level goals down to specific individual-level performance metrics that link to said goals. Similar to linking risks to the specific strategic goal(s) it impacts, managers can use this information as a basis for evaluating the value a particular employee is bringing to the organization.

Also, coupling performance and strategic goals gives employees a sense of ownership in the success of the organization. People crave this level of connection…they want to know they’re not doing something just for a paycheck but rather that what they do is making a real difference. Surveys in recent years have shown that employees increasingly value this more than pay raises and benefits.

#5. A strategic plan fosters a culture of informed decision-making.

Besides ensuring everyone throughout the organization is working toward the same goal(s), developing and executing a strategic plan also positively impacts the organization’s culture by setting a standard by which decisions at the business level are made.

Most strategic goals or objectives should require the input of different departments throughout the organization. This means that leadership will be working across the organization to solicit that input, which demonstrates to the employees that leadership recognizes the need for information and the value of the departmental knowledge and expertise.

In addition to corporate level strategic plans, departments need a strategy for what they will be doing to support the pursuit of these larger goal(s). This process eventually works its way through the culture of the organization to positively impact decision-making at all levels.

#6. A strategic plan increases confidence in the business’ mission, vision, and values.

Before any strategic plan can be developed, the organization (whether for-profit or not-for-profit) must develop its core mission, vision, and values statements to guide its strategic planning.

This is like a strategic plan for your strategic plan. Without it, the goal(s) executives develop will be at the mercy of “shiny-object syndrome,” which can lead to devastating consequences up to bankrupting the organization. To avoid this outcome, the mission, vision, and values must become ingrained in the culture at-large.

Once a full strategic plan is developed and stakeholders see it start to take shape, there will be greater confidence that the organization is fulfilling the purpose for which it was created.

I find it interesting (…and a little distressing, to be honest) that so many companies do not take the time and effort to develop a practical strategic plan. With so many potential landmines out there, from supply chain to changes in customer expectations to potential market disruptions, no organization can afford to just cross its fingers and hope for the best.

Through tools like ERM and others, time and effort will need to be put into developing an informed strategic plan that an organization can use as a blueprint for better serving its target market and ensuring long-term success.

With us heading into the last months of 2023, is your organization excited about developing its strategic plan? …or does it recoil at the thought?

I’m interested in hearing your thoughts about how a strategic plan has helped your organization be more focused and ultimately successful. Leave a comment below or join the conversation on LinkedIn.

And if you’re struggling to develop an actionable strategic plan and feel like a fresh perspective could help you get unstuck, please don’t hesitate to email me directly to schedule some time to discuss your issue(s) and potential solutions.

Featured image courtesy of Jeshoots via Unsplash.com

Additional blog image courtesy of Samuel Agbetunsin via Unsplash.com

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This blog was launched to provide strategy and risk practitioners with a go-to resource to better guide their efforts within their companies. Thank you for bringing me and my team along to be part of your journey towards better risk management, strategic planning and execution, and overall decision-making. Happy reading!

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