Part 1 in this series was on using vision, mission, and values to help decision-making.
In my experience, growth-stage companies do a below-average job of using their strategic and operating plans. Typically, they stop referring to them after a few months, don't review progress against them consistently, and they end up gathering dust. But the strategic and operating plan might be two of the most helpful decision-making tools a company has.
The best strategic plans are simple documents that identify the company's long-term priorities or goals, typically 2-5 years out, depending on the company's maturity. If it's a startup, two years is sufficient. For mature companies that are relatively stable, five years or more is better. And in our experience with growth-stage companies, three years is the best timeframe: long enough that most people can picture yet short enough to have some control over what happens.
Deciding the priorities for those timeframes takes effort. And this is where strategic plans don't get their "credit" as much as they should. Growth-stage and mature companies often spend 1-5 full days of executive time (and possibly thousands of dollars with a consulting firm or facilitators) to build a strategic plan. Research is done on their industry and market, past performance is analyzed, the company's team is evaluated, and so on. And then there's the important time when the team makes decisions of what priorities they will set for the long-term, often a spirited and debate-filled process that must end with consensus.
So when a company decides on its long-term strategic priorities, it's the result of a great deal of investment and effort.
But once the team is back to work, that plan often starts collecting dust. And when the company is suddenly faced with new opportunities or threats that require decisions to be made, the strategic plan often isn't used as a tool...all that time, energy, and effort goes out the window. Instead, more executive time is necessary.
There is power in the strategic plan because, combined with the vision and mission, it helps provide answers to how a company should approach its decisions. If faced with a "once in a lifetime opportunity," does pursuing it fit with the company's long-term priorities? Does the opportunity help move the company towards its vision and help fulfill its mission? These questions are usually answered pretty quickly, helping the company not only make a better decision but also a faster one.
At Junto, we define an operating plan as a document that identifies a company's short-term priorities, typically for a full year. We believe it should be driven by the company's strategic plan, demonstrating what the company will work on over the next 12 months to move closer to achieving its strategic priorities.
Furthermore, the key distinction of an operating plan is that it's meant to be a working document: each priority is broken down into more detailed action plans for the company to execute during the year.
Once again, a great deal of time and effort is invested in the process, and the operating plan has the capacity to serve as a valuable decision-making tool. On a day-to-day basis, as a company is faced with dozens of operating decisions, the plan can be referred to in weekly huddles, management meetings, performance reviews, and other venues where decisions need to be made.
When resources need to be re-allocated for a project, leadership can refer to the operating plan to see how that might affect other priorities. When there is employee turnover and a re-evaluation of which positions to create or fill, the operating plan can provide some direction. And when the CEO shares their "brilliant idea" that others don't believe in, the operating plan can be pulled out as a reminder of what is important in the short-term.
Part 3 of this series will cover how a company can make better and faster decisions with operating tools such as budgets and standards.