Strategic Plan Basics
Strategic planning is the process of defining strategy. It encompasses various cycles of internal and external assessment intended to inform decisions around the building of capabilities and adapting to change to maintain relevance to those who are served by the organization. Strategy is anchored by Vision, Mission, and Values and articulated in both long and short-term objectives that are measurable, trackable, and reportable. While strategic planning is a discreet process, at its best, it encompasses and leverages knowledge flow from across the organization, and in particular, risk management.
Purpose, Growth & Evolution Foundation
Before we delve into the generic details of strategic planning, it is important to understand some fundamental truths about organizations – regardless of size, complexity, industry, or type these fundamentals apply and they provide a critical link to the integration of strategy and risk that will be discussed in a later chapter.
First, you must have and pursue a higher purpose defined by vision, values, and contribution.
Second, you must be intentional about the growth of the organization and its people.
Third, you must continually adapt and evolve to meet the needs and wants of those served.
Fourth, purpose, growth, and evolution are inherently connected and must exist in a state of equilibrium.
Purpose is at the very heart of strategy design and operational excellence. An organization’s purpose defines where we came from, where we want to go and why others should care. Purpose is more than just a future measure of success in monetary terms, it must speak to the contribution the organization seeks to make both to the people who serve within it and those it seeks to serve.
Growth is not just about revenue, but includes deepening cores, expanding capabilities, and measurable impact on vision. How, what, and when we need to grow is dictated largely by market needs/wants and industry evolution. As we maintain focus externally, growth also requires intentionality with growing internal human resources and capabilities.
Evolution is about perpetuating the organization so that we can continue pursuing purpose and fulfilling vision. This requires continual navigation to see how well our strategy is working and to spot changes in the external environment so that we can adapt accordingly, all the while staying in alignment with purpose.
Vital Juncture is how we thread the needle through purpose, growth, and evolution to reveal top priorities in how we deploy resources to execute strategy. It establishes the context needed to maintain equilibrium and links it all together in a symbiotic. Vitju is the catalyst for aligning the organization, creating the focus and intent required for performance excellence and long-term organizational success.
By using the purpose, growth, and evolution foundation as cornerstones to design strategy, and then using vitju as the mechanism to reveal critical risks, we more clearly prioritize time, energy, and resources. This is the place where ERM operates within strategy. These concepts are addressed to provide a deeper understanding of the strategic planning process and where ERM can inform that process.
Program Structure Basics
The basic structure for a strategic plan includes a handful of key components in terms of outputs. Plan will vary by organization based on size, complexity, industry, etc. however these basic elements are easy to pull out. A high-level summary of the plan is generally available for public consumption and should be a document that every risk practitioner and manager should have and be familiar with. What will be more protected is the deeper details of the strategy itself, as well as the outcome of the assessment pieces which usually contain information that is protected for reasons of competitiveness as well as to maintain stakeholder confidence.
Vision, Mission & Values
This first set of strategy elements sit at the heart of any organization and serve as the grounding force for its strategic plan. Vision and mission are sometimes combined or titled differently (i.e., purpose) and values may or may not be defined. The form and format are less important than what these statements say and how clearly it is said.
Vision statements are exactly that – a vision of a future state that does not currently exist. These very short (usually only one sentence or even just a few words) are inspirational, forward-thinking, and most importantly describe what it would look like if the vision came to pass. It represents what the organization aspires to achieve.
Mission is more tactical and describes what the organization does day-to-day as it pursues its vision. These are typically longer statements and describe the contribution and value offered to those whom the organization seeks to serve.
Value statements are intended to shape the culture of the organization and to establish the tone for how those who represent the organization work and engage with each other as well as all other stakeholders.
There are usually other elements tied into these pieces that explain the origin and history of the organization, the “about us” piece that helps stakeholders connect to the story and engage on a level that is meaningful. These are woven in and around vision, mission, and values.
Imperatives, Goals, Objectives & Tactics
The next most visible piece of the strategic plan is the structure of goals. There is a hierarchy with how goals are established and then cascaded throughout the organization, and again, this varies significantly by organization. One, some or all these elements may be found, and generally, the highest level of strategic goals may be publicly available, while the finer detail of tactical goals are kept internal.
Imperatives are big, broad statements that describe the primary outcome or thing to be accomplished. They tend to be more qualitative, but clear enough that we will understand what achieving that goal looks like.
Goals are the approach you take to accomplish the overarching imperative – it is simply a plan that incorporates all that is known and should be considered in closing the gap between where you are and when you want to be (the goal).
Objectives are measurable steps to accomplish the goal – they are quantitative in nature and are the components that are tracked, measured, and reported to show progress towards implementing strategies that will accomplish the goals. These are often combined with goals as a single item and are often still called “goals” at the level cascaded - usually to a group with the group leader as the owner.
Tactics are the smallest component and represent specific activities and actions to be taken to execute the objectives. May also be combined with objectives and may still be called goals at the level cascaded – generally assigned to an individual.
Risk Appetite is the amount and type of risk that an organization is willing to take to meet its objectives based on risk-reward trade-offs. Risk appetite is strategic – driven by strategic objectives and informed by enterprise risk identification and analysis efforts. We insert this piece here because this is one of the more problematic components of both erm and strategy. Risk appetite is notoriously difficult to articulate even for the most accomplished organizations. It is a crucial component within the ERM process because it helps to prioritize which risks are truly strategic and should be elevated to that level versus the important, but not strategic, risks that flow through daily operations. We include this note here because it is one of the most important elements within a strategic plan, to ensure that risk appetite boundaries have been established for the top-level strategic goals defined, however, we will address this topic in greater detail later in this playbook as it is a complex subject.
Monitoring, Reporting & Adjusting
Again, consistent with the standard practices of the organization, monitoring, and progress tracking on strategic goals and initiatives will vary by organization. Tracking of goals can be done in various ways, most commonly in Microsoft Excel or some other database type system like Smartsheets, and the structure of it may be very basic or utilize some advanced methodology like Balanced Scorecard. Achievement of strategic goals may be incorporated as part of the performance management process at all levels, but at the very least is part of senior leadership performance reviews.
Strategic plans are typically created to cover a certain span of time, often three to five years but potentially longer depending on the organization type and breadth of the initiatives. It is common for strategic plans to be reviewed at least once per year with progress reported on a quarterly basis Using key performance indicators as well as key risk indicators which we will discuss in greater detail below. Ideally, strategic plans are built on a rolling basis, so when they are reviewed each year they roll forward so that there is always a multi-year plan in place.