“Don’t We Have People For That?”: Operational Planning & Strategy Execution

Posted by admin on May 11, 2010

Well-implemented strategic planning provides the vision, direction and goals for the organization, but operational planning translates that strategy into the everyday execution tactics of the business that will ultimately produce the outcomes defined by the strategy.  Operational planning is the conversion of strategic goals into execution.

No business likes to admit it, but most are lacking in the know-how, competencies (skills, knowledge, experience) and discipline to carry off precise execution of strategic goals. This article addresses just how critical operational planning is to having good execution and offers help to those organizations who struggle with why and how to do it.

What Is The Secret to Executing on Strategy?

If you think about what corporate strategy documents normally look like, it is not terribly surprising to find that a high percentage of corporate strategies fail to be implemented. They range from ugly Excel spreadsheets to beautifully bound books. Unless operational planning has accompanied the strategic planning effort, the strategic plan will always accomplish less than the intended result, resulting in wasted effort.

We have stated in previous articles that a high percentage of plans fail to be fully executed or fall flat altogether. How high a percentage you may ask? Here are a few statistics:

• "Organizations realize just 60% of the potential value of their strategies" Source: Economist Intelligence Unit
• "The average ROI on most strategic planning initiatives is 34% or less" Source: Harvard Business Review
• "90% of organizations fail to successfully implement their strategies" Source: Kaplan and Norton

Yes, there is a problem here to be solved. Most companies would receive a failing grade for their operational planning efforts. This is largely due to a lack of understanding of how such planning should be done. True, it is sometimes perceived to be the less “sexy” part of planning, but it is essential that operational planning be done and organizations must learn how to do it properly. Many companies have the attitude of, “Don’t we have people to do that?”. Far too often, they don’t.

It’s not that operational planning is that complex to carry out, but there is some art to doing it well and it does require finesse. In short, operational planning requires a different skill set and discipline than its counterpart - strategic planning. The biggest difference is that we must adjust our thinking to the day-to-day business operations and consider all of the constraints, inhibitors and accelerators that must be evaluated and factored into tactical planning. The discipline required is a mix of strategic planning with good old fashioned program and project management.

Hope is Not a Business Strategy

Operational planning must be done if strategic goals are to be accomplished. This is because the enterprise is really an eco-system, where a change in one area almost always effects others. The strategic goals of the organization must be translated one business unit / division / department at a time. Why? Because the goals mean something different to each area of the organization, based upon that area’s function in the enterprise.

It is not enough to simply put the strategic goals out there and let the business interpret the strategy on its own. To do so is not planning, but instead is crossing fingers and hoping for the best. We’ve all seen or read about the countless examples of failed strategy implementation this leads to (see more about this in the article Strategy Misalignment). Since hope is not a strategy, organizations need to buckle their safety belts and leave their comfort zones while mastering the art of execution or face the harsh realities of failing to execute on their plans.

Okay, So How Should It be Done?

For starters, the executive strategy team must carefully construct goals and metrics that will guide the layers of the organization to plan very effectively. Goals and supporting metrics should be defined and pushed downward through the organization -- approaching plan goals almost as if they were marketing them to the rest of the business. The metrics and measurements promote the governance aspect of planning and the buy-in from the enterprise is part of the change management needed to excite and mobilize action for accomplishing the objectives of the strategy.

This requires a communication plan that will educate, inform and help the operations leaders and management to understand what is expected of them and allow them to do the same thing with their people. This is important, since the tactics will be established by the operational leaders who are responsible for carrying out the execution of the goals. Their clear understanding and involvement is a must. This constitutes a bi-directional (or top-down / bottom-up) planning effort and lays the groundwork for operational planning.

A bi-directional planning approach allows executive management to set the goals and plan initiatives collaboratively with all the lower levels of management, thus providing a consistent direction for the strategic plan execution effort.  Taking a top-down only approach leads to confusion within the organization and undermines buy-in of the corporate direction.  Alternatively, a bottom-up only approach can lead to mission-drift from the strategic plan’s intentions when operational managers are left to interpret the strategy goals on their own.  This is especially true if the plan goals are ambiguous from the outset.

Let’s Walk Through an Example on Bi-Directional Planning

As an example of good bi-directional operations planning, consider this scenario.  During strategic planning, executives set an organizational goal to “reduce COGS by 3%”.  As operational planning is conducted, the director of purchasing sets forth ideas that support the plan goal of reducing COGS by 3% and might set as an objective “to negotiate more favorable supplier rates and payment terms”, or to “aggregate buying channels to increase volumes and cut costs”.

In order for the example above to work, the strategic plan needed to state the plan goal crisply so that its outcome could be measurable.  In this example, that was accomplished.  Vague or ambiguous goal statements are subject for interpretation and should be revised when they are discovered. 

To sum up these two points, the ideal process for operational planning involves senior management working in conjunction with the other layers of management to set operational goals that ensure alignment the enterprise goals.  This sets the direction for funded tactical initiatives that will produce the desired key outcomes of the business.

A Program Planning Example

Let’s assume that the enterprise strategic plan in this example consists of three major key outcomes (strategic goals), each one being well-articulated through a controlled vocabulary of minimize or increase statements. As a result, each strategic goal is measurable and has accompanying metrics that will be tracked for progress through plan governance.

At the operational level, in business unit #1, the planning team (consisting of the company’s Chief Operating Officer, the key business unit leaders and the departmental managers of the unit) would define the necessary changes in business tactics to address each of the plan goals effecting their business operations within the unit. This process is usually done through workshops and is very interactive in terms of discussion and brainstorming. See more detail and examples in “Why We Fail At Strategic Implementation: A Roadmap to Execution”.

These “changes”, once decided upon, would be refined through further planning into initiatives that are comprised of many projects to be completed by the business unit during the plan period. It is at this point that initiatives then need to be grouped into programs in order to fully understand interdependencies, resource sharing, scheduling and timelines. Each program represents a grouping of inter-related projects.

Programs will likely span across more than one business unit or department in terms of impact. There is a one-to-many relationship between each program and the initiatives under that program. Additionally, the strategic initiatives at the business level may fall under more than one program once the operational plan groupings have fully been established and the programs supporting plan goals identified.

Operational Planning Brings Alignment and Accountability & Results

Operational planning is truly the lynchpin of execution, producing plan outcomes while managing constraints on time, money and resources. It is the conduit by which strategy is converted to action and places accountability for goal execution on the leaders, the managers and the doers. Execution of corporate strategy can go awry very quickly in organizations large and small. The frustrating part of implementing strategic goals is that it usually takes far longer to detect that things are off track than it does to get off course in the first place. We all know that misfiring on execution leads to unnecessary costs, wasted management and employee time, committed financial resources that don’t produce the desired outcomes and missed revenue or profit targets. So how do we ensure that strategy execution will be spot on? Superior operational planning is the answer. Unlocking the power of this element of planning allows organizations to accomplish strategy and builds alignment to the strategy into the business framework.

Author: Joe D. Evans, President, Method Frameworks

For permission to reprint this copyrighted article, contact Method Frameworks at articles@methodframeworks.com.

 Join the Strategic Planning Xchange group.

Learn More

Does this leave you curious about Method Frameworks and the effectiveness of your own planning process? Plan4^SM is our proprietary business planning process that involves an integrated set of actions designed to help companies gain sustainable advantage. Download our brochure to learn more about Method Frameworks and our services or download our Plan4 Planning Process Overview.

You can contact Method Frameworks at 877-317-5264 (877-31PLAN4) or follow this link to request a meeting with a planning consultant. Check our articles and blog often at www.methodframeworks.com to get many more planning tips and information about our Plan4 process.

• Back to Articles & Tips
• Email Article