- Posted by: Moonshi Mohsenruddin
- Category: Strategy
What’s the difference between a Strategic Plan vs. an Operational Plan? Do you need both?
After mentoring Start-Ups from pre-revenue to achieving at least S$1M in revenues since 2012 and supporting growing Small-Medium Enterprises (“SMEs”) within the S$1M to S$3M range annual turnover, I observed that many business leaders are stuck in their day to day operational matters and fire-fighting. They asked me these questions frequently:
- How do I scale-up my business?
- I am already so busy working 10 to 15 hours a day, how do I do more?
- I have many issues – from employees, poor ROI in marketing and poor sales, what do I do?
- I am so busy, I am tired all the time and I don’t have time for my health, for my family.
- My employees come to me all the time for small issues to get me make decisions. How do I get them to think?
Does any of the above sounds familiar to you? You are not alone. Thousands of start-ups and SMEs around Asia that I have met since 2012 are feeling the same. For businesses that invested time and energy to plan their business from the ground up before they start, they have achieved the most alignment, growth and success. So, what’s the difference between a Strategic Plan and an Operational Plan?
A Strategic Plan outlines your Core Purpose, Vision, Mission, Core Values and Key Metrics. It outlines:
- Who are you as an organisation?
- What is your Purpose of existence?
- How do you add/create value for your customers?
- What do you do as an organisation?
- What do you everyday to achieve your goals?
- What metrics to observe to track and measure progress?
The plan allows you to clearly communicate to Employees, Customers, Partners, Suppliers, Investors, Board of Directors and Shareholders. From this Strategic Plan, you can build your organisation structure, what type of people to hire, what type of organisation culture to build with high-level goals for the next 3 to 5 years. It also takes into account how you’ll measure those goals, and the major projects you’ll take on to meet them.
An Operational Plan (also known as a work plan) is an outline of what each of your business departments shall focus on for the next financial year. It outlines:
- What type of people to hire, what skills they must have, what is their Job Description, KPIs/OKRs, what are the conditions to get a good fit?
- What to do for marketing to give you the best ROI?
- Who to sell to within the segment of the market?
- How to reach out to them?
- What do you do to acquire them as customers?
- What are the activities that the organisation must perform?
- What metrics to implement to know whether you are achieving it?
- How to measure these metrics?
- Who shall measure these metrics?
In essence, your Strategic Plan communicates your Purpose of existence and your Vision for the future, while your Operational Plan clearly define how you’ll get there on a daily, weekly, quarterly and yearly basis. Both management concepts describe your company’s plans for the future but in different contexts. Below I’ve listed 5 major differences between a Strategic Plan and an Operational Plan that could guide you to ensure you’re using these two concepts the most optimum way.
1. Time Period
2. Goal Focus
The goal of your strategic plan is to outline the company’s long-term Vision and short-term Mission on how all departments should work together to achieve it. The goal of your Operational Plan isn’t just company-focused instead, it is department-focused. There can be overlap between departments, but that’s the exception rather than the rule. Large departments may require multiple operational plans.
Everything starts with a Purpose, Vision, Mission, Core Values and Key Metrics. Many organisations use Vision, Mission, Values but I realised, if your organisation do not have a Core Purpose to define why the organisation exist, the reason for your being and for the team to come together beyond financial gains, very quickly the start-up can lose its steam and it attracts employees whose there just for pay cheque to pay cheque. It is the guiding principle of WHY an organisation exist. WHY should anyone care? WHO will miss the organisation if they are no longer around?
3. Plan Generation
Your organization’s high-level leadership team—the executive team or management team with its Board of Directors and Advisers, for instance—is responsible for creating the Strategic Plan with some of the Managers and junior executives. Once it’s created, the Strategic Plan will be pushed forward by cross-functional teams who work together to ensure the strategy is successful.
Every department should have a leader or team of leaders responsible for creating their operational plan. Although each operational plan is designed for a single department, its successful implementation will lead to organization-wide success.
For example, your marketing team has a set of broad strategic goals. These goals will be broken down into operational plans for marketing activities they use to increase brand awareness, visibility, engagements, website traffic, enquiries from partners, prospects or potential investors. These activities should translate to more qualified leads, sales opportunities and ultimately more revenue for the organisation (both of which could be goals in your strategic plan).
Understanding Strategic Planning vs. Operational Planning doesn’t mean you get to choose between them!
The budget for your Strategic Plan comes from your strategic budget, not your operational budget. Your organization may implement a budget that aligns part of your budget directly to your strategic projects or initiatives. This is a different approach than putting a budget against each of your divisions or departments.
For start-ups who do not have any capital to operate from, a boot-strapping mode is common and often the Founders inject some seed capital, lend the start-up resources or put together a short-term plan to raise capital or sell strategic products within the realm of the business to generate cash flow to pay for the demands of the business as they develop their Strategic Plan and Operational Plan.
The budget for your operational plan comes from your department’s annual budget. If your annual department budget needs to be cut, consider which elements don’t align to your strategic plan and cut those first. For example, if your strategic plan defines a marketing goal of establishing a strong online presence, your trade show budget should receive budget cuts before blog writing does.
When you report on your strategic plan (typically both quarterly and annually), your strategic planning committee or executive team will want to look at how your company is performing on its chosen Key Measures. Depending on the meeting, these discussions should remain fairly high-level so you don’t get bogged down on details.
Your operational reports, on the other hand, outline hundreds of projects or tasks people in the department are working on. Monthly operational reporting meetings give the leadership—and the rest of the department—an indication of each project’s status.
Unlike your Strategic Report, updates on operational projects can be anecdotal or qualitative (as it’s often difficult to quantify actions that aren’t tied to measures). Some organisations have a running text commentary either in an Excel field or a Word document. I usually propose a Management Dashboard built on Google Sheet with 3 colours (Green, Yellow, Red). This commentary is updated weekly and monthly, even if there are no direct measures for that part of the operational plan.
To be a strategy-focused company, you need a Strategic Plan and departmental level Operational Plans. If you’re sighing, groaning and thinking, “Oh great! One more thing I have to start doing……..” hang on!
Most departments have some form of operational work plans in place already. So you shouldn’t need to start from scratch; simply put your current plan into a framework or format that helps you perform at a higher level.
If you are a Start-Up, see this as an opportunity to set the right footing, build the foundation of the idea and develop a strategy-focus business. If your company doesn’t have a fully fleshed-out strategic plan, go read the Scaling Up by Verne Harnish.
By the time you’ve read the book 2 to 3 times and use the Gazelles Growth Tools, you’ll have an agenda ready and a strategy map created—complete with your top-priority goals!
Who should be involved in Strategic Planning?
If you are a Start-Up….
If you are a Founder of a Start-Up with a Purpose, Vision, and Mission but have no clue on how to achieve your vision and what to do to implement the idea and break it down into a day to day operational objectives, assemble your potential team of Founders and have conversations with each other to get to know one another and then identify the Core Values the organisation must have for everyone to be aligned to it to progress together and easily make decisions.
If the team gets excited, sees possibilities and wants to be involved in the Core Purpose and Vision to create this business and impact the world, next you have to set the frequency of interactions over a period of 3 to 6 months to develop the idea, list down hypothesis, do market research, conduct SWOT, PEST and VUCA analysis and then develop your ideal organisational structure, list down each role and responsibilities and implement your proof of concept to test your hypothesis.
If you are a Small-Medium Enterprise…
If you are the Managing Director and/or CEO of your SME and have a few Directors or Senior Managers in your company, you should already have the business going for a few years. You know WHAT you stand for, WHY you exist, WHO are you serving, WHAT your business challenges are (based on the day to day fire-fighting) WHO your competitors are, WHAT are the changes in the market, HOW are the market changing, is your business models obsolete, WHAT innovation can you develop, etc.
With a running Leadership & Management team, identify the Directors and Senior Managers to form this Strategic Planning Committee. Meet them at least once every 2 weeks to develop a conversation around Strategy. Read books about strategy, strategic planning and share ideas during the meetings. Once the team have an idea what Strategic Planning is about, develop a framework, schedule and project plan to keep you committed to developing the Strategic Plan.
If you need professional support to facilitate your Strategic Planning and engage someone to facilitate you through the process, please take note:
- Strategic Planning is a journey. It takes a minimum of 5 to 8 full days to get the team immersed and engaged to create the framework and plans. The process is messy and there could be storming sessions. Stay objective!
- It takes another 8 to 12 hours weekly over a period of 1-month for leaders to review, discuss and enhance the plan and finally, present it to their Managers for them to develop the Operational Plan.
- With the Managers support, an Operational Plan shall be drafted, discussed and reviewed over a period of 1-month, taking at least 12 to 16 hours per week. Throughout the process, the Managers shall also be detailed in their plans using the S.M.A.R.T. model (Specific, Measurable, Attainable, Realistic and Time-bound) to communicate their Operational Plans.
- After the departmental level Operational Plans are developed and submitted by the Managers to the Leaders, the Leadership team shall review and challenge the plan until there is alignment between the Leaders and Managers. This process takes another 8 to 12 hours per week for a period of 4 to 6 weeks.
This is why most businesses schedule their Strategic Planning meetings around Sept/Oct and take an average of 2 to 3 months to develop it with their teams. If your team is experienced, it takes an average of 4 to 6 weeks to complete it as you are aware of the framework, can re-use most of the past materials and plans with some tweaking depending on the market and business situation. If you are a start-up or a growing Small-Medium Enterprise and need support to facilitate and/or develop your strategic plans, contact us for a chat!