The StrategicPlanning Process

WHAT IS STRATEGIC PLANNING?

eople who think of “plan” as a noun tend to write a nice neat document, tuck it into a three-ring binder, and let it gather dust on a bookshelf while they make their day-to-day decisions and

react to events with little or no thought to a long-term direction.

Think of “plan” as a verb instead—something you do all the time, tending to it at regular intervals—a process that never ends—an ongoing part of your proactive approach to the marketplace and to

running your business. The best strategic plans share these attributes.

• Simplicity

• Clarity

• Measurability

EVERY COMPANY HAS A PLAN Every firm has some kind of strategic plan. Some firms document their plans, some don’t. In a company led by a strong entrepreneur, the plan may be in the owner’s head. But that plan is not as effective as it could be: if it were openly shared, everyone would know where the firm was going and could no doubt make a stronger contribution.

WHAT A STRATEGIC PLAN IS, WHAT IT’S NOT A strategic plan is your carefully considered written description of where your firm is going and how you will gain competitive advantage

P

by capitalizing on the unique capabilities of your firm. It accomplishes the following:

• Identifies what you bring to the marketplace to provide value for clients.

• Presents a specific vision of what your firm will look like in the future.

• Establishes measurable firm-wide and operational long-term and interim goals.

• Defines the strategies that will achieve your goals.

• Assigns responsibility and accountability for making it happen.

A strategic plan is not

• A budget

• An operational plan

• A list of tactics

• A one-time event

WHAT CAN STRATEGIC PLANNING DO FOR YOU? A well-managed planning process helps you run your business in several valuable ways. It:

• Lets your employee know where you want to go in the marketplace.

• Determines how you will devise and sell products and services to reach your goals.

• Helps you plan for the resources you’ll need in the future.

• Provides a check against making day-to-day decisions “in the heat of battle” that will throw you off your long-term course.

• Involves your people in setting goals and priorities in such a way as to win their support and act as a motivator.

• Helps create an adaptive organization that can take advantage of unexpected changes, inside or outside the company, without being thrown off balance.

• Helps you make things happen.

• Identifies contradictions between your daily operations and your desired direction.

• Helps to make you a proactive, not reactive, player in the marketplace.

• Provides a framework for continuously asking, and answering, the key questions about who you are and where you’re going.

• Clarifies the firm’s vision of the future, so various members can define their own contributions and reconcile their own goals with those of the firm.

• Provides the foundation for generating specific annual operations plans and financial plans.

HOW FAR AHEAD SHOULD YOU PLAN? It used to be safe to plan for ten years into the future. Hardly any firms do that now; the world is changing too fast. Some firms plan five years

out, some three years, and some two. PSMJ generally recommends a three- to five-year planning horizon. Look at the specific markets you serve. If your markets, your clients, or your clients’ demands are changing very quickly, plan for a shorter time. If you’re in a slow-moving market, you can plan a little further out. Regardless of the time horizon, it is desirable to review or rework your plan every year so you can make the mid-course corrections that will invariably be needed. Also, look at the specific parts of your plan. Some may require longer

time frames than others. For example, the best time to start planning for ownership transition is the day you set up the firm. That’s not realistic for most people, of course. But ownership transition planning

should start at least 10 years before an owner plans to leave the firm. (For detailed information on how to accomplish a change in leadership/ownership, see PSMJ’s Complete Guide to Ownership Transition.)

HOW DO OTHER FIRMS DO THEIR STRATEGIC PLANNING? PSMJ recently performed a survey of 85 design firms who conduct regular strategic planning retreats. The following are the results of that survey.

MEETING LOCATION MEETING DURATION

• OFF SITE 80% • 1 DAY 24%

• IN FIRM’S OFFICE 20% • 2 DAYS 56%

• >2 DAYS 20%

ATTENDEES AT MEETING DAYS OF MEETING

• PRINCIPALS 100% • WORKDAYS 48%

• DEPT. HEADS 52% • WORKDAYS/WEEKEND 40%

• ADMIN MANAGERS 40% • WEEKENDS 12%

• PROJECT MANAGERS 32%

AGENDA FOR MEETING

• STRATEGIC PLAN UPDATE

• MARKETING PLAN

• ANNUAL BUDGET

• ANNUAL BUSINESS PLAN

• TECHNOLOGY PLAN

THE STRATEGIC PLANNING PROCESS As shown in Figure 1.1, strategic planning is a four-step process. Each step leads to the next, with the fourth step leading back to Step 1 in the next scheduled strategic plan update.

Figure 1.1

STEP 1–WHERE ARE WE NOW?

This step is important because you cannot develop a coherent strategy

for the future until everyone has an accurate understanding of the present. In small firms, this step is relatively easy; every principal can easily see the current state of the firm. However, as firms grow, key managers become more removed from parts of the company that they are not directly responsible for.

PSMJ’s Approach to Strategic PlanningPSMJ’s Approach to Strategic Planning

1Where arewe now?

2What do we want

to become?

3What willwe do to

get there?

4How will we assure that it

really happens?

STEP 2–WHAT DO WE WANT TO BECOME?

Most design firm employees have no clue as to the direction of the company they are working for. This is sometimes a result of the company leaders not knowing their direction and sometimes because of the leaders’ inability to articulate their vision. In this step, the firm’s leaders select a specific target date (usually three to five years in the future) and develop a detailed description of the kind of company they want to have by that date. This is not a forecast of what the leaders believe will occur, it is a vision of what they want the future to be. This vision should answer the following kinds of strategic questions:

• What markets will you serve?

• In what proportions?

• At what office locations?

• With how many people?

• How much revenue?

• How profitable?

• What ownership structure?

• Under what kind of leadership?

The answers to the above questions must be quantitative. For example, if

you are a multi-office firm, identify how many people you want to have at each office and, if possible, what types of people they will be. When you have completed your vision statement, ask these questions to assess how well you have developed it:

• Is it specific?

• How rigid is it? Is flexibility included?

• Is it a bold idea of where a firm wants to go?

• Is there a clear message to employees?

• Is it exciting and compelling—for your employee and owner?

• Are the architects of this strategy going to be there long enough to get the rewards or pay the consequences?

Of course, the vision statement must be in synch with market realities. This requires some market research in the form of client interviews,

official projections, and published market forecasts. It also needs to be in synch with what your employees want—if you want their help in achieving the vision.

STEP 3–WHAT WILL WE DO TO GET THERE?

Once you have figured out (1) what kind of company you are now and (2) what kind of company you want to become, the next step is to develop a set of strategies that will begin you down the desired path. These strategies must include:

• Specific activities and deliverables

• The person with overall responsibility for each (even though it

may involve multiple other people)

• The target date for completion

STEP 4–HOW WILL WE ENSURE THAT IT REALLY HAPPENS?

Many otherwise excellent strategic plans have failed because they lacked this step. There must be a defined process for finalizing the plan,

communicating it to the troops and following up on the action items. This step should include a series of regularly scheduled meetings (usually held monthly or quarterly) in which each person responsible

for an action item presents the implementation status of that item to his/her colleagues. And if someone repeatedly fails to meet his/her commitments, the task should be formally abandoned or given to someone else who will do it. This approach imposes considerable accountability to the assignments as a result of peer pressure.

ESTABLISHING THE SCOPE OF YOUR STRATEGIC PLAN PSMJ has developed a model we call our Strategic Planning Wheel© (see Figure 1.2). This model identifies the key arenas that should be addressed in a strategic plan, as described below:

Figure 1.2

The PSMJ Strategic Planning Wheel©

Ownership Transition

Finance Organization

Project DeliveryInformation Technology

Purpose and Culture

Business Model

Marketing and Business DevelopmentHuman

Resources

Leadership Transition

PURPOSE, CULTURE AND BUSINESS MODEL

What’s your business all about? What’s special about it? What specifically are you trying to accomplish? What culture do you have? What culture would you like to have? Are you a niche firm? A commodity firm? Or some of both? What overall business strategy will you adopt?

MARKETING AND BUSINESS DEVELOPMENT

Is there a market for what you want to sell? Who are your clients and potential clients? How do your competitors and potential competitors approach the market? How will you gather market information? How will you sell your products or service?

ORGANIZATION

How are you currently organized? Is that the best structure for what you are trying to do? What kinds of responsibilities should key people have?

PROJECT DELIVERY

How are you delivering your products and services to your clients?

How do you want to deliver them in the future? How are your projects managed? How should they be managed?

INFORMATION TECHNOLOGY

How is your information technology supporting your business strategy? How will it need to change in the future?

FINANCE

Are your financial systems supporting your business strategy? How do your financial results stack up against other similar firms? If they are deficient, what should you do about it?

HUMAN RESOURCES

Will you focus on quantity or quality of your staff? How can you develop a high-performance organization? How will you develop your people to their maximum potential? What will you do about mediocre (or worse) performers? How will you recruit top-notch talent?

LEADERSHIP TRANSITION

What are your criteria for future leaders? How will you develop the next generation of leaders? How will you eventually replace yourself?

OWNERSHIP TRANSITION

What is your philosophy on stock ownership? Will you eventually sell stock internally or externally? How should you value the stock? It takes a great deal of time to successfully answer these questions—far more time than is usually available during a strategic planning retreat.

So prioritize these issues before the meeting in order to identify and deal with the most important ones. PSMJ has developed a self-audit questionnaire for each planning retreat participant. (See the work sheet

at the end of this chapter.) Tally the results to determine your highest priorities, then set the agenda for your retreat.

ESTABLISHING LINKAGE As shown in Figure 1.3, the strategic planning process requires input regarding market needs, the desires of the owners, and the desires of the

employees of the firm. Once the strategic plan has been developed, it must flow down to each business unit in the form of specific business objectives. It must then flow down to form project objectives and, ultimately, must be the basis for the personal performance objectives of each employee.

Figure 1.3

CompanyObjectives

Business UnitObjectives

ProjectObjectives

PersonalObjectives

Personal Objectives = Business Unit Objectives Business Unit Objectives = Company Objectives

MarketNeeds

EmployeeDesires

OwnersDesires

StrategicPlanningProcess

THE IMPORTANCE OF CONSISTENCY Your goals, strategies and actions in each strategic arena must be

consistent with those in each of the others. Your firm will achieve its full potential only when you’re moving in the same direction in all the arenas.

Study the following page, which illustrates goals vs. consistency.

For example:

IF YOUR GOAL IS TO: THIS PRACTICE IS INCONSISTENT:

Be team-based. Reward only top individual performers.

Sell more to existing clients. Reward only those who bring in new clients.

Increase hospital clients. Recruit people with no hospital experience.

Do government work. Promise potential employees top dollar.

Involve employees. Share financial data only with top management.

Focus on growth. Require a single principal to sign all contracts.

Train project managers to sell. Never let a project manger write a proposal.

Say you are performance driven. Don’t fire non performers.

Sell your company for the highest value.

Involve more owners.

Shut it down when you retire. Involve more owners.

Split into multiple companies. Involve more owners.

Have high levels of control. Share lots of information

TO JUMP START YOUR PLANNING PROCESS During your strategic planning session, put a table like the following on flip charts and use it to examine the consistency of your current strategies, or the strategies you propose. Write each of your key strategies in the left-hand column. How should the strategy in each strategic arena play out in the others? See the section earlier in this

chapter on “The Importance of Consistency.”

THIS

STRATEGY

MIGHT PLAY OUT LIKE THIS Marketing

and Business Development

Project Delivery

H/R

Finance

Ownership Transition

Purpose: To be the most innovative designer in the United States for hospitals and health care.

Image study. Decision making autonomy at local level. Studio organization. Investment in technology continuous.

Continuous training for designers. Continuous college recruitment. Strong local managers.

Decentralized autonomy at local level and with PMs.

Opportunity for employee ownership.

Marketing: 50 new clients in next 12 months.

Marketing done from HQ. Authority at local level to commit resources.

Flexibility to reorganize at local level.

Rewards for people who bring in new business.

Decisions made at top.

Project Delivery: Maintain strong central headquarters.

All staff is marketers. Commit-ments made at HQ only.

Departmental organization.

Strong HQ staff who travel a lot.

H/R: Create a strong team atmosphere.

Studio or matrix organization.

Share decision-making. Financial info tightly held. Leadership training for employees.

No opportunity for employee ownership.

Finance: Strong centralized system. Keep info closely held.

Departmental organization.

Share financial info with top staff only.

Decisions made at the top.

Ownership Transition: Maintain ownership with founder.

Flexibility to make financial commitments at local level.

Share financial info widely. No leadership training.

Opportunity for employee ownership.

Note that inconsistencies result when purposes conflict.

FROM THE DESK OF

David Maister M a i s t e r A s s o c i a t e s , I n c

GETTING STARTED

In launching a strategy development process, I hove found two

questions to be of particular value. Posing them either to the

management committee, the practice areas, or (better) to the

partnership at large, I seek answers to these questions:

If you could invest $X million in the next year (above and beyond

your current level of investment) with the goal of improving the

competitiveness of the practice and making its future more

secure, what would you spend it on?

If you could improve your competitiveness by changing one

aspect of the firm-wide management practices and policies

(measurements, reward systems, organization, compensation

policies, selection and appraisal of practice leaders, etc.), what

would you change?

The answers to these questions usually provide an excellent starting

point for the essential debate that is the crux of strategy: How can we

get better at what we do?

SOME PRINCIPLES TO REMEMBER AS YOU BEGIN YOUR PLANNING In this manual, you’ll find many specific suggestions to help you with your strategic plan. But there are a few basic principles to keep in mind.

• Involve as many people as feasible in the planning process. You’ll benefit from their ideas, and they’ll be excited about working toward goals they helped to define.

• Question everything about the way you currently do business.

• Minimize the paperwork. Keep the plan as simple to do and

as easy to grasp as you can.

• Maximize action steps.

• Focus on goals you can measure.

• Follow your passion. When people share a love for their work and a commitment to the values by which they operate, many strategic decisions make themselves.

• Watch for inconsistencies between your operations and your stated purpose.

• As a top manager, demonstrate your total commitment to

following and supporting the on-going planning process.

• Communicate. Share your plans and progress with the whole firm.

AN OUTLINE OF THE PLANNING PROCESS Set aside the time to take the following basic steps. Each of these is discussed in more detail later in this manual.

1. Compile current status information from managers, employees, and/or clients.

2. Decide who should be involved in the planning retreat. 3. Hire an outside facilitator. 4. Schedule two to three days off-site, where you can work

uninterrupted. 5. Before the meeting, have each participant answer, in writing,

the strategic planning questions included in the following six chapters.

6. Hold your meeting; devise your preliminary strategy.

7. Write the plan. 8. Finalize the plan. 9. Communicate it to everyone in the firm.

10. Schedule quarterly sessions during the next year for progress checks and adjustments.

11. After a year, schedule another retreat to repeat the process.

Worksheet 1.1

PSMJ’S MANAGEMENT SELF-AUDIT

Rank the following issues based on the degree to which you believe they constitute a serious problem in your firm (5 is the most serious).

Vision

a. We don’t have a clear, unified vision of where we are heading.

1 2 3 4 5

b. Our employees don’t understand our vision. 1 2 3 4 5

Marketing and Business Development

a. We don’t have a clearly defined marketing plan. 1 2 3 4 5

b. Our project managers and technical staff aren’t effective in bringing in work.

1 2 3 4 5

c. We spend too much money on losing proposals. 1 2 3 4 5

d. We win our share of small jobs, but lose too many big ones.

1 2 3 4 5

e. We often chase the wrong clients. 1 2 3 4 5

f. It costs us a lot to replace lost clients. 1 2 3 4 5

Financial Performance

a. Our clients won’t pay the rates we need to make a decent profit.

1 2 3 4 5

b. We often lose money due to over-budget jobs and uncollectible invoices.

1 2 3 4 5

c. Some “pockets” of our organization consistently blow their budgets.

1 2 3 4 5

d. Our costs for professional liability claims and lawsuits are too high.

1 2 3 4 5

e. Our overhead costs are too high. 1 2 3 4 5

f. We don’t have specific goals and methods in place to reduce these costs.

1 2 3 4 5

g. It takes us too long to collect from our clients. 1 2 3 4 5

Worksheet 1.1 (continued)

PSMJ’S MANAGEMENT SELF-AUDIT (CONTINUED)

Our Project Managers

a. They have inadequate levels of education and experience. 1 2 3 4 5

b. They don’t have a good track record of performance as project managers.

1 2 3 4 5

c. Their attitude isn’t what it should be. 1 2 3 4 5

d. Their knowledge of basic PM skills isn’t as good as it should be.

1 2 3 4 5

e. Their performance isn’t as good as our major competitors’ PMs.

1 2 3 4 5

Project Management Systems

a. We don’t have a consistent, documented approach to managing projects (i.e., it is left up to the discretion of each individual project manager).

1 2 3 4 5

b. We don’t have firm-wide systems for planning projects, controlling costs, keeping clients happy and getting your invoices paid promptly.

1 2 3 4 5

c. Our systems aren’t really effective in improving project performance.

1 2 3 4 5

d. Our systems add too much bureaucracy. 1 2 3 4 5

Information Technology

a. Out IT systems are inadequate. 1 2 3 4 5

b. We spend too much on IT. 1 2 3 4 5

c. Our IT people don’t provide adequate/timely support. 1 2 3 4 5

Quality Management

a. Our firm doesn’t have written quality assurance procedures.

1 2 3 4 5

b. Our procedures aren’t very effective in keeping our clients happy and avoiding professional liability problems.

1 2 3 4 5

c. Our project managers don’t consistently comply with our procedures.

1 2 3 4 5

Worksheet 1.1 (continued)

PSMJ’S MANAGEMENT SELF-AUDIT (CONTINUED)

Senior Management Oversight 1 2 3 4 5

a. Our principals don’t provide regular and consistent oversight of all jobs; they just leave performance up to each individual project manager.

1 2 3 4 5

b. Our senior management oversight isn’t thorough enough on high-risk jobs.

1 2 3 4 5

c. Our principals try to micromanage the PMs who report to them.

1 2 3 4 5

Human Resources Management

a. We can’t find enough good people. 1 2 3 4 5

b. The quality of our people isn’t as good as it should be. 1 2 3 4 5

c. Our staff turnover rate is too high. 1 2 3 4 5

d. We don’t do a good job of culling out poor performers. 1 2 3 4 5

e. Our mix of people is too heavily weighted to highly paid senior staff.

1 2 3 4 5

f. The salaries for our top people are too low compared to our competitors.

1 2 3 4 5

g. Our salaries are too high compared to our major competitors. 1 2 3 4 5

h. We don’t have effective incentive compensation programs in place.

1 2 3 4 5

i. We don’t have a plan for replacing key managers who retire or leave.

1 2 3 4 5

Leadership Development

a. We don’t do as well as we should in identifying new managers.

1 2 3 4 5

b. We need to improve our training of managers. 1 2 3 4 5

c. We need to do a better job of monitoring their performance. 1 2 3 4 5

d. We have no plans to keep our clients if/when key managers leave the firm.

1 2 3 4 5

e. Our leadership development programs aren’t as good as our competitors.

1 2 3 4 5

Worksheet 1.1 (continued)

PSMJ’S MANAGEMENT SELF-AUDIT (CONTINUED)

Ownership Transition a. We have too few owners. 1 2 3 4 5

b. We have too many owners. 1 2 3 4 5

c. Our ownership criteria are not well understood. 1 2 3 4 5

d. We need a better ownership transition plan. 1 2 3 4 5

e. We need a better buy-sell agreement. 1 2 3 4 5

Merger & Acquisition Issues

a. We need to find good firms to acquire. 1 2 3 4 5

b. We need to find a good firm to acquire us. 1 2 3 4 5

c. We need to find a good firm to merge with. 1 2 3 4 5

1 2 3 4 5

Other Issues

a. 1 2 3 4 5

b. 1 2 3 4 5

c. 1 2 3 4 5

d. 1 2 3 4 5

e. 1 2 3 4 5

f. 1 2 3 4 5

g. 1 2 3 4 5

h. 1 2 3 4 5

i. 1 2 3 4 5

j. 1 2 3 4 5

k. 1 2 3 4 5

l. 1 2 3 4 5

m. 1 2 3 4 5

n. 1 2 3 4 5

o. 1 2 3 4 5