PERFORMANCE MANAGEMENT
&
Strategic planning
Strategic Planning
Strategic Planning is a systematic process of finding
out what goals the organization can achieve in future.
It is managerial systematic process by which the
organization develops and measures its competencies
so that they can implicitly fit the organization’s
objectives, skills and resources and also the varying
opportunities.
The ultimate purpose of strategic planning is to design
the organization’s products, services and
communication in such a manner that the organization
is able to achieve its targeted profit and growth.
Nature of Strategic planning
Balance: Strategic planning is not just concerned with
financial decision making but also with operational and
human resources activities
Flexibility: Strategic planning is flexible in nature i.e. can be
changes and modified
Manageability: Strategic planning involves framing of
performance measures against the set objectives. It also
notifies the level of objectives and addresses the performance
issues and manages the resources required
Prioritizations: When there are multiple action plans then the
organization highlights the priority areas
Practicality: Strategic planning defines the plans which the
organization can implement and some plans which the
organization would like to implement in future.
Nature of Strategic planning
Sustainability: The organization sets pre-determined
time duration to attain the performance gaps and take
remedial measures for the same.
Effective Usage: The strategic plan aims to bring about
the optimum utilization of the firm’s resources and
capabilities among the various options available in the
firm’s product and market options.
Futuristic planning: Planning prepares the company to
face future scenario and also makes the company able to
define its future plans.
Accountability: Assigned responsibility related to the
completion of tasks.
Purpose of Strategic planning
Clearly define the purpose of the organization and to establish
realistic goals and objectives consistent with the mission in a
defined timeframe within the organization’s capacity for
implementation
Ensure that the most effective use is made of organization’s
resources by focusing the resources on the key priorities
Analyze the internal business culture and evaluates its impact
on the company’s performance.
Recognize the impact the changing business environment is
having on the company and affect the needed changes in
direction
Become aware of the company’s potential in light of its
strengths and weaknesses
May bring about needed change in the direction of the company
Purpose of Strategic planning
Growth can be accelerated and improves
Gain control of operational problems
Develop better communication
Provides a roadmap to show where the company is going
and how to get there
Develop better internal coordination of activities
Develop a frame of reference for budgets and short range
operating plans
Process of Strategic Planning
Mission & Objectives
Environment Scanning
Strategy Formulation
Strategy Implementation
Evaluation and control
Mission & Objectives
The company’s mission is defined by the mission
statement which also consists of predefined values,
purpose of firm and its goals and objectives which
guide the whole organization.
The top management frames the financial and
strategic objectives of the firm based on the vision.
Financial objectives include sales targets, profit
targets and growth targets. The strategic objectives
pertain to the firm’s market position including the
market share, company’s goodwill.
Environment Scanning
The main elements of environmental scanning are:
i. Internal analysis of the company
ii. Analysis of firm’s industry
iii. Analysis of external environment
SWOT analysis is the technique which is used to identify
the strengths, weaknesses, opportunities and threats. The
internal analysis is done to assess the firm’s strengths and
weaknesses, whereas external analysis identifies the
opportunities and threats to the firm. The industry
analysis uses Porter’s five forces framework which
examines the following features mainly; entry barriers,
bargaining power of suppliers and customers, threat of
substitute products and industry rivalry.
Strategy Formulation
After environmental scanning process the
organization requires to match its internal
strengths with the potential opportunities existing
in the external environment.
At the same time it also requires to reduce its
weaknesses and threats present in the external
environment. In order to earn profit the firm
should develop competitive advantage against its
rivals which can be based on cost or differentiation.
Strategy Implementation
Once the firm decides upon a strategy it has to
implement the same.
The strategy implementation comprises of
programs, budgets and procedures. For
implementing the strategy, organization needs
to utilize its resources effectively and also
motivate employees to achieve the targeted
goals.
Evaluation and control
The implementation of the strategy has to be
monitored at regular intervals along with necessary
adjustments required.
It involves following steps:
Define parameters to be measured
Define target values for those parameters
Perform measurements
Compare measured results with predefined standard
Make necessary changes
Importance of strategic planning
Roadmap for developing the operating budget:
Technique for management expertise
Mechanism to force managers to think long term
Helps in aligning managers as per organizational
goals
Framework for short run actions
Relationship between Strategic planning &
Performance Management
Performance management is really about setting and
achieving goals at the employee level, and identifying and
fixing barriers related to achieving those goals.
But where do the goals come from?
That's where strategic planning comes in.
There exists a crucial linkage between Performance
management and strategic planning
Performance management deals with the settlement and
achievement of goals at the level of an employee, besides
elimination of various hindrances to the achievement of
desired performance. Strategic planning forms an important
part of performance management.
In order to be effective, a firm’s performance
management system must be based on its strategic
plans and objectives. Moreover attitude, performance
and improvement plans of all employees must be based
on organizational and departmental goals and
objectives. With such linkage between performance
and corporate objectives, organizations can earn
improved returns from performance management
systems.
Recent study including 338 organization in 42
countries found performance management is the 3rd
most important factor affecting success of a strategic
plan.
