Laying the Foundation for Success
What’s the importance behind establishing a strategic management process model? More importantly, why is strategic management such an important part of a company’s overall success? Well, for one thing, the strategic management process model lays the groundwork for strategic planning. It’s the adoption of these strategic plans by management that sets the stage for a company being able to link its objectives and goals to company wide resources.
Without an all encompassing strategic plan, many companies simply go day to day, putting out one fire after another. Management not only needs the tools necessary to put plans to actions, but must also be given the foundation to take charge of the company’s future by adopting company wide strategies that reduce costs, grow business, and improve a company’s bottom line. So, where to get started?
1. Start With a Well Defined Mission Statement:
A well-defined mission statement is the initial first step. It’s that foundation that provides management with its modus operandi. It declares a company’s intent to its management and employees, its customers and the market it services. It defines the intent of the company by using a well crafted statement to outline its purpose. For instance, a company may use its mission statement to declare how it will “become the definitive market leader in wireless & satellite communications”.
2. Establish a Set of Company Wide Core Values:
When a company wants to establish its value assertions and make it clear what it expects from itself as an organization, as well as its managers and employees, it establishes a set of company wide core values. In some cases, companies establish a list of 5 or even 10 core values. The intention is to expand somewhat on the mission statement by declaring how the company will go about achieving its overall strategic plan. Core values can easily be considered a company’s declaration of conduct. It establishes the acceptable norms and company wide approach about how it conducts business.
3. Establish Goals and Objectives for the Entire Organization:
Many companies ignore the first two steps and jump right into defining their goals and objectives. Never allow this to happen. Company wide goals and objectives must be aligned with the overall purpose and strategic plan of the company. Otherwise it lacks focus and can lead to contradictory and conflicting goals where one department’s measure of success is entirely different from another. Conflicting goals and objectives between internal departments lead to waste, confusion and in some cases, higher costs. While some companies use either a goal or an objective and combine them, there is a difference. The goal is the ultimate end result while the objectives can be seen as those periods of reflection.
- Understanding Goals & Objectives: This is where a company provides incentives to begin its separate strategic planning initiatives. What are the goals of the company that will help it “become the definitive market leader in wireless & satellite communications”? Objectives can be seen as the company’s benchmarks. It’s these benchmarks that will be used to determine if the company is on the right path, or if it must change course.
How Are Goals & Objectives Determined? Goals can be as short as a quarter, and as long as several years. In fact, it’s not uncommon for companies to have a single goal over a given time frame with separate objectives listed as the company’s benchmarks.
Linking Goals to Objectives: Tying objectives to goals is essential for success. For instance, a company may decide that its goal is to attain $15 million in sales within 5 years. Its objectives might include growing sales by 3% quarter over quarter, reducing inventory costs by 6% a year, and growing its market share by 4% year over year. It’s the successful completion of these objectives that are essential to attaining the $15 million in sales goal.
4. Link Strategies to Goals and Objectives:
Determining the individual strategies to accomplish these goals and objectives is nowhere near as difficult as it may seem. In most cases, the difficulty lies in not knowing where to start or how to approach the process. Referring to the last bullet point above, what are the strategies that the company could use to achieve each of those individual objectives in order to attain its goal of $15 million in sales within 5 years? We’ll break down each and provide examples of some simple strategies to adopt.
How will the company increase its sales 3% quarter over quarter and grow its market share 4% yearly? Well, a good strategy to increase sales and grow market share may be to speed up new product development by introducing more products. It might involve lowering the cost of finding and keeping customers. It could mean the company needs to better incentivize customer loyalty with reward programs, discounts and benefit programs.
How will the company reduce inventory costs by 6% year over year? In this case, it could involve reducing damage and obsolescence on parts. It might also include lowering month to month holding costs by immediately liquidating slow moving stock. It could include better contractual agreements on supply with vendors. There are a myriad of strategies to use in both of these instances.
5. Link Company Resources to Strategies
Finding the most cost efficient method to accomplish these objectives is of paramount importance. Before a company seeks outside help, it must first exhaust all of its internal resources. Therefore, the question then becomes what resources does the company have to accomplish these objectives? Is a sales professional’s territory achieving higher returns than others and is there something to be learned from that individual’s approach? Perhaps this can be used to increase the sales and market share objective. Are there some customers the company has ignored that hold the key to more sales? What resources does the company have to speed up its product development initiatives? Linking a company’s existing resources to its strategies is a cost- efficient way to accomplish objectives.
A strategic management process model must provide the framework for management and employees to work side by side towards a common goal. When a company takes the time to properly establish its mission statement, and its core values, it allows the entire company to have one cohesive and all inclusive approach to strategic planning. The goal to increase sales to 15 million is just one part of the company’s strategic plan to eventually becoming a market leader. Increasing sales, market share and reducing costs are all a part of that plan.