November 2008
Why Strategic Planning Is Needed in a Declining Economy
Strategic Planning in Good Times – Charting the Course for Growth
In recent years, Win-Win has led numerous clients through strategic planning to help them expand and build their businesses. They've successfully faced challenges such as building capacity to meet growing customer demands, implementing new systems and processes, hiring new senior management to oversee expanding operations, and training employees and managers to handle greater responsibilities. Strategic planning has been an instrumental process in successfully growing their businesses.
Planning in an Economic Downturn — Steering Through Stormy Seas
In a declining economy, of course, we face different organizational challenges, which require very different responses. Nevertheless, these difficult times call for leaders to be intentional, thoughtful, and proactive in their approaches to planning and implementing organizational change, just as in periods of growth and prosperity. Strategic planning has been proven to be an effective tool in an economic downturn. We have helped our clients use strategic planning to successfully cut costs, downsize, and adapt to a shifting marketplace.
The Leadership Imperative – Six Steps to Moving Forward
The same process used to plan strategically for growth and profitability can be utilized for other organizational change needs including preparing for and succeeding in a declining economy. Here are six steps in a change process that can help your organization make good decisions and move forward in the current environment.
- Discovery — Why Change? With data from an updated internal and external assessment build a case for necessary, proactive change. Gather updated information about your organization, the competitive environment, and trends in your business. Examine changes in the economy, your marketplace, and your revenue streams as well as cost trends. The goal in this phase is to create a sense of urgency and a must-change mindset by making the case for proactive change.
- Leadership Development — Build a Guiding Coalition. Nothing is more difficult than making significant cost reductions before external pressures force the changes. Generate maximum motivation and energy in the leadership team to overcome resistance to change, i.e., "organizational inertia." The goal here is to prepare top leaders to plot the course for change, sell it, and mobilize the workforce. Create change "sponsorship" that will lead and maintain the hard work of proactive change.
- Change Strategy — Making the Right Decisions. Create a bold vision and bold goals that drive intelligent cuts — those that reduce costs without undermining productivity, quality, or long-term growth potential. Develop expense-reduction approaches that redesign your business operations in a fundamental and sustainable way. Here we create the overall blueprint and specific action plans for a high performance enterprise, including restructured operations and redefined core business strategy.
- Alignment — Rally your Organization. Engage all levels of your organization in action planning, including setting priorities, defining specific action steps, identifying responsible leaders, and agreeing on timelines. Build consensus and commitment throughout the organization by involving your whole team in every step of the process. Gaining widespread ownership and buy-in to the changes is critical to a successful and sustainable implementation. As cost reductions are implemented it is critical to maintain the morale of employees by empowering them in the changes. In particular, when workforce reductions are required, it is essential to maintain motivation and productivity as well as creativity among employees and managers who remain. How decisions are made, communicated, and implemented has a powerful impact on the organizational culture moving forward.
- Implementation — Tap the Energy and Commitment of Your Team. Working with an engaged workforce and middle management team, launch initiatives capitalizing on a broad array of organizational "levers," including getting short-term wins; eliminating barriers; realigning people, practices, and systems; maximizing involvement; and training people on new systems and processes. A committed team is needed to implement sustained cost-structure improvements, such as:
- More cost-effective materials-handling processes.
- More efficient purchasing processes and contracts.
- Streamlined workflow between departments.
- Combined job functions and cross-training.
- Reduction of redundant work, inefficiencies, and waste.
- Monitoring and Refinement — Sustain the Gains. Monitor the business environment and trends with your customers and stakeholders. Make course corrections based on new information and continually test and rework the change process. The goal is to create a learning organization that can stay innovative and continuously develop new efficiencies and process improvements as a new way of doing business.
Rising to the Challenge — A Call for Leadership
When faced with uncertainty, reduced revenue, or declining sales, what is our natural response? Cut expenses as much as possible, look for new business wherever we can, and brace ourselves for the downturn. However, investing in thoughtful cost reduction with strategic decisions made in a rigorous process will produce larger and more lasting savings.
In a growing business environment strategic planning is fueled by increasing revenues and the excitement of building capacity and expanding the business. In a contracting economy, decisions about where to cut, how to mobilize the workforce to be their best, and positioning for market opportunities is even more critical and requires leaders to step up to the challenge.
A Final Note on Being Proactive
Proactive leadership is essential to organizational success in a contracting economy just as during times of growth. Act before there is a crisis. A strategic planning approach gives you a tool to lead, manage, and minimize the impact of potential problems and even prevent bigger problems in the first place. Regardless of whether revenues decline in your business, you will have maximized profitability and positioned your company for optimal future growth. Find opportunities to cut costs, streamline operations, and eliminate waste before there is a crisis, which could lead to quick, poorly considered decisions and cuts that would be damaging to your business in the long-term.