How strategic planning can swing the pendulum to success for MSMEs

SMEs account for the largest business sector in every economy across the world. Thus, subsidies and growth stimulation packages for this sector are a part of every government's national development plan. Not only do they dominate in terms of numbers, but are also the key drivers of economic expansion and employment.

Despite their contributions, SMEs are a victim of high failure and poor performance. It is critical to understand why only some succeed and many fail.

Why is that so? What could be that one underlying element that could tip the scale to more successes and fewer failures?

The answer is STRATEGIC PLANNING.

In-depth studies on SMEs by experts reveal that businesses that engage in strategic planning are more likely to succeed. The findings of these studies suggest that the absence or presence of strategic planning is the crucial driver of corporate success.

The importance of strategic planning, rather flexible strategic planning, is exemplified by the increasingly competitive and volatile markets, which threaten the existence and long term viability of the business. 

What is strategic planning?

Strategic planning, in simple terms, is creating the roadmap to reach the organisation's goals. For alignment and buy-in, all key stakeholders of the company should be part of this activity.

It involves monitoring the environment, formulating the mission, vision, and devising strategies to optimise the organisational effectiveness and improve the market competitiveness.

What does it do for a business?

Strategic planning cushions SMEs from volatile business situations. It enables SMEs to be proactive and vigilant when wading through challenges. It helps the business to factor in elements required for sustainability in a dynamic environment. 

Strategic planning is crucial for getting alignment across the organisation. It helps articulate goals that all see from the same lens and hence, can channel their energies in the right direction.

It helps the management identify the skills and employees they want in the organisation, helping them recruit right.

Clarity of direction enables you to define crisp KRA's, effective prioritisations, effective teamwork, clearer communication, and last but not the least, makes you agile and responsive to market conditions.

All this results in a company that is focused, highly productive and agile. If that be the case, the only destination is SUCCESS.

Never has strategic planning been more critical than it is today for a business.

As business environments are growing exceedingly complex and uncertain, strategic planning methods enable the business to comprehend the current position, map it against where they wish to be, and define how to reach there.

It integrates the company's mission, vision, targets, aspirations, strategic decisions, and resources. 

A flexible strategic plan can play a pivotal role in defining how a business and its employees engage with opportunities and obstacles constructively.

Let’s take a look at some tried-and-tested strategic planning processes:

Scouting the environment

Volatility and turmoil and a highly competitive market mandate the firms to monitor the environment closely. Keeping a tab on the changing industry trends helps create strategies that enable a company to respond effectively to the ever-evolving market demands.

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Vision and mission

Employees come from various walks of life, each bringing a different set of values. To achieve the business goals, one needs all to file in to achieve those goals.

Inclusion of vision, mission and value definition helps provide employees with the framework of where to head and how to conduct themselves along the journey. The organisational principles serve as a general guideline for issue diagnosis and resolution. It also guarantees that the company is forward-thinking and customer-focused.

Establishing a time frame

It is critical to have defined time frames, which is medium and long-term planning. The majority of SMEs have stated that they employ three to four-year strategic plans, implying that their owners/managers have a medium-term outlook for their firms. 

They have found it successful. Setting a time frame keeps the employees and managers on their toes, with a reminder to accomplish pre-set goals. 

Create the right environment with the right people

Business owners are often hesitant to disclose information for fear of it falling into the wrong hands. As a result, to keep cards close to the chest, they hold strategic decisions with a small closed group. 

The challenge here is that the people closest to the clients have the best insight from the client perspective but have no voice on the decision-making table. 

To be a customer-oriented organisation, and in line with the market trends, ways and means need to be devised to allow everyone to voice their learning and concerns. 

Initiatives such as these not only bring forth different perspectives but often offer solutions. More importantly, this increases employee ownership and garners a higher commitment, improving the employee satisfaction score.

Profit-sharing, bonuses, and non-monetary incentives

Employees are motivated by a healthy mix of monetary and non-monetary benefits. 

For enforcing strategy implementation across the organisation, monetary benefits in the form of profit-sharing and performance bonuses can be explored. On the other hand, non-monetary incentives such as rewards and recognitions also need to be factored in.  

The employee motivation programmes demonstrate and reiterate the company's commitment to its strategy and its accomplishment. Performance stimulating rewards encourages employees to align their work and deliverables to the company's larger goals. 

Hence, this is a vital prerequisite for businesses to implement effective strategies. Outcomes are positive when one rewards employees.

Evaluation and monitoring, i.e., Keeping Tabs

One needs to conduct regular progress evaluations and periodic reviews. Communication channels to solicit feedback from team members and give them feedback need to be established. 

To maintain a competitive edge, regulating operations on a routine basis is a must. The underlying principle of the assessment and management strategy execution is to determine whether strategies and objectives are in sync.

This close analysis allows for a business to evaluate deviations, if any, from the predefined standards and identify corrective actions needed.

A balanced scorecard is a method for evaluating a company's entire performance. 

Typically, stakeholder demands and aspirations are of utmost importance at the executive level (financiers, customers, owners, etc.). Subsequently, objectives, operations, and internal processes are defined to fulfil these demands.

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How does one keep track of the progress?

A strategy map provides the answer. 

Strategy maps illustrate how different goals are connected and provide paths for attaining them.

Consider strategic planning to be a process rather than an event.

Companies go through a myriad of cycles. 

Strategic planning is a repeatable process (strategy, budget, scorecard, performance management, action plan) — an exercise that one needs to undertake every year. 

Leaders have to inspire with their vision. Businessmen need to avoid the trap of getting stuck working “in” the business. They have to work “on” the business and keep an eye on the bigger picture. 

Take time every day, reinforce the organisation goal across the company, till every employee recognises it as one of his own.

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