This is part 2 of a four-part series on strategic planning. Part 1 is here.
For this part, we will concern ourselves with the second question: where do we want to go? It is in this part where the firm formulates (if it hasn’t done so previously) or re-formulates (as needed) its hierarchy of objectives. This hierarchy of objectives is composed of the following in decreasing scope and time span:
The double-headed arrows between the vision, mission, and goals represent a two-way relationship. From top to bottom, the vision serves as a guide for the mission and, in turn, the mission serves as a guide for the goals. That is, there needs to be alignment in the three. From the bottom up, achievement of each goal contributes to the achievement of the mission. Likewise, the achievement of each area of the mission contributes to the achievement of the corporate vision.
In case you are wondering, the purpose of this activity is so that we will be able to identify the ‘gaps’ of the firm by comparing the corporate objectives with the firm’s present situation. Recall that the firm’s present situation was identified when we answered question #1. Note, however, that dealing with the gaps themselves will not happen until the third part of the strategic planning process. In this second part, we will only concern ourselves with identifying where the firm wants to be in 10 or 20 years.
In the above diagram, we did not include the corporate values as part of the hierarchy. Some firms might choose to leave these values out while others would consider the identification of values very important. At any rate, corporate values are defined as the guiding principles that an organization lives by. These are things that are so important for the whole company such that they cannot be compromised. A few examples of corporate values:
- Workmanship quality;
- Customer service;
- Concern for employees;
- Excellent supplier, creditor, and investor relations;
- Concern for the environment and the Philippines.
The vision statement answers the question “if the organization can be whatever I want it to be, what do I want it to be?” A vision statement is sometimes time-encompassing (although sometimes it can just be one that takes a while to accomplish) and is best when it subsumes the corporate values. Some examples of a corporate vision:
- To be recognized worldwide as a premier provider of quality generators;
- A computer on every desk and in every home (Microsoft)
- To become the most successful and respected lift truck company in the U.S. (Toyota Industrial Equipment)
A mission statement answers the question “what must the organization be, and do, for whom, in order for it to be what it wants to be?” To aid in the development of the company’s mission statement a strategist may employ tools such as Stakeholder Analysis. The use of this tool simply involves identifying the stakeholders of the firm (customers, employees, suppliers, investors, etc.), their expectations of the firm, and what the organisation can do for them. The following example is the mission statement of Deco Machine Shop, Inc. of Davao City, Philippines:
We exist to enhance the success of our customers.
We strive to be recognized worldwide as a premier provider of high-quality machine parts and services. In the process:
- Customers will choose us first because we deliver exactly what they need when they need it;
- People will be proud and eager to work here;
- Suppliers and creditors will be more than willing to assist us with our requirements;
- Investors will view us as an excellent long-term investment choice; and
- The community will see us as a model corporate citizen contributing positively to the nation’s economy, the preservation of the environment, and the overall well-being of the Philippines.
Goals represent the results expected from pursuing certain strategies (David 1998) and must be specific, measurable, attainable, realistic, and time-bound (S.M.A.R.T.). They will become the basis for the annual objectives to be set for each functional area (accounting, marketing, operations, and HR). The time-frame for both corporate-level goals and strategies are normally identical spanning three to five years. The following are sample goals:
- Achieve 80% plant utilisation by 20XX
- Relative to 20XX, Return on Equity (ROE) should be 4 times as much by 20XX
- Relative to 20XX, annual revenues shall be thrice as much by 20XX
As we have seen, answering question #2 involves identifying the firm’s hierarchy of objectives in the form of its vision, mission, and goals. The importance of this activity cannot be stressed enough since these objectives will be used together with the findings of the internal and external assessment to close the firms ‘gaps’ in the third phase of the strategic planning process.
In part 3, we will tackle the third question: “how do we get there?”
David, F. R. 1998. Strategic Management (International Edition). Singapore: Prentice Hall