Creating an actionable and effective strategic plan

July 2013 » Features » BUSINESS STRATEGIES
Freese and Nichols' year-round planning process engages employees and the helps firm respond to changing market conditions.
Cindy Milrany, CPA

A great deal of time and resources are expended annually on the strategic planning process at Freese and Nichols, Inc. This purposeful approach to doing business is time well spent when the outcome is a plan that engages employees and clearly defines a pathway to long-term success. However, through much of the 20th century, strategic planning was not a top priority for our engineering and architecture firm. The strategic plan was developed by the board of directors and approved by shareholders.

That all changed in the 1990s when the firm experienced its first profit loss ever in the midst of a changing competitive environment. This loss was a necessary wake-up call: We needed a more effective way to plan for the future. While our first plan of action was to return to profitability, we did not revert to our previous habits when we accomplished this goal. As profits returned, the executive team developed a rigorous process to help the company anticipate, understand, and respond to changing market conditions. This year-round planning strategy engages employees from every part of the company, allowing them to have some ownership in the plan and to see more clearly how their specific role fits into the overall success of the company.

Planning for the future
Our strategic planning process is an annual cycle that starts in February with refinement of the process itself and ends in December with the approval of each group's annual operating plan and budget. The planning team consists of the CEO, chief operating officer, chief financial officer, chief marketing officer, division managers, marketing manager, and human resources manager. The overall planning process addresses strategies, actions, and goals for the next three to five years.

In addition to keeping an eye on the immediate issues, it's also important to look out 15 to 20 years to see the big-picture issues. Companies are better able to make the necessary shifts in strategic direction when they are thinking about future revenue sources, demands for new services, and how the company can continue to differentiate itself in the marketplace. In 2006, Freese and Nichols established a Futures Committee to specially address these big-picture issues from a systems perspective.

Data from industry experts, economic forecasts, and client input are all collected and analyzed by the Freese and Nichols Futures Committee before they make any strategic recommendations. Sometimes the information and options are incorporated in the following year's strategic plan, or it may be assigned to an ad hoc committee for further research.

An effective strategic planning process also offers an opportunity for planners to better understand the organization. Knowing the organizational strengths and being able to communicate your competitive position are necessary to help planners establish strategic goals.

While many organizations rely on mission and vision statements alone to communicate this, Freese and Nichols took another step to further explain its competitive position. Inspired by the Jim Collins book, "Good to Great," our senior leaders worked with shareholders to determine what the firm does the very best. The result is summarized through our "hedgehog" concept: "Be the very best at client service, resulting in long-term, mutually beneficial relationships." The hedgehog concept has proven to be a solid foundation on which to build a strong client-oriented culture.

With organizational intent in place, we need to understand the factors impacting our firm. We accomplish this through an external scan, which looks at the economy, demographic trends, emerging technology, and regulatory and legislative trends impacting our organization. We also developed a market scan that highlights industry trends in services, technology, and regulation and legislation to determine the impact these trends will have on our markets.

Writing the plan
Research and assessments can show what is possible; however, each organization must wade through all the possibilities to determine what is practical. The planning team takes the results of the external and market scans, along with performance data, and decides on service and growth strategies. These decisions are made in the context of achieving our vision and leveraging our core competencies.

Incorporating strategies to help the organization improve its internal capabilities will also result in an effective strategic plan. Often, organizational structures and processes must change to support service and growth goals. At Freese and Nichols, a planning team looks at the capabilities of each of the firm's key functions in light of service and growth strategies and past performance to determine which functions need to be strengthened or expanded, as well as the addition of new capabilities.

Once the strategies are identified, it's time to define the specific actions necessary to put those strategies in place. To engage all employees, and create a system of accountability for executing the plan, a simple deployment grid is developed. The grid outlines each strategic action and clearly assigns the tasks to divisions, groups, and individuals for execution.

The final document produced by the strategic planning team does not have to be lengthy. Freese and Nichols uses a template with high-level strategies and actions with assigned action leads. It is accompanied by strategic action sheets that explain the planning team's thinking behind each action, directives about how to proceed, and the expected outcomes.

Putting the plan into action
At Freese and Nichols, strategic actions and goals are first introduced to all managers during an annual strategic planning retreat. These managers then filter the plan to their individual groups through the annual operating planning process. Each group addresses the strategic plan actions that have been deployed to them, as well as actions that are necessary to close gaps in performance for their groups.

One of the most valuable tools in our strategic planning process is development and use of the balanced scorecard to help the firm deploy strategies to all levels of employees. The balanced scorecard was originally designed to track the success of the firm's strategies and actions, but has evolved into a way for the planning team to align employees' goals with the firm's overall performance expectations by:

  • aligning group goals with the firm's goals;
  • aligning individual employee goals with the group's goals; and
  • helping employees see the connection between their personal performance and the firm's performance.

Deployment of strategic actions and goals has validated for senior management the powerful connection between employees' efforts and the success of the strategic plan. Senior managers monitor the effectiveness of this connection through the results of the balanced scorecard and the annual employee opinion survey.

Measuring progress
Another key to the success of strategic planning is monitoring performance. While many companies declare success or failure based solely on financial factors, there are many other ways to measure success. At Freese and Nichols, our key focus areas (KFA) are:

  • growth with financial stability
  • commitment to clients
  • commitment to technical excellence
  • commitment to employees

The balanced scorecard includes key focus indicators for each of the KFAs that help Freese and Nichols measure corporate, group, and individual performance. We review key focus indicator results monthly to measure group performance to corporate goals, and a bimonthly board review of these indicators helps us measure corporate performance to our goals. Bimonthly President's Reviews are held with each group manager to ensure group performance, while the Senior Management Team reviews the status of strategic plan actions quarterly. An annual employee performance review also ensures that employees continue working toward their individual goals, which ultimately drives the success of the company.

Making adjustments
A strategic plan is a working document. If you are collecting data, measuring results, and adjusting to unexpected external and internal factors, there should be continual adjustments. This is one of the most important steps to creating long-term, sustainable change within the organization.

The strategic planning process Freese and Nichols started in the mid-1990s, and improves upon each year, still guides us today and remains a focal point of the firm's overall continuous improvement journey. Our sustained growth and profitability during the recent economic downturn is proof to us that our strategic planning has been effective and is worth the time and effort.

Cindy Milrany, CPA, is the chief financial officer and chief administrative officer at Freese and Nichols, a full-service professional consulting firm serving municipal and county governments, water districts, the U.S. government, higher education, and the energy industry. Milrany leads strategic planning and continuous improvement programs, including Freese and Nichols' successful pursuit of the Malcolm Baldrige National Quality Award, the highest national recognition for performance excellence that any U.S. organization can receive. Freese and Nichols is the first, and only, engineering/architecture firm to receive this recognition. Contact Milrany at 817-735-7246 or at cindy.milrany@freese.com.


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