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White paper: Get a Plan

2022 strategic and operational planning.

​​‍Click here for a PDF version of our white paper.


In this white paper you will learn:

  • How to build a strategic plan
  • How to operationalize your plan
  • How to optimize resources to fulfill your plan


"An effective strategic plan helps leaders improve the focus and responsiveness of planning activities critical to achieving their long-term strategy. Leaders responsible for functional strategy can use strategic frameworks to focus their teams on what’s most material." 
—Gartner

Strategic planning has never been more important. With flux in the economy, uncertainty in taxes, and COVID variant concerns, setting a plan with purpose, goals, and timelines is critical. Equally important is how you get it done. Pairing annual operational planning to support a comprehensive strategic plan is the formula for success.



Strategic planning

A strategic plan is a multi-year plan that describes the company’s mission, vision and priorities over the time period of the plan. Its purpose is to make sure that company leadership and operational plans all support the same goals.

Flexibility is important here, as the strategic plan will evolve as the company grows in revenue, people, and complexity. While the set direction is set over three to five years, it is still a best practice to review on an annual basis.



Why do strategic planning?

Every company struggles with prioritizing goals. The strategic plan dictates a path forward for the organization; at the base level, it’s simple: Where do you want to go and how will you get there?

The strategic plan facilitates conversation, collaboration and alignment to the company’s leadership and needs to be communicated to the entire organization for complete transparency and alignment.

The process of creating the plan should be insightful – both internally and externally. As an organization, you should be aware of market trends and competitive threats; a SWOT (strengths, weaknesses, opportunities and threats) analysis is a particularly helpful tool at this juncture. 



Strategic planning models

There are several models for developing a strategic plan.  Some of the more popular approaches are V2MOM, OKR, EOS, and MBO. They are all effective in their own way; each determines the company vision/goal, methods, measures, etc.  Here’s a snapshot of some of the most popular and effective models.



V2MOM

The V2MOM operational model was developed by Salesforce; Marc Benioff calls it “critical to our success.”

Over the past 21 years, we’ve grown Salesforce from a four-person company to one with more than 50,000 employees,” Benioff explains, “I’ve always thought our biggest strength is how we’ve maintained alignment while growing quickly. Success depends on constant communication and complete alignment.”

V2MOM stands for: Vision, Values, Methods, Obstacles, and Measures. Orchid Black Managing Partner Jim Barnish has seen great success with V2MOM. “It’s great for companies—especially software companies—that struggle with communication, transparency and alignment at all levels. V2MOM is a great framework to ensure the company, functional, and individual goals are all well-aligned, documented and available for the full team.”

The V2MOM model focuses on five essential questions:

  1. Vision — what do you want to achieve?
  2. Values — what’s important to you?
  3. Methods — how do you get it?
  4. Obstacles — what is preventing you from being successful?
  5. Measures — how do you know you have it?

 

The V2MOM model leverages the modern software development model: In the last 15 years, software has transitioned to a continuous development and deployment process. V2MOM does the same, being updated by various team members as plans, goals, and priorities change. Benioff describes it as “a living and breathing document.” This flexibility sparks deep dialogue and creativity, leading to constant optimization of decision-making throughout the year.

 

Objectives and Key Results (OKR)

OKR is a model that can be effective for high-growth companies that are already well-aligned.

OKRs match an objective—a significant, concrete, clearly defined goal—and three to five key results—measurable criteria used to track the goal.

In a recent article on What Matters, Ryan Panchadsaram notes that “Key results should be measurable, either on a zero to 100 percent scale or with any numerical value (e.g. dollar amount or percentage) that can be used by planners and decision makers to determine whether those involved in working towards the key result have been successful. There should be no opportunity for "gray area" when defining a key result.”

Andrew Grove is typically considered the father of OKR. He introduced it to Intel during his tenure there. John Doerr of Kleiner Perkins, who worked with Grove, then took the model to Google, where it became a mainstay of their culture. Google co-founder Larry Page notes that “OKRs have helped lead us to 10x growth, many times over. They’ve helped make our crazily bold mission of 'organizing the world’s information' perhaps even achievable. They've kept me and the rest of the company on time and on track when it mattered the most.”3 


Entrepreneurial Operating System (EOS)

EOS is targeted for non-software companies with under 100 employees.

This simple set of basic, practical tools focuses on strengthening six key components of the business: Vision, People, Data, Issues, Process, and Traction. In each, EOS analyzes the root causes of problems to produce change.

The EOS framework helps define priorities, responsibilities and measurements for success, all to deliver consistent results. As the name implies, EOS works in any entrepreneurial company – across all industries and business models.


Management by Objectives (MBO)

MBO is ideal for later stage companies where the primary challenge is misaligned company goals, incentive plans, or performance reviews. The term Management by Objectives was first used by Peter F. Drucker in his 1954 book entitled The Practice of Management.

This management model improves performance by clearly defining objectives that are agreed to by both management and employees. Investopedia notes that “having a say in goal setting and action plans encourages participation and commitment among employees, as well as aligning objectives across the organization.”

The goal is to implement a management information system, where objectives can easily be compared to performance. This system improves motivation and commitment and allows for better communication.



The problem with strategic plans: resource capacity

All strategic planning models or approaches have common elements--objectives or goals, actions, and results or measures. Each of these models can be a valuable  framework for your strategic planning. No matter what approach is utilized, however, you have to consider resource capacity.

Howard Joyce
is an Orchid Black Managing Partner who specializes in strategic and operational planning. In his experience, the focus on resources is paramount: “I can’t tell you how many companies approach their strategic plans without regard to their resources. This is a critical factor— because a company's resources are not infinite.

Setting strategic goals is charting a path to a future state of where the organization wants to be—it’s a process where an organization is naturally ‘ambitious.’  Where you can lose your way is when these ‘ambitions’ get out of hand and achieving your strategic goals becomes unattainable.   Lack of resource capacity is usually the problem. 

Resource capacity for an enterprise company (e.g. SalesForce and V2MOM), may not matter much, as they have large balance sheets, lots of employees, and structural/organizational support. 

“Obviously, smaller organizations have fewer people,” explains Joyce. “In my experience, these companies don’t fully acknowledge the limits of their capacity and therefore create plans with unreal expectations. And the worst thing you can do to a company is set a plan that is not attainable. It affects your employee culture—and your ability to execute.”

To be effective, any strategic planning process should consider how their goal objectives can be executed operationally. This means taking a multi-year strategic plan and integrating it with an annual operational plan. An operational plan should detail the financial and human capital requirements that will be required to realize your strategic goals. This will probably result in some iterative cycles to your strategic plan.  But in the end, you will have a much better chance of success when you have a realistic view of your resources.



Operational planning

While the strategic plan covers three to five years, the operational plan is an annual exercise. The operational plan is highly tactical and describes what activities or initiatives will be undertaken, how much they will cost, how they will be measured and who is responsible for execution.

The activities and initiatives detailed in the operational plan must support the goals that are in the strategic plan—this is a key test to ensure that there is overall organizational alignment.

Finally, the operational plan should be integrated with the annual budget and the headcount plan, capturing all operational expenses and resource effort allocation.



Why do operational planning?

Simply put, an operational plan ensures the success of the strategic plan. Resources—financial, labor, time—are finite, and the operational plan can clearly dictate what will be done, when it will happen, who is responsible, what it will cost and what the benefits will be gained.

The operational plan also ensures that executive leadership is aligned on the financial/time investment that will be undertaken in the plan year, as well as the benefits that will be achieved. A summary of the plan should be socialized throughout the company to gain full alignment.

Finally, rigorous progress measurement is critical to success: every initiative should be measured on a monthly or quarterly basis through completion. The review of each initiative should be thorough and adjustments made if necessary.



Creating an operationally integrated strategic plan

To create an operationally integrated strategic plan, let’s begin with a look at the strategic plan components.



Strategic plan components

Our approach to strategic planning specifies three levels of granularity, beginning with goals—the company’s high level aspirations for the Plan period. Next are elements—statements of action or position that further define the material elements of the goals. Finally, goal drivers define the high-level initiatives that must be executed in order to successfully achieve the goal elements.

An example would be: 

  • Strategic goal: Aggressive market expansion.
  • Goal elements: Target SaaS revenue, acquire for scale, develop differentiated solutions, establish a reseller channel.
  • Goal drivers: Cloud solutions focus, acquire a platform company, develop predictive analytics, pilot channel relationships with value added resellers.

 

“Simply put, it’s a decomposition of the strategic goal,” explains Joyce, “It’s defining the elements required to reach the goal, and what are the tactical drivers that bring those elements to fruition.”

Goal Element Drivers

 

Once your strategic plan is defined with your goals and their associated elements and drivers, we can move to the operational plan.

 

 Operational plan components

First, operational plans feature initiatives. These should be actionable, measurable, and tied to a strategic driver. Attached to each initiative is the responsible party and an estimate of the investment required. The investment can be financial spend or resource effort. 

Also included are assumptions (which incorporate any dependencies on the operational initiatives), a schedule or timeline for each initiative, as well as measures of success. These success measures can be quantitative, qualitative or both.

 

How the Strategic Plan & Operational Plan Go Together


Building the operational plan is a team effort

Defining the operational initiatives is something that ideally should be done at the departmental or team level because successfully completing them will rely on more than one group’s efforts. 

Strategic goals are decomposed (goal - elements - drivers) to identify all of the components that will be required to accomplish the goal.  Operational initiatives in support of the drivers will spawn different initiatives for multiple departments in the organization (human resources, legal, product, finance, etc).  Some of these initiatives can be run in parallel and some may be dependent on one or the other(s).  

As operational Initiatives are defined, it is important to fully vet the components:

  • Actions: What specifically are we doing? In what order? 
  • Responsible Party:  Who owns the initiative and who will be accountable for execution? 
  • Investment: What investments are required?  Are they financial or human capital? If it is human capital, who specifically?
  • Assumptions: What assumptions did we take into account?  What are the dependencies?
  • Timeline: When will we start?  When will we be finished?
  • Measures of Success: How will measure success?  How will we measure progress along the way?


The department teams or groups whose contributions are required to realize the success of the plan are the best source of information on what will be required.  They will know whether the required actions will fall into their normal day-to-day responsibilities or whether they will demand extraordinary effort. It is important at this stage to probe deeply on resource capacity.  

A common mistake in developing operational initiatives is to underestimate the time component of a company’s human capital resources. Too often, actions are assigned to an internal team or individual that will overload their capacity.  Leaders need to be cognizant of the day-to-day responsibilities, other special projects (or operational initiatives) and even vacation time. Not understanding your resource capacity will result in overload and creates risk of poor execution or failure.

Properly vetting the initiatives is an iterative process. As operational initiatives are reviewed, the organization needs to determine how they connect to the strategic goal and their impact.  Investment required (especially resource capacity) is a critical component. Lastly, sequencing (dependencies and timeline to complete) should be understood. All of this information will illuminate what your organization can complete in the plan year - and it may change your strategic plan.


The last mile:  Integrating your operational plan to the budget

Once your operational plan is complete, it should be integrated into your annual budget and headcount plan. Steve Horwitz, Orchid Black Co-Founding Managing Partner, notes that ”an annual budget typically comprises the mathematical assumptions based on historical performance and forecast of the financial performance of a business or organization.  If you have a clear understanding of the resources required to drive the operational plan, the company will know when financial spend will be required or when new headcount will need to be added to the team.  Integrating these elements into the budget along with the associated assumptions will give a clear picture of expense impact and timing.”


Plan execution: Measure, measure, measure

Structured, rigorous review is essential for both plans. Operational initiatives should be reviewed monthly by the execution teams and quarterly by company executives. Progress measures put in place for each initiative should be reviewed along with associated assumptions. This will ensure that adjustments or course correction can be made in a timely manner.

Your strategic plan should also go under an annual review.  How much progress did we make with our operational plan? Are our strategic goals still as relevant or do we need to adjust?  What initiatives will we need for next year?   



Orchid Black’s conclusion

“Maybe the most important starting point is that strategic plan goals should be aspirational, but attainable,” explains Joyce, “They don’t necessarily have to be complex, in fact you should simplify it as much as possible.”

Which is not to say the planning process is simple. In fact, it’s difficult—but the good news is you get better and better every time you do it.  With repetition and rigor to a planning process, your company will establish a culture to continuously improve and grow. 

Properly executing an operational plan will build inclusivity and alignment in the organization.  Bringing in the leaders of your key departments into the planning process by sharing the  strategic plan - and then asking them to figure out if/how/what they need to do to realize the plan will have a powerful effect on the organization. 

Lastly, don’t overlook resource capacity.  Financial capital required is easy to understand since it is easily quantifiable and you know how much you can spend. The operational plan should clearly identify the human capital and the time required to execute your plan and is key to being successful. 

About the Author

Orchid Black is a boutique advisory of former CEOs, CROs, CMOs, strategy execs, and board members. We are accomplished operators with an investor mindset and deep M&A experience.  

Like an orchid, a company’s maximum value emerges from cultivating growth. Orchid Black’s unique business model not only accelerates value, but aligns our compensation with our partners' success. We invest together, betting on a collective vision, using shared skills and expertise.

If you would like to learn more please visit our
website or contact: grow@orchid.black.