strategic management notes

1. Topic Notes: Strategic Planning Process and
the Role of HR
Strategic Planning
Strategic planning is an organization-wide, long-term plan that helps the organization focus on
how to achieve its goals in the future. It involves three basic questions:
 Where is the organization now?
 Where does it want to go from here?
 How will it get there?
Strategic planning connects various organizational functions – operations, sales and marketing,
finance and accounting, R&D, HR – and their activities into a single thread for the achievement
of organizational goals.
Strategic planning helps to identify organizational opportunities and to capitalize on its internal
strengths to avail these opportunities. It helps to better allocate organizational resources to
activities critical in achieving organizational goals. It encourages forward thinking and promotes
a proactive, rather than reactive, culture. Other benefits of strategic planning may include
decisions better aligned to organizational goals: successful change management, and clarity with
regard to departmental and individual roles.
Whereas most organizations have a strategic plan of some sort, the way strategic plans are
developed varies from organization to organization or from one industry to another. The strategic
planning process depends on the complexity of the organization's environment and business, its
size, the nature of the organization's leadership, and the culture of the organization.
The Strategic Planning Process
The strategic planning process is based on the basic problem-solving or decision-making model.
It involves several stages:
1. strategy formulation
2. strategy development
3. strategy implementation, and
4. strategy evaluation
In the first stage, called strategy formulation, the organization's vision and mission statements are
developed and the organization's values are defined. The second stage, called strategy
development, requires a thorough analysis of factors found inside and outside of the
organization. In the third stage, known as strategy implementation, short-term goals are set,

2. action plans are created, resources are allocated to various business activities, and jobs are
defined for employees.
The final stage, called strategy evaluation, involves the assessment and evaluation of strategies
and performance and any necessary modifications needed to ensure the achievement of
organizational goals.
Strategic planning is a cyclical process. The evaluation of the strategy provides feedback to be
used in the process and helps direct any adjustment needed.
Stage 1: Strategy Formulation
In the strategy formulation stage, planners conduct essential preplanning activities that include
decisions about which stakeholders will participate in the process, the schedule and time frame
for completing the plan, and tools and methods to be used in collecting and analyzing data for the
plan. As every organization is unique, an early agreement on these issues can result in a more
accurate and meaningful strategic plan and could prevent costly errors or omissions from being
made later in the process.
Developing organizational vision and mission statements is a key strategic planning activity at
this stage. Organizational vision and mission statements yield the organization's general goals to
which the strategic plan, all employees, and business activities will be geared to achieve.
The vision statement is the leadership team's view of what the organization will look like in the
future. The vision statement must be inspiring and inform its employees, customers, and other
stakeholders what long-range success looks like for the organization.
A mission statement is a bit more specific, and it describes how the organization will achieve its
vision – what activities it intends to pursue. An effective mission statement attempts to answer
questions, such as who the organization is, what it does, and who its customers are.
Organizational values define the organization's standards for conducting business, and set the
standards for employee behavior and conduct. These values should be relatively sustainable, and
do not usually change with changes in product lines or business processes. Organizational values
are at the heart of any organization, though in many organizations they may be informal or
unwritten.
Stage 2: Strategy Development
In the second stage for strategic planning, a scanning and analysis of environment – both internal
and external to the organization – is conducted, long-term organizational goals are established,
and strategies to achieve these goals are determined.
After having developed its vision, mission, and values and conducted its external and internal
environment scanning, the organization is ready to establish its long-term objectives. These are

3. specific, measurable, action-oriented, realistic, and time-based, or SMART, goals that the
organization will seek to achieve in pursuit of its vision and mission in the long-term.
Strategies aim to provide direction as how to achieve the long-term organizational goals.
Strategies at the highest level in the organization, called corporate strategies, deal with questions
such as, What business and markets will the organization compete into? and Is the organization
oriented for growth, stability, or scaling back?
Environmental Scanning and Analysis
An environmental scan and analysis involves considering the present and future factors that will
influence the direction and goals of the organization. An environmental scan yields to key
information about the strategic direction of the organization. This information is valuable input
to the strategic planning process. Determining the external opportunities and threats as part of the
SWOT analysis, and the social, legal, economic, political, and technological information found
through the SLEPT analysis, are vital for external environmental scanning. The organization's
vision, mission, and values, as well as an analysis of the organization's internal strengths and
weaknesses from the SWOT analysis, are part of internal environmental scanning.
SWOT Analysis
A SWOT analysis is a strategic planning tool that helps you to analyze an organization's
strengths, weaknesses, opportunities, and threats. Strengths and weaknesses are factors internal
to the organization and are somewhat under an organization's control. Opportunities and threats
are external environmental factors and mostly beyond an organization's control. A properly
executed SWOT analysis helps the organization take advantage of external opportunities by
leveraging its internal strengths and minimizing its weaknesses and the potential impact of
external threats.
SLEPT Analysis
There are several factors in the external business environment that may affect an organization's
approach to business strategy. Organizational strategists sometimes use a model that categorizes
forces in the external business environment into social, legal, economic, political, and
technological factors. This is commonly referred to as the SLEPT model, and it helps
organizations in gathering information, scanning the external environment, and improving
organizational knowledge of them.
Stage 3: Strategy Implementation
In the third stage of the strategic planning process, the strategic plan is put into action.
Organizational goals are further defined for implementation at the business unit and functional or
departmental levels of the organization. The key activities undertaken at this stage are
 short-term goals are set

4.  action plans are developed
 resources are allocated, and
 employees are motivated
Long-term organizational goals are further broken up to short-term tactical goals. These tactical
goals must be met in order to achieve the organizational level goals. The tactical goals are
shorter (often six months to one year) than the organizational goals and are often concerned with
a business unit or a department. Many organizations adopt a participatory approach in defining
tactical goals by ensuring participation of a larger employee base. Resources are allocated and
employees are motivated to align their efforts to the achievement of organizational goals.
Action Plan and Resource Allocation
Once the business level and departmental goals are defined, they are broken into steps to be
taken by individual employees, teams, departments, or business units. Action plans often are
defined alongside the authority, responsibility, and control structure for the business unit or the
department.
Once the action plans are developed, they need to be followed by allocation of resources for the
accomplishment of the departmental and business level goals. Organizational resources may
include human, financial, physical, and technological resources. The resource allocation should
be consistent with the priorities set by these goals. These priorities also determine how many and
what kind of resources will be required to implement the strategy. The action plan may require
additional employees, subcontracting some part of the departmental tasks to an outside agency,
or the purchase of new technology or new equipment. All these activities involve funds and plans
for cash inflow or outflow. The financial plan for a department, business unit, or organization
over a designated period is called a budget.
Stage 4: Strategy Evaluation
The fourth and final stage in the strategic planning process involves reviewing existing strategies
periodically, measuring performance, and taking corrective actions needed to ensure the
achievement of organizational goals.
The goal of strategy evaluation is to see if strategies are helping the organization achieve its
goals and making adjustments, if needed. A proactive review of your current strategies is called
for when there is a change in the external or internal business environment. Sometimes there is a
change in organizational strengths and weaknesses. Changes in the external business
environment may result in new opportunities and threats. A corrective action is taken by revising
strategies based on a periodic review of the organization's environment.
The organization should also be prepared to respond immediately by adjusting the tactical goals
and action plans if the initial review and resulting measurements are indicating problems in the
performance metrics. Some of these performance metrics may include financial indicators such
as revenues, market share, costs, profitability and margin, return on investment, net income,

5. assets, or other equally important metrics such as customer satisfaction, customer loyalty,
defection, number of complaints, productivity, and defect rate.
Performance measurement involves a desired benchmark for some of these metrics with which
the actual performance is to be compared. When given appropriate benchmarks and means for
measuring the performance strategy, evaluation becomes easier. A negative variance between the
actual performance and with the benchmark indicates a problem and calls for an analysis of the
performance and possibly a corrective action for the existing strategies.
Taking corrective action may require changes in terms of new action plans and allocation of
resources, revising earlier goals or establishing new ones, and even bringing in a new incentive
and reward system to motivate employees to achieve revised goals.
Aligning the HR Function with the Strategic Plan
Strategic planning helps an organization to make better choices in terms of what it needs to do to
achieve its goals and how it should be done. Aligning the HR function with the strategic plan
goes a long way to make sure that the full potential of an organization's human resources is
realized to the company's advantage. Like any other functional strategy, HR strategy is driven by
the vision, mission statement, and values you create for the department to guide HR employees'
tasks. In order to align the HR function with the strategic plan, HR professionals need to
 understand the industry and the business environment
 gain a working knowledge of the roles and processes in the functional areas
 use knowledge of the organization and other functions to fulfill HR's functional mission
 build partnerships and alliances with key individuals inside and outside the organization,
and
 offer insightful suggestions and feedback supported by facts and objective data
HR's key functions are all important to the strategic planning process. In order for HR to fulfill
its primary function of helping the organization maximize the full potential of its employees and
the return on investment of them, HR must become a strategic partner in the strategic planning
and execution. HR can become a full strategic partner in an organization by taking several
actions:
Having greater interaction with the organization
HR must form part of the organization's executive team that develops business strategy. It has
the role of an organization architect, advising on the current status of the organization's human
resources and how these can be used to support the strategic goals.
Highlighting the importance of HR tasks and functions and how it contributes to the
organization's core capabilities
HR acts as an advocate for HR issues by underlining HR tasks and functions and explaining how
these contribute to the organization's core capabilities. At strategic, managerial, and functional

6. levels, HR should seek opportunities to validate its contribution. It should ensure that HR
employees have the skills to implement, carry out, and manage the goals set for the HR
department.
Setting strategic goals for key HR areas and implementing these goals by translating them
into effective HR practices
HR serves the organization's key stakeholders – investors, customers, and employees – by
translating strategic goals into annual performance targets.
HR's Strategic Role
HR professionals must have the skills to make functional strategies and action plans to realize
employee potential and efforts toward meeting organizational goals. HR professionals contribute
to decisions that build on employee strengths to meet corporate goals in several ways.
HR professionals are responsible for devising recruitment and retention plans. Organizations
need solid plans for recruiting and retaining the best-qualified employees. HR professionals have
the qualifications needed to create effective plans.
It's important for an organization to motivate employees and provide opportunities for
continuous development. Developing performance management systems is one way HR
professionals provide this strategic advantage to the organization.
Change management is critical if an organization is going to meet its goals. Leading and
participating in change management, such as re-engineering and restructuring programs, is an
important HR function.
There are always risks, and HR professionals must be alert to possible risks to the organization.
Risk management involves identifying risks and taking steps to mitigate their impact. This means
that organizational processes must be audited to discover areas that are not in compliance or are
exposed to risks. Risk management measures are put in place to nullify adverse impacts of a risk
event.