Strategic Management – A Simple Guide
David King, country leader of the East Coast, is a Newcastle-based CFO with extensive experience in a variety of industries, including manufacturing, industrial, property and professional services. Here at The CFO Centre, we interviewed David and decided to question his knowledge on Strategic Management…
What is the definition of “Strategic Management”?
It’s a process that allows the business owner or manager to clarify their purpose, their goals and their vision, from which a Strategic Plan (sometimes called a Business Plan or Business Strategy) can be formulated and implemented. The on-going monitoring and tweaking of the Plan gives the business the best chance of delivering on the owner’s long-term goals and Vision.
Strategic Management is not about trying to predict the future, there’s no crystal ball! Rather it’s about preparing for the future and knowing the steps the business will have to take to achieve its goals and objectives and to remain competitive.
What is the difference between Strategic Management and Strategic Planning?
Both terms are used interchangeably. I personally prefer the reference ‘Strategic Management’ as it encapsulates the on-going implementation and evaluation process, which is vital, rather than just the planning stage itself.
Strategic Management or Planning answers the key questions:
- Where is the organisation at the moment? (The SWOT analysis – strengths, weaknesses, opportunities and threats – is useful here)
- Where does the owner want to go? (Purpose, Vision and Goals)
- What does the business need to look like to support the above?
- How can the company get to this point? (Consider the long term strategic plan)
Why is Strategic Management important to all business owners?
From my own experience in the business environment, and from the clients we work with, I know how easy it is to get “stuck in the trenches” with the day-to-day operational stuff. Business owners have so many balls to juggle that time and focus for strategic management may never be made.
However this is the reason why strategic management is so important. It enables the business to evolve and strengthen, so the owner and/or managers can focus on the things that really matter and put steps in place to make the business less reliant on them for lots of the “other stuff”. Long-term success rarely happens without sound planning and execution, whether that’s to grow, sell or pass the business to the next generation.
What are the factors which are involved?
There are typically five stages in the Strategic Management process which involve utilising a balanced scorecard:
- Clarify your Purpose, Vision and Goals
- Gather and analyse information – both internal and external
- Formulate a Strategy (and KPIs)
- Implement Your Strategy – Asking questions like what, who or when.
- Monitor and evaluate – remain agile.
Do you have any tips or insights for owners / managers for introducing strategic analysis into their business?
I suggest that an external facilitator is used in the process who can guide the owner / managers, keep them accountable, challenge them, and assist in the formulation of the Strategic Plan. For example, our CFO’s within The CFO Centre assist our clients with the Strategic Management process from which financial forecasts and KPI’s can be set and monitored. We often hear our clients talk of the comfort and motivation that comes from the strategic clarity unlocked by the process!
Whilst it’s a good thing to challenge ourselves and evolve, make sure the Strategic Plan is achievable and realistic with clear action steps and time-frames. Ensure the available resources (people, funding, systems etc) can deliver on the Strategic Plan, or that the Plan includes steps to bolstering the necessary resources.
Monitoring progress against the Strategic Plan, and tweaking the Plan when necessary, is really important. The last thing you want is to see the Plan gather dust on a shelf and not be a key document in the running of the business.
At The CFO Centre we often introduce and chair the monthly management meeting for our clients, covering the strategic, financial and operational matters of the business. Our clients find it an effective way to keep on track and to hear from their part-time CFO as to how the execution of the Strategic Plan translates into financial performance.
Lastly, I encourage business owners and managers to make the time for Strategic Management as it will pay dividends (figuratively and literally). One must be open to the process and enjoy the journey!