Strategic and operational planning

Strategic planning and operational planning are vital to determining an organization’s future. Not to be confused, strategic plans and operational plans have two different functions.  

A strategic plan outlines an organizations long-term mission and goals. They’re grandiose. They’re high-level. They establish a vision. It lays out how the organization plans on meeting these goals and how the organization will measure success.  
Typically, the strategic plan has a longer time horizon, meaning it will outline your goals over the next three-to-five years. The strategic plan is created at the corporate-level by top-level management, like the CFO and CEO. It as serves as the guiding light for business operations and operational plans.  

An operational plan outlines the day-to-day activities of an organization at the project, business unit, functional, or department level. They’re tactical. They’re detailed. They involve action! And they’re typically single-use. Operational plans support the strategic plan by laying out an action plan for a particular goal or project. They can also map out how individual business units or departments will contribute to organizational goals.  
Typically, operational plans have a short-term time horizon, typically a fiscal year. These plans are created by mid-level management and provide specific answers related to execution: who, what, when, where, and how much. Operational plans serve as a roadmap for daily operations.

Operational plans provide a pathway for business units and departments towards meeting the goals established in the strategic plan. Thus, you need to build a strategic plan before operational plans. Strategic plans give operational plans direction and help keep business units, departments and functions working towards a cohesive vision, even if their day-to-day activities and short-term objectives are different.

Goal

The goal of the strategic plan is to lay out the path towards the organization’s vision. It outlines long term vision, mission, objectives — and how everyone in the organization should work together to achieve it. 

The goal of operational planning is to support the strategic plan with day-to-day activities and tactical plans that focus on execution. It supports organizational goals through detailed plans for short-term activities related to a specific department, unit, or function.

Time horizon

Strategic planning is long term, typically three to five years. Operational planning is done on the short-term, typically yearly, quarterly, or monthly. 

Modification and updates

The strategic plan evolves every three to five plus years, with potential for small changes year over year. The operational plan undergoes frequent evaluation and pivots, changing every year, quarter, or month.

Created by

The strategic plan is created by top-tier management, like the CEO, CFO, and other members of the C-Suite. Operational plans are created by mid-level management and department heads. 

Scope

The strategic plan considers the business' external business environment: Competition, long-term market trends, customer needs, and technology innovation. The operational plan considers internal business environment: Technology, KPIs, budget line items, projects, tasks, and the individuals responsible. 

A strategic plan usually consists of: 

The company’s mission and objectives 

 This section lays out why the company exists and its intended direction of growth through: 

• A mission statement 
• A vision statement 
• Company values 

A comprehensive market assessment:

This section lays out the competitive playing field to help identify the company’s potential differentiators, competitive threats, and unique value.

• A SWOT Analysis (Strength, Weakness, Opportunities, Threats)
• Porter’s 5 forces (Competitive rivalry, supplier power, buyer power, Threat of substitution, threat of new entry)
• A PEST Analysis (Political, Economic, Social, Technological, Environment) 

Financial forecasts 

Financial forecasts that lay out the anticipated results and critical metrics like breakeven, ROI, profits, and cost of investment.  

Strategic objectives 

What defines success? Companies need to determine the metrics that matter most to them.  Typically, key performance indicators are determined in four areas: 

• Financial KPIs (profitability, cost management, shareholder value)
• Customer satisfaction (Customer service, value or quality for cost)
• Operational efficiency (performance management, workplace safety)
• People (Employee retention, job satisfaction, company culture) 

Strategic initiatives 

How will the company meet its strategic objectives? This section maps out how the company intends on meeting its KPIs. 

Performance measures, analysis and evaluation 

Did the strategic plan meet its goals and was it successful? This section outlines how success will be measured and all the requisites for evaluation, including specific metrics and frequency of KPIs assessment. 

Because operational planning is broader in scope, there’s no singular recipe for an operational plan. But typically, operational plans will cover: 

1. Goals

   Lay out required tasks, goals, staffing needs, and management processes to ensure that the operational plan furthers a component of the strategic plan.  

2. Timeline

   Calendarize what needs to happen and when. 

3. Requirements
   

   Itemize people, processes, supplies, and technology needed to execute the operational plan. 

4. Parameters
   

   Outline KPIs and markers of success. 

5. Budget
   

   Create a budget that includes all project, task, and activity costs. 

6. Reporting
   

   Determine milestones for evaluation during the execution of the plan.