What is the relationship between strategic planning and operational planning?

If you’ve ever found yourself asking “What’s the difference between strategic and operational plans,” you’re not alone. Strategic business plans usually set long-term, big-picture goals for a company, explains The Hartford’s SmallBiz Ahead blog. Operational plans consist of policies and procedures to meet those strategic goals, according to ClearPoint Strategy. Looking for links between strategic and operational planning helps you create the right organizational setup and manage your staff to meet your goals.

Businesses use a variety of strategies to make and sell products and generate profits. Some companies create demand for their products, while others look to satisfy existing demands in the marketplace. Some companies create bargain brands, looking to profit on volume rather than margins. Other businesses create high-end products and services, selling fewer units, but making profits off their margins. Some businesses might create short-term strategic plans, such as lowering or eliminating debt over the course of one or two years, acquiring a new business, or diversifying into new product or service areas.

One way to link strategic and operational plans is to have different departments work together. For example, the marketing department might want to add new features to a company’s widget, which will allow the company to charge more. The marketing department would work with the production department to see what the company’s cost would be to add this new feature to ensure the company could do it and make a profit.

The sales department might want to create a strategy of selling more products online, which would require an analysis by the IT department to determine if the company could use a cost-effective third-party e-commerce solution or if selling on a site like Amazon or eBay would be more efficient.

If a business wants to increase sales using a strategy of discounts or coupons, that might not work well if the business has created an upscale, high-end brand. Sales and marketing would have to work together on this strategy.

When a business sets a strategic goal, it can affect the company’s finances in several ways. For example, a new company goal might require a one-time cost to purchase new equipment or create a new product. The company might need to borrow money to do this. A new product might cost more to pack and ship, requiring more staff and shrinking margins.

Pursuing a strategic goal of shifting the company’s marketing to digital channels might require the company to hire more expensive social media consultants and influencers and set up social media platforms.

If a company adds a new product, it might buy supplies from a vendor that only offers 15-day payment terms. The company might then sell the new product to wholesalers and retailers that require 30- or 60-day terms. This affects the company’s cash flow. Small-business owners can see the ripple effect of strategic planning by asking, “If so, then what?” scenarios to analyze different types of planning activities.

Some strategic plans require skills some small businesses don’t have. For example, selling direct to consumers requires order-taking, invoicing, payment processing, packing, shipping, and customer support services a business might lack. These areas might need to be outsourced. If a company decides to bring its customer service in-house, staff is needed to run a call center, write phone scripts or create trouble-shooting documents, and train phone reps.

If a small business decides to update its accounting to provide more reports to manage its bigger financial operations, it might not be able to use its current bookkeeper. The job requires someone who knows how to tie a master budget together, coordinating an annual budget, monthly profit-and-loss statements, a balance sheet, cash flow statements, and accounts receivable and payable reports, according to Accounting Tools.

When I think of disguises the first thing that comes to mind is the ending of every episode of Scooby Doo when theyfinally catch the “ghost” only to find out it was the owner of the abandoned amusement park all along. For the first28 minutes, you’re led to believe that ghosts are real, because you saw something that looked and acted like aghost… right up until the big reveal during the last two minutes.

The same can be said for many of the strategic plans I encounter on a regular basis.

In This Article

When a client signs up with AchieveIt, one of the first things we do is begin to discuss their strategic plan. Wetalk about the format, the scope, the history and a variety of important facts about the plan itself. When I hearour clients talk about their strategic plan I say to myself, “Yep, that sounds like a pretty standard plan.”However, once I get my hands on the documentation, I sometimes have my own personal Scooby Doo moment and realize that the strategic plan was an operating plan in disguise.

What’s the Difference Between Strategic and Operational Plans?

Let’s take a step back to define the terms we’re using to ensure we’re on the same page. A strategic plan is developed to help the organization achieve its long-term vision. Conversely, operating plans involve the process of deciding what needs to be done to achieve the tactical objectives of the business.

Operational planning is done to support strategic planning efforts. They’re the action plans, so in a perfect world, the strategic plan comes first, quickly followed by a robust and measurable operating plan. Operating plans should help you run the day-to-day activities in the company as efficiently as possible.

To be clear: this post is not about choosing between an operating plan or a strategic plan because you need both to be successful. My colleague Jonathan Morgan touched on this topic in one of his recent blog posts. What you don’t want is one huge document that blurs the lines between the two very different plans, which results in mediocre performance for both.

How to Tell if Your Operational Plan is Playing Masquerade

You’re probably thinking about your plan right now and wondering if it’s blurring the lines between being strategic or operational. Here are a couple of ways to spot the items that need to be moved out of your strategic plan and into a more focused operational plan.

1. Does your strategic plan have hundreds of items in it?
   • Strategic plans are successful due in large part to the focused effort. It’s nearly impossible to have your organization focus on hundreds of strategic items. If you have too many items to focus effectively, move some of your items into an ideas parking lot or, if the items are tactical and specific, move them into your operational plan.
2. Do the items in your plan have a definitive end date or are they ongoing?
   • A strategic plan is all about creating new capabilities to help your organization leverage future opportunities. As you begin to decide how to create new capabilities you’ll usually develop a variety of projects. Projects by their very definition are temporary with a defined beginning and end. Once that project is done and you’ve created a new capability, hold a graduation ceremony for that item because it needs to move into the operating plan.
     
3. Are the items in your strategic plan reoccurring?
   • Do the items in your strategic plan need to be completed monthly? If so, get them into your operating plan. Items like this are usually the result of solid strategic plan execution but once again, they’ve graduated into a different plan.

Accomplish Your Strategic and Operational Goals

Friends don’t let their friend’s strategic plan become an operating plan in disguise. Your homework assignment is to go and review your strategic planning documents. If you encounter any of the symptoms I’ve outlined above, please let us know and we’d be happy to help. To learn more about how AchieveIt can help you accomplish both your strategic and operational goals, click here.

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Planning is done keeping in mind the vision, mission, goals, and objectives of the enterprise. It also means thinking in advance and to know what we need to do in the future in order to fulfill business objectives. Planning occurring at a corporate level is called Strategic Planning, and planning process that takes place at the functional level is called operational planning. Though this is just a small picture, in this article, we shall brief you about not only its meaning but also look at what makes Strategic Planning and Operational Planning different from each other.

Definition of Strategic Planning

It is a planning process that’s undertaken by the top-level management with a view to decide where the organization wants to reach. It involves an analytical process that examines the micro and macro environment of business. The process is used to define the vision, ambitions of the company and set priorities to make a way that will help the company to achieve its goal.

This sort of planning is not just made for a department or unit, but it covers the entire organization. Strategic planning helps in determining the factors of the internal and external environment that influences the organization directly.

Definition of Operational Planning

Operational planning involves a process that determines the daily activities of the business. The planning is done in order to assist strategic planning to meet the organizational goals. In this, short run objectives of the company are determined, and the means to meet those objectives is also discovered in the process.

Mid-level management performs the operational planning functions. It includes planning regular business activities and operations for a shorter duration. Under this, the organization is divided into various departments, units, and division for which planning is done individually and is aligned with strategic planning to meet the vision of the organization.

Strategic and Operational Planning: Key Differences

The main points of difference between Strategic Planning and Operational Planning are discussed in the table made below.

In the next segment, we have discussed these differences in detail.

Difference between Strategic and Operational Planning in detail

Strategic planning is the establishment of the direction for an organization, determining its objectives and formulating the strategies that it is required to follow in order to achieve its vision. Strategic planning involves a general guideline for the management to follow to accomplish the objectives of the organization.

On the other hand, operational planning is done to present a guide to people about the routine tasks that they require to do. It involves short term activities that are to be achieved by employees. It, in turn, helps to meet the larger objective of the organization.

Strategic planning focuses on long term objectives, missions, and vision of the organization and the manner in which different departments should work with each other in order to achieve them. Operational planning is focused on planning on the operations of a business unit.

As stated above, strategic planning is long lasting than operational planning. Strategic planning is done keeping in mind long term, but the objectives of operational planning is to plan for everyday business activities of the organization.

Top notch management is involved in strategic planning but in case of operational planning, it is the responsibility of mid-level management.

Strategic planning has a greater scope as it pertains to the overall organization. On the flip side, operational planning is done for a specific business having a narrow scope.

Once the strategic plans are developed, they are kept the same for longer duration however, operational plans are frequently changed.

How to start Strategic Planning?

Given the value it provides to your organization, you can consider involving both Strategic Planning and Operational Planning.

Starting with the strategic planning, the following steps can help:

The creation of strategic plan is usually an activity for your senior leadership. Therefore have them to kick off the plan and get inputs from the rest of the organization to help in identifying right strategic priorities.

SWOT stands for Strengths, Weakness, Opportunity and Threats. Conducting SWOT analysis[1] can help you know what should go inside the strategic plan.

By knowing the mission and vision of your organization, develop goals that are specific, measurable, achievable, and realistic.

Develop ways to measure your progress as an organization towards goals in your strategic plan.

Pen down your plan and decide how many times will you visit it.

• Share it with your organization

Ensure sharing the plan with departments in order to help them develop operational plans.

Once this process is fulfilled, individual teams can create operational plans based on strategy that’s laid out. Every team or department should be having operational tactics to stay on target. 

Conclusion

Strategic planning and operational planning are two planning processes that has different objectives, but despite that, it is worth noting that the two processes are linked to each other, and it should be developed in a way that they complement each other. Operational planning has to be aligned with the strategic plan of the organization. This will help your organization to perform better in the long run.

Read our article: What is the Process for Strategic Planning Services?