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Published on Thursday, March 05, 2009 - 08:08 PM
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Introduction
Some companies will do strategic planning once and never update, review or modify those plans in the future. The companies who do strategic planning on a regular basis will out perform those that do not plan at all. It is costly to develop the strategies of the organization and not establish some clear directions on how to implement these strategies. Ideally strategies should be supported by clear goals, objectives, cost estimates, resource estimates and project plans that describe how the strategies will be achieved. There are often gaps or disconnects between the strategic plan and the projects that are approved by the company. For example, a high level financial forecast is usually developed to support the strategy. However, after the high level estimates are generated and agreed upon by executive management the financial team will develop budgets to support the agreed upon strategy and objectives. This team will provide their best top down estimate of what it will take to accomplish the objectives of the process. At the end of this phase, funds are allocated but not yet assigned to projects. Developing financial estimates without considering the supporting projects creates gaps and often projects that are on the books without good project management will experience extensive cost and schedule overrunsOften projects are generated that are not tied or aligned with a set of approved strategic objectives. In most cases, the organization has projects that are competing for the same resources and this shortage can contribute to cost and schedule overruns.
The deliverables for the strategic objectives are communicated within the organization to promote a common vision and goals. Management is tasked with defining the specific tactics to meet the strategic plan. Often the strategies communicated are not formally introduced to all stakeholders.
Companies can have hundreds of projects that have no direct linkage to the strategies of the organization. How can we align our projects to meet the organizational strategic objectives and how can we utilize project management to make sure that we develop projects that move the organization toward the goal of accomplishing their strategic objectives?
In this article, we explore some concepts of strategic planning and project management and show how the integration of these management processes will result in a more cohesive and realistic strategic plan. We will explore some concept of strategic planning and project management to see the benefits of integrating these two management processes.
What is Project Management?
The classical definition of “projects� is they are one time, unique efforts that have a fix start and end dates. The goal of project management is to complete the project work and deliver a product or service on time, within budget and at the appropriate scope for the customer. Project management is a profession that has been around since the early days of the Department of Defense.
The best practices of PM were established in the late 80’s by Project Management Institute (PMI) and we have seen the number of certified project management professional grow from a few hundred to over 250,000 today. Project managers have been and are still called on to manage projects in Automotive, Real Estate, Construction, Banking, Research and Development and Sales and almost every industry in our global economy. We will see in this article and other articles in this months edition of allPM.com how project management enhances the strategic planning process of the organization.
What is Strategic Planning?
In a brief Google search, I found about 18 definitions of strategic planning on the web. These definitions, as a whole describes some aspect of strategic planning.
Here are the two definitions of strategic planning that I liked the most:
- “Strategic Planning is a top-down approach concerned with the long-term mission and objectives of an organization, the resources used in achieving those objectives, and the policies and guidelines that govern the acquisition, use, and disposition of those resources. ...”
     www.quantum3.co.za/CI%20Glossary.htm
- “Strategic Planning is a process to determine or re-assess the vision, mission, and goals of an organization and then map out objective (measurable) ways to accomplish the ...”
planning.nmsu.edu/taskforce/glossary.html
The strategic planning process defines what the organization wants to do and how they want to do it. The strategic plans often include the vision, mission and the high level objectives of the firm. Once these are established, the next step would be to describe a plan that will take the firm to the successful completion of those objectives. At this point a sound project management methodology can pay off during strategic planning. Many of the tools, techniques and best practices of project management are used to develop a realistic strategic plan. The value of the process for strategic development and implementation is where project management fits. Project Management can assist the strategic team in planning, defining the supporting tasks, and identifying the critical resources that are needed to accomplish the objective of the strategic plan. So how does the organization go from where they are now to where they need to be to reach the goals established in the early planning process?
A typical set of deliverables for a strategic planning process is a reasonable set of strategic objectives that an organization wishes to support and implement.
Here is a list of strategic objectives that a company can pursue. The objectives are as follows:
1. A bigger market share
2. A higher, more secure industry rank
3. Higher product quality
4. Lower costs relative to key competitors
5. Broader or more attractive product line
6. A stronger reputation with customers
7. Superior customer service
8. Recognition as a leader in technology and/or product innovation
9. Increased ability to compete in international markets
10. Expanded growth opportunities
Source: A.A Thompson Jr. and A.J. Strickland III, Crating and implementing strategy (Chicago: Irwin, 1995), p. 31
These objectives define a high level direction and target for the firm. They provide the overview, motivation and summary of where the firm is going. To accomplish these objectives it may require the firm to engage in one or several projects to support these objectives.
A number of projects may be adopted to meet the strategic objectives. As and example the table below shows two strategic objectives and a set of projects that support each of these objectives.
Strategic Objective:
A BIGGER MARKET SHARE
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Strategic Objective:
SUPERIOR CUSTOMER SERVICE
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Project A:
Introduce New Product
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Project E:
Install new CRM Software
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Project B:
Sale products online
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Project F:
Implement Supply Change Management
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Project C:
Open Office in Asia
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Project G:
Implement 24/7 Call Center
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Project D:
Increase advertising
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Project H:
Train Support Staff
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Assuming each of the projects have been approved through some form of project portfolio management process, these projects will go through the corporate project management methodology that will provide for successful implementation of each project.
Each project listed above should support and be aligned with the strategic objectives. Much of the value of each project has to be realized in the planning phase and the development of the business case.
Why portfolio management and program management are now essential components of the strategic planning process?
The following statement describes the value of using portfolio and program management in strategic planning
“One of the roles of the PMO is to make sure that all projects approved for the pipeline are aligned with strategic objectives. First Energy Corporation created a PMO and the first responsibility for the PMO was to make sure that all IT requests were aligned with strategic objectives. In the first year of using the template for this, one third of all IT projects, or $80 million, was filtered out because of nonalignment.� Kerzner, Advance Project Management.
Why is alignment of project management with business planning a natural formula for success?
Business planning provides a systematic way to accomplish the objectives of the organization. Business planning involves determining our deliverables and providing a roadmap to take us from our current level to a desired level. Here are some parallels between the two:
| The Strategic Planning Process
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Project Management Process
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Address Short and Long Term Phases
Defines Organization Direction
Creates Mission
Determine Values
Establish Prioritize Projects
Supported by Governance
Define the Capital
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Address Projects that have Fix Length
Defines a Plan to get to the d\Direction
Create the Budget
Determine the Resources
Establish the Scope for teh Project
Include Risk Management
Create Schedules
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A strategic planning process is only as good as its implementation. Harold Kerzner has this to say about implementation,
“Implementation translates the formulated plan into policies and procedures for achieving the grand decision and involves all levels of management in moving the organization toward its mission. The process seeks to create a fit between the organization’s formulated goals and its ongoing activities.�
One method that can be used to achieve alignment between the strategies, objectives and the project plan is to create a performance matrix (Figure 1). “This analysis causes us to take a holistic view using a systems approach to the organization and its processes. “Using this approach we formulate performance variables within a performance framework - refer Rummler-Brache (1990)
Figure 1 – Rummeler-Brache’s Performance Matrix
By developing the performance matrix, the organization is able to address the strategic, objectives and the goals at multiple levels.
What is suggested here is that the strategies must be developed at the organizational level, process levels and the activity or performance level. A strategic plan is created at the top level, a supporting departmental strategy is created at the process level and a supporting project plan is created at the activity or performance level.
It is at the activity or performance level where we create a project plan to support the strategy. All goals, strategies and objectives are developed to support the higher levels.
What is the value of project management tools and processes in the development and management of strategic objectives?
There are many areas where project management can assist in the strategic planning, lets look at two of them: Identifying strategic resources and strategic selection of projects.
1. Identifying strategic resources:
“All business have corporate competencies and resources that distinguish them from their competitors. These competencies and resources are usually identified in terms of a company’s strengths and/or weaknesses. Deciding upon what a company �should do� can only be achieved after assessing the strength and weaknesses to determine what the company “can do�. Strengths and weaknesses can be identified at all levels of management�
2. Strategic selection of projects:
“What a company wants to do is not always what it can do. The critical constraint is normally the availability and quality of the critical resources. Companies normally have an abundance of projects they would like to work on but, because of resource limitations, have to develop a prioritization system for the selection of project.� A company needs to develop a process to select the best projects. Many organizations will use a type of portfolio selection process such as the one shown here in Figure 2.
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Figure 2: Project Selection Process
Summary
The strategic and project management planning efforts are subsets of overall good planning. As stated earlier the strategic plan defines what needs to be done and why. The project management process defines how the objectives will be accomplished and what resources will be needed to accomplish the objectives. There are some misconceptions regarding any planning process.
1. Planning that proves to be inaccurate is a waste of time. This is not true because the end result is only one of its purposes.
2. Planning can eliminate change. This is not true, because planning does not eliminate change. Change will happen, no matter what and no matter what managers do
3. Planning reduces flexibility. This is not true because planning implies commitment, but this is a constraint only if manager stop planning after doing it once. Planning is an ongoing activity.
From the book called “Management�, Robbins, p. 213
© 2009 allPM.com
George Bridges, PMP is a senior Consultant for International Institute for Learning. He is a trainer and Senior Consultant for the Business Analysis Certification Program and the Project Management Certification Program for IIL. George has an extensive background in Systems Development and Operations Research. He has participated in analyzing and developing business systems for Major corporations such as Ford Motor Company, Unisys Corporations and later for a large Mid-West Church in the Detroit Area. |
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