Strategic and Tactical Planning & Performance Measurement for Companies

 How do we measure the performance of our companies? The answer depends on what we regard as important in terms of company performance. For some it may be all about the financial performance of the company, for others the level of customer satisfaction achieved, etc. But in essence, if we look at performance in terms of ISO 9001:2015 (quality management system), it is about the ability of the company to remain in business from a financial point of view. Companies are normally focused on making a profit, for the benefit of the owners and for the employees.

To be able to decide on what we need to measure, we must first understand what we want to achieve as a company. This brings is to something that is mentioned several times in ISO 9001:2015, strategic direction. It gives us an indication of what we regard as important, derived from risks and opportunities discovered during the context assessment for the company.

We need to first look at a few terms that is important in this regard:

Mission	The “what?” of the company. It tells us why the company exists, and applies to the long-term, and throughout the company
Goal	The “where to?” of the company. It tells us what we hope to accomplish
Objective	This is also a “where to?” Objectives are much more detailed than goals, using SMART criteria to decide: Specific end goals How they we will measure achievement They need to be achievable They need to be realistic, based on context They are time-bound, there is a date set when they have to be achieved
Critical success factors	“How much?”. These are key indicators for measuring the success of objectives
Strategy	The “How?” How will we achieve our objectives?
Tactics	The ”what?” This is the concrete implementation, the specific actions to be taken - now
Key performance indicators	“How much?” These are indicators to measure the success of the tactics

 

So, when we measure performance, we start from the top. First there is the vision statement. The vision is a mental picture of what the company wants to accomplish or achieve. For example, “to be a successful winery business”, or “to develop an economically active community”. The vision will very much depend on the type of company you have.

The mission statement is a general statement of how the vision will be achieved. It must be an action statement. To help us to formulate it as an action statement, start with the word “to”. For example, “to provide unique and high quality dairy products to the local community”. Note that it contains certain specifics: Type of product, some characteristics (unique, high quality) and intended market.

Everything planned and done in the company needs to be linked to its core values. These are what defines the company in terms of the principles and values its leaders will follow when carrying out the activities of the company. Of course, it gets established throughout the company among all employees. Words like passion, integrity, community, teamwork and vision are often found, but it could be anything that is important to leadership.

Once we have created the statements of vision and mission, as well as the core values, we can develop strategies, goals, objectives and action plans that are needed to activate the mission and to achieve the vision.

Strategies are statements of how we are going to achieve what we need to achieve in our company. It is a unique approach of how we will use the mission to achieve our vision. They are critical to the success of the organization, because that is where we begin outlining a plan for doing something.

We then set goals, which are general statements of what we want to achieve. A goal is a milestone in the process of implementing a strategy. Make sure that goals are focused on the important aspects of implementing the strategy.

Once we have the goals for the company, we set objectives. An objective turns a goals general statement of what is to be accomplished into a specific, quantifiable, time-sensitive statement of what is going to be achieved and when it will be achieved. Objectives are measurable.

To enable us to achieve objectives, we need to establish action plans. These are statements of specific actions or activities that will be used to achieve a goal within the constraints of the objective. State what the goal is, what the objective or objectives are for the achievement of that goal, and then state how it will be achieved (what, who, when and how).

Action plans can be simple statements or full-blown and detailed business plans, including goals and objectives. Sometimes action plans are used to implement an entire strategy. It is then known as strategic planning.

Let us look at 2 examples. In both cases the vision and the mission are the same. But then different approaches are used.

Example 1

• Vision: A vibrant rural economy driven by new and growing businesses.
• Mission: To create new businesses and help existing businesses expand.
• Strategy: Use local leaders with business development skills.
• Goal: Recruit local leaders interested and experienced in business creation.
• Objective: Create a list of twenty individuals by February 1.
• Action Plan: Form a committee to recruit local leaders.
• Identify forty leaders in the area.
• List their qualifications.
• Contact them individually with the expectation that half
• of them will participate.

Example 2

• Vision: A vibrant rural economy driven by new and growing businesses.
• Mission: To create new businesses and help existing businesses expand.
• Strategy: Create successful businesses by focusing on current market opportunities.
• Goal: Identify and analyze market opportunities for possible business ventures.
• Objective: Identify three potential market opportunities by June 1.
• Action Plan: Select and contract with an industry consultant to conduct an industry scan to identify market opportunities.

A good practical example that we can look at is that of a Danish dairy product supplier, Arla Foods. They had what was known as their 2020 strategy, and it looked as follows:

The 2020 strategy: A lifecycle approach or lifecycle management perspective: From cow to consumer.

Strategy focus:

• Sustainable farming: We want to source milk and other agricultural material which have been farmed in a sustainable manner.
• Climate: We want to reduce green house gas emissions throughout the entire supply chain, from cow to consumer.
• Water and energy: We have respect for resources by reducing consumption and changing from fossil to renewable energy sources.
• Zero waste: We want to avoid waste, however when this is not possible we treat waste as a resource to be reused or recycled – we call this zero waste.

Arla’s management system’s main focus:

• Milk composition
• Food safety
• Animal welfare
• Environmental considerations

Examples of Arla’s goals and strategies:

We want to reduce greenhouse gas emissions along the entire supply chain from cow to consumer.

Focus	Goals	Objectives
Transport	Use of sustainable bio-fuels in trucks
	Training drivers to drive in an environmentally friendly way	Increase fuel efficiency by 1% annually
Food production	Use environmentally friendly technology
	Change from fossil to renewable energy sources	Increase energy and water efficiency by 3% annually
Packaging	Minimize the amount of packaging we use
	Increase the use of low-impact materials	Achieve 100% recyclable packaging materials

 Action plans had to be developed to achieve the company’s goals and objectives, and processes had to be developed that included measures for the achievement of objectives.

In terms of knowing what we need to measure the establish the performance levels of the company, we concentrate on the critical success factors (CSF) and their associated key performance indicators (KPI). The CSFs are what we do to achieve the goals of the company. The KPIs are specific indicators established in terms of the CFSs. For example:

• Goal: To be financially successful, we need to be able to keep selling our products to existing customers, while at the same time increasing our market share
• CSF 1: Consistently satisfied customers
• KPIs: Results of customer surveys, Customer retention figures, customer complaints received, market share growth

For each KPI specific objectives are set which are measurable, time-sensitive and focused on the achievement of the CSF, which in turn is focused on achieving the goal that it is associated with.

When setting goals and objectives, use a risk-based approach:

• What must be achieved to mitigate or prevent risk?
• What must be achieved to pursue and realize viable opportunities?

In our customer satisfaction example, the risks are losing customers, due to customers not being consistently satisfied, because of defective products, poor service, high price, etc. The opportunity lies in growing market share by ensuring consistent customer satisfaction, possibly leading to customer referrals, enhanced reputation of the company, etc.

Other examples of CSFs are low cost, energy saving, lower lost time injury rates, employee commitment, etc. In each case develop specific, measurable KPIs.

I hope that this clarifies the importance of strategic and tactical planning, and what is important to measure in terms of organizational performance. This will go a long way in helping us to implement a successful management system in terms of the ISO standards.

Feel free to contact me at koosgouws10@gmail.com, or leave a comment below.

Koos