Strategic Planning

Audrey Kinsella

Public health organizations operate in a dynamic environment that is turbulent and unpredictable. It is necessary for these organizations to be able to develop and implement plans to take advantage of their changing environment. Strategic planning is a management technique commonly used in the private sector and has many benefits that can be applied to the healthcare and public health arenas. Strategic managers have been able to develop successful business plans by taking a proactive approach to the process. The ideal organization is able to take advantage of opportunities, which offer a clear purpose, adequate resources, enthusiasm, and commitment 1. Health care professionals are beginning to formally study the strategic planning concepts and approaches that have led to success in the business sector.

The basic concept in strategic planning is to determine a plan for the organization to undertake in the coming period, based on a vision for the future. An organization prepares a strategic plan, which involves goals for several years in the future. Often, a plan is for 5 years, but it can be for as few as 3 or as many as 20 2.

Strategy can be defined as “the plans and activities developed by an organization in pursuit of its goals and objectives, particularly in regard to positioning itself to meet external environmental demands relative to its competition”3. By offering a roadmap for an organization, strategic planning provides a framework to coordinate efforts and support. Other benefits include improved decision-making and communication, as well as encouraging participation by all members and increasing motivation4. Strategy involves decisions of what should be done by a wide range of individuals in health services organizations and facilities. Planning as a management process leads to the establishment of objectives and helps to give the organization a direction that can exist in the external environment. It is then possible to determine the methods to achieve these objectives.

LEVELS OF STRATEGY

In business, strategy is often addressed as involving several levels5,3. Each level has unique planning responsibilities and goals. The types of decisions being made and how they affect the organization determine the levels. The levels of strategy include (1) corporate strategy, (2) business strategy, and (3) functional strategy. Corporate level strategy focuses on decisions of what type of business the organization should be in and how it should allocate resources. This may include decisions about new services or diversification. For example, whether or not a hospital should get involved in long-term care or home health care. Business level strategy focuses on decisions about how each of these businesses will compete in the market as a provider of a specific service or product. Functional level strategy determines how an organization will operationalize the corporate and business strategies. The effective implementation of any strategy may involve new systems, hiring, training, and the establishment of new relationships. The structure of the organization may no longer be appropriate to implement certain plans.

The most common approaches to strategic planning involve both a strategy formulation process and an implementation process. Formulation of the strategy is deciding what to do and implementation is how to do it. These processes are closely linked but can be examined separately. This chapter will focus primarily on strategy formulation.

STRATEGY FORMULATION

Strategy formulation is an adaptive process used to assess or reassess an organization’s mission and vision, and to develop plans to achieve the organization’s goals and objectives while preserving its mission and purpose5,3. The major variables involved in the strategy formulation process are (1) consensus of mission and vision, (2) environmental assessment (the identification of external opportunity and risk, and internal capabilities and advantages), and (3) setting goals and objectives.

Mission/Vision

A strategic plan should support the organization’s vision or purpose6. A clear mission is important to offer a guiding principle on which to base individual and departmental objectives. The organization’s mission should address questions such as:

What is the organization’s purpose? Why is this important? What will the organization do to fulfill this purpose? How will the organization benefit the community? 1. The mission statement should be specific, but should still allow for a diversity of programs or services to be utilized in accomplishing the vision for the future. For health services organizations, the institution must have a basic philosophy that addresses what are the health needs of the community and which will this organization best meet. Only when these questions are sufficiently answered will it be possible to set objectives and methods by which to implement them. The organization’s mission and vision can then be translated into specific performance goals5. It is important that the mission is clear and in agreement by all employees, donors, managers and those utilizing the services.

Environmental assessment

Strategy formulation is undertaken by individuals for an organization existing in a relationship to a dynamic external environment and an evolving internal environment7 . To make critical strategic decisions, it is essential to gain an understanding of the environment in which the organization operates 8.

By focusing on environmental factors using macroenvironmental analysis or trends assessment, it is possible to understand, anticipate, and respond to external and internal changes as a part of the strategic planning process. The amount of analysis necessary is determined by how much the organization interacts with the external environment. Public health and health care organizations are extremely susceptible to environmental influences9. Analysis of external opportunities and threats is of primary importance in planning for the future of these organizations.

A macroenvironmental analysis is the first step in the strategy formulation process. The focus of the analysis may involve an assessment of a number of areas of the environment including the political, economic, legal, social, and technological. All of these areas could be important in planning strategies for health care organizations. Information should be gathered through a wide variety of sources. Internal sources could include interviews and surveys of employees, administrators, physicians or from reports generated at meetings. External sources of data may include information from patients, suppliers, consultants, newspapers, academic publications, and conferences.

The approach to accomplishing an in-depth analysis of the macroenvironment involves a number of steps9:

1. Scanning macroenvironments for warning signs and possible environmental changes that will affect the organization.

2. Monitoring environments for specific trends and patterns.

3. Forecasting future directions of environmental change.

4. Assessing current and future trends in terms of the affects such changes would have on the organization.

Analysis of trends is especially important in long-range strategic planning, when the objectives will be focused on a point far in the future and not based on current situations 10. Utilizing the information gained in the macroenvironmental analysis can be helpful in strategy formulation for an uncertain future. Tools such as scenario planning can be used to evaluate proposed strategies for different potential futures. Scenario planning involves developing specific strategic alternatives to address different environments which may exist in the future to serve as a foundation for the formal strategic plan11. Through using exercises such as scenario planning, the individuals forming a strategic plan are forced to look not only at the organization in its historical and traditional roles, but also at the role it will have in a changing environment.

The internal environmental assessment should involve an evaluation of the resources available or needed to perform the operations of the organization, the performance of the organization in accomplishing its services, and the process used to provide resources and services1.

After information about the environment has been assessed, target opportunities can be identified for the strategic plan. The opportunities should be prioritized by how consistent they are with the mission statement.

Setting Goals and Objectives

Once the strategic opportunities have been identified and potential threats taken into account, a list of specific steps that will be taken to implement the plan should be formed. Measurable outcomes are described as specific to each objective and must be determined by the mission statement. Responsibilities for implementing the goals and objectives should be established. The strategic plan organized through goals and objectives offers a set of measurable outcomes which can be evaluated. Individuals within the organization with clear goals based on the objectives are able to focus on specific accomplishments.

IMPLEMENTATION

Strategic planning requires time and resources that are precious to the organizations involved in this management technique. Successful implementation of these strategies is a crucial part of the planning process. Strategy implementation involves variables such as organizational structure, division of labor, resource allocation, leadership, control systems, information systems, motivation and incentives, standards and measurement5. Each of these can play an important role in the design’s ability to achieve results.

In addition to the above variables, a number of characteristics of the strategy itself can influence the implementation process. These include complexity, divisibility, reversibility, diversity or consistency, and degree of agreement 3. Complexity refers to the number of different parts to the strategy and the difficulty in achieving them. Divisibility refers to the amount a strategic plan can be broken down into subcomponents making it simpler to implement. Reversibility implies the degree to which the strategic plan can be modified or discontinued if it becomes necessary. Diversity or consistency refers to how consistent the plan is with the current or previous strategic orientation. The more the new strategic plan diverges from the previous structure or strategy, the more difficult it will be to implement. The degree of agreement refers to the acceptance of the strategic plan by key organizational stakeholders. The more support from these key individuals, the more likely the plan will succeed.

PERFORMANCE

The final step in the strategic planning process is evaluating the performance and effectiveness of the plan towards achieving its objectives. By evaluating the progress of the plan, it is possible to determine whether or not changes need to be made to the overall strategy. The plan should be primarily assessed as to whether or not it has achieved its objectives. An assessment may also be made according to 3 basic types of performance indicators: financial, operational, and other strategic indicators5. Financial indicators are broad-based values based on standards or competitive comparisons. Operational indicators rate the efficiency and effectiveness of the organization. This may reflect competitive advantage or position. Other indicators may include public opinion or other more abstract measures.

Strategic planning can offer health care and public health professionals the opportunity to form a much clearer vision of what they are trying to accomplish. The volatile environment in which these organizations must adapt and evolve is the ideal situation for this management process to be utilized. Management in the health fields offers similar challenges to other areas including the accomplishment of the mission, designing goals and objectives, allocation of resources, and performance evaluation. Successful applications of strategic planning in the business sector offer some valuable techniques for health care.

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