The Strategic-Planning Process - Business Management for Financial Advisers

Successful strategic planning is a comprehensive exercise. To be effective, it relies on a five-step process:

  1. Develop your strategy and vision.
  2. Define your client and service focus, including the client-service experience.
  3. Evaluate the gaps and determine how to close them.
  4. Execute your plan.
  5. Monitor and measure results.

Steps two through five are updated annually; strategy and vision are reconfirmed periodically.

  • Develop Your Vision

A vision statement is a statement (typically 2-3 sentences simply stated) that gives the reader (and more importantly, the organization) a mental picture of what the organization hopes to become or what the organization hopes to achieve. It is important to understand where an organization is going before it can develop a strategic plan on how to get there. The organizational value of a vision statement is that is gives leadership and employees a shared goal.

To facilitate the visioning session:

  1. Get the visionaries in a room.
  2. Ask them to close their eyes and describe the mental picture they see when the organization has reached its optimal state.
  3. Document thoughts that describe the picture on a flip chart.
  4. Come to agreement on all that is described.
  5. Take some time to wordsmith or play with the wording until it describes the thoughts accurately.

There are nine potential driving forces, or strategy differentiators, influencing the strategic positioning of every business. These strategy differentiators—and what the businesses that use them become known for—include:

strategy differentiators

Although these strategy differentiators are not always mutually exclusive, each requires a different commitment of resources. And more important, the measurable outcome changes depending on which differentiator you choose to invest in. Let’s take the “niche” and the “specialist” as examples. A niche practice is a firm that identifies a named market, then identifies and delivers the products and services relevant to that market. A specialist, on the other hand, offers a particular technical skill or product, then seeks out markets in which that service or product can be sold.

Clearly, if you’re a niche firm, you’ll commit your resources to tracking the needs of your named market and then finding the right products and services to fulfill them. If you’re a specialist, you’ll be investing resources in maintaining the high level of expertise in a specialty, but primarily you’ll be concentrating on finding and developing new markets for that specialty.

An example of a firm with a technical specialty is Kochis Fitz in San Francisco, which built a substantial practice around its expertise in executive stock options. The firm’s strategy has evolved and it has become a more comprehensive wealth-management firm, but this initial strategy was a unique way to differentiate the firm in a very competitive market and helped to launch it successfully.

We find most advisory firms to be generalists. The challenge of being a generalist—especially when there is an opportunity to create a finer focus—is the risk of diluting your resources. Advisers are conditioned to think that diversification is good. They preach this concept to clients all the time, and they apply it in their investment allocation strategy. But why does one diversify?

Diversification is a way to manage risk. It’s a defensive strategy. Are you going to grow your business by deploying only a defensive approach? What will be your offensive strategy, the plan that propels the business forward?

Recent research into the financial-advisory community reveals the degree to which these strategy differentiators are being deployed.

Here are some examples:

strategy differentiators

Strategies deployed

This is just a short list of issues that must be addressed when you pick a strategic differentiator. Each question begs more questions, and each answer requires a review of what resources you need to make the strategy succeed.

The risk, of course, is that you’ll pick the wrong differentiator. That is why so many advisers hedge their strategic bets—again, the idea of diversification. With a long-term vision and a strategy to differentiate your firm in the market, you can confidently commit—and recommit—the resources required to win new clients and prospects while you continue to harvest income from existing clients.

If you can combine a niche with a specialty as a unique proposition, for example, you then can build your marketing and client service efforts around these concepts. With a concentration of effort, you could then pursue a strategy to become dominant in that segment of the market. Sources of referral would begin to recognize you as a specialist in that market and, as a result, put you at the top of the list when the need for expertise in your niche or specialty arises.

Caryn Spain introduced us to the critical concept of perspective. Perspective in this context refers to the points of view you should evaluate before deciding on your strategic positioning. For most advisory firms, there are four critical perspectives:

  • Your marketplace
  • Your competition
  • Your current capabilities
  • Your personal definition of success

Your marketplace:Write down the names of your top twenty to thirty clients—not just the most profitable ones but also those you enjoy most and who also happen to be among your top revenue generators. Then list the characteristics of these clients, such as age, occupation or preoccupation, geography, net worth and income, special interests and special issues, and how they became your client. See if you can identify a common thread in this client base. Your goal is to discover what you need to focus on to replicate this client base many times over.

In addition to trying to find the common thread, you also want to forecast the issues that might affect these types of clients going forward.

Your competition: Write down the names of five to ten of your top competitors. You may be inclined to say, “I don’t have any competition,” but that is obviously an illusion. Face it: if you did not have competition, you would have all the clients in your target market.

So by identifying the top firms serving clients in your market, you begin your competitive market research. Go to their websites; clip their ads; ask their clients and your prospects about them. Your objective is to discover what differentiates them and makes them strong, what compelling strengths.

Your core capabilities:The mantra at industry conferences used to be that advisers should build their businesses around their core competencies. Although this is an important perspective, it’s not the only one. By assessing your strengths and weaknesses, you can identify the gaps in your practice-management and service offerings.

Your personal definition of success: This exercise is an absolute must.

If you’re part of a larger organization such as a bank, CPA firm, insurance company, or even a larger advisory firm, you may have to answer this question about personal definition of success from a larger, firm wide perspective.

Furthermore, having a successful parent also gives firms like Sand Hill greater access to resources to better serve their clients, and that’s the potential payback.

Tying it together:. As you examine your strategic choices from these four perspectives, your priorities begin to take shape. Eventually, you’ll land on a primary strategy that’s supported by the others, and it will serve as your framework for making future business decisions. It will also help you to take some things off the table that have been a distraction, like the addition of new business lines, the addition of staff members who do not really serve your core clients, or even the acceptance of certain clients.

Your strategy for your business, then, will be one that

  • responds to your market
  • differentiates you from your competition
  • builds on your core capabilities
  • fulfills your personal definition of success

A one-dimensional strategy will likely lead you in the wrong direction. But an approach that considers your choices from these four critical perspectives will allow you to have a four-dimensional view of what your business needs to look like in the future. And when you can answer the question “What do I want my business to look like in the future?” you have a vision.

By using a structured strategic-planning process, called the Practice Navigator, with advisers we discovered that many financial advisers have made strategic choices in their practices that could differentiate them. Many of the same advisers, however, have not gotten past the thinking stage into the action stage. As a result, they have not transformed strategic choices into measurable results.

To achieve meaningful results, it’s essential to commit to a primary strategic differentiator. Commitment means your culture, your processes, your product and service offerings, your people, and your financial performance all align with how you’re strategically positioning, or differentiating, your firm in the marketplace.

To make this approach work, the firm needed to define the client-service experience, which included how it was going to report to the clients. The owners also had to make the internal commitment to applying this process to all of their clients to ensure consistency in their process and protocols. Individual jobs were redefined to support it.

Technology was designed to enhance it. The marketing came naturally, as an outgrowth of a clearly defined process, and the firm has become known and differentiated itself in its marketplace for this specialty. This is a good example of strategic positioning.

2. Define Your Focus

A mission statement is like an introductory paragraph: it lets the reader know where the writer is going, and it also shows that the writer knows where he or she is going. Likewise, a mission statement must communicates the essence of an organization to the reader. An organization's ability to articulate its mission indicates its focus and purposefulness. A mission statement typically describes an organization in terms of its:

  • Purpose - why the organization exists, and what it seeks to accomplish
  • Business - the main method or activity through which the organization tries it fulfill this purpose
  • Values - the principles or beliefs that guide an organization's members as they pursue the organization's purpose

Whereas the mission statement summarizes the what, how, and why of an organization's work, a vision statement presents an image of what success will look like. For example, the mission statement of the Support Centers of America is as follows:

The mission of the Support Centers of America is to increase the effectiveness of the nonprofit sector by providing management consulting, training and research. Our guiding principles are: promote client independence, expand cultural proficiency, collaborate with others, ensure our own competence, act as one organization.

We envision an ever increasing global movement to restore and revitalize the quality of life in local communities. The Support Centers of America will be a recognized contributor and leader in that movement.

With mission and vision statements in hand, an organization has taken an important step towards creating a shared, coherent idea of what it is strategically planning for.

At the end of Step Two, a draft mission statement and a draft vision statement is developed.

3. Evaluate the Gaps

Once you've gathered the information you need to determine the current state of your organization and its programs and activities, the next step is to make decisions based on that information. It's the responsibility of the planning team, in consultation with other stakeholders, to establish the organization's strategic direction and priorities; to identify goals and milestones on the road to achieving those priorities; and to craft objectives designed to meet those goals.

In making these decisions, the planning team should keep its focus on the big picture — the things most likely to result in positive change for the organization. Purchasing a boiler for your building or deciding to increase the size of your mailing list by 5 percent a year will not dramatically change or enhance your organization's prospects and are the kinds of operational decisions best left to staffers.

Once an organization has committed to why it exists and what it does, it must take a clear-eyed look at its current situation. Remember, that part of strategic planning, thinking, and management is an awareness of resources and an eye to the future environment, so that an organization can successfully respond to changes in the environment. Situation assessment, therefore, means obtaining current information about the organization's strengths, weaknesses, and performance - information that will highlight the critical issues that the organization faces and that its strategic plan must address.

These could include a variety of primary concerns, such as funding issues, new program opportunities, changing regulations or changing needs in the client population, and so on. The point is to choose the most important issues to address. The Planning Committee should agree on no more than five to ten critical issues around which to organize the strategic plan.

The products of Step Three include: a data base of quality information that can be used to make decisions; and a list of critical issues which demand a response from the organization - the most important issues the organization needs to deal with.

However, in the process of identifying the gap, a before-and-after analysis must occur. This can take several forms. For example, in lean management we perform a Value Stream Map of the current process. Then we create a Value Stream Map of the desired state. The differences between the two define the "gap". Once the gap is defined, a game plan can be developed that will move the organization from its current state toward its desired future state.

Another tool for identifying the gap is a step chart. With the step chart, various "classes" of performance are identified including world-class status. Then, current state and desired future state are noted on the chart. Once again, the difference between the two defines the "gap".

The issue of service quality can be used as an example to illustrate gaps. For this example, there are several gaps that are important to measure. From a service quality perspective, these include:

  1. service quality gap;
  2. management understanding gap;
  3. service design gap;
  4. service delivery gap; and
  5. communication gap.

Teams evolve with time and the effort of all the team members, so you can't expect success at the first meeting. In this section we will talk about tools you will need to use with your team to help it become a success.

Having a direction, establishing goals and developing a strategic plan are necessary for a team to be successful. This section guides you through the strategic-planning process using a S.W.O.T. analysis. Completion of the S.W.O.T. analysis will give the team a better idea of the strengths, weaknesses, opportunities and threats of the operation. These will guide you on your journey to a successful team, and most importantly, an improved dairy operation.

Committees, groups, businesses, organizations, and even communities frequently use S.W.O.T. analyses to determine their capacity to move forward and address advancing issues. You will want to include the S.W.O.T. analysis as an agenda item for your team in the early stages of development, but after the team has had a chance to tour and learn about the operation so they can better address the components of the analysis.

A S.W.O.T. analysis recognizes that there are both internal and external factors that can affect the ability of the farm to be successful.Internal factors are those that can be addressed on the farm. This would include conditions that might be addressed by operating procedures and/or management decisions on the farm. Your team will be most effective in working in this area.

External factors are those over which you have little influence, or are not in a position to change, but which have a direct influence on the success of your business. Probably one of the best examples of this in the dairy industry is the milk price, which is established by federal milk markets and influenced by global policies and economic forces over which the farm has very little control.

Each of the components of the S.W.O.T. analysis is described below. We'll start with the internal components, or those over which the farm has control:

  • S - Strengths: What this farm does best. Generally the farm is doing above average as compared to other farms in these areas. These strengths will be considered for business augmentation. (I.e. A producer that is good with people might consider having more employees that compliment personal weaknesses, thus making the business stronger.)
  • W - Weaknesses: Areas that this farm needs to improve. Generally the farm is below average as compared to other farms in these areas and needs to make some changes to recognize improvement. (I.e. A producer that is challenged in the area of crop production might consider other ways to grow crops and focus on the cow side where they are stronger.)

    Now we'll define the external components, or those over which the farm has little influence:
  • O - Opportunities: What conditions in the industry or the community might the farm use to improve its position?
  • T - Threats: What conditions in the industry or community might undermine the success of the farm operation?

Once the farm team identifies these components, they can then work to develop a strategy so that the farm is in the best position to benefit from or overcome these situations. These tools will assist you and the team coordinator as you guide the team through this process:

4. Execute Your Plan

To ensure that your plan is and remains ever present in the minds of your staff, volunteers, and other stakeholders, your governing committee (or its equivalent) should be tasked with monitoring progress toward the goals and objectives laid out in the plan. Direction-setting and -monitoring are core responsibilities of the board and should not be delegated to a planning team or other entity. Instead, the board as a whole should review the plan at regular intervals and, if necessary, suggest adjustments to keep the organization on track.

So there you have it: Five steps to a more secure future. Just remember as you get ready to plan for your next — or very first — plan, that truly effective strategic planning requires equal measures of leadership, commitment, patience, trust, and the participation of many stakeholders. Beyond that, if you can remember to be rigorously honest about your organization's strengths and weaknesses; include a sufficient amount of implementation detail; and strike a balance between ambition and realism, your chances of success are excellent.

5. Monitor and Measure Results

The gathering of data about the organization’s performance in pursuit of its goals and objectives is considered an essential aspect of good planning and management practice. The planning process is cyclical in nature and the information gathered is fundamentally important to the development of future strategic and operational plans.

Especially in consideration that organizations are continually experiencing staff turnover, there is a need to document the results of strategies to ensure that the organization is able to learn from its mistakes and to repeat strategies that work.

This process of monitoring the organization’s performance is more disciplined and effective when the method of measurement is set as an integral step in the strategic planning process. This is achieved by establishing and using Key Performance Indicators (KPI) to monitor progress. Establishing Key Performance Indicators in advance increases the consciousness of organization personnel to capture record and use information to ensure that desired outcomes are achieved and to steer the organization toward its goals.

Key Performance Indicators therefore are a standard or reference point that allows management to:

  • Measure the actual result of strategies
  • Make comparisons between desired results and actual results.

Monitoring the organization’s progress through Key Performance Indicators may be said to be "Keeping the Score". Unless the score is kept the organization might never be able to judge whether progress has been made or not.


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