The Importance of Corporate Planning
Many small and medium sized businesses do not have a formal Corporate Charter. This document includes the business’s Mission, Vision, Values, and Strategy. Often these business owners think that a corporate charter is only for big companies, but truth be told this document is likely more important for small and medium size companies to ensure the whole team is on the same path driving efficiencies and moving towards the same vision. The Corporate Charter makes decisions easier, outlines resource uses, saves money, increases the opportunities, and drives additional value in the business. It may be the most important thing small and medium businesses get right.
A lot has been written on the topic of corporate planning and strategy which can lead to a lot of confusion around the topic. To add to the confusion the term strategy is used in many different aspects of business and is a term thrown around in general conversations. Becoming clear on the methodology and purpose of corporate planning is the first step in ensuring success in the development of a useful Corporate Charter. While each of these headings could be a topic on their own, here are some brief descriptions to provide context:
1. Mission – defines what the business will and will not do. Essentially the reason the business exists.
2. Vision – provides a view of what the business can and should become if it follows and succeeds in the Mission.
3. Values – the principles that will guide the company to accomplish the mission and realize the vision.
4. Strategy – provides an analysis of the current situation and a plan to move the business towards it’s vision. The outcome of strategy are action items that the team can execute on and measure with milestones.
A map can be used as a good analogy for the importance of corporate planning that everyone will understand. A business is Point A on the map. The corporate vision is the future state of the business and is represented by Point B on the map. If a business does not have a mission it may not get to Point B. It may end up at a different point on the map than where it began, but a corporate charter defines Point B and also the path that will be taken to get to that point. As can be seen on a map there can be many different paths to choose to get from one point on the map to another. These paths are not equal, some take longer, some are rougher, some will not reach the desired end point. Ensuring the business defines the path and the steps along the way is the strategy and can drive huge value within an organization.
A business that has a well thought out Corporate Charter that is used regularly within the business drives a lot of value for the business and ultimately the employees and shareholders. Initially value is driven through increased efficiency within the business. When the leadership team fully understands what they are trying to achieve they will all be “pulling in the same direction” and decisions will be made considering the strategy and end goal.
Additional value is created by decreasing the time spent on decision making. Decisions will become a lot easier to make when there is a clear understanding of the Corporate Charter and less time is spent contemplating new opportunities. However, with that being said the business should not necessarily ignore opportunities outside of their defined charter. If changes are happening within their market they need to understand and make adjustments if necessary. A corporate charter will help the business and leadership team avoid the “chasing shiny idea” syndrome that often exists within organizations who lack a plan. A business can not be everything to everyone. It is just as important to understand what the business will not do as it is to understand what it will do. Again, having a clear understanding of the charter will make decision time easier and more efficient when the team is aligned.
Ultimately planning ahead will create options and opportunities for the organization. Many believe that having a narrow focus will limit the organizations opportunities. However, it has be shown that by providing focus to the business and having a clear understanding of the resource requirements the business will be aware of their surroundings and be prepared to pivot and adjust if needed.
A Corporate Charter also defines clear resource requirements for the organization. Understanding exactly what is needed to achieve the vision ensures the business can assess their current resources and make adjustments ensuring the correct tools are available for the jobs ahead. This can include making staff changes, looking for investment opportunities, or bringing in expertise when needed.
Without a plan how does a business know where it is going? Many business owners rely on inertia to show the path of the organization. While this can be somewhat effective in the startup phase of a business it leads to many inefficiencies and reduces the value of an organization. Begin clear on the What, Why, and How drives value, creates opportunities, and this in turn reduces the stress, workload, and pressure on the business owner and the leadership team.
