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The precise form and content of a business plan will vary from organization to organization, to reflect the different economic, market and other environmental contexts within which each organization operates. In addition to this, the form and content of the business plan will depend to an extent, on the process that was used to produce it.
Business plans need to be set in a context. For most organizations, this will be the corporate or strategic plan that describes the key components of the strategic environment in which the organization will be operating.
Departments will have a specific and identifiable part to play in the overall aim and objectives. That role should be described in a statement of purpose: the equivalent of the mission or vision statement that would exist in most commercial forms of organization. The statement of purpose should set out clearly and concisely the essential, distinctive role that the department will play in helping the organization to achieve its aim and objectives.
Business plans are statements of intent relating to some future period of time. The choice of that period of time may be imposed, in that the corporate plan requires that business plans cover a set time period. If this is not the case then the time period should be chosen carefully: there may well be a natural cycle of activity that helps to dictate what is an appropriate period over which to plan.
Associated with the statement of purpose there should be clear and measurable objectives that are SMART:
- Specific
- Measurable
- Achievable
- Realistic
- Time-limited
It should be possible to determine whether or not any particular objective has been achieved. The means by which this is done may be either through some unambiguous measure or by using an indicator, perhaps some surrogate measure that is almost certainly associated with the achievement of the main objective.
Objectives may relate to programs, a set of related activities designed to achieve some objective and often with an identifiable funding stream associated with it, or they may be related to organizational divisions of the department. Each objective should be the responsibility of a named individual. In some cases, it will be necessary to attribute responsibility for the achievement of an objective to more than one individual or, in exceptional cases, to a team or group. There are difficulties associated with this approach however. Objectives held by many are often effectively held by none, and it is all too easy for managers to assume that another individual is taking some action when in fact he/she is not. Where objectives are to be jointly held then, if at all possible, the respective contribution of each individual should be made clear.
All departments operate within an environment that is characterized by variety and uncertainty. The external environment contains the client groups that the department seeks to serve, the other organizations with which it competes to do so, and the general sociological, technological, environmental and political factors that are likely to affect the organization in its mission to meet the needs of its clients.
The business plan should describe the key components of this external environment clearly and concisely, in a way that illustrates easily the likely future development of each component and what this means for the plans of the department. In the most general of terms, future developments in the external environment are likely to result in the appearance of threats to the achievement of the aims and objectives of the department or opportunities that the department might seek to exploit.
Determining the boundary of the department will define the external environment from the internal environment. The internal environment is likely to contain many of the resources that the department will need to achieve its objectives. Analysis of these resources and how they are likely to develop over the period of the business plan ought to result in the identification of strengths that the department will be able to use to help it achieve its objectives, and weaknesses that, if not dealt with, might compromise its ability to do so.
Many organizations produce a summary of the threats and opportunities existing or likely to develop in the external environment, and the strengths and weaknesses associated with the internal environment in the form of a SWOT statement. Good practice in this area would seek to match up the components of the statement, identifying explicitly where strengths allow the exploitation of some opportunity or the countering of some threat: and where weaknesses leave the department vulnerable to an identified threat or unable to exploit some opportunity.
Such a tactic also helps to identify those ‘strengths’ that are not intended to be put to some use in exploiting an opportunity or countering a threat and therefore encourages the department to assess the extent to which they truly are strengths. In a similar vein, weaknesses that do not lead to vulnerability in terms of exposure to threats or inability to exploit opportunities, if correctly diagnosed, might safely be left unmanaged.
Business plans contain at their hearts a description of the range of products and services that the department will produce or deliver and the client groups that it will seek to serve. In appropriate circumstances, these products and services and client groups might each be classified as ‘existing’ and ‘new’, and programs of activity devised accordingly. Given that, in time, all existing products and services are likely to become unwanted and irrelevant and that new client groups are likely to emerge, then it is good practice to plan to direct at least some activity in the department towards identifying and meeting these developments.
Resources
Business plans are achieved through the deployment of resources. In this context, the term resources is used to refer to anything that can be used to help achieve an objective or aim. Some obvious and common resources are:
Less obvious (although often at least as important) resources are:
- image
- experience
- specialist knowledge
Where possible, the cost of resources consumed in the achievement of an objective should be quantified. In practice, this is most easily done for tangible resources and can, in practice, be quite difficult for those resources that have no physical existence, such as expertise.
A business plan should therefore contain a statement of the resources required to achieve the objectives with the cost of acquiring, maintaining or retaining them.
Where the resources to be deployed in the execution of a business plan are other than the most simple and straightforward, managers should consider the production of a resource management plan. This would set out:
- the key resources that are required for effective and efficient implementation of the business plan
- for resources not currently held by the department, an indication of how they are to be acquired and the cost, or the cost of maintaining or retaining those that are already held
- any likely future development of resources held that is necessary for the achievement of the plan and the costs of doing so. In this regard and with specific reference to human resources, the cost of ensuring the appropriate development of knowledge, skills and behaviors should be included here
- the identification of any resources that might be regarded as surplus to requirements, with a statement of what is proposed by way of disposing of such resources, including how much this is likely to cost
Where the deployment of resources is anything other than the most trivial of tasks then a plan for their deployment would be considered good practice.
Risk
Plans are statements of intent with regard to future actions. Given that the future is inherently unpredictable, it is possible that some significant future event will not materialize or a necessary condition may not come about. A robust business plan must therefore deal with the issue of risk.
All business plans depend to some extent or other on assumptions. Managers of departments should take care, therefore, to bring to the surface their own assumptions and those of the other individuals involved in helping them to produce the business plan. Documenting the key assumptions that underpin the plan is also good practice, as is testing each for consistency with assumptions made elsewhere.
Given that it is unlikely that all assumptions and forecasts will come about exactly as predicted in the plan, good practice mandates the use of sensitivity analysis. This essentially asks: “What would happen if the key variables affecting the achievement of objectives changed?”. For example, if the plan contained an assumption about future rates of price increase then you might test out the impact of rates that were slightly less and slightly more than you had assumed. If changing this assumption by, say, 5%, results in a 10% change in performance then you might reasonably conclude that that results are sensitive to changes in this key variable.
Sensitivity analysis might cause you, as the manager of the department, to revisit the plan, perhaps seeking to augment the risk management strategy or to change an objective because it is inherently and unacceptably risky.
Nowadays, most organizations have implemented programs of continuous improvement, however they might be designated in practice. As someone who manages others, you will wish to ensure that as well as having such programs in place for all key client-related and other activities, the same treatment is afforded to the process of business planning itself. You should be continuously striving to find ways to make the process of producing the business plan more effective and efficient each time you do it.
