Strategic vs. Operational Management
Strategic management and operational management are different and equally important aspects of the business. They’re separate, but related processes that work in parallel to each other. Each process can run on its own and in poorly run companies, they sometimes do. In corporate management, both processes were intended to function on a relatively equal basis in order for the company to function well as a whole.
For board directors and others that don’t understand each process well, it can be confusing, causing the dividing lines to become blurred. More importantly, there can be tensions between them and it takes skilled managers to be able to reconcile the differences.
When each process functions well, they will highlight the roles that managers can play in each aspect of the business and they will help leaders to identify strategic opportunities. In this way, board directors and managers bring both processes together with the goal of driving better competition and improved performance.
Leaders that make the mistake of putting too much attention into strategic planning or operations put the whole organization at risk because one process works harder than the other one.
What Is Operational Management?
Operational management is fairly easy to understand if you think about all the various activities that take place in a company and the departments that make up those activities or are a part of those activities. Think of it as the “what” that a company does. Operations departments typically consist of production, logistics, information technology, finance, marketing, sales, and service.
Operations is the current chain of activities that, when completed, leads to the delivery of business objectives. If leaders don’t give enough time and energy to strategic management, operational efficiency is sure to suffer.
What Is Strategic Management?
If operational management is the “what” a company does, strategic management is the “how” it does things.
Strategic management is a process that works to create a path for where the company should be going in the future. It helps the organization find new ways to be competitive. As a result of good strategic planning, companies will ultimately be more competitive in the long run. Your board should always be envisioning what the future competitive space looks like, which will most likely look very different than it does today.
Sound strategic planning outlines specifically what a company needs to do and how they need to do it. In this way, it helps to shape operational planning.
The company’s business strategy defines how the business and its employees need to evolve to achieve long-term success. It’s also important to note that the business strategy should always align closely with the mission statement.
Strategizing moves beyond just thinking and planning. The process of strategizing is inquisitive in nature. Strategy is one reason that diversity among boards and senior managers is so important. When many new sources of perspectives and opinions come together, it draws out new questions for consideration which aids in decision-making. A variety of perspectives is also important for strategizing about the competitive advantage.
A multitude of things go into strategic management. Strategic management requires board directors to figure out how they and other leaders need to act differently and better so they can keep their costs lower than the competition. Through the process of strategizing, boards need to explore new solutions, services, and concepts.
The marketing department is often an inherent part of the strategic plan. In their role, they explore new markets and customers, as well as solutions and concepts on how to attract and engage them.
Along with new strategies will inherently come new threats and opportunities. That requires taking a step back to ensure that risk management teams are working very hard to identify and mitigate new risks. At the same time, it’s just as important to identify new opportunities and decide if it makes sense to act on them.
Strategic planning isn’t an exact science. Often, it requires a degree of experimentation, or trial and error, with new processes and solutions. One of the goals of strategizing is to strive for activities that will successfully shape the future of the organization. In planning for the future, it entails shaping short and long-term growth, although it usually looks a bit harder at long-term growth of three to five years. Long-term growth usually varies substantially from one company to the next.
Strategic planning is also adaptable to make changes or change direction to add value creation for the customers or owners.
Strategic operation planning requires specific skills for board directors. It requires having the insight to imagine the quality and types of products and services that customers will want or need in the future. Boards will need to prepare for future environmental changes or tragedies on a national or global scale. Being responsive will mean taking advantage of new technologies, including board portal technology to improve the functioning of the board.
Strategic planning is forward-thinking from the perspective that it requires responding to possible new substitutes or market disruptions caused by competitors or others. Board directors that are skilled at anticipating future needs before their competitors do will be valuable assets to a company.
While board directors play an important role in strategic vs. operational management, it’s important that everyone in the organization understands the company’s strategic plan and supports it. Strong companies will value the opinions of their employees and other stakeholders on the topic of strategic planning.
Final Thoughts on Strategic vs. Operational Planning
With strategic planning vs. operational planning, the company may need to contribute more time and attention to one process or the other at various times, but overall, the time and attention for each should be fairly equal. It’s too much to expect a perfect balance between them, but it’s a goal that boards and managers should continue to strive for.
A good balance will be recognizable by business growth, talent growth, employment security, increased shareholder value, a greater market share, and improved products and services for customers.