Strategic Planning in Difficult Times

Why It’s Important to Create Meaningful and Reachable Goals

Let’s start off with three simple questions. Do you think business planning is important? Do you have a business plan? If you answered no to question two, you are not alone. Today there are still too few agencies (less than 10 percent) that have good written plans. One final question: 3. What is your business strategy? It is imperative that you know the answer to this last question. Strategic business plans are essential to proper agency management and are now often necessary to receive preferred status with carriers.

In these poor economic times and continued softening pricing, it is critical that you have a plan for riding these storms. There has never been such a hard combination of factors affecting our world and only the strong will indeed survive.

The successful implementation of a business plan lies in knowing the answers to three important questions:

• Where is the agency today?
• Where does agency management want the firm to go tomorrow?
• How can it get there with the resources available?

Strategic planning owes its development from the military. It is the science or art of long range planning and directing large-scale operations. Tactics on the other hand relate to the specific use or deployment of resources to meet a short-term objective. Too often business plans contain only tactics. An effective business plan should be based on a strategic plan.

Annual Planning Meeting

An annual meeting of key managers and agency owners should be held preferably off premises. A retreat-type atmosphere is the most effective. At this meeting, the planning team will develop the mission statement, map out the agency’s strategy and sketch out the formal business plan.

It may be beneficial, at least for the first time, to have a third party expert (such as a consultant) attend or moderate the planning meeting. The consultant can help keep the ideas flowing and keep the meeting on track. Above all, the consultant can offer expertise on what works in other firms. The advantage a third party has is the ability to look at the agency objectively from the outside.

An agency’s strategic direction is the big picture or the vision needed to guide the firm along the way. The best way to start the process is to create a mission statement. The agency’s mission statement is a clear and specific summary that describes the firm’s purpose. This exercise is a crucial first step to map out the direction of the firm’s future and assist in the planning process.

The next step is to determine the current status of the agency. Owners and key employees need to look within the firm – a self-assessment of the agency and its resources including an inventory of strengths and weaknesses. This allows the planning team members to create meaningful and reachable goals using appropriate tactics. Team members need to evaluate the strengths and weaknesses in any of the nine primary areas below:

1. Profit
2. Growth/Business Development
3. Personnel
4. Management and Organization
5. Compensation
6. Accounts Receivable/Money
7. Management
8. Markets
9. Accounts/Book of Business
10. Workflow

It is best to only pick two or three areas to focus on so there is time to write an action plan for each at the end of the meeting.

Well written business plans capitalize on the strengths of the organization and strive to minimize or eliminate the weaknesses. The major weaknesses identified can be turned into opportunities for improvement. These opportunities then become the agency’s goals of the coming year.

The Strategic Plan

At this point, the current status of the agency will be clear. The planning team then needs to spell out the assumptions for the agency’s operating environment. This includes both internal (within the agency, such as staffing, planning, procedures, resources) and external (factors outside of the agency’s control such as; market cycles, competition, local economy, the social and legislative climates). The team evaluates these factors and determines the future position of the firm within the assumed environment.

Now the long term goals and objectives (the agency strategy) can be delineated. Strategies are broad statements that support your mission statement and become the basic priorities of the agency. The team needs to ask fundamental questions such as: How can we attain growth in this difficult market? The answer to these types of questions will allow the team to map out the overall direction that is most appropriate for your agency.

Action Plan

Once the agency’s strategy is mapped out and the strengths and weaknesses are determined from an analysis of the critical primary areas, management should prioritized the weaknesses. From the prioritized list, opportunities for improvement are selected and turned into agency action plans and goals for the short term.

All the necessary steps to accomplish the goals need to be identified. These steps are then compiled into individual action plan sheets so they can be communicated to those affected. Responsibilities need to be assigned for accomplishing each step and the required timeframe clearly stated. These assignments should become part of each person’s performance evaluation.

Monitoring the progress on the steps should be done at least quarterly or, preferably in monthly staff meetings. Adjustments to the steps may need to be made periodically to take into account changes and problems that will occur.

Monitoring is the critical step, as without this it is most likely that the plan will fail.

Conclusion

Competition is keen. Expenses need to be well-controlled. Market cycles continue to cause havoc and agency value is at stake. This annual planning process and self-assessment is the key to success.

If you don’t know where you are, how can you possibly plan for tomorrow and know how to get there?

Agencies without a plan are totally reactive to their environment and have little control over their future. Firms that incorporate an annual planning process tend to be more efficient, more profitable and highly valued businesses. The choice is yours.

If you would like assistance on developing your plan using this process, call Oak & Associates and mention this article in Insurance Journal. We will charge you only for running the session; writing of the action plan will be free.