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The Alternative Board Blog

What an Operating Plan Is and Why You Absolutely Need One

Feb. 27, 2020 | Posted by The Alternative Board

Most companies spend valuable time and resources to create strategic plans, giving their best to outline a strategy that establishes a solid long-term vision. While having a strategic plan is necessary, a vast number of organizations often lack a critical strategy element: an operating plan.

An operational business plan outlines the details of your daily operations for over one year. It defines who does what, when they do it, and how they do it. When done well, an operation plan defines how you allocate human, physical, and financial resources to reach short-term objectives that support your larger business goals.

What Is An Operational Plan And Why Is It Important?

An operation plan is an extremely detail-oriented plan that clearly defines how a team or department contributes to reaching company goals. It outlines the daily tasks required for running a business. When properly created, an operating plan makes sure each manager and each employee know their specific obligations, as well as how they should execute them within a defined timeline. Mapping out the day-to-day tasks that ensure a clear path to your business and operational goals is essential to success.

On a daily basis, your operations plan should answer these crucial questions:

  • What are the strategies and tasks that need to be completed or achieved?
  • Who are the individuals responsible for those tasks and strategies?
  • When must each strategy be completed?
  • How much will it cost?

Your strategic plan is a manual that ensures your company and all its employees execute day-to-day operations in a way that ensures reaching your long-term business goals.

Operational Planning VS Strategic Planning

Very often, a strategic business plan also functions as an operating plan. The confusing of the two can cause problems because both plans are necessary for any company to achieve its goals.

A strategic plan helps your business outline long-term goals and fulfill the big vision. Operating plans define what processes need to be finished to achieve those goals. An operating plan supports the efforts of a strategic plan and makes sure everyone runs their day-to-day tasks as efficiently as possible. Both are action plans, and since the success of the strategic plan heavily depends on the efficiency of the operating plan, you should create it right after outlining your long-term strategy.

A successful company never chooses between an operational plan and a strategic plan. Instead, market leaders make sure they have both. Simply put, a strategic plan outlines your long-term goals for the future, while an operating plan defines how to get there through daily activities and processes.

The goal of an operating plan is to define how all departments join efforts to achieve your vision.

The Steps Of A Successful Operational Business Plan

You can't create a successful operational plan without clearly defining your operational goals. The template below walks you through several important steps to take if you want to develop a functional operating plan:

    1. Create your strategic plan first. An operating plan is a necessary tool for achieving the goals you've defined in a strategy, so first, you should make sure your strategic plan is in place.
    2. Focus on essential goals. All successful operating plan examples stick to one rule—focus on goals that matter the most. A complex plan with multiple unclear goals is hard to follow.
    3. Instead of lagging, use leading indicators. Lagging indicators will show your efforts are falling short only after you already execute the operations. By contrast, leading indicators include predictive measures that will prevent you from making a mistake in the first place.
    4. Choose the right KPIs. Defining the appropriate KPIs for your business is essential. You shouldn't develop them all by yourself. Instead, involve the whole team in the process.
    5. Communication is key. Everyone in the company should learn and understand what metrics you use, why they are important, and what everyone's roles are in working toward your goals.

Note, you can always check out our blog for more successful business tips like this!

Want additional insight? Read 4 Step Guide to Strategic Planning now to learn more

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Operational Planning Examples

An operational plan template should help you define and improve the day-to-day actions and processes of your business. Any successful operational plan example indicates that the plans include everything your company does daily to deliver your products or services to customers. They may cover any section, department, and operation. You can find numerous examples of successful operational plan implementation, especially among powerful enterprises.

Let's go over the most common ways of utilizing a proper operational plan:

Planning for Processes and Practices

Businesses often create operational plans for specific processes and practices to ensure they’re meeting objectives in what they deem the important areas. These include efficiency, turnaround time, productivity, cost reduction, waste reduction, sustainability, quality, and customer satisfaction. You can find a successful operating plan example in any department.

Planning As a Strategy Component

Take a look at this operational planning example: let's say a company makes strategic efforts to expand volume production by 50% by the end of the year. The strategic plan will include several critical components: marketing, sales, and operations. The operations part of the plan will include manufacturing, financial, and logistic strategies to achieve a boost in production.

Bottom Line

An operational plan is the key element of every goal-oriented organization. Contact The Alternative Board today to schedule a meeting with our team of business advisory services specialists. We will help you produce an effective operations plan that will help you fulfill your long-term business goals.

Read our 19 Reasons You Need a Business Owner Advisory Board

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Written by The Alternative Board

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