Best Practices in Strategic Planning For A/E Firms

By David Burstein, P.E.PSMJ Resources, Inc.

Best Practices in Strategic Planning for A/E Firms

INTRODUCTION

In Best Practices in Strategic Planning for A/E F irms, we begin by providing you with the results of a survey that we did with 75 firms on how they conduct strategic planning.

Next, we provide you with some information on what we have gleaned from the survey. We have mined the data to figure out what works and what doesn’t work in strategic planning.

Then, to help you conduct better strategic planning at your firm, we talk specifically about some things that we have learned over the many years we have been engaged in strategic planning with architecture and engineering firms.

We wrap up with some recommendations on best practices in strategic planning.

We hope that you find this report helpful in your strategic planning. For more information and additional resources, please contact us at 617-965-0055 or www.psmj.com.

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I. How do A/E firms conduct strategic planning? 4

II. What works? What doesn’t? 12

III. How to improve strategic planning at your firm. 17

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CONTENTS

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Below is the breakdown of firms that participated in the survey by firm size. You can see that we have a pretty representative group. While the majority came from firms with between 25 and 100 employees, these 75 firms represent a good cross-section of the sizes of firms you see in the A/E industry.

I. How Do A/E Firms Conduct Strategic Planning?

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Participants represented a wide range of firm sizes.

We’ll begin by sharing with you the results of a survey of 75 firms that PSMJ conducted on A/E firms’ strategic planning practices.

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The largest percentage of participants came from architecture firms.

Participants represented a wide range of practice areas.

We found that in this particular group, 39% of participants came from architecture firms, followed closely behind by 33% from engineering primes and 31% from engineering subs. Then it drops to 19% from interior design, and so on. Again, a pretty good cross-section of different types of firms.

We then asked firms how often they do strategic planning retreats.

We found that the most common response was every 3-5 years (25%). Other (45%) is a whole hodgepodge of time frames—the biggest category being every year. Only 8% of firms said they have never done a strategic planning retreat.

Firms vary greatly in terms of how frequently they have strategic planning retreats.

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There are two things that most firms do to prioritize.

We asked participants what kind of preparation they do prior to a retreat.We found that the majority (81%) did some form of financial benchmarking, which provides an idea of what metrics they need to work on. Unless you do some kind of benchmarking, it is difficult to prioritize what your financial issues are and what you need to look at the hardest.

Secondly, firms are likely to survey retreat participants on key issues (73%). When we work with firms, we survey on a variety of key issues we tend to see in strategic planning, and ask them to rate them on a scale of 1-5. We look for the 5 to 10 that have the highest rating. Again, this is a great way to prioritize what you do during the retreat.

There are other things that not as many firms do, such as getting input from clients regarding performance and employee satisfaction/engagement surveys. These are both very important!

Most strategic planning retreats primarily use an internal facilitator.

When we asked firms who facilitates retreats, the majority (34%) said “we always use an internal facilitator,” followed closely by “we usually facilitate it internally, but sometimes use an external facilitator.” Not as many firms primarily use only an external facilitator. Not exactly the right way to do it, but most firms primarily use an internal facilitator.

Focus the agenda of your planning retreat on key issues.

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We asked if firms use an external facilitator, what kind of expertise did they have.

We found that most firms use “an expert consultant specializing in the A/E/C industry who also facilitates the meeting” (61%).

A second group (35%) said they “use a local facilitator who understands strategic planning but is not an expert in the A/E/C industry.” That is okay, if you feel you have enough expertise and breath of perspective that you don’t need inside information about the A/E/C industry, and only need facilitation.

And then a few firms said they get input from an A/E/C expert who does not facilitate the meeting.

We then asked firms how satisfied they were with the facilitation of their retreats.

We found that the vast majority were either somewhat satisfied (51%) or very satisfied (44%) with their retreats. Only 6% were not very satisfied.

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We then asked firms who they invited to their strategic planning retreats.

No surprise here that the number one response was shareholders: 72% firms invite shareholders to the retreat. This is followed by the CFO (52%), other staff managers (49%), and non-shareholder line managers (42%). Meanwhile, 39% of firms invited rising young stars and HR directors.

Next, we asked firms if they have a formal retreat, how long they typically lasted.

The most common response was two days (33%). Some do strategic planning retreats for a day and a half (25%), and some for one day (26%). A few go to three days or more and a few last less than one day. Two days is what we have found in 90% of firms that we work with.

From our experience, 1 ½ -2 days is the right amount of time for most firms. This amount of time allows you to get into strategic issues in sufficient depth but it’s not so long that it takes too much time away from running the company. However, very large firms often require more time or multiple sessions.

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We then asked firmsabout how often they held formal strategic planning retreats.

We found that most firms hold retreats every 4-5 years (41%), followed closely by 2-3 years (39%). In general, it seems that firms go for a time horizon of anywhere from 2-5 years. In our strategic planning retreats, we find 3-5 years is what our clients prefer as well.

We also asked firms how many hours they invest in developing a strategic plan.

That includes preparation time, time spent at the retreat, and time after the retreat documenting the plan. Most firms spend 20-50 hours (39%). Some spent 50-100 hours (20%) and some spent less than 20 hours (17%). Fewer firms spent outside that range developing a strategic plan. So it seems most firms invest 20-100 hours.

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Next, we asked if firms shared the result of their strategic planning retreat with staff.

Interestingly, almost half of firms (48%) provide almost all of the information to all employees. That is higher than I would have guessed, but we believe that, with the exception of a small amount of truly confidential information in the strategic plan, the majority of that information should be shared with all employees.

And then another 39% provides a select portion of information. Only a very small percentage provide no information to all employees. So this is pretty consistent with our observations that you should provide information to employees. Your employees want to know your firm’s strategic goals to see if they align with their personal goals.

We also asked how often the firm’s most recent Strategic Plan is used by the leadership team.

Almost half (49%) of firms said frequently, which is really good. Another 47% said they sometimes used it. Only 4% said they never use it, which is pretty good.

The idea of strategic planning is not that it’s an event that happens every five years and produces a strategic plan that goes on the shelf and gathers dust for five years.

Your Strategic Plan should be document that is actually used by the senior leadership team.

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Most firms report that strategic planning has contributed to a shared vision and improved their firm’s performance.

We then asked firms how well strategic planning contributed to a shared vision among firm leaders.

A shared vision among firm leaders is a very important objective of strategic planning. It gets all the leaders aligned towards the same strategic goals.

What we saw was that almost half of participants said that their strategic plan has been quite helpful in developing a shared vision. And another 29% said that it has been somewhat helpful but they still have a problem with shared vision. Only 17% said that as a result of strategic planning they now have a strongly shared vision. And only 7% said they continue to struggle.

And finally, we were interested in how strategic planning improved performance.

What we found was that 25% of

participants said that strategic planning

has achieved major improvements in

performance. And 65% reported that

strategic planning has achieved some

improvement in performance. Only 10%

of firms said they have achieved little or

no improvement in performance. And so

you can see that 90% have seen some if

not major improvements in performance

from strategic planning.

II. What Works? What Doesn’t?

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The first portion of this report provides you with the demographics and results of the survey on how A/E firms conduct strategic planning. To identify the best practices, we did some mining of this data. We first compared various strategic planning practices with how well these practices contributed to a shared vision among the firm’s leaders. We then compared the reported strategic planning practices with the degree of improvement in their firm’s performance. The results are very interesting and sometimes counterintuitive. You will see from these results that the most common practices aren’t always the best.

We’ve compared survey participants strategic planning (SP) practices to the results they achieved.

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Firms That Plan Every Year (or More) Have a More Aligned Strategic Vision

We looked at how the frequency of strategic planning retreats contributes to a shared vision.

We broke the 75 participants into groups based on how often they held a strategic planning retreat. We found that firms that conduct strategic planning every year or more achieve the highest rating in terms of how well strategic planning contributes to a shared vision among firm leaders. So if you want a strategic plan that really gets your senior leaders aligned, have a retreat every year or more.

We then looked at how the frequency of strategic planning retreats improves performance.

We looked at that same grouping, and asked how has the frequency of strategic planning improved participating firms’ performance. Again we found that the highest level of performance improvement is achieved by firms that have retreats every year or more. Meanwhile, firms that have strategic planning retreats less than every five years achieve the lowest level of performance improvement, in fact significantly lower.

…And They Achieve Better Performance

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Longer Retreats Contribute More to a Share Vision

We looked at how the duration of strategic planning retreats contributes to a shared vision.

When we rated how duration contributes to shared vision, we found that firms with strategic planning retreats that last 3 days or more achieve the highest rating in terms of how well strategic planning contributes to a shared vision among firm leaders. You can see that there is a steady progression here: The longer the retreat the more strategic planning contributes to a shared vision among firm leaders.

We then looked at how the duration of strategic planning retreats improves performance.

Here, we get a completely different answer. Whereas in the previous chart you can see that longer retreats contribute more to shared vision, this isn’t the case in terms of improving firm performance. What this shows is that firms see only some improvement in firm performance, with the optimum being with retreats that last 2 days.

…But Not So Much to Firm Performance

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Spend Enough Time – But Don’t Get Carried AwayWe then looked at how time invested in strategic planning correlated with improved performance.

What we can see here is that there is a plateau at 50-100 hours. Firms that spend less that 50 hours in strategic planning achieve a significantly lower level of improved performance than firms that invest more than 50 hours.

What’s interesting is that firms that spend over 400 hours do not achieve significantly more organizationalimprovement than firms that spent 50-100 hours or 100-400 hours in strategic planning.

So the tipping point in terms of time spent seems to be at 50 hours. You need to spend the 50 hours, but really not a whole lot more than that. It’s how well you spend the time that matters.

We also looked at shared vison and improved performance in terms of who is invited to the retreat.

We found one thing that really jumps out: The highest bars on both shared vision and improved performance are for firms who invite rising stars to the strategic planning retreat. That is really interesting because most firms, as indicated in a previous chart, do not include rising stars. This data show that firms that invite rising stars achieve better shared vision and improved performance than firms that don’t invite rising stars.

Be Sure to Include Some Rising Stars

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Be Sure to Get Input About Employee Engagement

We then looked at shared vison and improved performance in terms of all the various inputs.

We looked at the impact of input from financial benchmarking, clients, employees, and retreat participants. We found that firms obtaining input about employee engagement achieved the highest ratings for both shared vision and improved performance. Interestingly, only a third of the firms surveyed get employee engagement input.

We also looked at what type of facilitator gets the best results.

Interestingly, we found that the highest level of satisfaction with the facilitation of the retreat is achieved by firms that always use an external facilitator. And that actually is a small percentage of firms. They are followed closely by firms that usually facilitate retreats internally but sometimes use a external facilitator. The level of satisfaction was lowest for firms that always use an internal facilitator. The message here is at least sometimes you should use a external facilitator for your retreat.

Consider Using an Outside Facilitator

III. How to Improve Strategic Planning at Your Firm

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In this section, we’ll discuss…

The difference between long-term strategic planning

and annual business planning

The strategic planning process –and how to simplify

it

What kind of information you

should collect prior to the retreat

How to prioritize your agenda

How to facilitate the retreat effectively

How to follow up to be sure you achieve your strategic goals

In this section, we provide some specific recommendations that will help you improve your firm’s strategic planning. Some are based on the results of this survey; others are based on PSMJ’s 40 year history of helping A/E/C firms with strategic planning.

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Long-term Strategic Planning vs. Annual Business Planning

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A Long-Term Strategic Goal is Aspirational

This Generates a Series of Short-term Operational Plans

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Cascade Effect of Strategic Planning

You Can Simplify This Process Into 4 Basic Steps

When firms conduct strategic planning, there is a cascade effect.

There are some really necessary pieces that firms need to achieve. Obviously, the big one is vision: What is our company going to look like 3-5 years out? I am also a firm believer in purpose: What are we about? Why do we exist? Are we design, practice, or business-driven? Also critical are: What are our core values? What guides us? What makes us tick? Your values will guide you as you go toward your vision to achieve your purpose.

What follows these high-level ideas of vision, purpose, and values are the mechanics of crafting your plan. So it goes from high levels to the specific detail level, the accountable, responsible items to get done. This involves writing goals, objectives, the strategies (what) to achieve, then the tactics (how) and finally the actions (who/when) needed to get things done.

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Set Your Priorities Based on…

You Can Then Prioritize the Most Important Issues Using a SWOT Analysis or Similar Format

Strengths• Sound ownership transition process

in place• Strong growth in recent years• Consistent financial performance• Low non-labor overhead structure

Opportunities• Move clients from “satisfied” to “raving

fans”• Improve profitability by reducing net

revenue deficit• Improve cash flow by reducing trade

collection days• Expanding into new locations

Weaknesses• Tolerance of poor performance• Perceived lack of meritocracy in

promotions• No culture of accountability

Threats• Leadership transition• Unintended consequences of

reorganization

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Decide Which Topics Are Most Important

PSMJ has developed what we call “The Strategic Planning Wheel” to illustrate how all the elements of a strategic plan fit together.

Based on your prioritization of topics, you can decide which ones to tackle at this year’s retreat and which ones to put off until future years.

An example is shown below.

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Facilitating the retreat can be tricky. Here are some suggestions to make it a bit easier.

Use These 3 Tests to Evaluate the Viability of Strategic Initiatives That Are Proposed

1. One person can’t be both the facilitator and a contributor. Be sure these roles are handled by different people.

2. The best ideas often come from those who don’t speak up. If you let a vocal few dominate the conversation, you may miss out on these ideas. So get everyone involved by using “nominal group technique” in which you ask everyone to write down their answer to a question, then call on each person to read their answer.

3. Make sure every discussion ends with an action plan that includes what will be done, who will be responsible and when it will be completed.

4. Before leaving the retreat, get everyone to commit to accomplishing their activities by their agreed upon dates.

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Establishing Linkage

An Example of Linkage

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How Long Should the Process Take?

But It’s Not Over When It’s Over!

Don’t leave the retreat without setting up a series of scheduled meetings to review the status of each person’s action items. These should generally be held every 2 to 4 months, depending on the amount of activity scheduled for that period. To be sure everyone attends, have each retreat participant put the scheduled update meetings onto their calendars before leaving the retreat.

And be sure to establish agreed upon consequences for those who miss their deadlines. For example, one firm elected to impose a “late fee” of $100 for anyone who misses a deadline. All the late fees were then donated to the firm’s charity.

ABOUT PSMJ

Over 40 years of helpingA/E/C firms achievebusiness success.

PSMJ Resources, Inc. is the world’s leading

authority, publisher, and consultant on

the effective management of architecture,

engineering, and construction firms.

With offices in the United States as well as

the United Kingdom and Australia, PSMJ

offers over 150 titles in book, audio, and video

format.

In addition, the company publishes several

monthly periodicals and delivers dozens of

seminars, roundtables, conferences, webinars,

and in-house training sessions every year for

A/E/C professionals around the world.

PSMJ’s sought-after consulting expertise

covers a range of critical business areas such

as strategic planning, project management,

valuation, succession planning, and mergers &

acquisitions.

PSMJ is also active within the community,

utilizing our resources and the contacts at our

fingertips within the A/E/C Industry to help

those in need.

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