A Guide to Operational Plans
What is an Operational Plan?
An operational plan is a comprehensive manual that clarifies how a business unit or group of employees assist in achieving business goals. This proposal defines all of the activities needed to operate different business units in an organization.
An effective operational plan ensures management and workers understand their requirements and how to perform them in a timely and efficient manner. Planning out daily activities as a pathway to reach key performance indicators is imperative for an organization to achieve goals and maintain profitability.
Typically, larger organizations use different operational plans for each business unit, while a small company may write one or two proposals, depending on its requirements and growth potential. Regardless of the size and scope of a business, each operational plan should address the following questions
- What are the required tasks and projects in each department?
- Which team members are in charge of these tasks and projects?
- What are the required deadlines for each task?
- How much will each project or task cost?
The Power of Operational Planning:
Operational Plan Elements
Though operational plans vary depending on the type of business and department, the majority include the following elements
- Activities- The tasks and activities required to operate and achieve key goals
- Goals and Objectives- The department's goals, plans, and desired outcomes
- Quality Standards- The expected level of quality to meet consumer needs and maintain the company's reputation
- Staffing and Resource Requirements- What each department does, how many employees are required for each business unit, and what resources are needed to ensure performance targets are met
- Timelines- Define the timelines required for each objective and identifies key milestones the business unit plans to meet
- Budget- Project-by-project scheduling and how resources will be allocated within a budget to achieve key targets
- Method to Monitor Performance- The methods, tools, metrics, and key performance indicators used to ensure everyone is meeting objectives
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The Importance of Operational Plans
Every successful entrepreneur requires a set of operational plans before embarking on a business venture. It serves as a manual to ensure quality management in each department and enforce organization-wide accountability.
Operational plans are revisited each year by established companies to pinpoint weak revenue areas, define new growth opportunities, or revamp workflows to maximize efficiency. It can restructure departments and ensure key participants are recommitted to meeting certain goals within specific timelines. Other top benefits of operational plans include
1. Establishes Accountability
An operational plan establishes accountability for each required business activity. By clarifying the expectations for each department and employee, everyone knows what activities they are responsible for and why.
If there are inefficiencies or discrepancies, department leaders can revisit the operational plan to pinpoint where they occurred and how to fix them.
2. Optimizes Shrinkage Control
Shrinkage refers to the loss of company property due to employee theft, mistake, or damage. Businesses can lose millions of dollars a year when shrinkage is not properly addressed and mitigated. An operational plan optimizes shrinkage control by defining what role department leaders have in delivering loss prevention.
This requires implementing policies that ensure each department is accountable for any theft while reiterating the role of HR in monitoring such occurrences. If theft or loss occurs, the company can reference the plan to determine how it should be handled and who is responsible.
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3. Improves Resource Management
Every company knows that mismanaged resources result in decreased productivity and lost revenue. Effectively allocating resources in an operating plan so each department has the necessary materials to perform their jobs is required to ensure business success.
An operational plan defines which activities are required, who is in charge of them, what the budget is, and which resources are needed. If implemented properly, an operational plan can eliminate guesswork and minimize any misallocation of resources that results in a loss in profit.
4. Optimizes Performance Management
Utilizing a set of key performance indicators to track employee performance is essential to maintain workplace accountability and morale. Without a specific set of goals for each role in an organization, productivity and operational effectiveness decrease.
An operational plan optimizes performance management by ensuring each business unit knows how their quality of work and level of productivity impacts the organization as a whole.
Established companies can revisit their operational plans when key goals are not met to determine what the problem is and how to fix it. It is often referenced to determine which workers are achieving better than their objectives, so management can reward and learn from their strategies.
How to Write an Operational Plan
An operational plan is typically written within or alongside a business plan. Established companies revisit each department's operational plan every year to modernize policies, meet new consumer needs and maintain a competitive edge.
Writing an operational plan requires brainstorming, research, goal setting, and strategizing by involved participants. It must be detailed and specific to ensure that no component or requirement is forgotten. The best practices for writing one include
1. Goals and Targets
The operational plan should include a clear set of objectives that team members can meet. This portion reiterates what the department's key goals are how they will be achieved. Every goal should be SMART, which stands for
- Specific- A specific rather than vague goal that everyone can understand
- Measurable- A measurable objective to track progress
- Attainable and Realistic- Attainable and realistic to keep workers motivated
- Timely- Requires a timeline to hold everyone accountable
2. Production Process
Once objectives are identified, department leaders must consider how it plans to achieve them. Every business unit must have the required equipment, materials, and technology to ensure success. Factors to consider include-
- Vendor- The vendor(s) required to ensure any product or resources are delivered promptly
- Technology Systems and Machinery- Supplies, machinery, materials, and software systems required to meet productivity goals. This varies depending on the type of department and its functions
- Budget- A budget that determines how much to spend on resources and each task
3. Operating Process
The operating process portion of the operational plan is not always included. It is typically written to help investors know how the executive wants each department to function every day. Key points to address in this part include
- Location- Whether workers will be remote or on-site and how many offices/facilities there are. It should also include whether there are any long-term plans for additional facilities
- Hours of Operation- Defines the hours of work, how the schedule works, and whether workers will be part-time or full-time
- Supervisors- Lists the people who ensure projects and tasks are finished in each department
4. Timeline and Milestones
A timeline ensures that employees stay motivated and productive. It is also an effective tracking mechanism for achieving operational effectiveness.
For example, if a deadline is missed on a regular basis, a department leader may consider hiring more employees or requesting an automated software system to maximize productivity. Typical timelines to plan for in an operational report include
- New Hires- The number of employees desired when specific milestones or revenue targets are met
- Production Timelines- The new products or services to create by a certain time, what the design phases are, testing periods, launch timelines, and release periods
- Market Timelines- Identifies the desired number of clients within a time frame, number of website users, signups, partnerships, or pricing change due to rising consumer demand
- Financial Timelines- Tracks financial performance over 12 months. May include desired timeline and number of funding events, annual profit, or number of yearly customer transactions
Operational Plan Examples
It is important to note that goals and elements within an operational plan change as business needs evolve. Team leaders can regularly outline objectives and describe the actions, people, and measurements required to ensure they are met. Here is how a portion of an operational plan within two separate departments of the same company may look-
2 Examples of Operational Plans
1. Department Contract Management
Goal- Reduce expenses
Action- Renegotiate with vendors to receive a discount on steel suppliers
Target- Must reduce cost by $200 per shipment
Employee Responsible- Jake Smith in sales
Target Date- February 1
2. Department Assembly
Goal - Improve productivity
Action - Reorganize and optimize assembly lines 3 and 4
Target - Improve employee efficiency to $700 per hour on lines 3 and 4
Employee Responsible- Jessica Johnson in assembly
Target Date- July 1
While the contract management team wants to save money by renegotiating with vendors, the assembly unit of the same organization is struggling to improve productivity. Both departments outline the specific actions required to resolve each problem and set out a timeline to fix it. If a new circumstance arises that disrupts this process, team leaders can rework the plan to meet a new target.
Strategic Planning vs. Operational Planning
Many business leaders confuse strategic planning with operational planning, but these are two different terms with two different purposes.
Both are imperative to a company's success by covering all of the functions, goals, strategies, plans, and resources required to achieve objectives. Though both strategic and operational planning map out a company's future goals, they are written in different circumstances.
Strategic planning requires mapping out the organization's mission, vision statement, and top-tier aims for the next 3-5 years. It considers how those goals will be measured and which activities are required to achieve them.
A strategic plan is more future-oriented and broad than an operational plan. It does not include the short-term, daily requirements needed to achieve future goals. The focus of a strategic plan is on the company rather than each department. Once created by high-level executives, various teams are responsible for ensuring it is successfully implemented.
The vast majority of organizations fail to carry out their strategic plan because their goals are too lofty or ambitious. Furthermore, they don't consider the various resources and budgets required to ensure success in their strategic plans.
To improve these chances, a company should design a specific budget for their strategic plan, considering all of the initiatives included in it. It's also important to create SMART goals rather than overly lofty goals to remain realistic. When tracking the progress of a strategic plan, the executive team must assess how the business is performing on specific metrics, rather than how each department is performing.
An operational plan breaks down the roles of departments in achieving company goals rather than focusing on long-term organizational objectives. Rather than using a 3-5-year timeline, it remains focused on the following year.
Operational plans are typically rewritten each year to keep up with company needs, department needs, market needs, and to minimize inefficiencies. They are written by or with department leaders, who review them with top-level executives to ensure goals align with company objectives.
While an organization may have 8 different operational plans for 8 departments, each properly implemented plan will contribute to the organization's overall success. The budget for an operational plan is included within each business unit's yearly budget, typically determined by the owner.
Unlike in a strategic plan, department leaders meet more regularly to track the performance of each task/objective.
Companies Need to Improve Planning:
In conclusion, here are the key points to remember about operational plans
- An operational plan addresses the required tasks of each department, who is responsible for them, what resources are needed, how much they cost, and any timelines or milestones.
- Operational plans benefit an organization by establishing accountability, optimizing shrinkage control, improves resource management, and ensures performance management.
- An operational plan should include goals and targets, the production process, the operation process, and various timelines.
- A strategic plan is a 3-5-year list of company future goals, while operational plans are focused on each business unit's objectives for the upcoming year.