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Strategic Planning in early childhood education centres

ECC Workshop 2014

Peter Reynolds CEO Early Childhood Council

Contents

• Why planning is important • How it all fits together • Typical Plan contents • The four key questions of strategic

planning… • …and then in detail

Planning and Monitoring are part of the learning cycle

Monitor

Learn

Reflect

Plan

Determine what is to be done, how, when and by whom

Consider performance and reflect on outcomes

Measure performance against targets

Review progress and learn from mistakes and successes

Planning and Monitoring must occur at all levels within the organisation

CEO or Centre Manager

Head Teacher or other middle management

Staff

Board Strategic Planning: addresses the long-term direction of the organisation; what it is going to do and how

Business Planning: addresses the activities and resources required to implement the Strategic Plan; eg: forecasts; financial, marketing and personnel plans

Operational Planning: addresses the activities and resources required to implement the Business Plan; eg: production plans

Plans have different time horizons

Strategic Planning 3-5yrs annually

Business Planning 12-18mths quarterly

Operational day/week daily/ Planning weekly

Planning Horizon

Reviewed

CEO or Centre Manager

Head Teacher or other middle management

Staff

Board

Illustrative plan contents Strategic Plan

• Vision, values, mission • Internal capabilities

review • Market overview • Strategic goals • Key performance

indicators • Risk factors and

mitigation • Competitive advantage

Business Plan • Strategic goals • Tactics • Budget/forecast profit &

loss • Budget/forecast balance

sheet • Other key targets, eg:

market share, brand recognition

A Strategic Plan should answer four questions…

Formulation Approval Monitoring

Where are we now?

Where do we want to be?

How do we get there?

How will we know we’re on track?

Where are we now? Where are we now?




SWOT Analysis

Internal Environment External Environment

Strengths Weaknesses Opportunities Threats

An organisation’s resources and capabilities that can be used to develop a competitive advantage

The lack of strengths may be considered weaknesses

Some strengths may also pose threats

External factors in the market place that are able to be exploited

External factors that pose risks to the business

The Environment…

• SWOT • SW – internal

– Structure, location, financial, HR, processes, customer relations

• OT – external – PEST

Where are we now?




Places to look for Strengths and Weakness Area of Business Strengths Weakness

Processes Processes mapped, high productivity/efficiency

Processes largely undocumented, inefficiencies

Management Clear management approach, team, high staff satisfaction

Poor staff management, high turnover, sick leave, etc

Marketing & Sales Good enrolment::enquiry ratio; clear understanding of market segments; clearly expressed benefits

Poor market research; inefficient enquiry management; benefits unclear

Other skills Excellent R&D Poor maintenance

Experiences Previous success Fingers burnt somewhere

Intellectual Property Branding, clear and unique competencies

No real brand; obscure or unknown competencies

Premises Excellent Location; presentation; welcoming; well-maintained

Poor location; poorly maintained; poor design

Plant, machinery Specialist equipment; well-maintained; popular with children

Worn out equipment; to little; bored/out-of-control children

Information technology Good management information Poor automation

Finance Good cash Flow Burden of debt

External Environment –PEST

Political Economic • Changes in policy

• Changes in financial market

Social Technological • Changes in research or

demographics

• Technology changes

Where are we now?




Places to look for Opportunities and Threats Area of Business Opportunities Threats

Political Policies open up new markets Policies threaten income or increase (compliance) costs

Economic Economic expansion will boost demand Resilience to natural disasters, mobility, flexibility Low-cost funds available Locally-available skilled workforce Competition is fragmented Market is growing rapidly

Growing unemployment will reduce demand Service closures, loss of data Higher borrowing costs will reduce customer spending power Skilled workforce herd to get; militant workforce Competitors are strong Market is mature, crowded

Social Latest research reflects current service delivery

Research points to shortfall in quality of service delivery; leading customer expectation; pressure on costs

Technological Technology slow, easy to access, decreases costs

Technology growth rate rapid, expensive, difficult to access; but led by customer expectation

SWOT Strengths Weaknesses • Things you do well; unique

• Things you don’t do well, in development

Opportunities Threats • Usually as a result of something

that has changed in your environment, that if you took advantage of it, would benefit your customer and create a strength

• External things outside your control that can impact badly on your centre

Where are we now?




Where do we want to be? • Vision

– A compelling description of the centre once it has implemented the strategic plan. It should PULL customers to the organisation and PUSH employees/members to greatness

• Values – The core priorities in the centre’s culture, including

what drives employees’/members’ priorities and how they truly act in the centre

• Mission – Defines the centre’s purpose and its core business in

the context of its Values; describes how the Vision will be achieved

Where are we now?




Vision

• Establishing a vision – 3 step method:

• Say what you want you centre to be – be really specific/use “here and now” terms/be definitive

• Think it/feel it on behalf of your customers – engage the passion you would feel, once you had achieved it; make it relevant to your parents

• Write it down daily – research shows there is a much greater chance of success if you do

Values and Culture • What are values?

– An organisational value is “a belief that a specific mode of conduct is preferable to an opposite or contrary mode of conduct” according to Rokeach (1973, The Nature Of Human Values)

• What is organisational culture? – the psychology, attitudes, experiences, beliefs

and values of an organisation – “The way we do things around here”

Mission

• Creating a mission

– Describes how you intend to achieve your vision, in the context of your values

– “XYZ centre provides quality early childhood

education and care for children aged 0 to 5. We involve parents in our centre and in their child’s learning and life journey.”


• Determine how the centre will create a sustainable value for its shareholders

• What are its target markets? • What service option(s) will it provide? • How will it deliver that service(s)?

Where are we now?




How are we going to get there?

Where are we now?




Two broad categories of Strategy: Growth Cost Reduction

•Increase revenue •Improve scale – spread fixed costs over higher volume •Diversify revenue base – reduce risk/ reliance on single market/product

•Diversify into home-based? •Offer after-school programme? •Saturday parents’ day? •Creche? •Offer a child minder network? •Offer an infant induction programme (including home visit)

•For a given level of quality, being the lowest cost producer •Can either sell services:

–At average market price, thus earning higher-than-average margins –At lower-than-market price, thus gaining market share

•In a price war, able to maintain profitability while the competition suffers

Leading to better return on assets

Strategy - Growth Where are we now?



How will we know we’re on track? Ansoff Matrix1

Existing products

New products

Existing markets

Market penetration

Product development

New markets Market development

diversification

Organic growth vs. Acquisition

1 H I Ansoff, Harvard Business Review (1957)

Strategy – Cost Reduction

• Achieve by: – Increasing productivity – Sourcing inputs at lower costs – Vertical integration – Process improvement

• Requirements: – Access to capital in order to invest in production

assets – Skill in designing services for efficient delivery – Efficient distribution channels

Where are we now?




Strategy – Cost Reduction (cont.)

• Risks: – Competitors also able to reduce costs by

following the same strategies – Competitors able to make greater step-

change cost reduction – Competitors with narrower focus able to

produce at lower cost – Customers may cease to need/want the

service or may jump ship

Where are we now?




Monitoring

Monitor what matters!

Monitoring

• Did we do what we said we would do? • Was it effective?


• The Board should establish a few vital measures of performance that should directly relate to the areas of the business that greatly influence its success

• These KPIs should alert the Board to pending trouble and can also be used to identify areas where the business is performing exceptionally well so that the cause of success can be recognised

• Monitoring is most effective when attention is given to those factors that truly impact performance

Where are we now?




A simple reporting model Where are we now?




Monitoring requires knowing when and how to intervene

• To protect stakeholder interests, directors must monitor performance

• Performance should be measured against agreed KPIs • KPIs should reflect current and future performance • Tolerance limits should be set around each indicator

– If measurement is outside the tolerance limit, action is required • The degree of intervention required by the Directors will

depend on how far from forecast the measurement is • Intervention approach should be set at the time the plan

is approved

Strategic Risks Concept

development Idea

Planning & Design

Execution

15% 10%

65%

10%

• Incorrect strategy selection

• Competing value creation agendas

• Lack of market relevance

Key reasons for failure

• Inappropriate business case

• Inadequate buy-in from executive team

• Poor decision-making

• Inadequate hand-off to execution team

• Cultural resistance • Insufficient detail

in design • Takes too long to

deliver results

Successful capture of value

Ready. Fire. AIM!

How to manage risk

• Ask two questions: – How likely is it to happen? – What would be the impact if it did?

Highly likely; low impact Highly likely; high impact

Less likely; low impact Less likely; high impact

Mitigating Failure Key reasons for failures Mitigation measures

Idea/concept development

•Incorrect strategy selection •Competing value creation agendas •Lack of market relevance

•Follow rigorous strategy evaluation and selection processes

Planning/design •Inappropriate business case •Inadequate buy-in from executive team •Poor decision-making

•Develop rigorous business case approval process •Involve executive team in strategic planning process •Have controls in place around decision-making process •Ensure decision-makers have access to required information

Execution •Inadequate hand-off to execution team •Cultural resistance •Insufficient detail in design •Takes too long to deliver results

•Involve executive team in exe4cution •Understanding current centre culture, recognise desired/required culture, develop plan to close the gap •Develop detailed implementation plans •Set realistic expectations for result timing

Strategic Planning Checklist

How does the strategy create value for stakeholders? Is this level of value acceptable?

Is the strategy consistent with the Vision, Values and Mission? Does the SP exploit the centre’s strengths and opportunities in the market? Does the SP minimise the centre’s weaknesses and susceptibility to

threats? Does the SP address the likely responses by competitors? Are the key areas of risk in adopting this strategy identified and mitigated

against? Does this fit with the risk profile of the centre’s shareholders? Does the SP include exit strategies that are viable Is the strategy sustainable? Are the strategic targets enough of a stretch but still attainable? Are there measures in place to know if the centre is on track to achieve

these targets?


Strategic Planning Checklist

Do we have the necessary environment and resources to execute? Is accountability for the SP’s realisation clearly allocated? Do indicators of current performance show that the centre is

performing better or worse than forecast? Do indicators of future performance show that the centre will perform

better of worse than forecast? If worse, what alternate strategies are available to improve

performance? Are shareholder funds at high risk? Is intervention required? If so, of what nature? What exit strategies are available? Have we put in place a learning loop: what went wrong?


Drafting your own Strategic Plan

1. What is your vision for your centre for the future?

2. What is important to you, your philosophy or values?

3. How will you achieve your Vision (Mission)? 4. What is your current situation (SWOT)? 5. What are your strategic options? 6. How will you monitor your success?

How the ECC Can Help…

• www.ecc.org.nz – Login

• Support – Governance and Strategic Planning

• 21 tools and templates to make your

governance and strategic planning activities easier

http://www.ecc.org.nz/

Your Strategic Plan

• Your questions? • Does this information give you cause to re-

think? • What will you do next? • Go to:

– www.ecc.org.nz member’s support and explore the governance section

– Use the tools and templates – Call the ECC for help/advice

http://www.ecc.org.nz/

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