Strategic Thinking: What’s the ROI of Your Strategic Plan?

June 1, 2002, By Paul Hysen

What makes an airplane fly? As a student pilot some 35 years ago, I learned that an airplane flew because of lift, drag, thrust, and gravity, the principal forces acting on the aircraft.

Eventually, with the passage of time, the real truth emerged. What makes an airplane fly is money!

And so it is with strategic plans. Regardless of your department’s genuine needs, or the inherent logic of your proposals, strategic plans very often are not going to fly without money. (Or a champion—but we’ll deal with that issue in a moment).

In the past 35 years as a consultant I’ve seen many a strategic plan, and developed a few myself, that never got off the ground. Sure, increasing customer satisfaction is great, increasing gross revenue is interesting, and renovating antiquated facilities is certainly necessary.

But speaking from the point of view of an administration, those benefits are not alone enough. Why should I decide to give your department some of the organization’s always-limited resources when there are so many other needy departments/ divisions also asking for it?

Further, the other departments may have more political clout, generate regular income or have an influential champion on their side (there’s that word again!)

A strategic plan involves an assessment of your organization’s present position (facilities, capabilities, present performance, etc.), a projection of where your customer/market is going and a plan to get there before the competition does. But why?

The answer had better be to increase your financial performance. The essence of a strategic plan is a proposition to introduce major change. That usually involves an investment of resources in the present in order to reap a greater return in the future. And that means showing that it has an ROI. Somehow, in some way, an effective plan must show your organization that it is a good investment!

“But,” you say, “ sometimes there isn’t a direct link between a strategic plan and a financial benefit.”

Let me reiterate—there had better be! Find a creative writer and re-work your plan to stress whatever legitimate linkage you can find. For example: new residence hall dining facilities or a new student union food court will entice more students to accept admission to your university/college, generating more income for the university, resulting in greater incremental net revenue since incremental expenses will be lower and...you get the picture.

Every organization has a different, sometimes very unique way of measuring return on investment. You should find out what that is and become knowledgeable in its intricacies. Some look at ROI in terms of payback years. Others use percentage return, net-present-value, hurdlerate, internal-rate-of-return and other ways to view financial performance.

While you don’t have to become an investment analyst, it is advantageous to befriend your Chief Financial Officer and learn specifically how your parent organization views internal investments. You can also learn from colleagues within your organization–peers in other departments or divisions–as well as your food service industry peers.

Ask how they have successfully justified projects for funding and approval. What process did they use? What arguments were most effective? Who in a senior leadership position helped their cause?

Ultimately, you must show why changing your present form of operation, service scope or facility is a good investment; that your strategic plan recognizes both the opportunities and risk the change may entail, and is a much better choice than standing still—the so-called “do-nothing” option.

The other essential ingredient to obtaining approval (and funding) of your strategic plan is finding a champion! The dictionary defines a CHAMPION as “an ardent defender or supporter of a cause.”

Sure, you’ve been with the organization many years, you’re well respected, and your department runs well. BUT—will your capital appropriations committee give you $1 million, $2 million or $5 million on your say so?

Many years of experience have shown that unless a foodservice department has a strong champion, someone on its side at a very senior level, the chances of approval are slim to none! So your biggest hurdle is selling your strategic plan to someone who will champion it. (And, let me add, an effective champion is usually not going to be the person to whom you report!)

As you can see, selling a strategic plan to the administration is a lot more work than simply developing one. But unless you have a vision to help the organization move forward and can convince the administration to invest in it, you had better have a strategic plan for a job change as your backup plan.

In summary, to move a strategic plan forward, you must first execute a good tactical plan to get support and approval for it, and, most importantly, to get the funds for its implementation.You and your department need to be viewed as a progressive and vibrant part of the organization. If they are not, the administration may start looking elsewhere for those qualities.

Paul Hysen is a principal with The Hysen Group, a foodservice consultant located in Northville, Michigan. The Hysen Group provides operators with architectural, engineering, planning and management solutions both nationally and internationally.