Businesses must engage in both strategic and tactical planning. Strategic decisions are those that govern what a company will do and why, while tactics focus on how the business will get it done.
Types of Decisions and Time Frames
Strategic decisions include what type of products, markets and acquisitions a company will pursue, and how it prioritizes spending on functions such as manufacturing, R&D and marketing. Tactical decisions include how employees will be reviewed and incentivized, where to locate a new store, and which new accounting software to purchase. Strategic planning is high-level and often nebulous, with long time frames, while tactical planning is practical, specific and short term.
Planning Effects and Benefits
Executives set the priority that an organization gives to strategy versus tactics. A company that prioritizes strategy over tactics may be visionary but may perform poorly if it lacks technical execution. A tactical organization with a poor strategy may be doing the wrong things very well. Effective strategic planning gives the company a direction to move in, and equally importantly, communicates to executives and managers what types of business the company will not engage in. Effective tactical planning allows the company to execute its vision to achieve desired results.
A business must perform both types of planning equally well in order to succeed. However, individuals are often better at one kind of thinking than the other. Businesses must ensure that its managers are assigned to strategic versus tactical planning based on skill rather than simply job function.