A few weeks back, Tim Vanderpyl wrote a post about strategic planning. It generated some great debate on LeaderLab and Twitter about the usefulness of strategic planning and we invited Ryan Olsen to write a response to Tim. That response is below.
I’m a bit late to the party, but I wanted to take the opportunity to add to the conversation.
Tim ended the post with his theory: “Strategic planning is simply an invention to justify the existence of middle management, and not a useful tool for those doing the actual leading or for the guys at the bottom doing the real work.”
In short, I would have to say that I agree and there is absolutely truth in the theory. I think we could agree though, when Strategic Planning (SP) is done right (development process, implementation, and execution) then there is great potential. SP is not easy and has challenges, but the hurdles are worth overcoming.
At M3 Planning, we have measured the following; “Businesses reporting a commitment to strategic planning showed a 12% bottom line and 11% top line greater than other respondents. This is in addition to the ‘business as usual.’”
A strong organizational focus benefits all companies in all industries. “Downturns are roller coasters for weak firms: 3x to 5x. During downturns, weaker businesses are the shock absorbers of their industries – their margin swings are often three to five times that of the leader. That gives companies with strong, focused cores the opportunity to invest and gain ground on their competitors during the downturn and the subsequent recovery” (from Bain & Company).
SP is necessary, but only successful when linking the long-term strategic priorities to today’s actions. The plan must be cascaded properly from top to bottom of the organization so that front line staff knows how their work impacts the organization’s goals. Assigning metrics and systematically measuring them fosters accountability. Others in our company would also say that it holds a team “able” instead of just accountable.
Three additional points to consider (I love tracking these):
1) Leadership challenge with SP: “Many people regard execution as detail work that’s beneath the dignity of a business leader. That’s wrong…it’s a leader’s most important job” (from Larry Bossidy, former CEO, Honeywell, Inc.)
2) Without the focus that a SP can provide, we can all fall into the trap of unproductive busyness: “90% of managers are typically either distracted or disengaged from key organizational objectives. Confusing frenetic motion with constructive action, they are noted for their “unproductive busyness” (Bruch & Ghoshai, 2002, Beware the Busy Manager, Harvard Business Review).
3) Lack of alignment: “Only 19% of workers say they can effectively translate the company’s top goals into the work they do” (from Franklin Covey).
Ryan Olsen provides account management and product development for MyStrategicPlan.com with a focus on the customer experience. His project and product management skill set provide the process oriented mindset to drive this objective. Ryan’s passion is rooted in the small/medium business environment. His success is measured through the number of customers who find value in the MyStrategicPlan system and leverage it to facilitate their strategic planning needs. Ryan received his B.S. of Business Administration with an emphasis on Marketing at the University of Nevada, Reno. He can be reached here.
Strategy is a good idea. And planning is a good idea.
But do people get confused by trying to define detailed plans for three to five years, rather than using strategy to set the high level choices that will identify what sort of plans are needed for the next three years?
I’ve recently been reading Stephen Bungay’s Art of Action and have found many of the concepts included in it extremely helpful – particularly the separation of strategy, operations and tactics – and the idea that strategy should be aware of the limits of its knowledge.
He’s also clear that strategic planning in its old micro-managing sense is dead, but that strategy and planning aren’t.
Ever since Jacobs Suchard of Zurich introduced me to the one-page strategic plan, I’ve been sold on it. I’ve crafted several dozen as a CEO and as a corporate strategy consultant . . . even managed to convince a $2.5 billion company to use it. They did and they benefitted by the process and the result.
John, your one page idea fascinates me, and I’m curious to know what a one page strategic plan looks like. Are you able to post a link to one here so I can see an example of one? If not, I understand. I am just really curious.
I will not argue that strategic planning should be eliminated, but I will argue that it has many limitations. Although I do not have the numbers to back this up, I suspect that most of the Fortune 500 companies have, for many years, had strategic planning processes in place. Given that most of us likely can agree with that statement, and if we think strategic planning makes organizations more successful, we would anticipate that Fortune 500 companies would have done very well over the long term. The problem is, the numbers do not seem to agree with the conclusion. According to Marshall Loeb, Editor-at-Large at Fortune Magazine, less than 40 percent of the Fortune 500 companies from 20 years ago still exist.
Strategic planning may help an organization be successful over a period of a few years, as it tends to help focus the organization, but it is certainly not a panacea for the long-term — a decade or more. What strikes me as probably being more important than strategic planning is leadership, and the ability to see what lies beyond the horizon. Strategic planning has a tendency to stifle strategic thinking, and reduce everything to a plan that must be followed and evaluated (including managers’ bonuses based on the success of the brilliant plan). One may be successful for a while, but often success becomes so ingrained that we forget the world is changing and our planning processes have not.
Randy, great to see a fellow Canadian posting on here!
I totally agree that a strategic plan MAY help an organization, but I also wonder if the time, money and resources dedicated to producing these plans could be better spent elsewhere. I also wonder how many successful CEOs actually read and follow their company’s strategic plans. It seems that great leaders just lead, and don’t need boxes and spreadsheets to tell them how to lead and where to lead to.
Martin T. – I’ll have to add that book to the reading list.
I would agree with the separation, although we have a slight modification to that. We tie the strategy and the tactics together. That is, the strategy is long-term. The actions or tactics are those immediate steps that are taken this month or this quarter to move forward. Our recommendation would be to separate the operational meetings from the strategic planning meetings as it encourages a mind shift. It is important to make the strategy meetings a part of the rhythm of the business and may have to adjust to meet that need.
Our system forces the cascading of the goals. Without getting into the weeds on this, the purpose is to ensure the proper rock size is at the right level. The essence of the ‘big rocks’ analogy is that if you don’t attend to the big things first, you’ll never get them done. By identifying and focusing on the business/strategic objectives (the Big Rocks) we can then layer on the appropriate goals and actions/tactics to accomplish the objectives.
John B. – Like Tim V, I am also interested in the one-page strategic plan as well. We know that it is successful in the market and there is definitely a place for it. We offer an eBook w/template for this exercise ourselves. Our flagship product is the MyStraticPlan.com system and one of the reports allows for a one-page plan and displays it very attractively. In our experience, we have had many customers bring us a great strategic plan, but as for help in executing against it (1-page to 3 binders). The problem for many is that a great plan is created, but then placed on a shelf and nothing is done with it.
What is your experience with the one-page plan (a document) and putting a process in place for execution – the strategic management?
Randy P – I can appreciate your experience with strategic planning may lead to your correlation. There are just too many other factors at play for me to say that strategic planning was not a significant value for the Fortune 500 stat. “On average, only 13% of public companies in the United States meet yearly financial expectations” (from Franklin Covey – Greatness Challenge). Are these the ones that have the greatest level of strategic planning expertise? I don’t think that that is the case either.
What I will say is that strategic plans should be a living process. It is the monthly status updates and the quarterly business reviews that make this viable. Doing so removes the stagnant nature of a strategic plan. As you indicated, leadership, or lack thereof, is probably a greater factor. My contention would be that a formalized strategic plan and execution management process leads to a culture of strategic thinking. Two potential outcomes could be:
1) Better/faster decision making. “Good Decisions Improve Financial Results: Companies that excel in decision making generate average total shareholder returns nearly 6 percentage points higher than those of other companies” (from Bain & Company – Decide & Deliver).
2) Innovation. “84 percent of executives say innovation is extremely or very important to their companies’ growth strategy” (from McKinsey Quarterly, 2010).
As Mintzberg says, “for every advantage associated with strategy, there is a drawback or disadvantaged” (Strategic Safari: A Guided Tour through the Wilds of Strategic Management). Mintzberg goes on to say that one danger with strategic planning is that it can create blinders. Without leadership continually checking to ensure the plan is not blinding those in the organization, or creating group think, a plan, if not adapted to a changing environment, can create a death spiral for the organization. Even monthly reviews can, if not applied correctly, result in demands to redouble efforts to bring about the success of the plan, rather than having someone question what happened to the environment. As an example, has anyone bought a ‘buggy whip’ lately? Buggy whip sales dropped regardless of the organizational strategic plan. Without encouraging and actually respecting people who question a plan’s beauty and conclusions, an organization is encouraging group think — which does stifle innovation.
With a typical time frame of 3 to 5 years, strategic plans fail to address the longer-term future of say 10, 20, or 30 years out. Over a shorter time period, I would absolutely agree that regular reviews are necessary, but the further one goes out into the future, the greater the variability becomes and the less useful a traditional strategic plan.
Ramo in his book, the Age of the Unthinkable, suggests it is important to have crises, small-scale revolts and recoveries in order to bring innovation and change resiliency into the organization, rather than waiting for large unanticipated collapse. I personally have never seen a strategic plan with a goal of creating small crises in the organization. Maybe there should be!
I have no issues with strategic plans, as far as they tend to go, but I truly believe that many fail to look at possible futures and to create organizational resilience to them. If those that use strategic plans miss weak signals, indicating change is on the way, organizations will fail even with otherwise great planning in place. Without future planning innovation built right into the plans, or as an addendum to the plans, in another 20 years we will again see that large numbers of corporations that faithfully used strategic planning have disappeared.