‘Strategic planning and budgeting’ are vital items in the corporate agenda of any organisation. As a CFO and a member of the senior leadership team of several large organisations both in the private sector and the public sector, I have tasted the sweetness as well as the bitterness of the process.
In my current role as an independent consultant, I experience the ground realities with multiple planning paradigms. Some emphasise numbers; others emphasise strategic objectives while many seem to consume a lot of paper and time but don’t really change their organisations from year to year.
‘Plans are nothing; planning is everything’
The above statement by Dwight D. Eisenhower; a former president of USA; clearly distinguishes the difference between the plan and planning. Hence, one of the fundamental questions one must ask is; “Do we really focus on planning (process) or just worried about the plan (outcome)?”
In a typical strategic planning process a greater emphasis is given to the timelines and the list of activities. Certain organisations merely retrieve the time schedule and the list of activities from the previous year and simply replicate the same with changes to the dates. The situation is even worse when the respective officers who are responsible to provide various inputs for the plan merely review what has been done in the previous year and do some cosmetics around it with minimal additions.
Consequently, it’s not unusual to find comments such as “our plans didn’t work” in the end. Instead, one should really wonder “how come our plan worked!” if it really worked in the above circumstances.
Given this backdrop, I thought of sharing 10 reasons why strategic plans fail, based on my observations and experience in the Sri Lankan context.
1.Tone at the top
A strategic plan of an organisation is the blue-print of its future direction and hence the commitment of the top management for their active participation in the process from the beginning till the end is essential. However, in reality most of the directors and C-suite executives do not get involved in the process until they see the first draft of the ‘plan’ which is produced after a substantial proportion of the planning process is over.
This result in either the management who spent an enormous amount of effort and time in preparing the plan gets bombarded with critiques that at times demand a complete revamping of the plan or the top management becomes followers of the plan while in certain cases they tend to ignore the plan and run the organisation on their own way.
2.Keeping it simple
Some organisations attempt to inculcate an unwarranted seriousness into the process to showcase that ‘strategic planning is high level, serious and complex stuff’ and as a result many stakeholders fail to contribute effectively. However, if we demystify the real task at hand in the process, it broadly has three questions to answer; 1. Where are we?; 2. Where do we want to go/be? and; 3. How do we get there?
These areas need to be broken down in a logical as well as digestible manner to ensure smooth execution by the parties involved in the process. It is also important to ensure that all the stakeholders who are involved in the process are appropriately educated on the process as well as technical jargon so that everyone is clear of their expected role and how their tasks contribute to the big picture.
3.Right people with right thinking
The selection of the right team to drive the planning process is a vital as well as a challenging task. It’s not necessarily the titles that matter. What is more important is to get a team that represents the key functions of the organisation and then providing them with sufficient resources and authority to actively drive the process.
Studies have found only around 30% of the management in organisations has the strategic thinking ability and this is one of the key reasons why most of the strategic plans become just roll-overs from the previous year. Therefore, intellectual capacity building is essential prior to the commencement of the strategic planning process. If an organisation lacks the expertise, it’s always a good idea to get an external resource involved as a ‘facilitator’.
4.Theory vs. practice
Most of the strategic management books are based on the practices in the western world and developed economies. Hence, the models and templates available in those text books may not always match the local context. As such, a serious attention should be paid to select the most appropriate models and use them with adequate customisation to capture the context and ground realities.
These models are just supporting tools to formalise the planning process as they provide logical frameworks to capture and interpret information. The management should first determine what needs to be captured and then select the most appropriate models or tools in carrying out the task. However, the practice for many organisations is to first determine the models (PESTEL, SWOT, BCG, etc.) and then look for information to fill them.
5.Missing the forest for trees
A PLC approached me to assist them in their revival strategy as the company has been running at a loss since its inception. Identifying the areas where revenue was low and cost was high and crafting strategies to optimise the two aspects have been the priorities of the company’s strategic planning activity over the years.
However, when I analyse the market and the total business model, I noted that the business cannot be made profitable even if it reaches the maximum possible revenue levels, as the same is not adequate to beat the overhead cost structure of the business. The only option to revive the organisation was to do a complete overhaul of the total business model. The management hasn’t seen this aspect until I pointed out the same, because they have never done a comprehensive business model scan as part of their strategic planning process.
This activity of reviewing the total business model and evaluating the same against the competitive environment and anticipated market conditions is a big miss in their traditional strategic planning process, as a result of which the companies become misfits in the changing market conditions despite the optimistic strategies identified by the management for individual components of the business.
6.Connecting the dots
The planning team typically spends a significant time in doing the environmental scan, industry analysis, SWOT analysis, etc. Technically, whatever the critical points identified during these analyses need to be linked with the strategies and actions. However, in many cases there are disconnects among each of these activities.
The primary reasons for these issues are the lack of understanding about the practical use of the models and not having a clearly established sequence of activities with logical flow of information from one activity to the other.
Planning is not only a technical process, but also entails a great deal of psychology in it. The execution of any plan requires the buy-in of all the employees and they must believe in the strategy in their heart and mind in order to contribute in the execution process. As such, sufficient attention needs to be paid during the planning phase to capture these sensitivities and cultural values that drives the mindset/attitudes of the people.
The psychology of the stakeholders involved in the process is also important. In order to think different, one must feel a difference and in order to think out of the box one must be out of the box. Therefore, I strongly recommend that the planning sessions are conducted in an outside location with a conducive environment, which is free of the distractions from the routine matters.
Strategic planning is not necessarily a replication of history, but getting ready for a new world with a new way of thinking and behaviours. As someone has said; ‘if you always do what you always did, you will always get what you always got’. Hence, when an organisation is expecting a different outcome, the organisational architecture and the culture should also be adjusted accordingly.
This requires a well-structured change management program that includes but not limited to, cultural transformation program, training and development of staff, communication plans as well as a reward mechanism to stimulate the desired behavioural changes.
Assumptions used in planning must be ratified by adequate feedback before being set in stone. Inadequate strategic thinking and lack of involvement by the top management in the process can trigger false assumptions that doom the plan to fail long before it starts.
It is not feasible to make perfect assumptions about what the future holds, but a thorough deliberation can make the assumptions more realistic in the circumstances. It is also important to review the set assumptions against appropriate benchmarks. The planning process generally takes a few months to complete and in certain cases the management fails to review the assumptions they made at the beginning which might require modifications owing to the changes in the circumstances over the period of planning.
10.Lack of agility
The ability to adapt quickly is the name of the game in today’s business climate. Many organisations believe once the strategic plan is done, it’s sealed and should not change. However, the environment and the competitive market keep on changing beyond the assumptions made in the strategic plan. Business leaders should be able to anticipate change and inculcate the possibilities into the plan. One way of handling this is scenario planning and embedding fall-back strategies (plan B) in the plan.
The list can go on, but the main message I attempted to convey was; if an organisation is serious about the strategic plan, they must be serious about the planning process.
[The writer, FCA, FCCA, ACMA, FMAAT, MBA, B.Sc.Accy.(Sp.) is the Chairman/Principal Consultant at H C P Consulting Ltd. and a sought-after expert by entities both in the private sector and public sector for strategic planning, organisational transformation and capacity building. He can be reached via email@example.com.]