This article is the seventh in a series on what causes a firm’s value to increase
Can you predict your organization’s future with certainty? Can this prediction then enable your firm to move to that future with supremacy and advantage? When strategic planning was popularized right after World War II, it promised to do just this. We now know, though, that nothing can do this short of an organization enjoying a lasting monopoly.
Harvard’s Dr. Michael Porter, the most recognized strategy professor in the world, recently wrote: “Great strategies are rarely, if ever, built on a particularly detailed or concrete prediction of the future.” What then are great strategies built on?
Let’s consider some conflicting evidence about the value of strategic planning. The highly respected strategy consulting firm Bain and Company (www.bain.com) conducts an annual survey of management tools and frameworks. Strategic planning always ranks at the top, if not first, on the list. But Jack Welch, the highly respected former CEO of General Electric, fired all of his strategic planning staff in the early 1980s. He did not like the bureaucracy all of the strategic planners created and directed his line executives to do their own strategic planning. Larry Greiner, a respected academic in the field, said recently that normal strategic planning is a waste of time and effort. However, some academic research shows that a strategic planning process correlates with higher Returns on Invested Capital and Total Shareholder Return.
So what is going on here and how can a strategic planning process help to build the great strategies Dr. Porter writes of? The answer in part lies in making the following distinctions:
1. Strategic thinking – is at its essence an entrepreneurial endeavor. It asks how an organization, faced with competition, will achieve sustained, superior performance.
2. Strategic planning – is an “appropriately bureaucratic” process to make sure that busy people in the firm take the time to think strategically. Otherwise the crush of operations and fire-fighting always wins out and strategic thinking does not get done.
3. Strategic acting – is strategic decision making (making critical resource allocations), strategy execution, and ongoing communication of the strategy to your organization’s people.
Notice then that a strategic planning process links strategic thinking and strategic acting for results. The exhibit depicts a typical generic strategic planning process found in most mid-sized to large publically traded companies. Hundreds, if not thousands, of variations exist and every firm customizes this typical process over time. Some firms have a head of strategic planning to bring these three aspects together. Most though ask the top management team to carve out time to do this together.
The exhibit depicts a calendar driven set of events as a “drumbeat” reminder to think strategically and then act. If this calendar set of events is always upheld, key managers know they will need to think, plan and act every year and they will be accountable. General Electric’s famous Operating System is a carefully scheduled and planned set of meetings throughout the year. Everyone knows they will have to stand and deliver, and that CEO Jeff Immelt will be listening and assessing.
But why did Jack Welch hate strategic planners so much and why does Larry Greiner think this typical process is a waste of time?
Jack Welch simply disliked staff work that he felt his line executives should be doing. Larry Greiner thinks the world moves even faster than the scheduled events in the strategic planning process can happen throughout the year. As such, people can be lulled into thinking they are doing strategic thinking and acting, but are really falling behind. I agree with Larry but, I have also found a deeper set of reasons why a typical strategic planning process fails to deliver what it could deliver and I offer suggestions for improvement:
- The process assumes all participants have equal weight. Every organization, though, has political issues caused by where the power resides. A whole year can be wasted if power bases are not accommodated from the start.
- Some organizations simply rebel against anything that looks too analytical. A strategic planning process can seem that way to those personalities who simply like to fire from the hip. The process can be adjusted to accommodate these kinds of entrepreneurs by making the process more like story telling than analytics.
- The process is not technologically enabled with the latest assistance to make the process as painless as possible. Current inexpensive virtual collaboration software and infrastructure can make capturing and publishing the entrepreneurial ideas very simple.
Does your organization use a strategic planning process? Does it add value? If you do not use such a process and you want to install one, the process needs to be designed to fit your organization like a glove in order to realize its promise.
Next Up: Globalization of Business and Northwest Louisiana
Bill Bigler is Director of MBA Programs and associate professor of strategy at LSU Shreveport. He spent twenty five years in the strategy consulting industry before returning to academia full time at LSUS. He is on the board of directors of the Association for Strategic Planning, one of the leading professional associations in the field of strategy. He can be reached at bbigler@lsus.eduThe Strategic Planning Process: Does Your Organization Need One?
This article is the seventh in a series on what causes a firm’s value to increase
Can you predict your organization’s future with certainty? Can this prediction then enable your firm to move to that future with supremacy and advantage? When strategic planning was popularized right after World War II, it promised to do just this. We now know, though, that nothing can do this short of an organization enjoying a lasting monopoly.
Harvard’s Dr. Michael Porter, the most recognized strategy professor in the world, recently wrote: “Great strategies are rarely, if ever, built on a particularly detailed or concrete prediction of the future.” What then are great strategies built on?
Let’s consider some conflicting evidence about the value of strategic planning. The highly respected strategy consulting firm Bain and Company (www.bain.com) conducts an annual survey of management tools and frameworks. Strategic planning always ranks at the top, if not first, on the list. But Jack Welch, the highly respected former CEO of General Electric, fired all of his strategic planning staff in the early 1980s. He did not like the bureaucracy all of the strategic planners created and directed his line executives to do their own strategic planning. Larry Greiner, a respected academic in the field, said recently that normal strategic planning is a waste of time and effort. However, some academic research shows that a strategic planning process correlates with higher Returns on Invested Capital and Total Shareholder Return.
So what is going on here and how can a strategic planning process help to build the great strategies Dr. Porter writes of? The answer in part lies in making the following distinctions:
1. Strategic thinking – is at its essence an entrepreneurial endeavor. It asks how an organization, faced with competition, will achieve sustained, superior performance.
2. Strategic planning – is an “appropriately bureaucratic” process to make sure that busy people in the firm take the time to think strategically. Otherwise the crush of operations and fire-fighting always wins out and strategic thinking does not get done.
3. Strategic acting – is strategic decision making (making critical resource allocations), strategy execution, and ongoing communication of the strategy to your organization’s people.
Notice then that a strategic planning process links strategic thinking and strategic acting for results. The exhibit depicts a typical generic strategic planning process found in most mid-sized to large publically traded companies. Hundreds, if not thousands, of variations exist and every firm customizes this typical process over time. Some firms have a head of strategic planning to bring these three aspects together. Most though ask the top management team to carve out time to do this together.
The exhibit depicts a calendar driven set of events as a “drumbeat” reminder to think strategically and then act. If this calendar set of events is always upheld, key managers know they will need to think, plan and act every year and they will be accountable. General Electric’s famous Operating System is a carefully scheduled and planned set of meetings throughout the year. Everyone knows they will have to stand and deliver, and that CEO Jeff Immelt will be listening and assessing.
But why did Jack Welch hate strategic planners so much and why does Larry Greiner think this typical process is a waste of time?
Jack Welch simply disliked staff work that he felt his line executives should be doing. Larry Greiner thinks the world moves even faster than the scheduled events in the strategic planning process can happen throughout the year. As such, people can be lulled into thinking they are doing strategic thinking and acting, but are really falling behind. I agree with Larry but, I have also found a deeper set of reasons why a typical strategic planning process fails to deliver what it could deliver and I offer suggestions for improvement:
- The process assumes all participants have equal weight. Every organization, though, has political issues caused by where the power resides. A whole year can be wasted if power bases are not accommodated from the start.
- Some organizations simply rebel against anything that looks too analytical. A strategic planning process can seem that way to those personalities who simply like to fire from the hip. The process can be adjusted to accommodate these kinds of entrepreneurs by making the process more like story telling than analytics.
- The process is not technologically enabled with the latest assistance to make the process as painless as possible. Current inexpensive virtual collaboration software and infrastructure can make capturing and publishing the entrepreneurial ideas very simple.
Does your organization use a strategic planning process? Does it add value? If you do not use such a process and you want to install one, the process needs to be designed to fit your organization like a glove in order to realize its promise.
Next Up: Globalization of Business and Northwest Louisiana
Bill Bigler is Director of MBA Programs and associate professor of strategy at LSU Shreveport. He spent twenty five years in the strategy consulting industry before returning to academia full time at LSUS. He is on the board of directors of the Association for Strategic Planning, one of the leading professional associations in the field of strategy. He can be reached at bbigler@lsus.edu