McKinsey & Co. have an article from their McKinsey Quarterly archives on their website discussing Strategic Planning, and proposing four guidelines to help strategic planners make the crucial leap from plans to decisions.
Cortell Project Manager and Consultant Van Zyl Brink discusses this article.
Louis Gerstner writes:
One of the most intriguing management phenomena of the late 6os and the early 70s has been the rapid spread of the strategic-planning concept. Except for the so-called computer revolution, few management techniques have swept through corporate and government enterprises more rapidly or completely. Writer after writer has hailed this new discipline as the fountainhead of all corporate progress. In 1962, one published report extolled strategic planning as “a systematic means by which a company can become what it wants to be” (Stanford Research Institute). Five years later, it was called “a means to help management gain increasing control over the destiny of a corporation” (R. H. Schaffer). By 1971, praise of strategic planning verged on the poetic; it had become “the manifestation of a company’s determination to be the master of its own fate . . . to penetrate the darkness of uncertainty and provide the illumination of probability” (S. R. Goodman).
It is not surprising, therefore, that one company after another raced to embrace this new source of managerial salvation. As a result, most major companies today can boast a corporate-planning officer, often with full attendant staff. It seemed appropriate to ask some chief executives whether strategic planning has lived up to its advance billings. Three anonymous reactions were as follows:
“Strategic planning is basically just a plaything of staff . . .”
“It’s like a Chinese dinner: I feel full when I get it, but after a little while
I wonder whether I’ve eaten at all!”
“Strategic planning? A staggering waste of time and money.”
Some CEOs, of course, would disagree with these comments, and certainly few if any would agree publicly. But the fact remains that in the large majority of companies corporate planning tends to be an academic, ill-defined activity with little or no bottom-line impact. Observations of many companies wrestling with the strategic-planning concept strongly suggest that this lack of real payoff is almost always the result of one fundamental weakness, namely, the failure to bring strategic planning down to current decisions.
Van Zyl responds:
When thinking about Strategic Planning, do the following concerns pop up?
- Strategic planning is a time- and money-wasting exercise?
- Its an ill-defined concept with no real benefit?
- It does not provide my organization with any bottom line impact?
During the Strategic Planning process, have the following crossed your mind?
- What do we do with the results of a strategic plan?
- Do we really focus on a 5 year operational plan?
- How changes in internal and external factors will affect the future?
- Will the future resemble the past?
In the above article, Lou Gerstner (former CEO of IBM) says that strategic planning can be actioned into the tool that it is meant to be by making decisions, not plans. Focus is easily lost when increasingly more time is spent on the plan. The level of granularity during planning, accounting-focused results, and assuming the future will be like the past are but a few of the pit falls that shift the focus to planning rather than decision making.
The decisions that are identified during strategic planning should be actively pursued by top management. Evaluating competitor strategies and determining contingency plans based on these competitor decisions will be crucial. Executives should analyse the capital needs of the strategic plan based on sources of growth, sources of earnings and sources of cash flow and not just cash paybacks and rate of returns. Responsibility should be given to decision makers and they should be rewarded for their strategic choices.