Strategic Planning – Best Practices

EPISODE SUMMARY

You must have the best organizational planning practice you can muster to complement your Enterprise Risk Management regime! Was Mintzberg right in saying Strategic Planning was dead? We continue our discussion of strategic planning best practices, supported by research.

SHOW NOTES

Main points              

Last episode we started with an examination of the planning regime, as the first step in High Quality Risk Assessment.

I mentioned that an 80/20 rule seems to obtain, 80% of our efforts as risk managers is properly spent on fixing the quality and extent of the planning. For that reason, we expand that discussion today.

We set out steps in a planning process to help you assess and fix how planning is approached in your organization.

Recall:
– What is the evolutionary stage of the organization?
– self-identification – Strategic Identity
– environmental scan – the outward view
– formulation of goals and objectives

Let’s situate our organizational practices in a wider planning and management schema

As explained, good planning is the necessary condition for effective risk management.

But, pausing for a moment to take a wider view, these questions naturally arise: are there not hundreds of different types of planning and management techniques? How are they inter-related?

Planning and management schema
– an attempt at a comprehensive listing
– purpose: to relate various management practices to one another in a logical order
– to use as a reference to compare and make changes to your own organization
– don’t forget all the wasted time in meetings
– is there potential for meaningful organizational change?

Is strategic planning dead?
– common attitudes: planning
– strategic planning is popular; yet somehow mysterious and ineffective (kinda sounds like ERM!)
– Mintzberg’s article “The Rise and Fall of Strategic Planning“
– his true complaint: not predictive; focused on quantitative targets; not participatory
– quote from Wall & Wall article: better characterization of strategic planning

Recommended practices

Subsequent research: Effective strategic planning is:
· an iterative process; participatory, involving dialogue and exchange between planners and the rest of the employee group
· well-informed by detection of trends, conditions and emergent issues; it has to stay relevant in order to arrive at creative and innovative solutions, rather than simply state a static target based on last year’s results
· helps promote an integrated culture, and a sense of belonging to the firm, based on common values

– examples and quotes from a few sources (cited in the show notes)
– business failure studies – yup, we do need planning!
– elements of strategic planning
– benefits of strategic planning
– psychological benefits and improvement of morale
– highlight on implementation
– lists of criteria are useful for risk assessment!

Conclusions

What is the best definition Strategic Planning?
What is the rationale for Strategic Planning?
Does this imply an extraordinary amount of work?

Summary: What did we cover today?

1. We reiterated that to begin High Quality Risk Assessment (our core practice in ERM), we must review the planning practice.
2. We reviewed the steps in a suggested planning process (discussed in more detail in Ep 5).
3. We situated strategic planning and many other techniques in a sort of grand schema.
4. Rationalize planning, meetings and management techniques: there is potential for meaningful change
5. We discussed the reason for negative impressions of planning.
6. We cited examples from the literature to show the best practices.
7. We finished with a recommended definition of Strategic Planning and its ultimate rationale.

KEY QUOTE

“Traditional planning fails to take into account the creative processes and discoveries that generate breakthroughs.” (article ~ Wall, S. and Wall ,S.R.)

LINKS

Aldehayyat J & Anchor J (2010) Strategic Planning Implementation and Creation of Value in the Firm
Wall, S. & Wall, S R (1995) “The Evolution (Not the Death) of Strategy
E. Robertson Strategic Planning: Process, Templates and Effective Implementation (2019)

TRANSCRIPT

Podcast Episode 6: Strategic Planning Best Practices. Well, this is a continuation of our discussion on strategic planning which I started in the last episode. I thought it was really worthwhile to spend the time on a second episode on the same topic, because it’s so important to establish a good planning practice as the basis, as the precursor, for good risk management.

I think many of you have probably had the experience of trying to conduct risk assessment on the basis of so-called plans that are not well-formulated, not well substantiated. You just end up going around circles. To avoid that, I suggested the steps in a strategic planning process in the last episode. I’ll just give you a quick review now.

First of all start with what I call strategic identity: an inward view of the character of the organization. What are its unique assets? How does it position itself in the market with respect to its constituency, its client group?

We talked also about the importance of environmental scan: an outward view to establish what the emerging issues are, the current trends and conditions.

I talked about the correct formulation of goals.

Okay, so far we’ve established that, in order to do risk management logically, following on the definitions — the very definitions in the standards — you’ve got to have goals and objectives that are properly formulated and well-substantiated. In other words, you have to have a good planning practice.

So I think we’ve established that point well enough, but I really think the whole subject bears closer scrutiny.

We can spend a little more time and hopefully a relaxed manner to try to investigate the different aspects of this question, and in the long run I think this is going to save you time; it’s going to save you some grief. So let me just try to explore this issue and give you some idea of how I’ve tried to come to terms with it, and the conclusions that I’ve reached. All of this culminates in the work that I’ve produced and in my comments today.

[02:49] Well one question that naturally arises, since we’re looking at enterprise risk management and strategic planning already, is: What about all of the other management practices and techniques that are out there? I mean, there must be hundreds or even thousands of them. So how do we make sense of those, and either incorporate them into our organizational practice, or leave them aside?

I tried to answer this question by creating a schema that, first of all, relates different kinds of planning to each other. So for example, we’ve got internal organizational planning. Now, that’s not strategic planning. It’s simply setting up your operations: determining what your business model is all about; what is your financial strategy; the ownership structure; the corporate structure; the management team — all of that. So I characterize those and many similar points as the internal organizational plan.

Then I distinguish that from strategic planning per se.

And then I distinguish that, yet again, from operational plans. So that’s already sort of a tripartite structure of planning. That might be helpful to you to make sense out of that whole world of planning!

[04:02] Beyond that, there’s all kinds of management techniques that might be related to, let’s say, IT (information technology), (for example) Agile product development. They may be related to manufacturing, like Lean and Enterprise Resource Planning (ERP).

What I’ve done is to set out all of these various elements of planning and management practice to try to relate them logically to one another, and to give things in a logical order. Now, at the very least that schema that I’ve created could be a reference for you. You can take a look at it and say okay, well I can see that there’s some sort of an order here, and we’re doing this and we’re doing that, but we’re missing this or that. Or you could say, there are things that we’re doing that aren’t even mentioned in the schema — but now I better understand where they fit in to the whole picture.

[04:48] It’s not a bad idea to take a step back and to try to rationalize the whole management and planning process, and to make sense of why we’re doing what we’re doing in the organization on a daily basis.

In the first episode of this whole podcast series I talked about how time in meetings is wasted, and this is shown in studies (and we’ve all experienced it). Well, there’s one interesting stat that I did not mention at the time, that was in one of the articles. And that is that 10% of meetings — not ten percent of the time in meetings, but rather ten percent of the number of meetings held — were actually characterized by respondents as being completely unnecessary.

So my conclusion from all that is: if you’re at all in a position in the organization to make changes and you can do some sort of analysis as to the time spent; the meeting practice; the planning practice; the management techniques that are used — and try to rationalize the whole thing. Then there’s potential for you to create change in the organization which could be very meaningful for the people involved — and be career altering for yourself.

So right away I hasten to add that if you’re going to try to make change in the organization, do so on an incremental, gradual basis, and check back with your participants to make sure that it’s going in the right direction. That’s one of the many success factors in program implementation that you need to pay attention to. Another idea would be to have an executive sponsor to back you up.

]06:12] Well let’s circle back around now to this question of strategic planning itself. I think it’s possible that you might be running into some resistance on this. One common attitude is that strategic planning is kind of dead — it’s not worthwhile, because plans tend to sit on a shelf. This was really brought home several years ago in an article by Mintzberg called “The rise and fall of strategic planning”. Now at the same time we see that strategic planning is one of the most popular management tools.

Let me quote you a quick summary of some of the literature on business failure that I’ve got in my book here. I said: in the review article mentioned, lack of specific business plans ranked among the top five of fourteen reasons for business failure, virtually equivalent in importance to adequate capitalization and management experience. Okay, but now, juxtapose that with this interesting stat: not one of the two hundred failed entrepreneur interviewed (in two studies that I quote) identified the issue of planning.

Isn’t that curious! So planning is very important, and yet it’s not even recognized as an issue. It’s almost like Enterprise Risk Management itself, which is somehow appreciated, but mysterious, it’s not understood and it’s not done well. All right, so we see that while strategic planning is among the most popular of management tools — that’s what the literature is telling us — at the same time, people don’t quite understand it. They don’t even try to revisit it when they fail as entrepreneurs. And at the same time there’s an undercurrent of a negative attitude towards planning, that was characterized in that famous article by Mintzberg.

[07:56] Looking at his article more closely, we see that he was complaining about specific things. Number one: planning does a bad job of predicting. Well, of course, he’s right there. I mean the kind of planning that pretends to forecast exactly what’s going to happen is not a very good planning practice.

Second, he says the plans themselves are quantitative and statistical in nature, and set out simply targets for increase — like two percent of over last year, that kind of thing.

Third, Mintzberg was complaining about the fact that these plans were really crafted at the higher levels, and then imposed upon the rest of the management community.

[08:36] In a review of this, in an article called “The evolution (not the death) of strategy” [citation given] they characterize traditional strategic planning as “failing to take into account creative processes and discoveries that generate real breakthroughs.” They say that there’s too much creation of “strategies that are either repetitions of a largely irrelevant past” or “imitations of something being done by another organization”. And they say that traditional planning has been used as instrument of control particularly over middle managers.

So it’s this kind of planning in the conventional sense that I think a lot of people have experienced and has given them a bad taste. In a lot of the subsequent literature, planning is actually demonstrated to be beneficial and useful, as long as it’s conceived in the right way. Just like in enterprise risk management, where we saw a whole fragmentation of definitions and interpretations of a how it should be done, the same thing in strategic planning.

[Recommended practices]

]09:31] Here’s a few quotes from a pretty interesting article that’s called “Strategic planning implementation and creation of value in the firm” [citation given]. Notably, in their list of benefits of strategic planning that they’ve gleaned from the literature, they say:

“identifying and exploiting future marketing opportunities” and

“encouraging personnel in a favorable attitude to change”

And moreover, partly in response to this whole criticism of the traditional view of planning, there is in more recent years:

“less bureaucracy with more emphasis on implementation and innovation”

“participation from line managers and teams of employees”;

“more sophisticated planning techniques such as scenario planning” and

“increased attention to changing markets and to competitive and technological trends”.

So that gives us an indication of a much better method and subject matter focus for strategic planning!

One interesting aspect of this study is that they emphasize the connection between implementation problems and poor performance results. The companies that they studied experienced difficulties in implementation that were, for example:

– unanticipated major problems which arose (so they didn’t necessarily have a risk management process in place!);

– the unclear statement of goals, which is a classic problem in implementation.

So, even just using some of these indications from the literature, we can start to put together a picture of recommended planning practices. I’ve got a list of three (more) items here:

[[11:02] First, the strategic planning process has to be an iterative process. It is participatory involving dialogue and exchange between the planners and the rest of the employee group, who hopefully are consulted.

Second, the whole process is well informed by environmental scan, so people are detecting the trends the conditions, and emerging issues, and they make an effort to stay relevant [i.e., current] in order to arrive at creative and innovative solutions — rather than simply stating a static target based on last year’s results.

Third point: This all helps promote an integrated culture. People start to gain a sense of belonging to the firm, and this is all based on common values that are arrived at in participatory exercises. People can create official company documents, like, let’s say, a mission statement, and they feel a personal investment in the firm.

[11:53] I wanted to make a comment in passing on the use of academic literature. Often you can find studies that are quite interesting. They may not always directly relate to your industry vertical, to your type of organization and they might even be a bit dated. But after a while after you’ve surveyed review articles, and enough research has been done, so you start to get a sense that people are discovering pretty much the core information on, let’s say, what makes strategic planning successful.

And you can bring to the table lists of criteria that the authors might have identified that are relevant to your next risk assessment [i.e., on any particular topic]!

Recommended definition: strategic planning

So by way of conclusion wanted to emphasize that strategic planning in its best practice aspect, is really made up of three parts.

The first one is the research; the discussion; the writing that you have to do — the exchange that goes on.

But secondly, it’s the psychological aspect: the understanding and the unity of purpose and motivation that has developed in the minds of the people who participate in this.

And the third thing is the translation of all of that into meaningful action.

Now why do we want to consider all this? It could go back to the point that we made earlier [in Episode 5] about your organization perhaps reaching a certain point in its evolution, where you start to really need to consider systematic methods and best practices. Your organization can stop fluctuating in it’s performance results and really take the next quantum leap ahead.

Let me read you a paragraph here under the heading: The Why: The Case for Strategic Planning:

“Leaders who aspire to a world-class level of organizational development will want to build capacity. They want a management culture that is competent beyond one person’s capricious influence. They also want an organization that is coherent—that has a sense of identity, defined aims, and consistent execution. Practitioners discover that strategic planning, in the form I describe it, is much more than the sum of its parts. It has a psychological effect, creating a shared vision and healthy interactions. This is the foundation of successful growth.”

That’s from my book Strategic Planning [citation given] on page 21.

[14:11] Before we summarize the points in today’s episode. Let’s address one final point, and that is the concern that some people might have that I’m asking for a little bit too much. I could be perhaps imposing an expectation that is too burdensome for Risk Managers to take on.

First of all, I’ve tried to present a lot of information, and I covered this this earlier, with respect to planning and management practice, so that you can pick and choose. You can use my general survey as a point of reference so that you can compare what you’re doing and where you might pick up pointers, where you might do some incremental improvement, and where you’re already having success.

And so it is isn’t necessarily the quantity of work that I’m asking for, it simply to check the quality of the work.

The second point is that if people can improve their planning process along the lines I’m suggesting, then they’re going to have much more confidence in the quality of those plans. And the risk assessment itself will tend to go much better, much smoother — because they’ve already mitigated a lot of the risk in putting the quality work in up front.

[15:20] Let’s summarize what we covered today.

1. We reiterated that to begin High Quality Risk Assessment, which is the core practice in ERM, we have to review the planning practice.

2. We reviewed the steps in suggested planning process, which is discussed in more detail back in the previous episode (five).

3. We situated strategic planning and many other techniques in sort of a grand schema that you can use as a reference. Now in one of my books I call that the Generic Planning and Management Schema and in the other book, the Tools and Templates, I call it the Complete Organizational Planning Process. And that will be made available for those who subscribe to my podcast and receive the monthly newsletter.

4. The suggestion to try to rationalize planning, meetings and all your management techniques so that you can make the whole thing as efficient as possible — and there’s potential there for meaningful change, especially in view of the fact that a lot of time is wasted in meetings.

5. We discussed the reasons for the negative attitude towards planning and how this really refers to the old conventional strategic planning which was top down, non-participatory and detached from the real world of creative innovative change.

6. We went on to discuss examples in the literature, showing that strategic planning really has progressed. There are discernible best practices.

7. We finished with a recommended definition of strategic planning and gave some idea as to its ultimate rationale.

Well that brings us to the end of Episode 6. Please leave comments to tell me what you’ve enjoyed so far, what you’d like to hear more of, and what you need to hear about with respect to enterprise risk management, strategic planning, innovation, and so on. I’ll try to build the best content I can going forward based on those comments. Thank you.

…/end.

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