Haters Gonna Hate Annual Strategy

What do you think of annual strategic planning? Does your organization do it? Is it productive? If you don’t do it, why not?

The Hate Brigade

I have been struck by the recent uptick in articles, podcasts and tweets suggesting that annual planning is dead. A search for “annual strategic planning is a waste of time” yields 150,000 results!

Much of the criticism is about the frequency, not the activity. Weird.  

If I were going to change the planning cadence it would be toward less frequency. I could make the case for only doing a full strategic plan every 5 years, with periodic updates and iterations along the way.

Real-Time, All the Time

Instead, the push is for abandoning any longer-term planning and instead attempting to address strategy in real-time –on an ongoing basis.

In this model, the only long-term plan is a sort of vision or goal. But as to how you get there –it is decided moment by moment depending on circumstances.

There are lots of problems with this –not least of which is that it is utterly reactive and doesn’t address what not to do when faced with choices between opportunities (I’ve written a lot about that hereand here).  

The basic argument against an annual plan is the “inevitability” of its obsolescence. After all, they remind us, no one could have planned for a 2020 global pandemic –and nor can anyone anticipate forthcoming changes to befall us tomorrow or in 6 months.

This annual plan hate is pervasive. A McKinsey survey determined that only 45% of 800 respondents were satisfied with the strategic-planning process.

That made me sit up and think that there must be more to this argument than the refrain of “But the pandemic…”.

There was a bit more –two major points in fact. The first uses the pandemic for its evidence.

The Unexpected? Scary!

No plan can account for unpredictable conditions.

What’s especially interesting about that is that the literature starts in 2020. Prior to the pandemic, very few folks had this concern about needing to predict the future perfectly.  

I think this is a flawed objection. It is integral to strategic planning that the plan both accounts for the past and theorizes for the future. The goal isn’t to foretell the exact events that will take place. Instead, it is to create an unforeseen future that accomplishes a hard goal—and that accounts for realistic threats along the way.

Imagine we want to go from Miami to Vermont. We are planning our strategy and we have several specific targets along the way. We want to arrive no more than 5 days after we leave. We don’t want to rent a car. We’d like to spend two days in Philadelphia and one in Manhattan. Our strategy might be to drive a personal car from Miami, up I-95, stopping off in the relevant cities.

There are lots of unknowns: Will there be an accident along the way? Will the car break down or one of us get ill? Could an airplane fly into the highway and kill us? Will there be torrential rain that floods the road? These are the unknowable.

There are also knowables: It’s VERY expensive to park in Philadelphia or Manhattan. Maybe we need an alternative for those stopovers? Should we find Airbnb’s that include parking. Or –maybe we forget about driving the whole way and simply drive to Atlanta and take the train.

We haven’t eliminated uncertainty. But, we have carved out a plan that precludes flying, hitchhiking, renting a car or taking an Uber. We have also ruled out stopping in Austin and Minneapolis because they are detours.

If the very unexpected happens –say the trains go on strike when we are in Philadelphia (this happened to me in Chicago a month ago)—we then iterate upon our plan, and either violate the no rental rule or we fly.

We don’t decide to jump on the Queen Mary and go to Venice even though the magazine that the hotel gives us has a great deal to do just that.

Strategy requires looking forward and backwards. Making decisions without perfect information is uncomfortable. But that’s strategy. It is hypothetical and developed in a state of uncertainty.

It is the very reason for the expression “No Risk, no reward”.

Back to the Haters.

The second major complaint is about the content of the annual strategy meetings themselves.

The descriptions of the planning process sound awful and familiar. My clients who work in legacy companies describe the same processes. Departments heads craft presentations of historical data, annual results, and their planned projects and budget.  While at the event itself, the CEO shares her goals for the next year, and each department makes its presentation. Soon thereafter, budgets are allocated.

In organizations that do this kind of annual activity, the CEO’s goal is to motivate leaders to produce results while spending as little as possible.

The department heads’ goals are complimentary: To justify last year’s budget and earn a bigger budget next year.

Nothing about any of this seems interesting, challenging or rewarding. It’s not hard to understand why so many business leaders want to retire that ritual. 

But, that activity is NOT strategic planning. It is planning of a sort. It just isn’t strategic.

Because it is not strategic, it cannot answer the first complaint –that it doesn’t provide guidance that can apply to the unpredicted challenges or opportunities following in its wake.

In fact, as an occasion, it’s a waste of time except for the golf or fine dining. It could easily be done by email, and probably needn’t be done annually, but on an ongoing basis.

After all –it’s just resource allocation. It could be included as part of a strategic planning session –but in these cases it isn’t.

Moreover, the resource allocation itself is typically a mirage. Historic budgets dictate over 98% of future budgets. So that renders the entire dog and pony show moot. Why not just collect results and project plans, add or subtract 1%-2% here and there and disseminate the budgetary news?

That’s Annual Strategic Planning? No.

None of that is strategy. The purpose of strategy –ANY strategy—is to develop a theory of how to solve a hard problem or accomplish a difficult goal—of how to generate new value.  Calling this kind of meeting strategy is misleading.

And it’s probably why so many people are upset about their annual off-sites; they’re told it’s strategy, but it lacks strategic-ness.

What’s missing? A theoretical framework of how to create new value. Without that discussion nothing changes in the aftermath, other than the speed or cost of existing projects.

When you address strategic questions you can craft a robust plan for change or for capturing new value. That plan would establish which market and how to extract new value from it. It would posit causality between projects and value, and the activities of frontline employees. It would also provide a platform from which to deal with the inevitable changes that can’t be anticipated.  

And yes, it would also include resource allocation.

But –and this is a big BUT– those resources would be tied to value not to precedent. In that scenario, even the departmental presentations feed into an overarching strategy –and must make a case for their contribution to the new value the strategy will create.

Developing a plan for new value creation demands that leaders put a stake in the ground and decide how they will accomplish a hard goal. As that plan unfolds, unexpected obstacles occur. But having a strategy is exactly how you parse options and decide how to confront the unexpected. 

It might be a global pandemic that stymies the plan, but more likely a technological advancement, an insurgent competitor, cost inflation, or the discovery that the plan is underperforming. That is when you react in real time, within the universe of options the strategy implies –and find alternative ways to create new value.

Fortunately, if you have a strategy, the universe of options is pared down to those that advance the strategy. Not the Queen Mary to Southampton, but a modified incursion into the same market territory.

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