Strategic Planning Analogy #380: Where Should Strategic Planning Report?

THE STORY
Baking soda has an interesting quality. It will absorb the odors around it. After awhile, the baking soda will smell like the odor of its environment. Then it is no longer useful for baking.

THE ANALOGY
Strategic planning departments can be like baking soda. Just as baking soda can take on the odor of its environment, planning departments can take on the culture of their location within the organization.

For example, if you place a strategic planning department within the finance department, it will tend to take on a lot of the characteristics of finance. Planning will tend to be more data driven and concern itself more with implications to the income statement and balance sheet. Strategies will more likely be framed in terms of asset allocation and in the buying and selling of pieces of the portfolio.

If you place the strategy department somewhere else, that culture and orientation will move in bit of a different direction. Therefore, if you want the proper “odor” for your strategic planning department, it is important to consider where you place it within the organization.

THE PRINCIPLE
The principle here is that there is no law forcing a company to place a strategic planning department into a particular silo in your organization. In theory, it can go almost anywhere. So, even though most businesses have Strategic Planning reporting either directly to the CEO or into the Finance Department, you have other options.

Strategists are supposed to think outside the box, so I am going to do that with the idea of where to locate Strategic Planning. Why can’t it report somewhere else?

Marketing
Why couldn’t Strategic Planning report into marketing? After all, the chief strategist and the chief marketing officer have much in common. Both are concerned with the long-term strength of the brand/company. Strategic positioning is a lot like Brand positioning.

A good strategy needs to provide a superior solution for a consumer segment. That sounds a lot like marketing, too. Marketers usually know the customers better than anyone else, so a strategy lead by marketing would probably be consumer centric and appropriate for the marketplace.

One of the major complaints against many current strategic planning programs is that the plan is poorly communicated throughout the organization. I bet that if marketers ran strategic planning, the communication issue would be less of a problem. They’re good at communications.

I know of a retailer who recently conducted a major strategic reanalysis of the company. It was run by the marketing department and I think the process went very well.

Of course, there would also be some issues if strategic planning reported into marketing. Marketers are not known as being the most astute when it comes to containing costs. Financial issues tend not to be at the top of their priority list. So the plans might lack some of the financial or risk-based rigor which comes from a finance department.

In addition, marketers do not always understand all the nuances of the business model. As a result, they may underestimate the ramifications of their strategy on the capabilities of the organization. In other words, they might create a great strategy which is a bit out of touch with what the company can accomplish.

Human Resources
Why couldn’t Strategic Planning report into human resources? Lots of CEOs say that their people are their most important asset. Therefore, why not place strategy in the hands of those managing the most important asset?

Many of the complaints against how strategy is currently done talk about issues like mishandling of corporate culture, improper alignment, poor organizational structure, and poor integration of people after a merger. Aren’t these the types of things human resource departments are supposed to be good at? They could help solve all these issues.

Because human resources is not closely tied to the status quo of operations, they may be better able to push innovative, out of the box solutions (this could also apply to marketing).

I’d bet that if strategic planning reported to human resources, the plans would be better at getting alignment between people, functions and strategic issues. There would probably be more thought given to how to organize to get the strategy accomplished more efficiently and effectively.

I know of a company where the chief advocate of strategy came from human resources. It can be done.

The down side to human resources is that although they are good with processes, they are not always the best at knowing how to get business results. In other words, they may create a great “means” for doing strategy, but not have a great “end” in terms of what strategy to do.

R&D
How about having strategic planning report into research and development? Both areas are involved in research. Both areas are looking out long term. Both areas are looking for the next big thing. I think there is even a cultural fit, since strategists and R&D people both tend to be a bit nerdy.

If you want to build a plan around the art of the possible, the R&D folks are best suited for knowing what is possible. If you want innovation in your planning, this could be a great place to be.

And it also works in the opposite direction. If the strategists are closely tied to R&D, they will make sure that the R&D efforts are focused on what is needed to make the strategy a reality.

The down side is that although this approach could create some of the best ideas, it may not be the best place to create the game plan to get the rest of the company on board. It could be great on strategy conception, but not strategy implementation.

Operations
How about having strategy report into operations? Your operations people understand the details of how things get done. One of the biggest complaints about strategy is in the poor handoff from idea to implementation. If you put the responsibility for strategy in the hands of the implementers, you stand a better chance of getting it implemented. Operators would be able to easily reject ideas which are disconnected from the strength and skill-sets of the organization, because the operators are a large part of that skill-set.

Strategic objectives will probably be very realistic and doable, because it is run by the people who know how to do what needs to get done. And they will be more inclined to do it, because they would have a larger vested interest in the plan if it reported to them.

Of course, the down side is that operators are highly tied to the status quo. They will tend to resist radical changes which put their operations at risk. Your plans will tend to create only incremental improvements to the status quo. That may not be enough.

SUMMARY
The point I’m trying to make here is that nobody has a monopoly on everything needed to create and implement great strategy. Every area in the organization has unique skills and insights which are beneficial. In addition, every area in the organization has blind spots preventing them from seeing the whole picture. Therefore, narrowly slotting strategic planning into any one department is probably a mistake (even if put in finance). You are not getting the richness of all the flavors the company has to offer.

For strategic planning to work best, it needs to be owned by everybody. That way, you get the unique insights of each area, while also having everyone’s blind spot covered by another area for whom that is not a blind spot.

SUGGESTIONS
So how do we accomplish this? One way is by rotating people through strategic planning. Strategic planning departments would benefit from having people from finance, marketing, human resources, R&D and operations rotate into the area for awhile. If your company is large enough, I would suggest that strategy departments have a blend of both strategy professionals and rotating experts from all these areas.

I used to run a strategy department which did this, and I thought it worked well in many ways. The strategy formation was better, because there were broader insights from all these areas of expertise. The strategy implementation was better because there were stronger ties and greater credibility with the ones outside the strategy department who have to get the work done. And once someone in rotation went back to their old part of the organization, they took a greater strategic orientation to that department.

Even if you do not rotate people through the department, you can still get some of the benefits by opening up more opportunities for the teams of strategy and elsewhere to work together throughout the year. Get strategists on the committees where decisions are being made on a regular basis.

If strategy people are hidden away for most of the year and are only exposed to the rest of the organization at some annual off-site planning meeting, then you are missing all this richness.

FINAL THOUGHTS
I’m not sure what victory smells like, but I do know that victory is more likely if you absorb the rich aromas of the entire organization.

Strategic Planning Analogy #347: GPS

THE STORY
I love those GPS devices you can put in cars. I’m a typical guy who doesn’t like to ask for directions, and with GPS, you don’t have to ask for directions.

I remember when those devices first came out, and about the only cars that had them were rental cars. I was on a business trip to go visit some stores. I put the addresses of the stores I wanted to visit into the GPS device on the rental car and the device would tell me how to get to the stores.

That worked fine until I put in the address of one particular store. The GPS device took me to a location, but the store wasn’t there. I got really angry with the GPS device for taking me to the wrong location. I was blaming it for having a defect, because it did not get me to the store I wanted to see.

Eventually, I figured out that the store I was looking for was no longer in existence. The GPS accurately took me to the empty lot where the store used to be. Apparently, my list of store addresses was out-of-date. The device was fine.

I guess this goes to show that even the latest and most sophisticated technology is worthless if you fill the device with out-of-date information.

THE ANALOGY
The purpose of the GPS device is to help a driver more easily get from his starting point to his desired destination. Strategic planning has a similar function. Its goal is to help a company more easily get from where it is now to its desired destination.

Therefore, instead of having GPS stand for Global Positioning System, we should rename it the Global Planning System.

THE PRINCIPLE
The principle here is that we can make strategic planning a lot more popular and useful if we borrow some of the functionality which has made the GPS device so popular.

1. It is next to the driver during the journey.
The beauty of the GPS device is that it is right there in the car next to the driver during the entire trip. It isn’t anchored to your desktop computer back in your office. The GPS is highly useful specifically because it is immediately available when you need it most—while you are driving.

Unfortunately, not all strategic planning systems work this way. In many cases, the strategist is there at the beginning helping to set up the destination and the path for the company, but once the journey to the future begins, the strategist is not in the “car.” It is as if the strategist is waving to the company car as it pulls away, yelling to the driver “Good luck on the journey.” No wonder a lot of companies find strategic planning as irrelevant. They don’t take it along on the journey.

You wouldn’t set up a plan on the GPS and then leave the GPS device in the office. That would be silly. No, you would take the GPS with you to use in the car while you are driving. The same principle should apply to planners. To not bring them along on the journey is equally silly.

Usually, when strategists are left behind, it is because management sees them as being a part of corporate staff, and there is apparently no place for staff once the “operators” of the business to take over. This is a shame, because just as the GPS is most useful after the journey has begun, strategists can be most useful once the journey to the future has begun.

Strategists can be there to help companies interpret the environment they are driving into and make suggestions on how to adjust to that environment. With the ever more rapid changes in the environment, this type of in-car advice is more critical than ever. But strategists can only do that if they are in the car next to the driver.

If the strategists are left out of the car, the operators will make corrections and adjustments on their own once the journey begins. Due to short-term reward systems and the “tyranny of the immediate,” long-term considerations may not get properly reflected in those adjustments (no one in the car has their eye focused on the long term). Eventually, the car may get so far off the original course that nobody can figure out how to make those old maps given them by the strategists before the journey make any sense any more. This just reinforces their original perception that these staff planners aren’t useful for the journey anyway.

As a planner, as much as it is in your power of influence, make sure you get a seat in the car once the journey begins. This will make your services more relevant and more valuable.

2. There is live-time interaction and adjustment.
There is great power in the immediacy of the information of the GPS. When it is time to turn left, the GPS will tell you to turn left. When it is time to turn right, the GPS will tell you to turn right. And if you accidentally turn right when you should have turned left, the GPS will immediately help you get back on track.

The information is given to the driver at precisely the moment it is needed, in real-time interaction. The relevancy and usefulness is increased precisely because of the frequent interaction. If the GPS only dispensed its suggestions for turning once every hour, it would not be very useful. You would miss a lot of turns, because the information would come too late, after the intersection is long passed.

This is why it is a mistake to only use strategy as part of a long, drawn out annual process. If the only time major dialog between the operators and the strategists occurs is at some annual off-site planning retreat, the strategist becomes just as irrelevant as a GPS device that only tells a driver about turns once per hour.

The annual off-site retreat is an artificial environment. The car has been temporarily parked. The daily “turns” of business have been set aside. A GPS is not as important when the car is parked, and neither is the strategist.

A lot of decisions need to be made in the period between annual business cycles. If the strategist is not there, the decisions can lose a lot of the long-term strategic perspective. Strategic turns will be missed because the strategist is not there to point them out.

Therefore, as much as it is in your power of influence as a planner, make sure you get frequent interaction time with the operational leaders of the company. Insist on having a voice at the regular meetings where the decisions on which way to “turn” are being made. As you increase the frequency of your interactions, you will also be increasing your relevancy to the business.

3. It is easy to use.
People like the GPS device because it is relatively easy to use. You don’t need to spend weeks in advance filling out complicated paperwork each time you want to use it. Just a few simple clicks and away you go.

How easy is it for your company to use the resources of strategic planning? Does your process force operators to get lost in a sea of paperwork? Do they dread having to do anything related to planning because of all the seemingly tedious and time-wasting work your process puts them through? Are you as easy to use as a GPS device?

Fortunately, if you get points 1 and 2 correct (lots of frequent interaction at the times when decisions are being made), then a lot of that complicated process stuff is less critical. Your frequent interactions help you to know what’s going on, so that you don’t need others to write it all down for you on complicated forms. More frequent access to strategists usually leads to ease in interaction, since there is greater familiarity.

4. It relies on periodic updates of its database.
GPS systems make their advice based on their database. Since roads and road conditions change over time, it is important for the GPS database to get updated. Otherwise, the GPS can make improper suggestions.

Similarly, strategists need to periodically update their data and perspective on what is happening in the environment. Otherwise, the decisions based on the data will be out-of-date and irrelevant. Are you taking the time to stay relevant with what is happening in the environment? Or are you like the situation in the story, where you are directing people to empty lots, because your information is out-of-date?

SUMMARY
If you want your strategic planning to be as desirable and as useful as a GPS device, then follow its examples:

a) Be in the car for the whole journey. Don’t just set up the trip and wave good-bye.

b) Have frequent and timely interaction with the key operators when decisions are being made—all year long. Don’t rely on an annual meeting to be your primary time of interaction.

c) Have an easy-to-use process, so people will want to interact with you.

d) Update your data periodically, so that your perspective remains relevant to the changing environment.

FINAL THOUGHTS
The Cooper Mini automobile from BMW is based off a design originally made for small race cars. That is why many of the key dials on the dashboard are in the center of the dash rather than right in front of the driver. When the small cars race, they have two occupants—one is mostly concerned about what’s happening outside and one is mostly concerned about what the dials are saying. This power of two makes for better racing. The same is true for businesses. By having the strategist alongside the driver, the strategist can better help the driver win the race.