Strategic Planning, Useful?

By Esra Junius Ginting, Employee of the Directorate General of Taxes

“Plan what you do, do what you plan.”

This proverb might be heard hundred times. Generally, even at the individual level, each person is familiar with setting a plan in order to achieve something in the (near) future, especially related to important stuff. And of course, providing sizeable stretch to arrange the timing and activities to achieve aims is undeniable. In big organization level, this thing is usually known as strategic planning. In fact, it frequently goes wrong. This article will try to scrutinize more about why it happens and how to make it useful for lucrative organizations, including the Directorate General of Taxes.

Alright, before going further, commonly strategy covers determining organization goals, arranging activities how to achieve the goals through mobilizing resources in executing the activities. That is a strategy. Then, what about strategic planning?

Expertises defined strategic planning from various perspectives. Some said it is a management tool utilized to controlling current situation experienced by an organization in order to project future. Others said it is a process of agencies in defining their direction or strategy, and making appropriate decisions on assigning their resource to achieve the organization goals. In a simple word, strategic planning is a process containing inputs, items of activities, outputs, and undoubtedly outcomes. Generally, company strategies will be the result of strategic planning. It covers environment conditions, a guiding policy of what it wants to accomplish, and actions plans or key initiatives to achieve this guiding policy.

Why do strategic planning?
If you fail to plan, then you plan to fail
Clear.

Next, to what extent the strategic planning actually is useful? Is it truly useful or completely useless? Good question. This is the similar question of most CEOs of global manufacturers recently. I would say, it depends. Depends on what? Okay, let us take a look from international business perspectives.

It Goes Useless

Most executives of international organizations including CEOs looked strategic planning pessimistically. Why? Apparently, most enterprises are trapped in designing a sophisticated plan, even worse; they documented options that have already been made which are often haphazardly. It is not rare, that strategic planning is too high level, takes too much time and is disconnected from the organization run their business. Even, the CEOs are frequently flabbergasted as the fact that approaches to strategic planning generated little actual decisions although a cutting edge planning process was implemented. Despite all the energy and time put into strategic planning, the most frequent a blockade to good decision making is the Process. In the end, strategic planning does not really affect most enterprises’ strategy.

What kind factors influencing?

Strategic planning in most organizations goes wrong because of 2 factors i.e. typically annual process and frequently concerned on individual business units.
Most companies translate strategic planning as a periodic event. They frequently formed it as a precursor to the yearly budgeting and capital approval processes. It is usually known as the calendar effect. In fact, the best practice is linking strategic planning to these other management processes. But, forcing strategic planning to an annual cycle risks making it irrelevant to top management, who has to make many crucial decisions throughout the year.

Undeniably, there are two shortcomings about this rigid schedule i.e. time problem and timing problem. First, time problem indicates that a once-a-year planning schedule just does not provide top management sufficient time to address the themes that most influence performance. Then, timing problem shows that even when Board of Directors have ample time in strategy development to address hard issues, the timing of the process can create problems. Most organizations translate strategic planning as a batch process analyzing environment change, identifying threats and opportunities, and then defining a multiyear plan. However, in the real world, managers make strategic decisions continuously, even often motivated a soon need for an action or reaction.

In addition to the calendar effects, the organizational focus of the common planning process compounds its calendar effects,- or perhaps more aptly, defects. In a similar way, more than 65% international companies conducted strategic planning through business-by-business which focuses on units. However, in fact, more than 70% of the executives make decisions issue by issue. The organizational focus of traditional strategic planning also generates distance, even antagonism, between top management and business-unit managers.

On the other hand, the way executives actually generating crucial decisions in organizations are neither defined by unit borders nor constrained by the calendar. In other words, the process is often completely in odds with the way executives make decisions. Not surprisingly, the leaders often sidestep the planning process in making decisions that really determine the future of organizations and shape companies’ strategy.

With the huge decisions being made outside the planning process, strategic planning becomes merely a codification of judgments top executives has already made, rather than a tool for analyzing and debating the crucial decisions that the company needs to make to generate superior performance. Over time, managers begin to question the value of traditional strategic planning, withdraw from this view, and turn to rely on other processes for determining company strategy.

So, is strategic planning useful?

It Goes Very Useful

Organizations can shot the process if they outbreak its root causes. A small number of well-performing and forward-looking organizations have replaced their unit-business focused, and calendar-driven planning processes with continuous, issued-focused decision making. Also, they changed the nature of the executives’ strategy discussions from “review and approve” towards “debate and decide.” It strongly indicates that the top management seriously thinks via each major decision and its implication into organizations’ value and performance. Indeed, the enterprises use the strategy development process to drive decision making. It is believed that this approach will produce more important strategic decisions compared to traditional planning method. Yes, they have stopped making plans and started making decisions.

Most high-performing companies firmly believe that strategic planning has no significant impact if it does not drive decision making. And it cannot turn to decision making if it remains limited by calendars and focused on individual business units.

Next question is how to make it?

Firstly, according to research on Harvard Business Review, the well-performing enterprises separate decision making and planning making, but they integrate these two processes. The most important thing is an enterprise has to take decisions out of the traditional planning process and generate a parallel, different process for developing strategy helping executives to identify the decisions they need to make to generate more shareholder value time over time. Then, the output is a set of concrete decisions which can be codified by top management into future business plans via the existing planning process. Identifying and making decisions is separated from formulating, monitoring and updating a strategic plan. These two sets of tasks require very distinct but integrated, processes.

Also, high-performing organizations focus their strategy decisions on a limited number of key issues or themes, many of which span multiple businesses. Moving away from old model - a business-by-business planning- has proved in complex or large organizations where strategy discussions can get bogged down. It is not without reasons as each division manager tries to cover every aspect of the unit’s strategy. Business-unit managers should stay involved in corporate-level strategy planning that influences their units. By way of example, we can consider Microsoft which implemented this way as the world’s leading software maker which has a highly matrixed organization.

Moreover, leading organizations make strategy development continuous. Effective men of strategy planning spread strategy reviews throughout the year rather than squeeze them into a two- or three-month window. This approach allows top management to focus on one issue at a time until they reach a decision or set of decisions. Besides, deputy or middle managers can add issues to the agenda as environmental conditions change, so there is no need for ad hoc processes. It will make Board of Directors can thus rely on a single strategic planning process—or, perhaps more appropriately, a single strategic decision-making model—to drive decision making across the organization.

Finally, the organizations having stunning performance structure strategy reviews to generate real decisions. The most common hindrances to decision-making at big companies are disagreements among Board of Directors over past decisions, current options, and even the facts presented to support strategic plans. High-performing companies structure their strategy review sessions to overcome these problems. For instance, Textron, a $10 billion multi-industry enterprise, has strategic-theme reviews organized around “facts, alternatives, and options.” Each issue is divided into two half-day sessions with the enterprise’s management committee, allowing for 8 to 10 issues to be resolved throughout the year.

All in all, strategic planning can have an enormous impact on an organization’s performance and long-term value, especially lucrative organizations including a key institution like the Directorate General of Taxes. By formulating a planning process enabling managers to discover great numbers of hidden strategic themes and make more decisions, organizations will open the door to many more opportunities for long-term growth. By embracing decision-focused planning, agencies will almost certainly find that the quality and quantity of their decisions will increase. And—no coincidence—they will find an improvement in the quality of the dialogue between executives and unit managers. Top executives will obtain a better understanding of the challenges their companies encounter, and unit managers will benefit wholly from the experience and insights of the organization’s leaders. Therefore, continuous, decision-focused strategic planning will help top management team to streamline agenda and activity of works with functional management and business units to make far better business strategy and accurate decisions.(*)

Thus, is strategic planning useful?
IT DEPENDS!!

*) The information and views set out in this article are those of the author and do not necessarily reflect the official opinion of the institution in which the author works.