Planning in high uncertainty
Companies have very diverse planning systems, from robust and structured to simple and intuitive, but they all share a common factor: they are insufficient to make key business decisions.
How to design planning processes that work?
In strongly process-oriented organizations, with generally complex structures and formal management habits, planning processes often feature an overabundance of information, repeated and endless review instances, long presentations that require a lot of time to put together, and tiring team negotiations in the, “I give you RESULTS, you give me a greater BUDGET” format, where the egos of executives seem to be more important than the very strategic objectives of the business. Knowing that the executive’s time is the most valuable scarce resource in a competitive organization, it would seem that this structured planning format could be distracting key resources.
On the contrary, in more flexible organizations, generally young ones, with little structural complexity, where intuition is valued -or perhaps overvalued-, the planning processes, if they can be called that, are some sporadic group of meetings that take place when the maelstrom of management allows it. In very competitive and highly uncertain environments, this flexible format would appear to be clearly insufficient.
How can an organization design an ideal planning system that does not overload management teams with tasks, but does not fail either to analyze uncertainty and capture strategic opportunities for the business?
There are at least four key principles that organizations should keep in mind when designing their own planning process:
1. Looking out
Even the most complex planning systems seem to be heavily biased towards considering and basing much of their strategies on internal business information. Without a doubt, it is very valuable information to consider, but it is not usually the right source to detect unforeseen events and anticipate changes in trends. A planning process that successfully monitors external variables and considers instances to help the organization look outwards will also help it detect early signs, design contingency plans to react to changing scenarios and develop strategies that allow it to be successful in the future.
2. Putting uncertainty on the table
Much time and effort is spent in planning processes to describe, explain, expose and justify past events. Participants’ egos often shift the focus of planning meetings away from their most important purpose: looking forward. Although the facts of the past are essential to later base decisions on concrete foundations, we must not forget that these should serve only to learn and project the uncertain variables of the future that will define the success or failure of the business. Most human beings, and especially business leaders, do not usually feel completely comfortable when talking about uncertainty, essentially because we do not control it. To avoid this uncomfortable feeling in ancient times, prophecies, divinations, or future writings were spoken of.
Today, we have sophisticated our uncertainty avoidance and invented planning assumptions. In an uncertain environment, it is clearly not enough to “assume” what can happen, but rather the planning process must allow putting the uncertainty, in other words, that which we do not know and do not control, on the table. In order to take advantage of changes and be able to capture opportunities, it will first be necessary to recognize and know what the organization does not control, the uncertainty of the business.
3. Setting the appropriate frequency for meetings
Executives often argue that the strategic planning exercise is not always frequent enough to support key business decisions. It would be strange to think that during the few months the annual planning process lasts, all the key business decisions happen to arise and must be made. On the other hand, the complex processes also establish that in the initial months (May to August, for example) is when the information that will serve as the basis for future strategies should be collected. The planning process must be designed in such a way that it contemplates continuous, reiterated, and flexible instances.
4. Clear metrics for guiding decisions and aligning teams
A planning model that looks outwards, that contemplates uncertainty with the appropriate frequency, must allow the generation of strategic guidelines so the rest of the organization can make key decisions and function effectively. To do so, the planning process must provide clear metrics that not only allow management to be evaluated at the end of the cycle, but also make decisions and modify the course of results before the end of the cycle. The metrics must allow realizing the strategic objectives and incorporating them into the decision habits of everyone in the company. When the objectives of each area are aligned with clear metrics, they also provide adequate guidance to base the decisions of executives.
Each business must find the process that best suits its requirements, generating its own strategic planning model that opens the way for executives to hold orderly discussions, to be able to find alternatives that otherwise would not have been considered and to take, ultimately, better quality decisions.
A planning process that is based on data analysis, the justification of activities that have already been carried out and negotiations on the power of divination of the participants, in contexts of change such as those experienced today, is insufficient. A modern planning process needs to be able to generate high-impact strategies and maximize the opportunities left by uncertainty. To do so, it must be based on its own decisions.
Partner at Tandem.