Performance Management Solutions

Is strategic planning as practised by many companies simply poorly done and very badly executed or is it a failed process that should be abandoned? This question has been on my mind. Let me explain.

The purpose of strategic planning is to plan strategically – that much is self-evident – and the goal of planning strategically is to determine what objective the organization or company wants to achieve given its physical assets, the skills and competencies of its people, its implicit and explicit knowledge, its intellectual property and its financial resources. An analysis of the various combinations of these elements should enable the company to answer the question: “what should we be selling, at what price and in which markets?”

From this, the competent organisation should be able to derive tactical plans for the delivery of the strategic objective, plans that take into account market conditions, market trends, and the possibility (if not the probability) of positive and negative ‘black swan’ events. (For an explanation of ‘black swan’ events, it is worth reading The Black Swan by Nassim Nicholas Taleb, a book that should be compulsory reading for all managers and especially strategic planners.)

Unfortunately, while the strategic objective setting is often done well, the tactical delivery has often clearly failed – one only has to think of Lehman Brothers and the other big banks that crashed the world economy in the last four years. One can also look at General Motors and their appalling record of incompetence that led inexorably to the company seeking protection from their (often very angry) creditors through Chapter 11 bankruptcy. One can also look more recently at BP and the Deepwater Horizon disaster as well the company that built and operated the Fukushima Daiichi nuclear power plant that has been wrecked by the recent earthquake in Japan (given its site, right on the tectonic fault line, this was hardly an unexpected negative black swan event!)

Which ever way it is looked at, the failure of companies and their managers to develop proper tactical plans and effective execution is lamentable but it is also understandable given the super-sized egos of those managers and directors who have been at the head of these organisations. No matter what ‘they’ might say to the contrary, given the current management styles and centralised power structures, it is exceptionally difficult for young managers and middle managers to make themselves properly heard at this upper and often selectively deaf level. Their careers are at the mercy of the whims of their seniors and it is all to easy to get labelled as ‘not a team player’ if they are brave enough to question the assumptions that underpin the certainties of the commercial barons, many of whom have avidly read Sun Zu’s The Art of War and who see themselves as some sort of modern day war lord. These ‘war lords’ have centralised power to themselves to such an extent that there are no longer effective checks-and-balances in place to ensure that disaster can be averted.

It is, perhaps, inevitable, therefore that those companies with cultures built around the cult of the leader and which have handed CEOs such power should have forgotten the aphorism that ‘power corrupts and total power corrupts totally’ and although these senior managers are not, perhaps, ‘corrupt’ in the modern financial sense they have certainly lost the humility and sense of reality that those in power must have if they are to succeed in the long term.

And perhaps that is the point, ‘succeed in the long term’ has become a joke: one senior manager in a large multi-national bank said to me quite recently “short term planning is about what happens today, long term planning is about what we need to achieve next week” and I don’t think he was actually joking! The entire mind-set of modern western business is so focused on the short term that managers no longer know how to or care to plan for the future. The trouble is, unfortunately, much of western corporate culture does not allow for the flexibility of response nor the understanding of ambiguity that is essential if we are to survive long term.

In truth, perhaps the current western business culture is so corrupted that is was bound to fail and managers and management thinkers are in thrall to some long dead theorist who once believed that since the future is unknowable and the past is unchangeable we should live only in the present. Indeed, perhaps the entire capitalistic philosophy is a sham and Marx and Engels were right, perhaps we are now seeing the inevitable end game of capitalism as practiced in the western world and in those countries that aspire to emulate it.

And who is to blame for this rather parlous state of affairs? Well, the idea of the nation state, the culture of the self and the ego, and the current curriculum of many leading business schools all come to mind.

And how can this be fixed? Well, not easily is probably the most honest answer, but a change to more collaboration and less egoism, more working with others rather than blind competition, more acceptance of responsibility and less rule by diktat, and a greater understanding of the behavioural aspects of management would all help. This at least would be a start and it is the business schools that must lead the way if they are to remain relevant in the modern world. For the last sixty years, the MBA and undergraduate business management curriculum developed and promoted short-termism, ‘analysis of the numbers’, and the scientific approach to management and we are currently reaping the bitter harvest of being wrong. A new approach to business education is sorely needed and it must start now! Only then will business climb out of its current reviled state and once again be seen as the way to a better world.