156 – Decision making: The calendar effect and local government planning.

Posted by Lancing Farrell                                                              700 words

calendar

This is the fourth post in a series. Most councils prepare their plans in a very conventional way. All of the councils where I have worked have been the same. The planning process is frequently criticised but seldom challenged. There is a better way.

Despite the effort put into strategic planning by many organisations, it can actually be a barrier to decision making. Michael Mankins and Richard Steele believe that difficulties in strategic planning are attributable to two factors:

  1. The calendar effect – it is usually an annual process.
  2. The business unit effect – it is usually focussed on individual business units.

This is completely at odds with the way executives actually make important strategic decisions. They make the decisions that really shape organisational strategy and determine the future direction of the organisation outside the formal planning process. And they often do it in an ad hoc way without rigorous analysis and debate.

It is not uncommon in local government for major changes in strategy or the organisational business model to emerge without them being referenced directly in the Council Plan or a strategic organisational plan. Sometimes they are unforseen. Often, they are a response to an issue that could have been identified and the decision made using a more open process and then taken through the scrutiny of a planning process.

The timing and structure of strategic planning are obstacles to good decision making. This reduces the number of decisions made, which in turn reduces the organisation’s ability to respond and adapt to external pressures or issues impacting on performance. Mankins and Steele believe that often strategic direction is established in spite of the strategic planning process, not because of it

“… with the big decisions being made outside the planning process, strategic planning becomes merely a codification of judgements top management has already made, rather than a vehicle for identifying and debating the critical decisions the organisation needs to make to produce superior performance”.

When this happens, there is a risk that, over time, managers will question the strategic planning process, withdraw from it, and come to rely on other processes to set strategy where there is no ‘corporate visibility’.

The calendar effect

The first point of failure of strategic planning is an annual planning process linked to budgets and capital bidding. When strategic planning is forced into an annual time slot it becomes irrelevant to executives who must make many decisions during the year. Planning once a year doesn’t allow enough time for executives to address the issues that most affect performance. There isn’t enough time to collect relevant facts, set strategic priorities, weigh competing alternatives and make choices.

When constrained by time, executives will put big or difficult issues into the ‘too hard’ basket or deal with them outside the planning process. This type of issue is likely to span multiple business units or involve entire value chains and are the decisions that go to the heart of value creation in a diversified organisation like local government.

Waiting to carry out strategic planning once a year is a effectively a batching process for decisions, which doesn’t work well for strategic decisions because they need to be made continuously as required. Mankin and Steele say that few organisations have rigorous or disciplined processes to make decisions ‘on the run’ in response to changes in the external environment. Instead, ad hoc processes are used to correct course or make opportunistic moves.

The business unit effect

The second point of failure is carrying out strategic planning at the business unit level on a business unit by business unit basis. Strategic decisions need to be made issue by issue. The mismatch between the way planning is organised and the way big decisions are actually made results in executives looking elsewhere for inspiration and guidance, and using other processes to make strategic decisions.

Traditional strategic planning can create antagonism between executives and managers as a result of the information asymmetry that exists because the executive either needs to believe the manager or reject their views on strategy arising from their business unit.

Mankins and Steele believe that improving strategic planning and decision making will improve the relationship between executives and managers. It will streamline the executive team’s agenda and help executives to work with managers.

The next post covers a better way to plan and integrate strategic planning.

Mankins, Michael and Steele, Richard 2006. ‘Stop making plans, start making strategy’, Harvard Business Review, January.

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