Granted, an approach based on issues will not necessarily yield better strategic results. In our experience, the first liberating change managers can make to improve the quality of the planning process is to begin it by deliberately and thoughtfully identifying and discussing the strategic issues that will have the greatest impact on future business performance. If the calendar-based process is to play a more valuable role in a company’s overall strategy efforts, it must complement budgeting with a focus on strategic issues. At many companies, however, this noble purpose has taken a backseat to rigid, data-driven processes dominated by the production of budgets and financial forecasts. These steps cannot guarantee that the right strategic decisions will be made or that strategy will be better executed, but by enhancing the planning process-and thus increasing satisfaction with the development of strategy-they will improve the odds for success.Īsk CEOs what they think strategic planning should involve and they will talk about anticipating big challenges and spotting important trends. The changes we discuss here (such as a focus on important strategic issues or a connection to core-management processes) are the elements most linked with the satisfaction of employees and their perceptions of the significance of the process. Instead we offer, from our research, five emergent ideas that executives can employ immediately to make existing processes run better. So what can managers do to improve the process? There are many ways to conduct strategic planning, but determining the ideal method goes beyond the scope of this article. Looked at another way, 51 percent of the respondents whose companies had no formal process were dissatisfied with their approach to the development of strategy, against only 20 percent of those at companies with a formal process. That role can be seen in the responses of the 79 percent of managers who claimed that the formal planning process played a significant role in developing strategies and were satisfied with the approach of their companies, compared with only 21 percent of the respondents who felt that the process did not play a significant role. Our research shows that formal strategic-planning processes play an important role in improving overall satisfaction with strategy development. CEOs know that strategy is often formulated through ad hoc meetings or brand reviews, or as a result of decisions about mergers and acquisitions. The operative question for chief executives is how to make the planning process more effective-not whether it is the sole mechanism used to design strategy. In addition to formulating at least some elements of a company’s strategy, the process results in a budget, which establishes the resource allocation map for the coming 12 to 18 months sets financial and operating targets, often used to determine compensation metrics and to provide guidance for financial markets and aligns the management team on its strategic priorities. Given these results, managers might well be tempted to jettison the planning process altogether.īut for those working in the overwhelming majority of corporations, the annual planning process plays an essential role. Moreover, only 23 percent indicated that major strategic decisions were made within its confines. All panelists have mostly financial or strategic responsibilities and work in a wide range of industries for organizations with revenues of at least $500 million. The survey, conducted in late July and early August 2006, received 796 responses from a panel of executives from around the world. “ Improving strategic planning: A McKinsey Survey,” The McKinsey Quarterly, Web exclusive, September 2006. This sense of disappointment was captured in a recent McKinsey Quarterly survey of nearly 800 executives: just 45 percent of the respondents said they were satisfied with the strategic-planning process. ![]() But at the end of this expensive and time-consuming process, many participants say they are frustrated by its lack of impact on either their own actions or the strategic direction of the company. For the better part of a year, they collect financial and operational data, make forecasts, and prepare lengthy presentations with the CEO and other senior managers about the future direction of the business. In conference rooms everywhere, corporate planners are in the midst of the annual strategic-planning process.
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