There is an oft-repeated statement suggesting those who fail to plan plan to fail. I suppose there may be some truth in that. One of my favorite examples of an organization that failed to plan (and ultimately failed) was a high-flying dotcom from the late 90s. The firm was led by a brash CEO who suggested in a magazine article that the business practices of old-economy companies, particularly practices related to formal business planning, were outdated. In the article, he went on to say that the world moved too fast, that business opportunities too swift to emerge, and that those who wasted time formally planing would miss these opportunities and thereby plan themselves right out of business. I wonder how often he ponders that wisdom from the basement of his parents house, which is apparently where he ended up.
Planning, contrary to the beliefs of some, is a critical exercise. Not only does it help you define where you will allocate available resources, but it helps you understand just which emerging opportunities you should take advantage of.
The Essence of a Plan
A plan is basically a detailed proposal for doing or achieving something. The key here is knowing what that “something” actually is, the vision of accomplishment/strategic direction. Planning as a business discipline, then, is the process of identifying where you are headed, and the building blocks necessary to get you there.
Assuming that you have a defined vision (that ‘something’) identifying where you want to be in the future, planning then involves three major actions:
- Clearly defining and prioritizing strategic goals.
- Outlining the measurements that you will use to track the progress of strategic goals.
- Drafting action plans that specify how and when each goal will be achieved.
In this post we will explore each of these individually.
Defining Strategic Goals
The first area of focus is on strategic goals. In your plan, you will need to have well-developed areas of focus and activity that will drive you to attaining your vision. We call these key success factors, because they represent the actions that are key to strategic success. Let’s take a look at how they work in defining and prioritizing strategic goals.
Consider this example. Suppose a credit union’s vision is be the number one auto lender in its market. The tendency is to jump in and define auto loan growth goals reflective of a market leader. The best place to start the conversation about strategic goals, however, is not to set such immediate goals but to ask, “What are the factors key to the success of becoming the number one auto lender?” This changes the discussion immensely.
As an aside, when entertaining such a question, it is best to limit key success factors to five to seven unique factors. Any more than that tends to drive complicated or conflicting goals, any less is a sign of too limited strategic creativity.
Getting back to the “number 1 auto lender” vision referenced above, let’s assume we defined the following five items as key to our success:
- Strong dealer relationships
- A brand name recognized in the community
- Loan life tracking and analysis capabilities
- Swift underwriting and funding capabilities
- Strong collection department
Let’s take a look at how these key success factors are then used to structure the discussion concerning strategic goals and objectives.
Our first key success factor covers dealer relationships. This a key success factor because dealers are the gatekeepers of auto loan relationships. They sell the cars. The rationale is that if we don’t have good dealer relationships then we will be shut out of the loan opportunities where members do not come to us first – before they go to the dealer. This would ultimately undermine the vision.
So then, what goals specific to the strong dealer relationship key success factor might be appropriate? Maybe a goal to hire a dealer relationship manager. Maybe also a goal to better structure dealer incentives. Maybe cooperative advertising with dealers to drive both sales and loans. What is important to recognize is that the discussion of objectives and goals is framed first by the vision and then by the key success factors. By building the framework first, discussion then becomes more focused on manageable and attainable options that best support the key success factor and, ultimately, the vision.
You can of course back into key success factors after you draft goals and objectives, but I have two concerns with regard to this reversing of the planning flow. First, you may end up with a multitude of unaffiliated goals and to-do’s which means you will end up with an unmanageable list of key success factors and a lack of organizational focus. Second, the discussion of goals will either be too broad, with everything under the sun listed as a goal, or the discussion will be too limited because the only available framework for discussion will be the existing goals and strategies from prior year efforts.
Two positive outcomes emerge if you engage this vision to key success factors to goals and objectives approach. First, you will end up with an interrelated mapping of activities that lead from present day to the future. Second, as the daily tasks related to goals are defined or realigned with specific key success factors, your management team can show employees how tasks and other day-to-day activities in which they engage directly contribute to the envisioned future.
Let’s not forget, however, that the first component was not just defining goals but prioritizing goals. If you have institutional consensus on the highest priorities, and the best place to get that consensus is in a planning session where board and senior managers can hash out an appropriate priority list, then you have fewer fights over resources. Why? Because you can then use these consensus priorities to make the case for the way in which resources must be allocated.
A key word of caution, here, is to avoid confusing priority and importance. If you have a strategic goal then it is important. However, an important strategic goal may not be your highest priority. As an aside, you should prioritize your key success factors, and also the goals and objectives under each key success factor.
So, where are we? We have a vision as well as a list of key success factors and related goals that carry a group consensus on their priority to the organization.
The next step is outlining the measurements you will use to track goal progress. While you can start and end at the key success factor level, defining broad high-level measurements of progress, you probably will want to take the discussion of measurement down to each specific goal or objective embedded in the key success factors. No matter how far down the line you take it, the key is create and commit to the categories for tracking. If you can’t track where you are, or how you are doing, then you will never know for sure if you are making any progress.
Revisiting our vision example of becoming the number 1 auto lender, the credit union with this vision that does not track progress at least at the level of key success factors will ultimately be forced to rely on anecdotal and/or superficial data to determine success (such as loan growth, membership growth, etc.). Read The Emperors New Clothes if you are curious why anecdotal or superficial evidence of success is a bad idea.
On a related note, I have encountered a number of credit unions who do not like to define such detailed, granular measurements for their goals. The reason seems to be that they don’t want to work that hard – it is so much easier to have simple financial goals and benchmarks than to determine a way to measure success for something as “vague” as good dealer relationships. By focusing on the actual progress of key success factors and related goals, however, a certain accountability to important results is introduced. Sure you have accountability when focusing on “the numbers,” but you can meet your numbers and not do a thing to move your credit union forward, closer to attaining its vision.
Tactical Action Plans
The final action in developing a solid strategic/business plan is turning the plan framework (consisting of vision, prioritized key success factors, goals and objectives, and measurements) over to your line/department managers to build tactical action plans. Tactical action plans are those plans that drive to the fulfillment and satisfaction of each goal. Such plans, like most project plans, should at least consist of:
- Milestones and due dates
- Required resources
- Ownership and team members
There are many ways to classify and build tactical action plans, but there are two important points to take away here. First, drive the creation of these plans to the lowest possible level of the organization. Why? Again, organizational accountability. It is much easier to hold people accountable to certain actions, milestones, and commitments that they themselves make vs. those that are handed to them without their input. Just to be clear, I’m not suggesting that you have tellers drafting branch policy, but you should bring them in for discussion on action plans that require their personal execution.
The second point to take away is the requirement of due dates. It is common to almost every organization that its plans – particularly action plans – are front-loaded. That is all of the activities are scheduled to happen right away. By adding specific due dates and then working these dates into a master calendar of projects, action plans, daily commitments, so on and so forth, planners are given a dose of reality. There is nothing worse than demoralizing an organization by overburdening the schedule. Due dates defined during the planning process help avoid such an overly aggressive, and doomed to fail, schedule.
The End of Planning
So now where are we in the plan process? Following the plan process through, we have:
- A defined vision with a listing of factors (or areas of focus) key to getting us to that vision.
- Prioritized goals that relate to one or more of these key success factors.
- Associated goal measurements that define what it means to be successful.
- Tactical action plans that define how each goal is to be successfully accomplished, and by when.
There are many schools of thought on planning, from the laissez faire approach taken by the dotcom mentioned at the start of this post to complex scenario analyses and multi-tiered response triggers. Of course, we do not advocate hands-off planning, and while we do help credit unions with planning using a variety of more complicated models, our focus in this post was not to debate or define the validity any particular planning model. Rather, we looked to showcase a simple way for you to relate various stages of planning to one another and to the various layers of your organization.
Sometimes the problem with overly complicated planning methods is that they cloud the very reason for planning – to define a clear focus for an institution. The more complicated planning becomes, the less rooted in reality the outcome of planning. And if the outcome is complicated or divorced from reality, how can you execute? And if you don’t execute, then why plan?
The planning discussion, in the thoughts and ideas participants bring to the discussion and process, is where richness and complexity should be found. The planning process is, or at least it should be, simple. Simple!