Can anybody pinpoint exactly when Harvard Business Review
article titles got so bloggy? I wonder if we’re headed toward Buzzfeed-style quizzes, “What Famous CEO are you? — I got Lee Iacocca!”
Anyway, this one is from the January/February 2014 issue of HBR. “The Big Lie of Strategic Planning: A detailed plan may be comforting, but it’s not a strategy,” written by Roger L. Martin from Toronto’s Rotman School of Management.
TL;DR: Most strategic plans aren’t actually strategy. They’re detailed planning documents designed make managers feel good. Strategy is more fundamental, and should be both explicitly documented and inherently risky.
Why should nonprofits care? All nonprofits have strategic plans, right? Not only that, we have board-level strategic planning committees, we may invest in expensive planning consultants, and sophisticated funders regularly ask for copies. So if strategic plans are “dangerous traps,” according to Martin, perhaps we should find out more.
Martin describes a typical strategic planning process as one that attempts to minimize outcome risk by plotting out the activities that will result in hitting a particular target. In English, that means setting goals that you can both measure and reach. He goes on to explain three reasons why this is a bad thing.
- Planning and strategy should be two distinct activities.
- Focusing on the cost side of the equation distracts from customer acquisition and retention, which is more important.
- Popular strategy frameworks, like “emergent strategy” and “core competencies” allow managers to feel like they’re in control of their destinies, so again, they distract from actual strategy development.
The root idea seems to be that managers tend to default back to comfortable activities that they can control (writing plans, tallying costs, following instructions) and that strategy development shouldn’t be a comfortable activity. Instead, it should be about making bets on the future, which will occasionally turn out to be wrong.
Avoiding Comfort Traps
The crux of the author’s argument is that a “natural aversion to discomfort and fear” causes people to rely on safe, familiar and uncontroversial tools rather than digging into actual strategy. Martin then provides three rules to help us avoid the comfort traps.
- Strategy should only be about which customers to target and what will make those customers choose your product.
- Since rule #1 is about revenue and not about cost, forecasting is much more difficult. Be okay with that uncertainty.
- Document all of your assumptions, and then compare them to what actually happened. Use that information to make adjustments to both strategy and forecasting as needed.
The Nonprofit Perspective
Imagine walking into a board meeting with, “We’re not doing a strategic plan this year because it’s too comfortable. Instead we’ve put together a two-pager on the donors we’re going to target and a discussion of our value proposition.” (Someone please do this and put it on YouTube.)
Obviously, that feels wrong, but why? First, nonprofit boards are notoriously risk averse. And no sane executive director is going to inject “discomfort and fear” into a board or committee meeting. But let’s assume we can overlay appropriate planning documents over the uncomfortable strategy formulation. Good nonprofit managers could get intelligent boards to approve a strategy developed this way.
I suspect that the focus on donors and their needs struck some of you as completely wrong-headed. “What about our charitable mission and our stakeholders,” you ask? On the other hand, a nonprofit without donors probably doesn’t do much good. Let’s agree to explore this again later, since it’s certainly going to prove controversial.
The big takeaway for nonprofits is that expecting perfection from strategy formulation (and plans and budgets) stifles innovation and results in less than optimal service delivery. It’s better to make well documented bets, and then tweak your strategy based on whether your assumptions were right or not.