05 Apr What a CEO should know about strategic planning

Why does your organisation exist?

Harvard Professor Dr Rosabeth Moss Kanter wrote that “great companies identify something larger than transactions to provide purpose and meaning” and went onto suggest that every organisation needs to be able to explain or justify its place in society.

This is a wonderful challenge when undertaking strategic effort of any sort.

One social enterprise organisation I chair has been running for almost 60 years and over that time its mission or purpose has shifted and been re-shaped to address the needs posed by generational change in the communities we serve.

Your purpose will direct your strategic planning

The objectives of an organisation (usually found enshrined in the Company’s Constitution) are crucial in determining what a strategy will focus on.

Along with organisational purpose, the relevance and real world context of organisations and how they operate does change over time. Therefore, the objectives may also need to evolve.

For example, organisations that are geographically restricted may seek to expand beyond their current borders.

Businesses that want to extend operations up or down their value chain may be at odds with their constitution that limits such things. Some changes could require shareholder or member approval, adding further barriers to the process.

Being clear about what the “why and the what” of your business direction is a conditional precedent for strategic effort.

Who are you making these changes for?

The classic default response to this is shareholders or stakeholders but is this insightful enough?

Investor oriented organisations are typically cold blooded in their focus on today’s investors. If there are enough profits to go around, maybe then they can demonstrate efforts toward showing social responsibility as well.

Social enterprises on the other hand typically harbour more altruistic aspirations for enriching the lives of specific groups, developing better local communities or saving the planet which is more of a multi-generational mindset.

Seeking alignment and emotional engagement

Many organisations have value statements. Whether they mean anything at all in terms of organisational effort will typically come back to the ability of the board, CEOs and business owners to align their behaviours with these values rather than just what they say.

Leaders are not judged by what they stand for, they are judged by what they fall for. Authentic leaders have to live the organisation’s values and engage all levels of the business. Leaders who can nurture the ongoing dialogue about the importance of appropriate strategic effort whilst providing role clarity to individuals will be better placed to outperform their rivals.

If you can provide clarity and alignment on the why, what and who – the question of how to apply your strategic effort will be better answered.

Old ways don’t align with the new world

It’s important for a leader to realise that strategic planning, strategic thinking, strategy making and strategic programming are not synonymous.

While theorists debate the definitions – decades of practice by CEOs and business owners is converging with a new world order that shifts and morphs over time more dramatically than ever before. It won’t be slowing down anytime soon, either.

Even in less disruptive times, strategic “effort” has been plagued by false starts, inflexibility and rigorous formalisation. To combat this, CEO’s need to loosen up how they apply strategic effort and work harder to help their organisation and team to put context around what is going on around the business and what you are trying to achieve.

I think overall leaders are starting to do a better job of looking at emerging strategic risks, but they’re still looking too much in isolation. They don’t necessarily look at the potential convergence of two different risks and how the combination could have devastating effects.

CEOs have to understand the links between risk and strategy

Any organisation that fails to consider its key risks when developing strategy will be sub-optimal. In the best case it will merely be duplicating activities and wasting valuable company resources under different labels (such as SWOT, Environmental Scanning, Scenario Planning, etc). In the worst case, it may adopt a strategy that is doomed to fail because of invalid theories and flawed assumptions.

No strategy can be properly formulated without a deep and accurate understanding of the key strategic risks – especially the emerging strategic risks. Strategy must always include an analysis of key risks, and in one sense, is a strategic risk management plan. This means it also has to evolve regularly, so checking up on risk profiles months after a strategy has been implemented is nowhere near dynamic enough.

An organisation’s strategy should be designed to articulate objectives and ensure they are met therefore strategic risks MUST be identified and considered in the development of the strategic plan.

CEOs need to un-learn the concept that a formulaic “strategy event” like a strategy day is best divorced from another formalised event that looks at strategic and business risks.

CEOs need to re-learn that organisational strategy is continually shaped by regularly updating key business risks in the risk profile, assessed against the organisations risk appetite and risk tolerance and then applied to the new strategic effort.

Linking strategy and risk is not to be seen as a “glass half empty exercise” that might somehow restrain the pursuit of an organisation’s objectives. Instead, it should be enabling and enriching strategic efforts.

CEOs should view the risk and strategy link as a key way of prioritising scarce resources and purposefully focusing on the mitigation of existing and emerging strategic risks that may affect the achievement of longer term objectives

What it means for CEOs

Great business leaders today are not sitting around searching for impressive contemporary strategy theory – nor absolute answers. That’s because surviving and thriving in business is increasingly about being authentic.

CEOs need to be forever curious, as well as calculated risk takers in a more dynamic world. I always laugh when I see comments about people struggling with four different generations in the workforce. The signs were always there, we just needed leaders who could look ahead, take the hint and prepare for the changes before they happened.

They need to be always learning, un-learning and re-learning faster than competitors or the emerging forces of change. Boards and CEO’s must meet the increasing expectations of society that sometimes go beyond simply what is required by law.

The expectations placed on the shoulders of the modern CEO when applying effort to strategy have never been greater. By realising how an organisation’s purpose aligns with its target audience, CEOs can craft a strategy that is connected with the modern business environment.