Strategic planning is hard to argue with.
Unless your practices and your operations are absolutely positively optimal across the board (in which case you need to divulge to me the source of your pixie dust), strategic planning is the generally accepted tool for charting your course from current day reality to the more desirable future state. That is to say, strategic planning generally entails:
- A realistic and hard-headed assessment of where your firm (your practice group, your New York office, your [insert appropriate focus here]) actually is in terms of capabilities and perception in the marketplace;
- A thoughtful and relatively painstaking group exercise in defining a more optimal future state—which is actually attainable given your resources, human, financial, and otherwise, and your colleagues’ tolerance for change; and lastly
- A reasonably well-defined roadmap for getting from here to there.
Who can argue with that? Certainly not the ranks of MBA’s and others willing to help you down that road, for a small toll of course.
The problem is, as John Lennon famously said, "Life is what happens while you’re making other plans." And too often, business as usual is what happens while you’re making strategic plans. The problem is not strategic planning per se: Not its intrinsic value, not our ability to sensibly and cogently perform the planning, and not the indubitable benefits that would flow from actually executing the plan.
The problem is there can be leagues between the plan as conceived and how professionals behave after going through the planning exercise—which is to say, precisely as before.
One of the more practical and truly detail-oriented discussions of "How to improve strategic planning" comes now courtesy of McKinsey.
We start with the inarguable observation that corporate planners sedulously spend half a year or more collecting financial and operation data, making forecasts, and preparing extensive presentations to the CEO and others, only to see the impact be…well, unimpressive. Indeed, according to a survey of nearly 800 executives, only 45% they were "satisfied" with the strategic planning process, and only 23% said that major strategic decisions were actually made as a result.
Now, with the usual caveats that nothing can guarantee astute strategic decisions will be made nor that execution will be more comprehensive and robust, here are the five key recommendations for enhancing the effectiveness of the process itself.
Focus on the real issues
Law school and "learning to think like a lawyer" are all about issue-spotting, right, so we should excel at this stuff. True, to a point. Our occupational hazard in this area is spotting all the issues—most of which have a vanishingly small chance of materializing or making a dime’s worth of difference. So control yourself: Focus on what really matters. (Again, this doesn’t guarantee you’ll come up with a brilliant solution; as McKinsey observes, the music business has tied itself in knots over digital file-sharing for years and still has to come up with an effective adaptation to this new world.)
There are techniques to help. One approach is for the managing partner or executive committee to ask practice group leaders to envision how particular economic, legal, or business trends might affect their areas, and how to capitalize upon opportunities or minimize threats.
Another is to identify a handful of priorities for the coming year (3 to 5 is plenty), debate them at a retreat or off-site, and try to align actual behavior for the coming year with achieving those priorities. A third is to pose a handful of questions tailored to each practice area, give them a few months to ponder them, and then bring everyone together for brainstorming and—it’s to be hoped—productive session of how to meet the challenges.
What type of questions? Well, just for example:
- If you wanted to double your business in X years, what would it take? More from existing clients, new business from new clients, or a combination? How would you achieve that? Precisely?
- What are our competitors doing that we’re not? Who’s taking market share from who?
- Is the strategy you’re proposing different from that of our competitors? Why? Is that good or bad?
- If you were King, what would you do with the firm? What would be standing in your way?
- How would you monitor execution of this strategy?
Get the right people in the room
Again, this sounds obvious, no? But recognize that the "right" people doesn’t automatically map one-to-one with the most senior people. Round up those who have management authority, to be sure (if they’re not on board, stop right now), but also include others who may be particularly knowledgeable or influential—including those who may not subscribe to the firm’s party line.
More importantly: If those who are expected to carry out strategy don’t have a hand in developing it, you can predict their low-tide level of engagement.
Finally, don’t overlook the most obvious requirement of laying the groundwork for an intelligent discussion of strategy: Give people the facts.
Some partners may keep themselves apprised of financial performance metrics—assuming they’re available to them. (They are available to them, aren’t they?) But others may not, or may not feel confident knowing what they should focus on. So, some weeks in advance of the strategy discussion, provide those attending with key operational information and an outline, if it has been developed, of the key strategic issues on the agenda. Keep it short: 10 pages beat 25, and if you can’t frame the issues in 10 pages, go back to the drafting board.
One planning cycle does not fit all
Fiscal year-end, annual strategic reviews? For everyone, all the time?
- Do things really change that fast in each of your practice groups? How high-velocity is the practice, after all? Sure, Sarbanes-Oxley should have mandated an across-the-board review of all your securities and corporate governance practices, but how often does a Sarbanes-Oxley come down the pike?
- Second, if you’re serious about strategic reviews, and you have large ambitions, it’s highly improbable you can implement everything you set forth, mid-course corrections and all, in the space of 12 months. Eighteen to 36 seems more realistic. So what’s the point of annual? It borders on the hypocritical.
- Third, consider a default time schedule of every three years or so for each practice group. This tempo allows senior management to devote truly focused and concentrated attention to the team that’s "at bat." Better yet, you can change the strategic review cycle as needed so that when Sarbanes-Oxley comes along you have room in your mental and physical calendars to attend to the group that’s suddenly front and center.
Follow Through With Performance Expectations
The McKinsey survey reports that 45% of strategic plans have no component tracking actual execution, and another 25% say there wasn’t even an execution plan to begin with.
This is obviously insanity, and I’ll assume you’re smart enough not to proceed down this wayward path.
But what type of performance metrics can we actually put in place? How do we know if "strategy –> execution?"
The short answer is, "It depends on the strategy," but the real answer is you’ll know as soon as you think about it. For example, assume a strategic initiative is to expand your firm’s presence in China. If so, you can look to both inputs and outputs to see if you’re making progress:
- Inputs: Are you recruiting the right caliber of talent? Are you reaching out to current and prospective clients to let them know of your enhanced capabilities? Are you communicating internally about the opportunities and capabilities the firm is now establishing in China?
- Outputs: Realistically, expect a lag, perhaps a big one, between inputs and outputs, but start measuring right away in any event. Are you making any money? Easier: Are you collecting any revenue? Easiest yet: Are clients kicking the tires?
So you get the idea. But again, strategy divorced from execution is what John Lennon was talking about. Devoutly to be avoided.
Tie Compensation to Execution on the Plan
Monitoring results is one thing; paying people for results is another. The McKinsey survey found that barely one-third of firms tied any component of compensation to performance against the strategic plan. Typically, rewards are correlated with relatively short-term financial metrics, but any strategic plan worth its salt will extend over a period of years at least.
We know this makes no sense, fundamentally, but how can we get out from under the need to distribute all available profits to partners at the end of each year?
Let me introduce a perhaps novel notion here: Deferred compensation.
What if a (meaningful) percentage of partner compensation depended on the firm’s progress over a period of years towards its defined strategic objectives? Would people respond intelligently and even powerfully to those incentives? My confident belief is that they would.
Should we anticipate resistance? To be sure, from the usual suspects: "It can’t really be measured." "It’s bound to be subjective." "How can I be responsible for what everyone else does?" "You picked the wrong targets to begin with [and/or] your targets were unrealistic and un-meetable." Etc., etc.
But in our hearts and our heads we know better. We know who’s pulling for the team and who’s brushing it off, who’s enlisted and engaged in the strategic plan and who’s off on their own pursuit of personal glory.
Serious about strategy? So are we all. Now the rubber meets the road.
