07 Oct Forget Your Plans and Focus on Planning
Will the fed raise interest rates? What will oil prices be a year from now? Is there any future left for commodities? Will World War 3 break out in the Middle East? Are we going to see the United States of Europe in the next 10 years? Despite the seemingly endless list of geo-economic and political crosscurrents, many of us are still charged with making business and personal decisions.
In trying to navigate through a chaotic and uncertain future, many of us resort to some form of strategic planning. What could be more prudent than sitting down with your morning coffee, pulling out a financial model, and making sure the numbers work out for next year? Wanna hire another sales person? Run it through your base case to see if the numbers still work.
Or what about that convertible your husband wants: can you afford it? He’s suggesting it won’t affect the budget because he’s going to stop his bank-busting Sunday afternoon pre-game runs to Whole Paycheck for $9 guacamole, $14 six-packs of beer, $18 artisanal garlic lemon olives, and of course, the $12 organic, GMO-free, gluten-free, free-range, and fair trade tortilla chips, among other stuff.
Really? This all sounds nice, but there’s a catch. We tend to think of planning as a process for making plans. What if I told you that committing to planning is the best choice you could make, and that committing to a plan is just about the worst. Sound contradictory? It’s not.
You see, planning is often treated as a way to calculate, predict, and lock in. We build the spreadsheets, model out the projections, and make long-range hire/fire or build/buy/rent decisions based on these calculations. But, as we know, our assumptions will inevitably be over-simplified, the data shoddy, the predictions off. That’s just reality. So might we be doing a disservice by committing to plans? If we treat plans as sacred, we’ll likely make bad decisions. We’ll be disappointed. And we won’t be better off. The sad reality is that plans are self-imposed tunnel vision.
The antidote to this disease is planning. Confused? Don’t be. The act of planning is our savior. It invites and encourages us to consider various future scenarios and to brainstorm possible actions. We need to emphasize planning over plans. Through planning, we voice diverse opinions, survey the range of possibilities— including the seemingly unlikely extremes—and evaluate scenarios that may seem far-fetched.
Planning multiplies perspectives and possibilities, rather than reducing them. Plans generate a false sense of certainty; planning highlights, acknowledges, and emphasizes uncertainty. People who embrace planning are better thinkers because they consider multiple perspectives. They don’t fool themselves into thinking they’re always right.
Consider the case of Shell Oil. In the mid 1960s, the company implemented a program called Unified Planning Machinery (UPM), a model-driven computer-generated financial system. UPM generated a plan, but it did not promote planning. Around the same time, Shell also introduced a planning operation called Long-Term Studies. It was an almost polar opposite of UPM. This group explored a range of future scenarios and considered the ramifications of various oil prices, for instance. They shunned a supposedly precise numerical forecast and instead considered alternatives, one of which they hoped would ultimately be approximately right.
Shell soon dropped the Unified Planning Machinery—it was useless—but Long-Term Studies proved invaluable. Scenario planning helped Shell weather the turbulent 1970s much better than its peers, who hadn’t taken the time to meditate on such extreme possibilities as an oil price shock. Over the next few years, they were able to successfully maneuver the company through a highly uncertain global economic environment. The result: while other international oil companies struggled to survive, Shell thrived.
Planning is about broadening our mental maps. As the head of Long-Term Studies at Shell in the 1960s put it, “You are trying to manipulate people into being open-minded.” Hmmm, time to manipulate hubby into thinking about a four-wheel drive minivan that can handle the kids? After all, we are heading into Winter…