It’s a wonderful time of year, for strategy
It’s generally around this time of year when I start to think about strategy and annual planning cycles. I find clients are starting to think about where they are in their current strategic arcs and what they need to do to get their Board’s buy-in for the next financial year.
It’s an important opportunity in the business calendar to give due credence to how you want the planning process for FY27 to play out and create the conditions for good decision making. More than anything else though, its a time to close the loop on performance to objectives, consolidate learnings, and develop pragmatic action plans.
What have we achieved: Baseline drift
One of the most interesting planning behaviours we repeatedly come across, is the collective blindspot for changing the strategic critical path without acknowledgement, or retaining integrity of performance reporting across the arc.
When we agree our strategy, generally it is enacted through a series of goals, outcomes, or objectives. As we begin to move through our strategy and the situation changes (see any number of classic quotes on plans needing to change), it’s an opportunity to reflect on changing context and make informed decisions to adapt accordingly. What often gets missed though, is referencing back to the original strategic outcomes and ensuring our informed adaptations haven’t instigated (or even cemented) a deviation from the path to success, aka ‘baseline drift’.
Sometimes this drift isn’t picked up until the deviation has become so pronounced, its no longer possible to correct within the arc. This can look like goals unachieved, or implementation activities being rolled into the next strategic arc, or even just abandonment of an outcome as a way to enable remaining objectives to be achieved with reallocated resources (we’re all guilty of this one).
Reflection before action (planning)
We exist in a fast-paced world and, thanks to various modern inventions like email, share markets, and global trade, we have normalised an availability and pace of delivery that often keeps leaders in a space of constant urgency. This urgency often crowds out time for reflection (both individual and organisational), professional development, and unstructured thinking time. So when it comes time to think about annual planning cycles, the same urgency dominates and opportunities to test underlying assumptions and behaviours are missed.
The trick is to build disciplined rhythms into your year that enable you to engage in meaningful reflection as a leadership team, while reinforcing the behaviours you want to cultivate, in yourself and your teams, through regular practice. We all know culture is role modeled, and not just spoken of, so the behaviours you demonstrate and prioritise are the ones your teams will feel safe and empowered to emulate.
We recently worked with a client who came to the realisation that their historical ways of working would be sustainable into the future and would need to change if they wanted to achieve their strategy. As a result, they made some bold decisions to change that also created the conditions to sustain that change - through behaviours and shared accountability, explicit permission and practice for collaborative outcomes, and commitment to creating space for the ‘new rhythms’ of working. This also meant letting go of some things (activity and control) that required commitment to the journey while the organisation learned (a topic we will explore in another post).
Informed decision making: integration is key
How many times have you been part of a planning cycle that results in a shiny, inspirational strategy that gets arbitrarily decimated once the budget process is overlaid? While financial hygiene and some refinement is inevitable as a continuation of planning, the act of setting strategy and allocating resources to execute should be closely connected, logical and reinforce to the organisation and its stakeholders what really matters (tip - its unique to each organisation, but planning cycles often show up the disconnect between steady-state delivery and what we aspire to).
Setting strategy, whether its for a new arc or refining the year ahead, requires a balanced view of what’s achievable of the strategy given the capacity and capability of resources. To do this, you need really good information on what’s been delivered to date and with what compromises. And good information is not the same as lots of data - many leadership teams and Boards are given so much information it becomes hard to consume, eroding meaning and failing to paint the picture you were hoping for. Holistic, integrated information and the discipline to review it collectively, is an important part of building the strategic discipline.
Effective allocation of resources to strategy also requires knowing what it takes/costs to run your normal operations, otherwise how will you know what available capacity there is for new work, innovation and/or improvement? This is another space that is often blurry, poorly estimated, and lacking in context such as organisational change fatigue.
How to get it right
So as you schedule your off-site sessions and start planning your Board briefing packs, here are our critical questions to answer:
What have we achieved of our strategy? Where have we compromised, diverted, adjusted and how did we make the decision to do so?
How far do we need to go next year to maintain the necessary trajectory and momentum to our agreed outcomes? Are there any protective/defensive actions we need to take to manage our risk profile? (see our previous post on integrating strategy and risk)
What is the delta between resourcing requirements for normal operations and next year’s targets? Can we afford to fund that? What are our principles for prioritisation should investment not be forthcoming? How will that impact subsequent years (i.e. incremental deviation)?
What signals within the organisation will we track for review, on what cadence? What is the threshold for intervention?