Strategic Planning

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Introduction to Strategic Planning

Introduction to Strategic Planning Program Transcript

[MUSIC PLAYING]

NARRATOR: Organizations engage in strategic planning to foster growth and promote change. In this video program, Dr. Paul Nutt explains how a comprehensive strategic planning process facilitates growth and change through collaboration, cooperation and coordination.

DR. PAUL NUTT: A frequently asked question is what is strategy, what is it all about? And it's a strategy—is a—some people regard it as both a noun and a verb. So let's talk about it as a noun.

What is strategy? It has to do with the organizations in the private sector competitive advantage and sustainable competitive advantage namely, you know, how do you maintain whatever it is is making your money and position you in a marketplace so that you're highly successful. And this is a very controversial thing, you know?

For one thing, what creates the competitive advantage, and secondly, how do you sustain it? And there are arguments, you know, these should be diversified or not diversified and there should be synergy across the various elements in the firm, so it should have some sort of cooperative use of the resources.

And so on, for example, General Motors uses the same engine in all of its cars. So presumably, there's some sort of synergy across the product lines that they have. In the public sector, this is a very—it's a very different proposition, you know? Strategy there is limited oftentimes by legislative edict. Different branches of government are allowed to do certain things according to some sort of legislative mandate that comes from a authorized body. And the real question is to what extent can they go beyond that, or interpret what the legislator meant?

And the dilemma here is that almost all legislatives—almost all legislation, I should say, is a compromise in one kind or another. There are people that are supportive and people that are not supportive.

That's why—the legislation is written in such a way as to find a way to weave the path between people that are supportive and the people that are not. That makes it ambiguous. It's ambiguous about who should be served, it's ambiguous about who should pay for this, it's ambiguous about how aggressive the organization should be in identifying needs and responding to them.

Introduction to Strategic Planning

And to one degree or another, almost all public organizations face this dilemma. Nonprofit organizations have a little bit different issue to deal with. Oftentimes, there's a history here.

For example, religious organizations have started lots of hospitals, and there's certain expectations that are associated with that, charities, you know, the Shriners, for example, run hospitals. And they give away care under certain circumstances, which changes the financial picture all over the place.

Question is, how should the public organization work its way through this ticket provided by legislation or oversight, in the case of public organizations, board of directors, in the case of nonprofits?

Oftentimes, the nonprofit board of directors are also major benefactors of that organization and have to be listened to. How do they work their way through this ticket and try to figure out how to position themselves to the future so they can be successful?

The question revolves around the notion of process, a set of steps one follows that will get you from one place to another in an expeditious way and also an insightful way. And usually, there's three kinds of questions that are helpful in this context.

The “what question”—the so “what question—the now what question.” The “what question” has to do with what the organization is up to. What events or trends that influence it in the past and are likely influenced it in the future? And it's interesting that a lot of people in organization are aware of some of these but not all of them.

So the idea is to try to create some joint knowledge about this as to the fashion the future. And the next one is the so what. This is a question of inference. Given that these trends and events take place, what significance can you attach to them? Which ones are the more important, which ones are the more indicative of the future and are more likely to keep you from realizing the desired future?

Then the now what question. Where do we go from here? This is the most difficult aspect of strategic management. Basically, what we have to do is to fashion the set of issues out of all of this analysis and say, what are the most significant things, trends and events, that are keeping the organization from achieving this desired future?

Getting to the desired outcome is very difficult because the questions really requires creativity and careful analysis of all these other factors in ensuring we attend to them.

Introduction to Strategic Planning

[MUSIC]

[On-screen Text: Strategic Process]

Well, many people ask, what is strategic process? And the best way to answer this is that a process itself is a means to an end and not an end to itself.

And there's a story about this, and it's sometimes useful, it's about the Swiss army. Hopefully, this will be helpful to the folks. The way the story goes is that Swiss army, which is, you know, contextually, not the most effective organization you perhaps have never heard of.

They're off on bivouac in the Alps, and as they went through the last little town where the ski resorts were, whenever they wave goodbye, whenever.

All of a sudden, the mayor realized a week later that they're lost and have not returned. So he sent out arguably the more effective organization in Switzerland, the ski patrol, to try to find them. And after a week of looking, they were unable to find anything—about gave them up for lost and the mayor was quite upset about all this when in comes the Swiss army straggling in, and he said, "my god, we've given you up for lost."

And he said, "How did you find your way back," and he says, "Well, I was looking at my backpack and I found this map," he said. "I looked at it," and he said, "Well, this is a map of the Pyrenees, not the Alps." The fellow said, "Well, that just goes to show you when you're lost, any map will do."

Now, a lot of people use this story to kind of make two points, and one of them is that managers oftentimes get caught up in a situation where they really don't know how to go about strategic management or strategic planning. Consequently, any map will do.

That means, essentially, there are organized process that address the series of important questions that arise in this context as invariably useful. However, in my case, I happen to think that my map is better. And I think most folks in my business would say the same thing. The point is that there's different ways of doing things.

There's overlap to some extent, but the purposes basically remain the same. When you ask the question, what's the benefit of a plan? Some people say it's the journey other people say it's the outcome, the plan or the process in other words. I think both are useful.

Introduction to Strategic Planning

The process itself where you share information, for example, historical context, everybody is on the same page about information, the trends and events that are affecting an organization significantly. There's also the question of working together and facilitating cooperation and mutual understanding, which is useful in a process.

And a plan is useful as well, and a plan typically is thought of in several different ways. You think of them in terms of positioning every organization. You think of them in terms of ploys. You think of them in terms of patterns.

These three elements perhaps are enough to kind of get a feel for this. It's a ploy; a plan is sometimes an attempt to deflect the opposition. You find this more in private sector organizations.

Case in point was a number of years ago, Johnson Controls, actually. Advertised a false product to try to trick Honeywell into thinking that they had invested in a particular line of development that they hadn't. And supposedly, this deflected Honeywell for several years from putting money where it was going to be more useful as Johnson had already decided that this approach was not going to produce useful results.

So in the private sector, there's a good deal of this where you kind of, feint, that you're doing something, when in fact, you're looking to do something else. It's a position planning, has to do with trying to stakeout a niche that you're going to exploit in some systematic way. Knowing that in advance is usually very helpful in organizing resources and getting your act together in terms of, you know, your administrative structure, your financing and what have you.

In the public sector, it takes place very differently. Positioning here is often dictated by legislation, so you have to work within the legislative context and say, what action is going to, in fact, take that are useful within that context.

Not having a plan poses a variety of risks for an organization. The notion of “Unk Unks” I think, comes up, the unknown, unknowns. Those are the ones that really get you. That is the thing you don't know that you don't know about. And what often happens in a planning process is these things come to light.

Sometimes, not everyone is in the dark, so to speak, about, say, a market niche that's important to exploit, an opportunity for funds or for, some sort of financial support for the organization that was not explicitly known. And the risk in not doing planning is that you overlook those things. They're not available; they're not on the table when the circumstances arise.

Let me give you an example. There's OTTA, Ohio Tuition Trust Authority, in the state of Ohio. It's a tuition-based organization created by investment strategies where people can invest in their children or their grandchildren, in my case,

Introduction to Strategic Planning

future education by investing in this organization. And they had a, somewhat interesting relationship with—investments.

The dilemma, of course, is that as we've experienced recently, the stock market has a tendency to fluctuate. And under bad conditions, when you have rising tuition costs, you have the declining investment payouts and guarantees on the part of OTTA to provide certain degree of tuition credits for certain contractual arrangement, you have serious shortfall in the organization. The risk there is not being able to forecast ahead and plan for that.

Have an understanding what the fluctuations look like and being able to identify worst-case scenarios and plan for that. And as I told the director of that, if you don't do that, you know, the Ohio legislature, at least in my state, would say to the executive director, "You're going to fall on your sword," and you now want that to happen.

So you need to have a planning process that kind of thinks through this issue and tries to figure out what the worst-case situation might be. When I think of a process, I think about the concept, the dance, what I call the dance of the “what and how.”

That is, what you need to do and how are you going to do it. What has to do with an outcome and how it has to do with how you produce that outcome? And this dance moves back and forth from process to content to process to make it effective. Everybody handles this a bit differently.

However, in my case, what I like to do is to walk through a series of phases. The way we typically break things down is three major things. There's a historical context of the organization, there's the organizational situation and then the strategic situation.

In the historical context, we do basically a system's model where you look at things like needs and a—in the case for public organization it's more needs than it's a question of market and resources that are available, administrative structure that's available.

What we try to do is to find out from the participants, and this is again, another issue we need to discuss is where the participants come from.

But assuming the participants are there, we have people sit down and tell us their concept of where we've been and where we're going and what the events and trends are that punctuate the reality for say, the administrative structure of the organization. Case in point might be a dramatic decline on the current situation of what we're facing is dramatic decline in funding particularly at the state government level where most services are rendered.

Introduction to Strategic Planning

The dilemma there, of course, is how are you going to provide services when you have a declining budget. Another way to look at this is, are the needs growing for a particular organization?

In some instances, you can say they are depending on the state's circumstances or what's going on federally. Unemployment issue is really the demands are increasing and the resources to fund that organization are declining.

So you'd like to get a picture of the historical context, then you move to the organizational situation. And this is often characterized what's called a SWOT analysis, strengths, organizations, opportunities and threats, and you'd like to get an idea of what those are.

Every organization has a tendency to have a different make-up of those. And typically, their strengths and weaknesses are considered internal, opportunities and threats external, although that is probably not completely correct. There can be some overlap there. So they're not exclusively external and internal.

However, the balance of these things give you some sort of situational notion about how the organization is positioned at this point in time. Then you do a strategic assessment of the organization and say, “What are the issues flowing out of all this mix that are really key.”

And my co-author and myself have developed what we call an issue tension to try to capture that. The first thing is, let's say, declining resources is the key issue that came out of the previous mix.

The question is, what's the dominant thing that's pulling in the opposite direction that keep you from getting more resources? And that could be the prevailing attitude that the—toward public sector of starve the beast. That is, we don't want to give any more money. We're—the process is to require less money.

So, if you're doing a scenario, you don't talk about the best-case scenario being an increase in budget. The best-case scenario is oftentimes a flat budget. And the worst-case scenario, as what they're talking about today and there's a dramatic decline 10 or 20 percent maybe in the available funds.

Now, how in the world—going to run a BES, for example, Bureau of Employment Services with a 20 percent reduction on funds and a dramatic increase in the number of people that require services? The same issue is going take place with social security in the near future.

We have a dramatic increase in boomers retiring, and that's going to grow dramatically over the next 10 to 15 years. And if you've ever tried to contact the social security office, you realize that it's almost hopeless to get anybody on the

Introduction to Strategic Planning

line. Well, imagine when the demand doubles. The starve the beast is—alive and well in this context as well.

So, once you have the issues identified, then the question is what strategies can you come up with that would be useful in resolving these issues? And you don't relax the tensions—you manage them. And there's a little anecdote I can tell about that that I think is useful.

There's a story of Reagan visiting Germany a number of years ago when Helmut Kohl was the prime minister. And he took Reagan to the graves where a lot of Nazi soldiers were buried. And Reagan objected saying that, "You know, the Jewish constituents in the United States is not going to be happy with this."

And kohl protested in saying, "Well, I was 15 when World War II ended. Many of the people that are buried in this graveyard are—were classmates of mine that were killed. They were children that were killed in the war." And he says, "I want to put this behind us," and the fact is, you can't do that.

These things are—that's a tension that you can't relax. You may be able to manage it with diplomacy, but you certainly can't relax it. It won't go away.

[MUSIC]

[On-screen Text: Cooperation]

People often ask about cooperation and basically how one could facilitate cooperation within the process. In a way, the process that I’m talking about typically goes about this is fashioned, what I call a strategic management group. And there are some interesting participation questions about this that we need to address as well.

But what we try to do is to pull together the key decision makers in an organization. That's oftentimes either a top management team or a board of directors.

When you're talking about private non-profits, oftentimes, you have to work with boards. In public organizations, you have to oftentimes work with oversight bodies. Getting those people to participate in such a process is the biggest challenge. The only way you can facilitate cooperation is to have mutual understanding.

The only way to have mutual understanding is have people sit through a process where everybody gets on the same page as the same kinds of understanding of the issues and the same kind of understanding about what the options may be.

Introduction to Strategic Planning

In other words, do we address the short fall of needs that we've identified or do we decide not to do that and somebody has to take responsibility for that?

It's one of the major dilemmas in the public sector today is that people are not taking responsibility for it and it isn't clear where that responsibility resides. This is a way to do that. Of course, many of the oversight groups don't want to participate for that very reason. They do not want to take out any responsibility.

They like to push that off on the agency head. One of the real dilemmas is trying to figure out who should participate in this to facilitate the cooperation that's necessary, to make the organization as effective as it could be.

[MUSIC]

[On-screen text: Collaboration]

The question of collaboration is really related to the coordination issues. To get people to collaborate, we have to create an environment in, which they're working together to try to facilitate some end.

In my experience of trying to facilitate these kinds of processes, you're oftentimes stuck, so to speak, with a group of people that aren't necessarily the best for every phase of the process.

We've oftentimes stressed implementation and acceptance ahead of creativity and new ideas. And it's understandable why that would happen.

An agency head contacts me and says, "Would you help us facilitate a process, and I have to work with these people as their—the opinion leaders of my organization.” In order to facilitate acceptance of what we do, they have to be onboard and understand it. And that's, you certainly can appreciate that.

However, these people are oftentimes not the most talented when it comes to coming up with new ideas. It's fine to find the issues. Then from your—you're stuck with coming up with strategies that address these issues in a new and interesting ways, these people are not able to do that. There's a number of ways we can think about participation.

You look at it from the one hand in terms of trying to get people—they use the word co-optation, in other words, this came from the studies that show that people that participate in the process are more likely to have ownership of the results supported and even advocate those results.

Consequently, opinion leaders oftentimes dominate what I call the strategic management group that are fashioning strategy and coming up with the ideas we talked about previously.

Introduction to Strategic Planning

Unfortunately, these are not oftentimes the best people to come up with new ways to handle the issues. And as what strategies should the organization be pursuing. And I like to talk about collaborative advantage as being one of the eight strategic elements that you're trying to address.

The others are—in the public sector, it's oftentimes services, what does the service profile look like. Obviously, the counterpart in the private sector is products or business units and so on.

Their market channels, case in point there, say for a mental health system, would be the hospitals in a particular system would all be channels of care—okay.

There are the needs or the total clientele that exist, in the case of mental health, it's how many people are in need of those services. And as a kind of prevalence kind of question that is oftentimes difficult to answer, what is the target group that you're trying to address?

Sometimes, this is dictated by legislation, sometimes with budget limitations. Another important issue is persona or image. What persona or image does the organization want to purvey?

We talk about collaborative vantages, one of those strategic elements. And a public sector collaborative advantage is the equivalent of competitive advantage. Basically, we're not trying to beat the other person out, so to speak, to a market. We're trying to share the resources we have and deal with the total need situation.

Healthcare is a good case in point where a patient's handed from one organization to another and nobody has a picture of the total needs of this individual.

If you're talking about mental health patients, this is a serious concern because a lot of them are in corrections—they're incarcerated. It is very difficult to get these people the care they need.

We had a riot in Ohio recently, in Lucasville prison, in which the behavior of the prisoners was so bizarre and so outside of their interests that people were asking what are the mental health issues.

And 30 some percent of these people have serious mental health problems. And there's no capacity to treat more than five or 10 percent of them. Now, there's a serious shortfall here. Whose responsibility is it to deal about that?

Is it the mental health system, the corrections, or some other organization? Collaborative advantage would have those organizations band together and act

Introduction to Strategic Planning

collectively, to try to meet those needs as best they can with the resources they have available.

The question, again, about participation is if you have the opportunity to suggest people that were going to participate in the process that are more likely to offer creative results, you know, who would you recommend? And sometimes, that opportunity presents itself.

When as—that's the case, there's a variety of things you can do. First is to create what they call a safe space. And you can create the safe spaces in a variety of ways.

One of them is to allow the people that are there to actually deconstruct the organization. And as we have certain alliances in the organization is based on we say, let's assume that those alliances don't exist any longer.

Let's assume we don't have budget constraints. Let's assume we don't have legislative edicts that are hamstringing in essence and so on. And we go through the process of deconstructing the organization and that kind of opens up the environment, to a lot more creative ideas to emerge.

And one of the things I used to do when I met with the leader of the organization to try to get a contract to do this work is that asking for his organization chart, and those were the old days when you could smoke, and I would take out a match and I’d burn the organization chart in the ashtray and say, "How do you feel about that?"

It's symbolic, in other words of to what extent are you willing to start from scratch and to think out of the box, so to speak about the organization. And there are certain kinds of people that do well at this. As I used to say, “No criticism and no accountants.” And two of my best friends, as they say, are accountants, but the trouble is accountants, knee-jerk reactions are to evaluate everything. And the worst thing you can do in this kind of a situation is to offer an evaluation. You want to offer ideas not whether this will work or not. And that kind of mentality could be very destructive.

Introduction to Strategic Planning

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