WHY STRATEGIC PLANS FAIL

Pete Babich
© Total Quality Engineering Inc., 1995

INTRODUCTION

Strategic Planning has long been considered a necessary tool for business success. Unfortunately, many
businesses will invest countless hours of their key managers' time and spend thousands of dollars publishing
a Strategic Plan only to file the impressive document away and never use it. A strategic plan that is not used
is worthless! This paper will discuss classical strategic planning techniques and explore some of the
reasons why plans are not used to guide the business. It will also present alternative techniques that can
improve the business planning process. The concepts of effective mission statements and visions will be
reviewed. The distinction between "business intent" and long range plans will also be addressed. The
intent of this paper is to share tools that will help make the strategic plan an integral part of business
management; not just a once a year exercise for senior management.

The following fictional description of a typical strategic planning process is used to illustrate many of the
common pitfalls.

A TYPICAL PLANNING PROCESS

The morning air was crisp and the smell of salt water had a calming effect. The view of the Pacific Ocean
from my hotel balcony was magnificent. Last year our strategic planning session was in Lake Tahoe. The
skiing was great. The Company placed a lot of importance on strategic planning and spared no expense to
make sure the management team was comfortable, relaxed and in the right frame of mind to make strategic
decisions. I went back inside my room, picked up my notes and walked down to the conference center. I
certainly enjoyed the environment here at the hotel, but I wasn't looking forward to two days of boring
meetings.

The meeting began with the President of The Company, Abe Ackers, welcoming us and setting the
expectations for the meeting. He then introduced a planning facilitator, Barbara Bowers that would help us
create The Company's strategic plan. Barbara led us through a couple of style awareness and team building
exercises. I learned one more time that some people perceive my style as abrupt and uncaring. I resolved
to myself again that I would try to improve that trait. I felt the teaming exercise was a little silly, but it did
give me a chance to meet and spend time with the new Finance Manager, Carl Caruthers. He's not such a
bad guy after all. When the exercises were complete, it was time for lunch.

After lunch, Barbara started to lead us through development of our Mission Statement. Don Dobson, the
Human Resources Manager, suggested we simply use the statement created last year. Barbara wasn't aware
of last year's statement. She pointed out that we have some new members of the management team, and she
believed it would be helpful for us to create a new statement. That way everyone could contribute to its
development. Abe Ackers shut off more discussion by stating that we were going to follow Barbara's
process.

To develop the Mission, we broke up into three different teams. Each team brainstormed ideas, issues,
situations, and values, and then created a proposed Mission Statement. Each team then shared their process
and the resulting proposed Mission Statement. We then identified common themes in each statement and
developed a first draft, Mission Statement. After significant wordsmithing, we arrived at a statement that
was acceptable to everyone and didn't offend anyone:

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 "The Mission of The Company is to serve our customers with the highest levels of customer
satisfaction, providing price competitive products developed and delivered on time by our
innovative, talented, dedicated and empowered workforce."

After completing the Mission Statement, we closed the meeting and car-pooled to dinner. The meal was
excellent, the show was great, the camaraderie was wonderful, and the wine wasn't bad either.
Unfortunately the party couldn't last. At 8:00 AM sharp, Day 2 was scheduled to begin.

We began Day 2 by creating a Vision Statement. We used the same process that we used to develop the
Mission Statement. It wasn't clear to me why we needed both a Mission and a Vision Statement, but being a
good team player, I went along with the process. After much debate and wordsmithing we agreed on a
Vision Statement:

"Our customers are fully satisfied with our products and services; they consider us a responsive
supplier. Our workforce is empowered and always striving to do their best. Within our community,
we are viewed as a good citizen. Our internal processes are always functional and striving for the
highest quality possible. We use TQM to make continuous improvement in everything we do."

After lunch, we brainstormed issues and problems that are preventing us from achieving our Mission and
Vision. The ideas flowed like water. Before we knew it, every piece of wall space was covered in flip-
chart paper, loaded with issues and problems. We prioritized the issues and ranked them in order of
importance. From the prioritized list, we selected the top 10 objectives for next year:

• Reduce overhead costs • Investigate new market opportunities

• Improve customer satisfaction • Improve employee training
• Reduce time to market of new products • Automate work processes
• Improve product quality • Reduce worker accident reports
• Improve supplier quality • Improve environmental management

We debated the priority of the list and concluded that all items have equal importance. We didn't want
anyone optimizing one item at the expense of another item. It was a conscious decision not to number the
list of objectives.

The afternoon session moved along very quickly. Everyone participated and the energy level was very
high, but we ran out of time and could not define the objectives' sub-strategies. Abe said that he would
work with Barbara and a few other key managers to finalize our strategic plan. He committed to publishing
the plan within one week.

Next Monday morning, I arrived back at work. I felt good about our planning session. If we could improve
on those ten things, The Company would really benefit. I was excited and ready to go to work on the
objectives. I especially liked the objective to automate work processes. Computers can do wonderful
things nowadays.

Before I sat down at my desk, Ed Elton notified me that three product shipments went to the wrong
customers. I called the customers and assured them things would be straightened out right away. After
working with shipping, Ed and I finally got the right products to the right customers. Returning to my
office, I saw Fran Frantic waiting for me. She said two employees called in sick and she was unable to get
temporary replacements. She didn't know what to do.

It seemed that each workday was filled with one fire after another. At the end of each day I was exhausted.
The motivation necessary to begin a new project just wasn't there. About four weeks later, I was reviewing
my mail, and I saw the finished strategic plan. I was impressed. It was on glossy paper, and had full color
pictures. There were photos of the management team, stylized Mission and Vision Statements, and a page
where each senior manager signed to show their commitment. Briefly scanning the document, I noticed a

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couple of activities under cost reduction where I had been assigned ownership. I made a note to review
them in more detail later. I put the plan in my file drawer under "Plans," so I would be sure to find it when I
needed it.

FIVE REASONS STRATEGIC PLANNING FAILS

The preceding story is a compilation of many different strategic planning sessions where I've been involved.
In each case, the primary reason the strategic planning process failed was because it was never used to run
the business. Businesses tend to go to great lengths to create a strategic plan only to have it sit on a shelf.
We all agree that planning is important, but for some reason strategic planning sessions end up being annual
team building exercises that do little to drive the business.

There are probably hundreds of reasons why strategic planning fails, but I will concentrate on five key
reasons that I have observed:

• Daily Management not distinct from Breakthrough objectives.

• Vague Mission/Values and weak organizational linkage.
• Vague Vision/Strategic Intent and weak organizational linkage.
• Lack of data analysis during plan creation.
• Lack of periodic review and process improvement.

DAILY MANAGEMENT NOT DISTINCT FROM BREAKTHROUGH OBJECTIVES

When day-to-day work is not clearly separated from breakthrough plans, people have a hard time balancing
resources between urgent and important activities. Since failure to accomplish urgent activities tends to
cause the most immediate pain, resources are focused primarily on urgent issues. The old cliché, "If you are
up to you neck in alligators, it's hard to maintain focus on your objective of draining the swamp," wasn't
developed just because it's a cute image. It was created because every person working in any job has
experienced such a situation. When his boss asked why key objectives had not been accomplished, a
worker explained, "Work got in the way."

This inability to separate daily work from breakthrough activities is a major reason for worker frustration.
From their point of view, grand breakthrough objectives just add more to their already full plate. How can
they be expected to work on new things when there are not enough hours in the day to complete their job?
Until this issue is resolved there can be no hope of achieving long-range objectives. The business will
continue to be managed in a reactionary manner, handling one urgent issue after another.

To resolve this dilemma, management and workers should act together to define the essential elements of
each department's or work group's responsibility. Resources should then be adjusted to assure that critical
activities are staffed and supported. This means making tough decisions regarding activities that will not be
supported. Failure to take things off the plate can spell disaster later. Proper resource balancing does not
consume 100% of worker's time. At least 5 to 10% of worker's time should not allocated. This unallocated
resource can now be invested in critical company breakthrough activities or department continuous
improvement efforts.

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MISSION NOT CLEAR AND LIMITED DEPLOYMENT

The best way to properly separate day-to-day activities from breakthrough activities is to develop an
effective Mission Statement. Mission Statements describe why the company exists. The Mission is also
referred to as Purpose, Charter or Business Intent. The Mission identifies customers and the fundamental
customer needs the company is fulfilling. Mission Statements are appropriate for each organizational
element within the company. All internal Mission Statements should link to the Company's Mission. When
people understand why they are doing things and how they support the whole organization, they are more
motivated and can act independently and creatively to fulfill the Mission.

Effective Mission Statements focus on markets and customers, not products and services. They tend to be
specific, achievable and motivating. The simplest form of a Mission Statement is, "To satisfy a need For
some customers, By providing, serving..." The To and For portions of the statement describe the basic
business intent of the company. The By portions describe the Key Strategies that are employed to
accomplish the business intent.

Avoid complicating your Mission statement with qualifiers, values, measures, and other "God, Country and
Apple Pie" statements. Keep the Mission simple, so people can remember it! Consider the below Mission
Statements of a fictitious utilities company:

Our Mission is to provide quality, responsive, and cost effective electrical power services to our
diverse customer base through an innovative, talented and dedicated work-force that believes in
teamwork, good citizenship, fairness, integrity and is constantly striving for excellence in everything
we do. We strive for the highest levels of customer satisfaction and work to provide our
shareholders with acceptable returns.

Our Mission is to improve the standard of living for Southern California commercial and residential
customers by providing uninterrupted electrical power.

Which of the two statements is more likely to be remembered? Which one provides an outward focus on
the customer? Which statement clearly identifies who and what is important. The secret to effective
Mission Statements is to keep them simple and focus on how the customer will benefit from your products
and services.

After the company Mission Statement is developed, it needs to be deployed throughout the organization. If
deployment is effective, everyone can describe how their job supports the company's Mission.

Performance measures should also be developed at each level of deployment. Data should be collected to
establish typical or normal performance. Once normal performance is identified, management can set
Action Limits. The Action Limits allow day-to-day processes to be almost totally managed by workers. As
long as performance remains within the Action Limits, management has confidence that performance is
normal, and they can concentrate on breakthrough activities.

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VAGUE VISION/STRATEGIC INTENT AND WEAK ORGANIZATIONAL LINKAGE

The Mission and Business Fundamentals describe what the company's business "is." The Vision of the
company describes what the company's business "should be" in the future. Visions appeal to emotions.
They describe the future in terms of metaphors, symbols and feelings. Visions are powerful images that
draw people to them.

Prior to beginning a grueling, four-year, struggle, every Olympic athlete visualizes themselves climbing to
the top step during the medal ceremony, having the gold medal placed around their neck, and hearing their
National Anthem played. On more than one occasion, that vision will help them overcome the pain and
suffering necessary to become one of the world's great athletes. Companies, Departments and every
organizational element within the company need to have visions too. The effect is exactly the same. When
things get tough, the Vision provides the motivation to continue their efforts.

Visions are also referred to as Strategic Intent. Non-market leaders typically have visions of beating a key
competitor. Market leaders tend to have broader visions. For example, the Vision of Coke-A-Cola is "to
put a coke within arms reach of everyone in the world." McDonald's wants to "serve people food, where
ever they gather." In each case a visual picture is created that points in the direction the company wants to
go.

The Vision should guide all organizational change and improvement activities. The simplest way is to
capture the Vision in a long-range objective. Three to five key activities can then be identified to assure the
Vision is achieved. This long-range plan is the starting point for the annual planning process. The annual
plan identifies the essential things that must be accomplished this year in order to achieve the Vision. All
critical activities must then be deployed to all necessary areas of the organization. Owners should be
assigned and performance measures identified to track progress.

LACK OF DATA ANALYSIS DURING PLAN CREATION.

Most strategic planning sessions are conducted off-site in an intense two or three day session. This
technique goes a long way to improving the teamwork of the management team, but because they are
separated from the information, data are rarely used. Opinions take the place of data during these meetings.
The person with the best debating skill (sometimes the one with the loudest voice) tends to dominate and
influence the direction of the group. Consensus is difficult because it's hard to separate the opinions from
their owners. For example, if you have high regard for an individual you will be more apt to believe their
opinions are facts. On the other hand, if you don't trust someone their opinions will always be clouded with
perceived hidden agendas.

A good technique to inject more use of data into the plan development is to hold all planning meetings on-
site. Instead of one big meeting, consider multiple smaller meetings over a two to four week period. When
data are analyzed and presented, oftentimes as many questions are raised as are answered. With frequent,
short meetings, the questions raised from data analysis can be answered with a different set of data and/or
analysis at the next meeting.

Each company has its own particular set of data required for strategic planning, but in general data should
address the following key areas: 1) Sales and sales trends, 2) Customer satisfaction and trends, 3)
Competitors and predicted moves, 4) Technology trends, 5) Supplier trends, and 6) Company core
competencies. Data from each of these areas should be segmented and analyzed until it is obvious to
everyone what key opportunities exist. The focus on data helps remove personalities from the decision
making process. It also improves buy-in because decisions can be supported with data.

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LACK OF PERIODIC REVIEW AND PROCESS IMPROVEMENT

It does not matter how great the plan is, if progress is not periodically reviewed the plan will fail to
precipitate the required change. People want to work on things that are important. If no one ever asks
about the progress of the plan, people will perceive that plan activities are not important. The review
process is probably the most important step in the planning process.

Effective reviews are scheduled. A Planning Calendar is a good way to document when reviews will occur.
People need to know that reviews will always occur and that they are expected to present the status of
Business Fundamentals and Breakthrough Objectives for which they have responsibility. The old adage,
"You inspect what you expect" holds true. If management does not demonstrate that they value the review
process, the employees will not value it either. Infrequent reviews or reviews that just gloss over the issues
imply the things being reviewed are not important. Nobody wants to work on something that is not
important.

In general, effective reviews meet the below characteristics:

• Conducted on a regular basis.

• Come as you are. Fancy presentations are not required.
• Use actual performance data, not opinions or anecdotes.
• An open, honest and supportive atmosphere is maintained.
• Review Business Basics first, followed by status of Breakthrough Activities.

It is important that the review process includes specific data. It is very easy to make statements like "made
progress" or "will continue efforts." If these statements are made on reviews, you will find they tend to
show up on every review and there will be little evidence of real progress. The use of actual performance
measures to quantify progress helps to focus on the real issues. It forces the statement, "Why was the goal
not met?" The discussion that follows provides insight into the issues and helps expose alternatives for
improvement.

When conducting the review, it is important for the manager to maintain a calm, non-threatening attitude.
Attacking the process owner every time goals are not met will cause the process owner to cover up or omit
negative information. This will destroy the review process. It is the manager's responsibility to assure an
open, honest, and supportive environment.

Effective reviews require the process owner to bring all completed review forms and supporting data to the
meeting. Business Fundamentals are reviewed first. Generally they will be performing to expectations, and
therefore this part of the review should be very quick. There is no need to spend a lot of time on things that
are working properly. On the other hand, if a Business Fundamental performance measure exceeded its lim-
its anytime during the review period, the process owner should describe the situation and the action taken to
resolve the problem and prevent its reoccurrence.

After reviewing Business Fundamentals, progress toward achieving Breakthrough Objectives should be
reviewed. The review should compare what was expected to happen with what actually happened. All
deviations should be analyzed to understand root cause. Based on root cause understanding, the
implications for the future should be discussed and agreement obtained on what results are expected during
the next review period.

There should always be two way dialog between the manager and the process owner regarding clarification
of results expected during the next review period. If "Expected Results" are too ambitious, motivation will
be damaged because the process owner will be unable to achieve them. On the other hand, "Expected
Results" that are not challenging will not motivate exceptional performance. "Expected Results" should
document activities that can reasonably be accomplished during the next review period.

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As the year progresses, it may become obvious that the original objectives will not be achieved. This could
be due to changes in the business situation, requiring a change in plans or the fact that resources were
underestimated. If this happens, the review process should be used to document the changes without
recreating the Annual Plan. This will prevent the plan from being unnecessarily reworked or cast aside
because it no longer reflects the current situation.

SUMMARY

Strategic planning is an essential element of business success, but many companies do not effectively use it
to guide their business efforts. Some of the key causes include mixing business fundamentals with
breakthrough activities, vague Missions and Visions, lack of data use and failure to review progress. Each
company should evaluate its own planning process and determine if it is being effectively used. If the
planning process is not producing the desired results, then the process should be changed. The tips and
techniques presented in this paper are offered as solutions to some of the more common planning
weaknesses. The most important point, however, is that companies should continue to modify and improve
their planning process until it becomes an integral part of their business processes.

About the Author:

Pete Babich, MSEE, is the President of Total Quality Engineering, Inc., a company that specializes in
applying quality engineering principles to improve business competitiveness. Formed in 1991, TQE
provides software, training, and consultation in strategic planning (with emphasis on Hoshin Kanri),
product/process quality and reliability improvement, and customer satisfaction measurement and
improvement. Previously employed by Hewlett-Packard for seventeen years, he held positions of R&D
engineer, Reliability Engineering Manager, and Quality Manager for the San Diego Division. He is an ASQ
Certified Quality Engineer, ASQ Certified Quality Manager, and a past Malcolm Baldrige National Quality
Award examiner. The author appreciates receiving your comments regarding this paper.

Pete Babich
President
Total Quality Engineering, Inc. ph: (858) 748-2916
15997 Grey Stone Road fax: (858) 748-0427
Poway CA 92064-2363 e-mail: pbabich@tqe.com Web: http://www.tqe.com

This paper may be copied and distributed to others provided it is copied intact and with no modifications. It
may not be sold or included in another publication without the author's written permission.

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