After writing about Agile Budgeting, I stumbled serendipitously (as is the way with these things) on a Tom Fishburne post about Waterfall Planning that echoed some of the points I was making. Specifically, how crafting an annual plan is “like getting a bill through Congress”, what with all the hours of spreadsheet crunching, debate, negotiation, and compromise, followed by more of the same, before eventually settling on “a plan that is wrong the moment it’s inked”. Tom goes on to mention Ian Sanders, who gave a talk on Unplanning at last years SXSW (there’s also a short e-book here if you’re interested).
Unplanning is an interesting concept because it suggests that we need to ‘undo’ what we currently know and relearn a whole new way of doing things in business planning which I think in essence, we do. The thing I particularly like about the idea is that, in Ian’s words, it “replaces the focus on business planning with ‘business doing’”.
The typical big business planning process lays out a detailed linear plan to get us to a predicted outcome. If you are in any doubt of the need to transform how this process plays out in most organisations, consider the fundamental flaws that sit at its heart:
- The predicted outcome will be wrong.
Let’s face it, in the environment in which we now operate no-one can predict what will happen in the next month let alone the next year, or five years. In their book, Rework (you can download part of the book here), the founders of 37Signals David Heinemeier Hansson and Jason Fried talk about why we should start referring to plans as what they really are – guesses. Start referring to business plans as business guesses, financial plans as financial guesses, and strategic plans as strategic guesses, and stuff becomes a whole lot simpler. Plans become objectives, so if your predicted outcome is wrong, your objective is already flawed.
- The assumptions on which the plan is built are wrong.
Most plans use the previous year’s numbers as the basis for the forecast of the following year’s numbers (and often those beyond). Last year’s numbers which were the result of last year’s competitive context, consumer demand and behaviour. All of which (you can guarantee) will be very different a year later. Planning is typically done part way through the year and so the numbers you finally finish the year on are inevitably different than those that formed the basis of your plan. So your year-on-year variable starts to look either gloriously easy or (more likely) increasingly unreachable and unrealistic as the year goes on. Either way, the basis for the plan is flawed.
- Plans “let the past drive the future”.
Business planning, as does much ‘management thinking’, favours inductive thinking (based on directly observable facts) and deductive thinking (logic and analysis, typically based on past evidence). It’s how we are taught at business school, and often the basis of reward when we start in gainful employment. And it’s the kind of thinking with which business process is most comfortable. Abductive thinking (of the kind emphasised in design, imagining what could be possible) on the other hand, is not. Many businesses are characterised by processes that are convergent (focused on making choices, closing down on a solution), rather than divergent (focused on creating choices, opening up options). Making big decisions based on contexts that are no longer relevant or information that will soon be out of date is flawed.
- It perpetuates incremental thinking.
The context for most plans is the percentile variable from the previous year. Usually it’s an increase of somewhere between 0-10%. The criteria for success is set at doing-what-you-did-before-but-slightly-better. This focuses the mind on driving incremental gain through incremental benefit or efficiencies. When entire industries are being reinvented, this kind of approach in isolation breeds complacency and in complacency sits risk.
- Detailed plans are the enemy of adaptability.
The more detailed your plan, the harder you have to work to do something outside it. The harder it is to improvise. The higher the cost of change. The more difficult it is to budget to the pace of innovation, rather than innovate to the cycle of your budget. As circumstance changes (as it inevitably will), plans are revised, reworked, rejustified. Revisions and justifications are focused on the differential from the first plan (which was fundamentally flawed in the first place) making for an unhelpful comparison. Managers spend time generating reports and attending meetings to justify why the original plan (which was fundamentally flawed in the first place) is no longer relevant.
Tom Fishburne quotes a finance director who once told him that “spending more time on planning won’t make the numbers more accurate; it just makes the numbers wrong to the penny”. I shudder to think of the amount of management time that must be wasted on on over-complex and over-burdening planning processes. It kills morale and it kills time that could be spent on ideas that will genuinely move the business forward.
I spent last Saturday at Goodfornothing, a hack day organised by the good people at Pipeline, where a bunch of creative, tech, and strategy types came together on their own time to work on briefs from three not-for-profits (including The Great Football Givewaway with whom I did this). One of the (many) amazing things about the day was that even though it had an extremely loose structure, people were remarkably efficient at getting together in self-forming groups and organising themselves to actually create stuff. The lesson, once again, is about how motivated groups of individuals can achieve stuff in a short space of time by just getting stuck in, and starting before they are ready. Adopting more of the build stuff first, learn second mentality of a start up.
There’s nothing wrong with setting goals, or thinking about the future and preparing for potential opportunities or threats. But business planning processes are ripe for change. I say, enough. It’s time to move on.
A hat tip to the exceptionally smart James Haycock of Adaptive Lab who sent me the 37Signals link.