Wednesday, March 28, 2012
The Recession's Impact on Strategic Planning
During this week's assigned reading articles, it was mentioned repeatedly that strategic planning consists of discussing long term trends, opportunities, challenges, and targets. Additionally it was stated that five to seven year financial targets should be tied to the strategic initiatives.
I currently work for a large financial services organization, who was impacted by the recession of recent years (as was everyone in the industry). Since I was not an employee during the heart of the recession, I was curious to how large companies changed their strategic planning and corresponding processes to better react to the recession and difficult financial times.
I found an article on the Wall Street Journal, entitled Strategic Plans Lose Favor, that speaks directly to the changing of strategic plans during the recession. This article begins with stating that faced with the recession, business executives realized that strategic plan and forecasting does not always work. Alternatively these executives learned that it was instead beneficial to plan on the fly and in the moment, rather than seven years into the future. Despite the fact that the financial outlook of the market is improving, the author of the article argues that these new opinions and styles of strategic planning will continue to be used.
Of the many organizations and their leaders discussed in the article, the CEO of Home Depot is the one most heavily mentioned. For instance Home Depot still reviews the budget on a monthly basis instead of quarterly, as they did prior to the recession. Other CEOs were quoted as saying "strategy, as we knew it, is dead" and revealing how they embrace their new "just in time decision making".
Due to the recession, the majority of strategic plans were largely put on hold and instead "bridge plans" were created. Despite brighter financial times, companies say that those previous strategic plans are no longer relevant and useful.
In conclusion, the traditional seven year strategic plans are not gone forever. According to this article, they are just not as in as much favor as they once were. With time, and the recession in the future being the past and not the current times, it is likely the trend will change once again. However, it was interesting reading the impact of the recession on strategic planning.