Tony Golsby-Smith on his HBR blog tackles a problem that most companies face: budgeting processes kill pure strategy:
Ideally, developing a strategy should be exciting: strategy making is about creating a future for your organization, and engaging your people in that process. But all too often, the budget-planning monster weighs an organization down with endless inputs and bureaucracy and rules. The monster does not create coherence. It does not create energy. It does not excite people. No wonder companies have trouble inventing new products, services, and futures.
So what does he suggest?
Reframe strategy as a story. Strategy is not about streamlining or improving present operations or organizational structures. It is not about a budget, a yearly plan, or solving a specific problem. It is a compelling story about discovering the firm’s unrealized possibilities. It’s also about imagining a big, bold goal and designing ways to reach that goal.
It’s about storytelling! It’s about imaging and inspiring a long-term goal and finding ways to reach it. Often times, people are simply allotted a fixed amount to explore and discover, and the strategy is set by a central group. The company down to individual groups should have a story of who they are today and where they are going.
Separate the strategic planning process from the budgeting process. Every leader has two jobs: to run the operation as it exists today, and to rethink the organization so that it can survive and thrive into the future. These are two distinct jobs. The budgetary and business planning system helps the organization manage today’s operations; it also extrapolates into the near future. The strategic system, on the other hand, confronts an uncertain, further-off future and imagines a desired future state. When the two activities are conflated, the strong, data-driven budgeting process can overwhelm the more fragile (but equally important) strategy-making process.
I suggest setting up two separate systems — one for strategy, and one for the budget. The strategy-making system should focus on building the company’s “argument” — its reason for being, its value statement, its goals and ambitions for the future. This system has longer time horizons, and its budget should be taken from an investment fund dedicated to that purpose. The budgeting system, by contrast, should be built around key performance indicators with shorter time horizons.
You need two types of people to make this happen, and they are equally important: idea people and implementation people. Idea people struggle to see the reality of implementing their ideas. On the flip side, implementation people are quick to shoot down new ideas, being too practical about them. There is a healthy balance in any organization, and as one of these groups, it’s important to develop a strong working relationship with those of the other group.
Set aside time and space for strategy. Too often, the very people who should be charting the future get so sucked into the operational quagmire that they have no time to think about where the firm should be going. I recommend setting aside one to two days every quarter when you pull together your best thinkers from across the company to have an offsite strategic conversation about the firm.
This is an incredibly difficult thing to do, especially with the right people. Most everyone gets caught up in their day to day jobs and meetings everywhere, that setting aside a solid day or two to get away can get hairy. People are bound not to come, because the urgent always gets tended to first.