- Email: [email protected]
Paradoxes in planning
0024-6301/86 $3.00 + .OO Pergamon Journals Ltd.
Long Range Planning, Vol. 19, No. 6, pp. 21 to 24, 1986 Printed in Great Britain
21
Paradoxes in Planning John Robinson
A paradox may be described as: ‘an idea which seems to conflict with conventional logic*. Strategic planning has acquired such a conventional logic, or set of paradigms, which enables its practitioners to structure and understand their activities. However, some years of being a practitioner has convinced the author that good management and good planning often violate these principles. It is necessary to restate them, or frequently to invert them, to obtain a useful structure for successful planning.
Some 20 years of strategic planning activities have shown me that life is full of similar paradoxes. Often our observations refuse to fit our conceptual models and we have to look for another framework, or the other side of the coin, to understand what is happening and what to do. This can be illustrated in the context of four fundamental steps in planning.
Identifying Either the well was very deep or she fell very slowly.
One of the reasons certain children’s books have achieved the stature of classics is that they appeal to the adult reader as much as to the child listener, although in different ways. Alice in Wonderland is an example and the above quotation is one of the utmost profundity, in more senses than one. It also contains a paradox, which is what appeals to the adult. Most of us have been brought up to see life through one particular set of paradigms, a mental framework which enables us to understand, rather than merely record, what we observe. In the above example the paradigm happens to be Newtonian mechanics, and we intuitively think that the well was deep because she took a long time to reach the bottom. However, the alternative explanation that she was falling very slowly may be equally valid. It was not until some years afterwards that Einstein provided a scientific basis for this with the concept that time is not universal. John Robinson is Head of Planning Co-ordination in Shell UK Limited. After graduating in Chemistry at the University of Oxford and a period of service in the Royal Navy, he joined Shell in 1955. Since this time he has worked in various posts in plant operations, process engineering, manufacturing economics, investment appraisal and corporate planning. He has written a number of articles and papers on planning and other subjects, and is a regular speaker on these topics.
Objectives
Some companies go to great trouble to formulate and publish objectives. The annual report of Cadbury Schweppes contains a set of objectives, which can be used within that company as a framework for making strategic decisions. However, other examples often amount to little more than a collection of motherhood statements and rarely identify the real objectives of the management. A good example of this type was the General Electric objectives published in the 1960s which really amount to a statement of business principles. A well-known primer on corporate planning states: ‘To make a profit is the one and only true objective.’ This may not always be so. The owner of a company aiming to go public in a few years will not necessarily be interested primarily in profit. His objective will be to maximize its size and prospects, and hence its value, and growth will be a more important criterion in the meantime. A case study related a few years ago illustrates the existence of other objectives more clearly. The owner of a company had a laboratory and developed new scientific instruments. His company manufactured and marketed them, but had been b adl y managed by him and was making a loss. He therefore hired a general manager, who within a year had restored the company to profitability. Not
BRUCE KYLE PRIZE: 1986 This article has been awarded the Bruce Kyle Prize for 1986 as an innovative paper based on experience which is of practical value to planners and senior managers.
22
December
Long Range Planning Vol. 19
satisfied with this, the general manager then identified new markets and started to expand the company. Within a further year he found himself in conflict with the owner and out of a job. Why? Because he had not recognized a fundamental difference between what the owner said he wanted and what he really wanted. The owner was by temperament an inventor who liked to spend several months a year in other parts of the world, giving lectures and getting new ideas. He saw his company purely as a means of providing the wherewithal for his lifestyle, not as a dynamic and growing enterpriseper se. Once the general manager tried to turn it into something different, problems arose. Another good example is that of a chairman who over the years had built his company into one of the largest in the country. His objective had clearly been growth. However, his priorities then changed and he started to become an elder statesman of the industry, spending less and less time in his office and more and more in the corridors of power. Fortunately those who worked for him recognized his new objectives, which were never stated, and were able to identify with them. The chairman obtained his knighthood and his ambitions were fulfilled. Identifying objectives is one of the cornerstones of successful planning. However, one of the most frequent causes of failure is not realizing the simple fact that the real objectives are often not the stated ones. It is necessary to turn the coin and look at the other side.
Agreed objectives are often published real objectives are often hidden
Understanding
but
the Future
Many managers entering business in the 1950s and 1960s experienced an age of growth and predictability. In the case of the oil industry, worldwide growth averaged 7% per annum over the 25-year period 1948-73, and many other businesses experienced a similar phenomenon. Planning, such as that of new facilities, became little more than a matter of prediction. Moreover, if the forecast of market growth turned out to be wrong and a plant was built too early, the cost of the error was small as growth ensured that it would soon be fully loaded. In this climate we not surprisingly formulated a particular mental model of business, that growth was inevitable and the future predictable. The planning primer mentioned previously identifies the second step in planning as: ‘Prepare a forecast and declare the probable error.’ The planner, by producing the forecasts that drove the decisions, virtually became the decision-maker. Management,
1986
by default, abdicated one of its prime responsibilities. The impact of two oil price shocks changed these notions completely. After 1974, many industries assumed that the fall in demand was a mere hiccup, and that growth would sooner or later continue unabated. After the second crisis in 1979, it was evident that the world had changed and would never be the same again. More recently there has been a third price shock, this time downwards. Now only a brave man would say that growth is inevitable and predictable. More importantly, however, the world was subject to discontinuities which had not been anticipated, and it was these that caused the greatest problems to planning. One result was that planning lost credibility in many organizations and departments were abolished. However, the trouble was not that planning was impossible, for in such circumstances it was even more necessary. It was that our previous concepts were wrong and had to be changed. The problem was now to handle the future when we knew it to be unpredictable. Despite the enormous improvements in forecasting facilitated by satellites, the British weather remains unpredictable to a considerable extent. However, we realize this and manage to plan accordingly. If there is a possibility of rain, we take an umbrella. If it is actually raining but may clear up, we wear a raincoat. If we are organizing an open-air event, we provide alternative indoor facilities or take out insurance. Other examples are common in business. If we know there is a currency risk we can reduce it, for example by hedging. If a potential competitor move would threaten our markets, we make a contingency plan. However, if we do not realize that these uncertainties exist, or more culpably try to treat them as certainties by producing predictions, we can be badly wrong-footed. The paradox is that if we pretend the future is predictable the consequences may be unmanageable, whereas if we realize that it is unpredictable we can usually manage to cope with them.
Much
planning
assumes that the future predictable. Good planning assumes that it is unpredictable.
is
A number of approaches have been developed for handling uncertainty, such as scenarios and riskreward matrices, which are outside the scope of this essay. One important effect of these has been to oblige managers to understand the future better, rather than rely on a putative prediction, and put decision-making back where it properly belongs.
Paradoxes in Planning
Deciding
on Strategy
One of the more perceptive articles written in the last 20 years on how managers make decisions was ‘Good Managers Don’t Make Policy Decisions’, which became an HBR classic. The theme of this is that good managers do not, indeed, enunciate precise objectives or clear policies, but ‘give a sense of direction and are masters at developing opportunities’. Such managers avoid becoming publicly committed to objectives and policies, but have a clear idea of what they want to achieve, modify it pragmatically and seize opportunities to make the desired changes. In the 1985 Reith Lectures, sponsored by the British Broadcasting Corporation, the speaker lamented the practice of ‘do-it-yourself economics’, a penchant for politicians apparently to override the advice of economists and develop their own brand of economic thinking. However, any good planner or reader of the previous article will recognize and accept this fact. Apart from the question of whether the economists were giving good or bad advice, the politician or policy-maker usually has more complex considerations in mind than his advisers and, as we have seen, often hidden and shifting objectives. The factors a manager faces in a decision are numerous and frequently conflicting. The economist, planner or other adviser usually perceives only a relatively narrow and often rational view of these, and may be unaware of wider issues. He is interested in giving accurate advice and often bemused when it appears not to be heeded. However, the decision-maker is interested in the advice only as a means to making the right decision. If you provide advice, your object is to be right. If you use advice, your object is to make the right decision.
Any planner who disregards this is heading for frustration. His object should be to identify and understand the problem, and to provide an approach which will lead to the right decision. Some of the best economic advice I have seen did not pretend to be accurate, but discussed various possibilities and their outcomes in a way which gave new insights to a problem. A decision requires judgment, and the task of the planner is often to produce the insights which help to formulate this judgment.
Developing
a Plan
When the Club of Rome report ‘The Limits to Growth’ was published, it attracted widespread attention and comment. One ofits main conclusions was: ‘If the present growth trends in world popula-
23
tion, industrialization, pollution, food production, and resource depletion continue unchanged, the limits to growth on this planet will be reached some time within the next one hundred years.’ This was widely treated as a prophecy and the authors criticized for assuming that trends would remain unchanged. However, the critics missed the main point made in the next conclusion: ‘It is possible to alter these growth trends.’ The report was not a prediction of what actually would happen, but of what could happen if certain actions were not taken. As a prediction it contained the seeds of its own destruction, because some of these actions have now been taken. Good plans are often like this. A few years ago I was involved in preparing a plan in which a high level of investment was anticipated. During the course of the exercise it became increasingly clear that not only was the scale of capital expenditure ambitious relative to cash resources, but that one major investment was vulnerable to a potential shift in market forces. However, stopping work on that project could not be done overnight, as its impact was international and involved discussion with governments. As a deadline had to be met, the planning document produced included that particular investment. On the other hand, the real plan in the minds of management had by then already taken the initial steps to modify the project, the full effects of which were not evident until some months later. A somewhat different example of a self-destructive plan occurred in the mid-1970s, when there was potential legislation in the United Kingdom on planning agreements between major companies and government. The subject of what would constitute such an agreement engendered much debate, and to those in industries subject to environmental uncertainty the idea of a definitive and binding accord seemed unattainable. To clarify its ideas on the subject, one of the protagonists produced a specimen agreement for the motor industry. This included pages of schedules, giving details of investments, prices and production levels for each model, which would have been quite impossible to fulfil in a centrally controlled economy, let alone one in which production is dependent on customer preferences. This proposal was obviously so unrealistic that the whole concept lost credibility and was ultimately overtaken by a change in political climate. The paradox is that a so-called plan often reveals the infeasibility of what is intended, and is self-aborting. Good planners know that planning is a process and the resulting document only a snapshot of that process, not a blueprint for all further action.
A good plan often shows not what will happen but what will not happen
24
Long Range
Planning
Vol. 19
December
What Makes a Good Planner? In this anniversary of the Strategic Planning Society, it is interesting to look back over the last 20 years and note that some of the basic principles of planning stated then have stood the test of time. It is vital first to identify objectives, then to conduct a look into the future, then to choose a preferred strategy, then to develop a plan. However, our understanding of each of these stages has undergone a transformation. Objectives are a vital first step, but the real ones are often unstated. The future was considered predictable, whereas we now realize it to be unpredictable. We produce options and possible outcomes, but realize that they are no more than an aid to making the right decision. We produce plans, but know that the document is often outdated before the ink is dry.
1986
Thus we conclude that the job of the planner is not to state the objectives but to elicit them, is not to predict the future but to help understand it, is not to make the key decisions but to help managers do so, and is not to produce a plan so much as to conduct the planning process. We therefore reach the final contradiction: Good planners don’t plan, they enable good managers to plan
In the very journal we planning is developing which make c’est la r&me
first article published in the Society’s of long range read: ‘The purpose not so much having a plan but attitudes, processes and perspectives planning possible.’ Plus (a change, plus chose.
Long Range Planning, Vol. 19, No. 6, pp. 21 to 24, 1986 Printed in Great Britain
21
Paradoxes in Planning John Robinson
A paradox may be described as: ‘an idea which seems to conflict with conventional logic*. Strategic planning has acquired such a conventional logic, or set of paradigms, which enables its practitioners to structure and understand their activities. However, some years of being a practitioner has convinced the author that good management and good planning often violate these principles. It is necessary to restate them, or frequently to invert them, to obtain a useful structure for successful planning.
Some 20 years of strategic planning activities have shown me that life is full of similar paradoxes. Often our observations refuse to fit our conceptual models and we have to look for another framework, or the other side of the coin, to understand what is happening and what to do. This can be illustrated in the context of four fundamental steps in planning.
Identifying Either the well was very deep or she fell very slowly.
One of the reasons certain children’s books have achieved the stature of classics is that they appeal to the adult reader as much as to the child listener, although in different ways. Alice in Wonderland is an example and the above quotation is one of the utmost profundity, in more senses than one. It also contains a paradox, which is what appeals to the adult. Most of us have been brought up to see life through one particular set of paradigms, a mental framework which enables us to understand, rather than merely record, what we observe. In the above example the paradigm happens to be Newtonian mechanics, and we intuitively think that the well was deep because she took a long time to reach the bottom. However, the alternative explanation that she was falling very slowly may be equally valid. It was not until some years afterwards that Einstein provided a scientific basis for this with the concept that time is not universal. John Robinson is Head of Planning Co-ordination in Shell UK Limited. After graduating in Chemistry at the University of Oxford and a period of service in the Royal Navy, he joined Shell in 1955. Since this time he has worked in various posts in plant operations, process engineering, manufacturing economics, investment appraisal and corporate planning. He has written a number of articles and papers on planning and other subjects, and is a regular speaker on these topics.
Objectives
Some companies go to great trouble to formulate and publish objectives. The annual report of Cadbury Schweppes contains a set of objectives, which can be used within that company as a framework for making strategic decisions. However, other examples often amount to little more than a collection of motherhood statements and rarely identify the real objectives of the management. A good example of this type was the General Electric objectives published in the 1960s which really amount to a statement of business principles. A well-known primer on corporate planning states: ‘To make a profit is the one and only true objective.’ This may not always be so. The owner of a company aiming to go public in a few years will not necessarily be interested primarily in profit. His objective will be to maximize its size and prospects, and hence its value, and growth will be a more important criterion in the meantime. A case study related a few years ago illustrates the existence of other objectives more clearly. The owner of a company had a laboratory and developed new scientific instruments. His company manufactured and marketed them, but had been b adl y managed by him and was making a loss. He therefore hired a general manager, who within a year had restored the company to profitability. Not
BRUCE KYLE PRIZE: 1986 This article has been awarded the Bruce Kyle Prize for 1986 as an innovative paper based on experience which is of practical value to planners and senior managers.
22
December
Long Range Planning Vol. 19
satisfied with this, the general manager then identified new markets and started to expand the company. Within a further year he found himself in conflict with the owner and out of a job. Why? Because he had not recognized a fundamental difference between what the owner said he wanted and what he really wanted. The owner was by temperament an inventor who liked to spend several months a year in other parts of the world, giving lectures and getting new ideas. He saw his company purely as a means of providing the wherewithal for his lifestyle, not as a dynamic and growing enterpriseper se. Once the general manager tried to turn it into something different, problems arose. Another good example is that of a chairman who over the years had built his company into one of the largest in the country. His objective had clearly been growth. However, his priorities then changed and he started to become an elder statesman of the industry, spending less and less time in his office and more and more in the corridors of power. Fortunately those who worked for him recognized his new objectives, which were never stated, and were able to identify with them. The chairman obtained his knighthood and his ambitions were fulfilled. Identifying objectives is one of the cornerstones of successful planning. However, one of the most frequent causes of failure is not realizing the simple fact that the real objectives are often not the stated ones. It is necessary to turn the coin and look at the other side.
Agreed objectives are often published real objectives are often hidden
Understanding
but
the Future
Many managers entering business in the 1950s and 1960s experienced an age of growth and predictability. In the case of the oil industry, worldwide growth averaged 7% per annum over the 25-year period 1948-73, and many other businesses experienced a similar phenomenon. Planning, such as that of new facilities, became little more than a matter of prediction. Moreover, if the forecast of market growth turned out to be wrong and a plant was built too early, the cost of the error was small as growth ensured that it would soon be fully loaded. In this climate we not surprisingly formulated a particular mental model of business, that growth was inevitable and the future predictable. The planning primer mentioned previously identifies the second step in planning as: ‘Prepare a forecast and declare the probable error.’ The planner, by producing the forecasts that drove the decisions, virtually became the decision-maker. Management,
1986
by default, abdicated one of its prime responsibilities. The impact of two oil price shocks changed these notions completely. After 1974, many industries assumed that the fall in demand was a mere hiccup, and that growth would sooner or later continue unabated. After the second crisis in 1979, it was evident that the world had changed and would never be the same again. More recently there has been a third price shock, this time downwards. Now only a brave man would say that growth is inevitable and predictable. More importantly, however, the world was subject to discontinuities which had not been anticipated, and it was these that caused the greatest problems to planning. One result was that planning lost credibility in many organizations and departments were abolished. However, the trouble was not that planning was impossible, for in such circumstances it was even more necessary. It was that our previous concepts were wrong and had to be changed. The problem was now to handle the future when we knew it to be unpredictable. Despite the enormous improvements in forecasting facilitated by satellites, the British weather remains unpredictable to a considerable extent. However, we realize this and manage to plan accordingly. If there is a possibility of rain, we take an umbrella. If it is actually raining but may clear up, we wear a raincoat. If we are organizing an open-air event, we provide alternative indoor facilities or take out insurance. Other examples are common in business. If we know there is a currency risk we can reduce it, for example by hedging. If a potential competitor move would threaten our markets, we make a contingency plan. However, if we do not realize that these uncertainties exist, or more culpably try to treat them as certainties by producing predictions, we can be badly wrong-footed. The paradox is that if we pretend the future is predictable the consequences may be unmanageable, whereas if we realize that it is unpredictable we can usually manage to cope with them.
Much
planning
assumes that the future predictable. Good planning assumes that it is unpredictable.
is
A number of approaches have been developed for handling uncertainty, such as scenarios and riskreward matrices, which are outside the scope of this essay. One important effect of these has been to oblige managers to understand the future better, rather than rely on a putative prediction, and put decision-making back where it properly belongs.
Paradoxes in Planning
Deciding
on Strategy
One of the more perceptive articles written in the last 20 years on how managers make decisions was ‘Good Managers Don’t Make Policy Decisions’, which became an HBR classic. The theme of this is that good managers do not, indeed, enunciate precise objectives or clear policies, but ‘give a sense of direction and are masters at developing opportunities’. Such managers avoid becoming publicly committed to objectives and policies, but have a clear idea of what they want to achieve, modify it pragmatically and seize opportunities to make the desired changes. In the 1985 Reith Lectures, sponsored by the British Broadcasting Corporation, the speaker lamented the practice of ‘do-it-yourself economics’, a penchant for politicians apparently to override the advice of economists and develop their own brand of economic thinking. However, any good planner or reader of the previous article will recognize and accept this fact. Apart from the question of whether the economists were giving good or bad advice, the politician or policy-maker usually has more complex considerations in mind than his advisers and, as we have seen, often hidden and shifting objectives. The factors a manager faces in a decision are numerous and frequently conflicting. The economist, planner or other adviser usually perceives only a relatively narrow and often rational view of these, and may be unaware of wider issues. He is interested in giving accurate advice and often bemused when it appears not to be heeded. However, the decision-maker is interested in the advice only as a means to making the right decision. If you provide advice, your object is to be right. If you use advice, your object is to make the right decision.
Any planner who disregards this is heading for frustration. His object should be to identify and understand the problem, and to provide an approach which will lead to the right decision. Some of the best economic advice I have seen did not pretend to be accurate, but discussed various possibilities and their outcomes in a way which gave new insights to a problem. A decision requires judgment, and the task of the planner is often to produce the insights which help to formulate this judgment.
Developing
a Plan
When the Club of Rome report ‘The Limits to Growth’ was published, it attracted widespread attention and comment. One ofits main conclusions was: ‘If the present growth trends in world popula-
23
tion, industrialization, pollution, food production, and resource depletion continue unchanged, the limits to growth on this planet will be reached some time within the next one hundred years.’ This was widely treated as a prophecy and the authors criticized for assuming that trends would remain unchanged. However, the critics missed the main point made in the next conclusion: ‘It is possible to alter these growth trends.’ The report was not a prediction of what actually would happen, but of what could happen if certain actions were not taken. As a prediction it contained the seeds of its own destruction, because some of these actions have now been taken. Good plans are often like this. A few years ago I was involved in preparing a plan in which a high level of investment was anticipated. During the course of the exercise it became increasingly clear that not only was the scale of capital expenditure ambitious relative to cash resources, but that one major investment was vulnerable to a potential shift in market forces. However, stopping work on that project could not be done overnight, as its impact was international and involved discussion with governments. As a deadline had to be met, the planning document produced included that particular investment. On the other hand, the real plan in the minds of management had by then already taken the initial steps to modify the project, the full effects of which were not evident until some months later. A somewhat different example of a self-destructive plan occurred in the mid-1970s, when there was potential legislation in the United Kingdom on planning agreements between major companies and government. The subject of what would constitute such an agreement engendered much debate, and to those in industries subject to environmental uncertainty the idea of a definitive and binding accord seemed unattainable. To clarify its ideas on the subject, one of the protagonists produced a specimen agreement for the motor industry. This included pages of schedules, giving details of investments, prices and production levels for each model, which would have been quite impossible to fulfil in a centrally controlled economy, let alone one in which production is dependent on customer preferences. This proposal was obviously so unrealistic that the whole concept lost credibility and was ultimately overtaken by a change in political climate. The paradox is that a so-called plan often reveals the infeasibility of what is intended, and is self-aborting. Good planners know that planning is a process and the resulting document only a snapshot of that process, not a blueprint for all further action.
A good plan often shows not what will happen but what will not happen
24
Long Range
Planning
Vol. 19
December
What Makes a Good Planner? In this anniversary of the Strategic Planning Society, it is interesting to look back over the last 20 years and note that some of the basic principles of planning stated then have stood the test of time. It is vital first to identify objectives, then to conduct a look into the future, then to choose a preferred strategy, then to develop a plan. However, our understanding of each of these stages has undergone a transformation. Objectives are a vital first step, but the real ones are often unstated. The future was considered predictable, whereas we now realize it to be unpredictable. We produce options and possible outcomes, but realize that they are no more than an aid to making the right decision. We produce plans, but know that the document is often outdated before the ink is dry.
1986
Thus we conclude that the job of the planner is not to state the objectives but to elicit them, is not to predict the future but to help understand it, is not to make the key decisions but to help managers do so, and is not to produce a plan so much as to conduct the planning process. We therefore reach the final contradiction: Good planners don’t plan, they enable good managers to plan
In the very journal we planning is developing which make c’est la r&me
first article published in the Society’s of long range read: ‘The purpose not so much having a plan but attitudes, processes and perspectives planning possible.’ Plus (a change, plus chose.