An academic medical center client recently asked me to advise on developing a Departmental and programmatic strategic plan. My first reaction was OK, nothing new, let’s go. But I soon found myself pausing to have a discussion about what that should look like this year in light of the economy and it turns out that our conversation pretty closely tracked: Strategic planning: Three tips for 2009, published in the April 2009 McKinsey Quarterly. You can register on the McKinsey site for free and view this article as well as a post-publication survey of readers here.
While healthcare leaders (and followers) tend to glaze over when forced to think about strategic planning, the nuances discussed by these authors bear consideration.
The theme of this article is “what’s different” in planning for a recessionary 2009-200X. Well, first of all, it’s really hard to plan. With unpredictable capital and operating resources, attenuated and distracted human resources, and a potentially changing regulatory environment, why bother? For my client whose Departmental revenues, programs, and faculty are growing rapidly despite the economy, it’s about being sure the resources which do exist are invested in the Department’s long-term strategic best interest – and not “appropriated” to cover operating costs in other parts of the enterprise. For other leaders, it’s about how to make the best of less – when you don’t know how much less it will be or for how long.
What ‘s to be Done?
So in 2018 it’s simply hard to adopt a long-term perspective and yet that’s exactly the reason a plan is needed. The authors of the McKinsey article offer three sensible guidelines: (1) Be realistic about scenario planning; (2) Intensify monitoring, and (3) Look beyond the crisis.
Scenario Planning: McKinsey advises that: “In a highly uncertain environment, the advantages of scenario planning are clear: since no one base case can be regarded as probable, it’s necessary to develop plans on the assumption that several different futures are possible.” Scenario planning is just that. In a review of the concept in September 2008, The Economist’s Idea column opened by stating: “Scenario planning (sometimes called “scenario and contingency planning”) is a structured way for organizations to think about the future. A group of executives sets out to develop a small number of scenarios–stories about how the future might unfold and how this might affect an issue that confronts them.” This form of planning has been used successfully by complex corporations since the mid-1970’s.
So 2009 strategic healthcare planning should consider alternative paths, strategies, and environmental conditions, assign relative likelihoods to these, and develop operating plans that make it possible to adjust as necessary. When the hard questions about layoffs or program elimination present themselves, it is impossible to make good decisions by considering only a single strategy going forward. By considering several scenarios, healthcare leaders can make better decisions about which resources to grow, or eliminate, in response to current conditions while preserving the ability to remain nimble under multiple potential future scenarios.
Monitoring: The article further advises: “Since the effectiveness of such a strategy depends on an organization’s ability to adjust rapidly as the fog starts to lift, managers must identify and intensively monitor key indicators suggesting which scenario might unfold.” Music to my ears. Historically, once a strategic plan was put into place, it was the rare healthcare organization that closely monitored progress to relevant, linked, operational goals to be sure it was on track. In good times, we were protected by the rising tide.
More recently balanced scorecard organizations, in particular, are increasingly measuring operational and staff performance through such metrics. While many are still not actually linking strategy to the scorecard metrics through the strategic planning process (strategy mapping), I expect we will see more of this. It’s the path I am taking with my academic Department client. The strategic plan will yield a strategic operating plan under various scenarios – and progress to the strategic goals will be monitored regularly via scorecard metrics.
Looking Beyond: Finally, the authors caution planners not to be hypnotized by the current economic crisis. While economic conditions certainly call for operational adjustments, the more fundamental market, technologic, and social forces that impact industries – health care included – remain in play. Healthcare leaders who are overly diverted from these risk creating short-term crisis “strategies” while failing to position their organizations for long-run success. Inevitably, current conditions will ease and the long run will be determined by more durable fundamentals. So while creating and monitoring scenarios that are responsive to current conditions, wise healthcare leaders will not fail to keep their gaze on where the puck is going to be in the future.
What are the Strategic Leaders Actually Doing?
One of the unique aspects of McKinsey Quarterly reports, including this one, is the organization’s systematic approach to tracking feedback. So beyond advice, there’s some information on how it is (or isn’t) being followed. Here are some nuggets from nearly 600 respondents who provided feedback to McKinsey’s survey about planning:
- 80% of respondents state they are taking a different approach to strategic planning in 2009;
- 61% of respondents indicated they are analyzing more scenarios than in the past;
- 37% stated they are doing more formal scenario planning than in the past; and
- 85% of organizations are monitoring results of strategy on at least a quarterly basis and 50% are monitoring monthly or weekly!
If it’s good enough advice for them.