Why Financial Strategic Planning Falls Short (According to Pink Floyd)

From my consulting experience, I know that many financial institutions are frustrated with their strategic planning efforts. Too many times, one of two things happen:

  1. Great visions and plans are developed that never see the light of day, or
  2. Strategic planning efforts fail to provide creative ideas for strategic direction and correction.

Why is this the case? As I sat at my desk, staring at the black light that illuminates my Pink Floyd Dark Side of the Moon poster, I realized that the answer was right in front of me. The three reasons why strategic planning efforts fall short:

  1. Money.
  2. Time.
  3. Us and Them.

For the uninitiated, these are the names of songs on the Dark Side of the Moon album. For the initiated, no — “Brain Damage” is not one of the reasons why your firm’s strategic planning efforts fall short.


Money, So They Say

The money problem in strategic planning isn’t what you might think it is. It’s not about how much money is spent on strategic initiatives. The problem is the inconsistent treatment of money during the strategic planning effort.

There are two sides of the coin, here. Companies either:

  1. Get too bogged down by financial details, or
  2. Don’t identify financial details at all.

Some firms come up with detailed cost estimates for strategic initiatives and — worse — detailed estimates of financial return (revenue and/or cost reduction). Sadly, these estimates are less reliable predictions of what the stock market will do 10 years from now. The detailed focus on cost and benefit estimates during the strategic planning effort itself chokes off creative, strategic thinking.

On the other hand, some firms, in their strategic planning efforts, don’t discuss cost or return at a quantitative level at all. Then when budgeting time comes around, no one has a clue how much strategic initiatives are going to cost, so they often don’t get funded at the appropriate level.

I wish I could give you a magic bullet for finding the balance between these extremes, but I can’t. The challenge — from a strategic planning perspective — is that it takes time to estimate costs and benefits, and that could bog down the strategic planning effort itself. Which is a good lead-in to the second reason strategic planning efforts fall short.

The Time is Gone (But This Post’s Not Over)

“Every year is getting shorter, never seem to find the time
Plans that either come to naught or half a page of scribbled lines.”
— Pink Floyd, “Time”

Every year, in late summer or early fall, banks and credit unions begin their strategic planning efforts for the upcoming year. And they expect to finish those efforts before the end of the year (or at worse, sometime in January of the new year).

Problem is, some potential strategic initiatives, directions, and strategies need more time for discussion and analysis. But everything has to get crammed into the planning process or it doesn’t get defined, evaluated, and vetted.

I have found few firms (I’m lying, I haven’t found any) that understand the concept of “planning arcs.” That is, different planning timelines that correspond to the complexity of the strategic decision the firm faces.

For example, deciding whether or not to develop and deploy online account opening tools next year is a (relatively) well-defined initiative that fits neatly into the existing planning process.

But what about a decision to get into an entirely new line of business, or decide whether or not to spin-off a business? Think you can make that decision in a 3-month time frame? You can’t. That kind of decision requires more time, and has to go through various stages of decision-making. How does that fit with the current strategic planning process? For most of you, the answer is “it doesn’t.”

Us Us Us and Them Them Them

The “time” and “money” problems  are solvable with some effort, thinking, and time. The third cause of strategic planning failure, however, is a bit more troublesome, and, in my opinion, the biggest cause of the shortfall.

The first two causes fit nicely with two of the Pink Floyd songs, but for this third cause, I’ve had to cheat a bit. It would have been more convenient if there was a song titled “People” on the album, because the third cause of strategic planning shortfall is people-related.

But there is no song by that name, so I’ve had go with “Us” — the executives who are good at strategic planning — and “Them,” the executives who aren’t good as strategic planning.

A recent study, published in the Harvard Business Review, found that just 8% of senior executives are “very effective” at both strategy formulation and strategy execution. That’s a bit restrictive, but even relaxing the constraints only puts 37% of executives in the “effective as strategy and execution”.

Looking at it from another angle, more relevant to this post, roughly half of executives were categorized as less than effective at strategy development.


Hey CEOs, try this: Call in one of your direct reports to your office. Start with the 55 year old EVP who runs a major line of business in your organization. Sit him or her down, look him/her in the eye, and say: “You know what? You suck at developing strategy.”

Bottom Line:

Even if your firm addresses the time and money issues described above, if your executive team conforms to the norm, half the team isn't effective at developing strategy. That's not good.

I don’t know of too many CEOs that would do that, and I know even fewer EVPs who would take kindly to hearing that statement. Actually, I lied: I don’t know any that would take kindly to it.

Here’s the problem, though: These guys (and ladies) know it. They don’t have to be told. They know they’re not that good at strategic thinking. So you know what they do? They discreetly — and often subconsciously — thwart the strategic planning process. They downplay the importance of the process, and dismiss the process as a waste of time.

The rest of “us” think that these executives are resisting change. That’s not it. The problem is that “they” are simply not that good at thinking strategically and figuring out what to change to (oh, they know what needs to be changed, they just don’t know what the change needs to be).

Yet, strategic planning processes are designed to get input from these executives on what the strategic direction of the company needs to be.

Here’s a tough thing for companies to do: Face up to this fact, and tell those members of the executive team who aren’t good at strategy formulation to stay home (or, at least away from the strategic planning process). Have those executives identify their direct reports who are good at strategic thinking, and let those folks participate in the process.

In one recent strategy planning effort I worked, the CEO did something like that (but not exactly). He did invite direct report of the EVPs to participate in some parts of the process. That’s good.

But their bosses were still in the room, and that probably squelched some of the ideas and contributions those folks could have made.

What’s a CEO to Do?

Addressing the money challenge requires some policy setting, and perhaps some negotiation with the CFO. Fixing this problem starts with the recognition that it is a problem.

Fixing the time and “us and them” problems are bit more challenging. Here’s what financial institutions need to do:

Make strategic planning a project/process.

We often talk about strategic planning being a process, but it’s really not–it’s more like a project that occurs every year during a specified time frame. A business process is something that typically happens throughout the course of the year. What most companies need is a hybrid of this.

To address the need for “planning arcs,” strategic planning should be ongoing. Many senior executives (the “them” more than the “us”) will balk and scoff at this idea, because the last thing they want to do is subject themselves to “needless” and painful strategic thinking.

No problem. Kick them off the project/process.

Create a project/process team that includes the truly strategic thinkers. The CEO and executive team can be the project sponsor(s), who the planning team reports to. For some mid-level (and even more junior?) execs, this assignment could be, dare I say, the great gig in the sky.

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