What is in this article?:
- Long-Range Planning: The Good, the Bad (Some Ugly) and the Way Forward
- The Way Forward for Companies that Want to Improve
The numbers from a new long-range planning study support quantitatively what we've known intuitively all along: The better your data, communications, processes and systems, the more your long-range planning will help you determine the best strategy for succeeding in your market and secure the best assets to support your strategic objectives. This is the good news from the 2013 Long-Range Planning Benchmark Study, which was conducted by Ventana Research and sponsored by Planview and Financial Executives Research Foundation (FERF). The new benchmark report conveys the practices and needs of the 289 global long-range planning professionals across various industries.
Like any good yarn, the tale told by the study also has some bad (and some just plain ugly) elements: 95 percent of respondents indicate needing some type of improvements. The research also includes some prescriptive elements -- the moral of the story, if you will -- to help organizations create a more effective long-range planning process.
First, the Bad News
- Capital projects and initiatives not integrated with strategic and long-range planning: Of the survey respondents, 63 percent have a somewhat integrated process and 22 percent have no integration at all, making it difficult to align strategy with planning. Very large organizations are less well integrated than large or mid-size companies.
- Ability to choose the best projects atypical: Only 10 percent of organizations say they consistently select the best major initiatives and capital projects for funding, while 30 percent say that their results have been mixed.
- Lack of quality data hampers good decision-making: According to the study, data that is inaccurate, outdated, or takes too long to obtain impairs an organization's ability to make good decisions about major initiatives and capital projects. Only 20 percent say the data they use for long-range planning is almost always accurate. Just 17 percent say their data is all up to date. Only 14 percent are able to drill down to underlying details during review meetings. For nearly two-thirds of organizations this takes a day or more. Nearly half say they take a week.
- Spreadsheets reign but are rated poorly: Two-thirds of the companies surveyed are using spreadsheets. However, the study participants ranked spreadsheets substantially below dedicated applications on how well they monitor and manage capital projects as well as handle forecasting and budgeting issues. In addition, companies where more than 20 people are involved in long-range planning are much more likely to say that spreadsheets make it difficult to manage their planning process. According to Ventana Research, "[the] research consistently shows that in this setting spreadsheets are error-prone and lead to inconsistency and staleness in data that may be used to make decisions."
- Executives do not communicate the plan well: Only 27 percent of organizations say their executives communicate strategic objectives clearly and consistently in the planning process. About half say they communicate the general idea, and 16 percent say they do not communicate objectives well or at all. Of the companies with executives who do not communicate well or at all, only 30 percent have a process that they say is well or perfectly aligned with the strategic objectives.
Now Here's the Good News
- Integrating long-range planning with capital projects and initiatives yields superior results: Of the 25 percent of companies with a highly integrated approach, nine out of 10 create long-range plans that are well aligned to the corporate strategy. The same nine out of 10 say their long-range planning process works well or very well. In addition, the research shows that 85 percent of companies that integrate long-range planning with annual budgets are more likely to have a more effective capital planning process.
- Effectiveness of planning correlated with quality of decisions: According to the research, 89 percent of companies with a long-range planning process that works well say their choices of major initiatives and capital projects are good.
- Companies with more accurate data make consistently better decisions: More than 90 percent of companies with more up-to-date and accurate data say they make consistently better choices of capital projects and major initiatives. In addition, the study found a correlation between the ability to quickly access data and the quality of decisions made. Of the organizations that can drill down into underlying details immediately during a review meeting, nine out of 10 say all or most of their capital or project choices are good vs. less than half of those organizations that take a week.
- Direct correlation between software and effective long-range plans: The effectiveness of the software a company uses has a direct impact on its ability to do many of the important tasks related to the long-range plan. For example, contingency or what-if scenarios are critical to assessing alternatives and understanding the implications of specific choices. Two-thirds that have very or generally effective software say they can examine all relevant scenarios versus just 20 percent of those who do not have effective software. In addition, more than half with very effective software can complete their planning process within a month.
- Good executive communication improves performance: Almost all companies (93 percent) with good executive communications have a long-range planning process that is well aligned to their strategy.