A CEO’s Worst Nightmare
How Contingency Planning Can Avoid Strategy Failures
by Robert A. Simpkins, CMC©

     
   

Just imagine you’re the CEO of a large animal health company with a great new product poised to roll out of the pipeline.  Your strategy and tactics are all in place and the future looks bright.  Industry analysts and Wall Street investors are all placing their bets on your firm’s near-term growth.  Suddenly bird flu breaks out in your largest market.  Your customers aren’t interested in your new product, but on salvaging the shattered remains of their poultry businesses.  What can you do to save the day? 

An equally terrifying scenario could be provided for just about any business, government agency or military operation.  From the day your organization’s strategic plan begins development, through its roll out, and finally to its point of completion, the world will shift on its axis more than once.  If your planning team hasn’t built contingencies into the strategy, the plan faces the unenviable task of reconstructing itself over and over again.  Eventually, any enthusiasm for the strategy is lost and your organization falls back on just completing the daily operational tasks without any thought for the future.  Unfortunately, your credibility as a CEO also takes a serious hit.

Contingency Planning is one of the most important aspects of an organization’s overall strategic plan and one that many leaders tend to overlook or not take seriously.  Just consider some of the internal and external environmental drivers that have affected, and will continue to affect, your organization’s success. 

  1. Advances in technology (hardware and/or software)
  2. Changes in the global environment (wars, droughts, political upheavals, etc.)
  3. Changes in the competitive landscape (new, improved, alternative, substitute competitors)
  4. Changes in your customer realities (housing and food costs, crime, health care, tax increases, pandemics, buying behaviors, etc.)
  5. Continuing shifts in employee and customer demographics (age, diversity, ethnicity, education, cultures, etc.)
  6. Market sentiments (the psychological state of mind of both end consumers and organizations)
  7. Changes to the economy
  8. Regulatory introductions and revisions

There are two versions of Contingency Planning.  The first one is framed to assure Business Continuity in the face of some short-term, unexpected man-made or natural disaster.  Although every CEO needs to pay attention to this form of planning, these are usually very large scale and you’re typically not expected to meet your goals in the face of such a catastrophe. 

Another form of contingency planning, and one that has a greater impact on the success of your strategic plan, is Uncertainty Planning. Rather than focusing on disasters or major disruptions, this form of planning considers, in advance, various risks to the strategic plan.  These risks, typically, have a longer lasting impact on your organization’s success, as well as your reputation as a leader.  Yet, with proper attention, they can be more predictable and more manageable.  Considering your organization’s strategic plan, how will you assure the success of it if the organization is downsized; the stock market, and more specifically your stock value, drops 20%; you suffer a mandated recall; your organization fails to meet its top and bottom line forecasts; there is a labor strike; key vendors fail to deliver critical components on time; your largest customer departs the market; key senior leadership leave or change positions; capital becomes in very short supply, and on and on .

It doesn’t matter whether it’s one of the above-mentioned unexpected occurrences or another event.  As CEO, you must make sure that your organization has a proactive and executable impact-mitigating plan in place to ensure the success of your organization’s long- term Vision and short-term Mission. As every CEO knows, analysts and investors still expect you to meet your financial and non-financial goals in the face of these events.

When should Contingency Plans be developed?  The answer is: Whenever your organization’s planning team is faced with the possibility, no matter how slight, of  uncontrollable events that could alter the rationale and foundational assumptions of your strategic plan. 

There are some basic steps to Contingency Planning.  First and foremost, always make sure your organizational members are educated about the necessity of Contingency Planning and that every individual will be held accountable for having a Contingency Plan in their own goal attainment.

As a second step, establish ongoing environmental scan teams from inside your organization or from outside resources to look for indicators of change.  Just because your organization’s strategic plan is done and announced, it doesn’t mean the planning team can stop scanning the world in which you operate.  Use the assumptions used in the strategic plan as a baseline to identify variances.

Next, make sure your strategic planning team clearly identifies all variables that could impact the success of your plan’s specific short-term performance improvement and long-term transformational objectives.  Classify them as “best case” (overly positive results can be disruptive to your processes, too), “most likely”, and “worst case” scenarios.

Finally, treat the “best case” and worst case” scenarios as a separate occurrence and develop a Contingency Plan for each of them.  The Contingency Plan should identify the event in a clear, to the point, and measurable manner.  Once you feel assured that your planning team has done this, ask the really hard questions:

  1. How will your team measure the deviation to the scenarios?
  2. What’s the probability of occurrence?
  3. How will they reduce its impact on the organization’s strategic plan?
  4. What new or alternative resources will be required?
  5. What will be the short- and long-term financial impact on the organization?
  6. Who will manage and be held accountable for the new aspects of the plan?

This seems demanding, but if you wait until an unanticipated event occurs to come up with a plan to get back on track, it’ll be too late to save the strategic plan.  Both you and the organization will be in jeopardy.  In most cases, you’ll need short-term or long-term outside help from experienced advisors, particularly in the analysis of your plan’s assumptions and measurements.

Get rid of the CEO’s worst nightmare!  Make Contingency Planning part of your organization’s resident expertise.

     
   
     
   

The Author

Robert Simpkins

Robert A. Simpkins, president of Global Crosswinds, LLC, is an international advisor and trainer.  He helps corporate, non-profit, government and military leaders develop and communicate realistic, actionable and adaptable strategic plans that create breakthroughs and achieve competitive goals and objectives. He speaks frequently to international audiences and regularly contributes articles to international business publications. His newest book, "Not Another Pretty Binder: Strategic Planning That Actually Works," is due out later this year. Robert can be reached at team@globalcrosswinds.com

     
   
     
   
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Copyright 2008 by
Robert A. Simpkins. All rights reserved.

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