Monday, December 28, 2009

Gut vs. Analysis

I keep hearing that strategic planning is not necessary because you can just run things "from the gut". There may be something to that, in some circumstances, depending on what you mean by "from the gut."

If "from the gut" means that someone is planning in a non-formal process using many, many years of experience, using the same methods that they have used in the past, then this may be a satisfactory planning method, providing that nothing changes and the organization can continue with business as usual.

Malcolm Gladwell's "Outliers" describes how, after 10,000 hours of experience, someone gains sufficient expertise at something that they can begin to manage intuitively, without need for recourse to stodgy planning tools. Once someone has logged their 10,000 hours, then you might argue that they're not really planning "from the gut" at all, but rather through a synthesis of thousands or even millions of data points that they have experienced over that time. 10,000 hours of experience provides sufficient variation in situations that someone can recognize a wide variety of patterns and know what has resulted from a wide variety of actions.

There are (at least) three major problems with leading "from the gut".

The first is that those who lead from the gut rarely communicate their plans effectively throughout an organization. One of the benefits of a formal strategic planning process is that the strategies, tactics, measures and responsibilities are written down for all to see. When the plan is documented and clearly communicated throughout the organization, we're much more likely to see alignment in which everyone is working together towards common goals. The alternative is a relatively anarchistic environment with everyone pursuing their own version of "how we've done it in the past." This kind of haphazard leadership style may work in a smaller organization where "leadership by osmosis" can occur, but it will likely fail in a larger, more complex organization where everyone does not get direct access to the top leadership.

The second big problem with leading from the gut is that "stuff happens." There are impacts on the organization both from inside and outside that can wreak havoc with the casual plan. When planning from the gut, there is rarely a scenario planning exercise, risk analysis, alternative scenarios or research to understand leading indicators that would provide the organization with a warning when trends impact their industry either positively or negatively. This means that the casually run organization is both at a greater risk from outside forces, and also is less able to take advantage of new opportunities.

The third challenge with leading from the gut is that managing from the gut works well in situations where there is little complexity, but when organizations get bigger and where social, technological, environmental, economic or political changes are dynamic, the gut is no longer effective. There is simply too much complexity for even a genius with 10,000+ hours of experience to synthesize informally. Unfortunately some managers get away with managing from the gut for a long time and therefore believe that it will continue to serve them well in the future. As situations become increasingly complex, the gut approach ultimately fails, collapsing under the weight of unanticipated outcomes.

Those who manage from the gut may have been successful using this methodology in the past, but ultimately it is a lazy and ineffective way of managing and leading an organization. Utilizing a formalized system that both takes advantage of the leaders' experience and also follows a process that includes communication, alignment, consideration of risks and alternative scenarios, and clearly documents responsibilities and measures of success will win out over the gut system. Surveys show that companies that use a formalized strategic planning process are 70% more successful than those who do not.


No comments:

Post a Comment