A common meme in the strategic planning world is that there is no one pre-determined future. The objective in strategic planning is not to forecast a single outcome but rather to identify a number of possible outcomes. Preparedness comes in having thought through multiple possible end states, and agility comes from the ability to quickly identify which of those end states is coming to fruition and then acting accordingly. The job of the manager is to be both prepared and agile.
That said, strategy is more typically treated as a dark art that is practiced by a group of business development people in an ivory tower tucked into the corner of the company. No one really explains strategy to the managers and individuals responsible for the day-to-day operation of the company.
What is scenario planning?
At its most basic, scenario planning is the admission that no one can predict the future. The best that most of us can do is limit the future to a small set of likely futures. Sure, we can weight those futures, which allows us to rank them in order of likelihood to occur. But if we are being honest with ourselves, we cannot guarantee that any one of them will emerge.
Scenario planning essentially takes these situations and asks planners to consider the various factors at play, using them to determine a small set of future scenarios. The goal of scenario planning is not to specify every possible outcome but rather to focus on the most likely. If you are doing scenario planning, you ought to be targeting 2-4 possible scenarios. Anything more than that ends up being a bit too much to practically handle.
Once you have the scenarios identified, you can plan out what you would do in each scenario. If, for example, budgets are tight and headcount is frozen, how will you handle staffing in the second half of the year? What will you do with your commitments to the roadmap? How will you adjust your resource allocations?
The key to effective scenario planning
There is nothing particularly magical about scenario planning. Most people tend to think through scenarios naturally, so in many ways, the strategic change here is more about documenting what you are already thinking. That said, the vast majority of people who actively engage in scenario planning actually miss the most important part.
Scenario planning is not effective because of the scenarios; it is effective because of the planning that goes into determining which of those scenarios is active.
Put slightly differently, just knowing what the possible outcomes are is meaningless unless you use that information to change how you behave. If, for instance, the scenario hinges on hitting development milestones on an aggressive architectural project, identifying early whether you are on track is the real key.
This means that the key to effective scenario planning has less to do with the scenarios than it does with the leading metrics that let you determine what path you are on.
Scenario planning is an ongoing task
The other major mistake that managers make when it comes to scenario planning is that they spend all this time up front completing the planning, but they never revisit it while the work is actually in progress. If you do scenario planning well, you will identify a set of leading and lagging indicators that indicate which scenario you are in. But having those indicators documented doesn’t mean that you are actively tracking them.
As a manager, you need to be looking at these metrics frequently enough that changes in the indicators allow you time to enact one of your scenarios. For first-line managers, this aspect of strategic planning is almost universally ignored. Either you lack appropriate early indicators, or you just refuse to monitor them. Whatever the case, you end up ignoring the tracking aspects, which means you have all this good scenario planning without a means to activate differences in execution.
For first-line managers, scenarios will tend to hinge on one of two things: budget and progress. Macro-level things like sales progress or market dynamics tend to be somewhat shielded from first-line managers. This is partially why young managers don’t engage in meaningful scenario planning. But they should.
As a first-line manager, you are likely responsible for allocating resources to projects. In a typical planning cycle, you likely allocate resources that still need to be hired (frequently called TBHs or To-be-hired). You have committed to a set of deliverables knowing that you are dependent on new reqs materializing in time to get people hired, on board, and useful.
What are the earliest indicators you ought to be looking at?
If your company is light on revenue in Q1 or Q2, that frequently indicates a slowing of hiring in the back half of the year. You ought to be having discussions early on as your company reports revenue. If you are surprised that hiring stops after having a couple of light quarters, the fault is really no one’s but your own. The tendency here is to assume everything is fine until you are told that the hiring spigots have been turned off. While this is defensible, it doesn’t mean that you should be caught unaware. By making a couple of staffing decisions up front, you can put yourself in the best position to staff the most critical projects, leaving the risk exposure to things lower in the priority queue. This is effective management.
The other common scenario is around execution against a large project. Engineers will tend to outline major milestones in a project. However, they also tend to believe that you can make up additional work later in the cycle (similar to writing a term paper the night before it is due). Missing early milestones, though, will put pressure on the back end of the schedule. This might compress things like testing, and it can leave resources stranded in a wait state. Identifying gaps in progress early on, you can proactively slot ready-to-go efforts and then more heavily staff the back end. Being caught unaware a few days before the project is due leaves you no time to adjust.
The bottom line
Almost every New Product Introduction process includes some placeholder slots to talk about risk. Everyone knows enough to put mitigation plans in these slots. But those mitigation plans are drafted and then ignored by the vast majority of managers. To be an effective manager, you really need to draft the mitigation plans, identify the early indicators so you know what scenario is actually live, and then actively monitor conditions so you can make adjustments as soon as possible. Rather than succumb to the all-too-common strategy of waiting and hoping that things will improve, you ought to be tracking these early indicators regularly. If you do not look at these stats at your weekly staff meeting, chances are that you are subscribing to the hope and pray method of leadership. If this is the case, you might as well go buy a rabbit’s foot as a backup plan.