I'm posting excerpts from a few of my most popular posts from my other blog called Manage By Walking Around. This post tries to distinguish between strategy and planning.
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For several years, I’ve argued that performance management is more than just budgeting. I’ve also pointed out that the term planning was often misused by software vendors whose products were mostly limited to financial planning (aka budgeting), rather than end-to-end resource allocation and management. And finally I’ve advocated outcome-based budgeting, rather than activity-based budgeting, so that the financial plan was more explicitly aligned with the strategic plan. After all, the budget isn’t really the plan; instead, it’s how you intend to invest to achieve your objectives.
A critical assessment of the current market suggests that things have improved. Most people acknowledge that performance management extends beyond budgeting to strategy management, profitability management and other performance considerations outside of finance. Most planning products support financial, headcount, and other forms of operational planning. Unfortunately, outcome-based budgeting is still rare and many organizations still don’t tie planning and strategy.
In “How chief strategy officers think about their role” in The McKinsey Quarterly, Dan Simpson, vice president, office of the chairman, at Clorox and the head of strategy and planning for 16 years echoes my sentiment:
"People commonly confuse strategy and planning. Planning is primarily internal resource allocation and budgeting, which is clearly tied to finance. Resource allocation has to be tied to strategy but isn’t strategy in and of itself. Strategy should be focused on the marketplace and on customers and consumers."
Read the rest of the post.
