Is your long-term strategy the biggest influence on your short-term planning?
Thursday, 16 April 2015 13:03
It is around this time of year that Colleges are busy preparing and polishing budgets and forecasts for next academic year. With a Government Budget recently delivered, a General Election approaching and ongoing speculation about global political and economic stability, it makes good business sense to think beyond the annual budget cycle and make changes now for the longer-term benefit of your organisation.
Adult funding cuts of 24% have understandably caused immediate concern for leadership teams across the country and despite economic recovery finally taking hold in the UK, several more years of austerity seem likely. The Government’s latest Budget revealed an intention for public spending cuts to end in 2019-20, but the result of the upcoming General Election is uncertain. The political and economic backdrop makes it seemingly impossible to predict public spending levels for years ahead, but many will be planning for the worst!
So how can our leadership teams effectively plan for the longer-term?
Any economist worth their salt will tell you that economic strategy is a game of chance. A successful strategy relies on your ability to play the odds and go for the option that is likely to maximise your desired outcome in the longer term. One well-known economic strategic group is the Monetary Policy Committee (MPC). In setting the Bank of England base rate and deciding on Quantitative Easing measures, the MPC thinks ahead to a time around two years into the future.
Complex information gathering and mathematical modelling provide a useful framework for decision making, but ultimately a judgement is made. The MPC has one distinction compared to most other organisations, which is that it has a limited number of options available. The key is being able to apply a consistent approach to decision making and focussing on only one or two key outputs, in order to influence future outcomes. This approach is something we could all apply to our business planning process, by concentrating on the factors which will be most influential over the longer-term and acting now to effect change to those key areas. This is not to say that ‘change’ itself cannot be brought to bear very quickly – it is to say that changes need to be made with a longer-term strategy in mind.
The right mix of resources
An organisation is only fit for purpose if it has the right people – especially in a teaching and learning environment. Falling foul (pun intended) of cliché, there is a useful sporting analogy in relation to staff cost management. In the second tier of English football, most clubs put an annual plan in place to try and achieve promotion – but not everybody can win the league and there are humps and bumps, opportunities and threats along the way. The organisation needs to be flexible in its approach, from minute to minute within a game, week to week and season to season. If there is an opportunity to achieve promotion then the club might spend money on extra talent for the final push, or an injury crisis in a key area could cause the team to lose its way (unless they can find excellent temporary cover!).
A top player becoming available could be too much of an opportunity to miss out on. A successful season brings promotion and the associated riches from the top division, but the temptation is to match spending with income to maintain top-flight status. An unlucky team relegated from the top division will need to cut costs, regroup and be ready to take on the challenge of the next season. The best managed clubs offer great rewards to their people for achieving success, but being geared-up only for their current circumstances they often find they have stubbornly high costs when more austere times present themselves. Short-term misfortune can create long-term instability; and inflexibility can mean that opportunities are not taken when they should be. The best prepared organisations will have flexibility in their resources, so they can change size and shape according the opportunities and threats that come along week to week and year to year.
Being “fit” is all about being suitable, right and proper. Something that is “fitted” is the right size and shape to meet its purpose. Fitness is the ability to adapt and complete an objective, recover quickly and be ready and able to reach the next goal. Whether you are a private company or a public sector organisation, the economy and environment is an ever changing scene. Even within a seemingly predictable macro-environment, unseen threats appear from time to time – and opportunities don’t always present themselves at a convenient moment. Organisations need to be fit, which means being flexible. The more uncertainty there is, the more flexibility becomes a bigger priority. Flexibility is the key to organisational fitness.
In conclusion – How to make immediate improvements
Most leaders and leadership teams would probably admit that short-termism and ‘fire fighting’ often get in the way of making strategic changes. To avoid this, I suggest that you take some time to review your short term plans and evaluate each one against your long term strategy. Every new project (big or small) should be evaluated in the same way. Don’t procrastinate – make a sound decision and implement changes quickly, so that the benefits start to accrue sooner rather than later. Concentrate on a few key variables – and understand that you can’t control all of the variables.
Finally and perhaps most importantly, make your resources flexible, so you can bounce back from short term mishaps and seize opportunities with both hands.
Chris Pilkington FCCA is the Head of Finance at Protocol, with over 5 years of experience in helping customers to manage the cost, benefits and risks of flexible staffing solutions