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I work with many clients on strategic planning and implementation. Invariably, I am asked whether we should develop a shorter or longer-term plan (for example, 3 years vs. 5 years). My answer? “It depends”.
I think of a strategic plan as ‘well defined map’ to take an organization from A to B, and something that gets the entire organization ‘rowing in the same direction’ over a period of time. In my experience, it is the surrounding environment that most often dictates the choice between a 3-year or 5-year plan.
Fast-moving markets demand that an organization respond and pivot more quickly. Startups gathering customer feedback may adjust their strategy inside a year or even a few months.
Li & Fung, one of the biggest and most innovative retailers on the planet, believes a 3 year planning horizon is appropriate as technology impacts the retail sector.
More mature and stable industries will take a longer-term perspective. I still see many 5 year plans. However, even in not-for-profit, associations and other quasi-public organizations, 4 year plans are increasingly the norm.
The momentum of change must also be considered. Some sectors seem to undergo constant progressive change. For example, the home computing industry has moved through phases of evolution from desktops, to laptops, to notebooks and tablets.
Companies choosing a too long planning horizon may end up with a plan that needs continual adaptation. This detracts from efficiency.
In some cases the planning horizon is simply dictated from outside the management team. In the private sector, a Board of Directors with great expectations for growth might prefer to see a shorter 3 year plan directed at achieving this objective. In some not-for-profit or association, I have seen the strategic planning parameters simply handed down in detail to the organization, including plan duration.
That’s the long and the short of strategic planning horizons. To a certain extent, this debate should not keep anyone awake at night.
What matters more is how you structure and manage your strategic plan. These are the assumptions behind the major thrusts of the strategic plan, the target outcomes and objectives the organization creates for itself, and the robustness of your management processes designed to deliver on these outcomes, regardless of whether it is over 3 or 5 years.
But that is a topic for another blog post…