5 blunders in strategic planning

img_2081

Is strategic planning still relevant? For most development agencies I have engaged, strategic planning is merely an exercise to comply with the ‘requirements,’ a checking of the box so to speak. Some were even contented that they have a vision and mission statements as if those were the end-all in a long-term plan.

Strategic planning as a tool in organizational development  allow institutions to easily adjust to the changing environment and the shifting trends in the industry. It usually starts with a SWOT (strengths-weaknesses-opportunities-threats) analysis, the basis for  strategic statements that determines the directions to take, and the key activities to be implemented.

As the blueprint for action, it should guide and enable the institution to pursue its growth targets and adjust when disruptive events happen. Despite having a strategic plan, there are institutions that are dislocated and finding it hard to cope when the environment changes. Being caught unaware when change happen is an indication that something is wrong with their plan. Five of the common blunders in strategic planning are discussed in this article.

1. Erroneous internal assessment. If the staffs are primarily responsible for evaluating the strength and weaknesses of the institution, partiality and personal biases usually cloud the results. Some staffs will tend to hide the weaknesses as it may reflect on them, or deflate the weaknesses in such a way that it will not reflect too bad on them. Strengths are also padded to offset the glaring weaknesses. In the end, you look at the mirror and be surprised when you cannot recognize the image reflected in it.

2. Misreading the external environment. A comprehensive picture of the environment, including future trends, is one of the vital elements in planning. Internal experts can provide their own reading of the environment, but it is also necessary to get opinions of external industry experts. It would also be helpful to get resource persons from other industries as their movements will also affect the industry you are in. Getting the most comprehensive briefing on the trends and the directions of things will enable the institution to steer its strategies in the right direction and anticipate responses to disruptive events.

3. Failure to make decisions. Strategies are big, bold moves aimed at ensuring the institution is abreast with the latest trends in the industry. Strategic planning is the point when leadership is expected to decide and steer the institution towards further growth or adjustments in response to anticipated disruptive events. However, some leaders would rather not ‘rock the boat’ and stay on course with what is familiar and routine. And when the expected changes happen, put the whole institution into panic mode.

4. Recycled activities. There may be jargons and the latest terminologies in the document, but the activities in essence remain the same with those in the previous plans. Same activities with end-results projected in five years and divided into annual activities. Disruptive events derail these standard activities and will require special team and effort to address.

5. Reactive rather than pro-active plan. A strategic plan that does not address issues of innovation and disruption is a poor plan. The wind of change will easily sweep away the institution without a pro-active plan.

There is a saying that goes, ‘if you fail to plan, you plan to fail.’ It is the same if you have a flawed plan.

Advertisements

Are the Prospects for Vietnam MFIs really bleak? Some Insights during a Strategic Planning Workshop

Image

What would you do if there are signs showing that your industry is moving towards sunset?   It was met with mixed feelings by participants to the strategic planning workshop for microfinance institutions.  The Credit Support Fund (CSF), a wholesale lending facility under the Vietnam Women’s Union (VMU) organized a training-workshop on strategic planning as part of its support to capacity-building of microfinance institutions in Vietnam. It was attended by participants from 10 MFOs, where only one has an existing strategic plan, three are in the process of formulating, and the rest has yet to draft their own strategic plans. The training-workshop was aimed at helping microfinance institutions develop strategic thinking and position their institutions for the future.

The strategic planning process is generally divided into four main activities, which includes the following:

  •  Setting the vision and the mission of the institution. This requires defining the reason for being of the institution, the clients they want to reach and the methods on how they can provide their services;
  •  The environmental assessment follows which focuses on the political, social, economic and technological developments that affect the operation of the institution. This part also includes looking at the industry and details on how competitors are doing;
  •  The internal assessment focuses the present capacities and resources of the institution to move forward and the direction that would lead to the attainment of its vision;
  • Identifying the strategic choices and the detailed plan where the objectives and the indicators are identified, the schedule of the activities are set, the monitoring mechanism is determined, and the people or the units involved in each activity are designated.

 Going through the first step, setting the vision, was easy. Everybody wanted to be sustainable and be the leading institution in their respective areas of operation. The mission statements were also unanimous which is serving the poor women and providing access to financial services to enable them to uplift their standard of living.

However, working on the assessment of the external environment raised issues that made the participants think not only about their future but the whole microfinance industry in Vietnam in general. The following issues are therefore considered “risk assumptions” that may affect the continuous operations of microfinance institutions in the country:

  •    Vietnam experienced consistent economic growth in the past several years, and the growth was coupled with declining rate of poverty.  As the country continue in its growth pattern and the poverty reduction measures become more successful, microfinance may become irrelevant several years from now.
  • Government poverty reduction programs are primarily with two government banks: The Vietnam Bank for Agriculture and Rural Development (VBARD) and the Vietnam Bank for Social Policies (VBSP). These banks provide subsidized loans to the agriculture sector and the poor in general. VBSP is even listed in the MIX market as the biggest microfinance provider in the country. Microfinance institutions cannot compete with these two institutions.
  •   Recent development in the rice industry showed a substantial number of farmers shifting to other crops as the price of rice keep going low. Most of the clients of microfinance institutions are rice farming families.
  •   The regulatory environment is slow in creating an environment that supports the development of the microfinance industry.  Of the than 50 microfinance institutions, only 2 are registered.

 Poverty reduction is of course a welcome development, but the idea of microfinance becoming irrelevant with the reduction of the number of poor people kept the participants thinking hard. If ever the trend continues, the question will be, are the microfinance institutions ready for that eventuality?