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It’s coming up on that time of year when the kids head back to school and summer activities and vacations are winding down. It’s time to settle in for the last push to year end.

Executive Summary

Drawing a distinction between the “what” and “how” aspects of strategic planning vs. annual planning, Carol Williams, a risk management and strategy consultant for P/C insurers and recurring contributor to Carrier Management, offers strategic planning framework that is meant to make the activity of developing the right corporate goals less painless for P/C executives.

In the life of a property/casualty insurance executive, it’s also time to start thinking about strategic goals for 2023 and beyond.

All executives should be thinking about strategy throughout the year, especially around current news and events and their impact to the company. But it’s around late summer and early fall when goals are re-evaluated and plans formalized for the next few years.

Like your last dentist visit, the process is not something you typically look forward to; you just know it needs to happen. Sadly, for a significant number of companies, strategic planning is a fruitless ordeal, with many executives describing it as “boring” and like “being lost in a haze with no way out.”

After setting metrics to track strategic goals, Williams suggests setting thresholds and limits that can be checked at certain intervals, which mark off “getting nervous” points and “freak out” moments.

To be sure we’re on the same page, strategic planning is about what you and other leaders want to accomplish over the next few years. This was typically a five-year horizon in the past, but considering the current atmosphere, this window has narrowed to three years (or even one depending on your line of business or states in which you write business). On the other hand, annual or business planning occurs yearly and determines the projects and processes for how goals will be met.

This should lead to the question: Since strategic planning is of the utmost importance, how can we effectively develop corporate goals in a painless way that positions the company for future success?

Below is a general framework for accomplishing this dual mandate, but a word of caution: before getting into specifics, the following is not meant to be cut/paste. Every company, even within the P/C industry, is unique in its own right. Copying what one other company is doing rarely yields results. But it does make sense to look at other companies, even in other industries and different types of organizations like nonprofits.

Also, there’s the need to take things one step at a time. The Sistine Chapel wasn’t painted in one day, after all, so you should expect a bit of trial and error as you refine your approach.

With that out of the way, let’s continue this thought.

After formal brainstorming and “light-bulb” ideas, you and other company leaders hopefully already have some idea of what goals should be pursued. However, the ultimate purpose of strategic planning is not just to identify the goals but rather to make sure the company is identifying the right goals.

Step #1: Look Outward

Carefully examine the external environment around your company and how competitors, regulators, and other events and trends already are impacting or could impact the company or current goals.

As an executive, you’re always scanning the horizon, but as you formalize strategic goals, you need to understand the environment around the company before looking internally. Market share, market changes and developments, consumer sentiment, legal changes, new or changing regulations, and general news and developments all combine to impact your company positively or negatively. What about issues like the steady rise of “zombie” firms over the last 12-15 years, increased litigation among competitors, or new regulations impacting the company?

Therefore, you need data or other information on these external factors to effectuate an informed decision, but not so much that it becomes overwhelming. (See CM related article by Williams, “How to Move Past ‘Analysis Paralysis’: 5 Steps for Leaders.”) And while you certainly want to understand what’s on your competitors’ radar, focusing too much on these generalized concerns found in countless top “risk” reports and surveys can lead you astray.

Step #2: Look Inward

Pivot and take a thorough and honest look inward with questions like:

  • What are our biggest strengths?
  • What are our biggest weaknesses?
  • Where do we see ourselves in the marketplace in five years?
  • What do we want to look like as a company in five years (e.g., product positioning, geographic area, marketing tactics, customer messaging)?

Understanding weaknesses gives you things to focus on fortifying, while strengths can be utilized to address weaknesses and ultimately get the company to where you want it to be.

At this point, bringing in those people responsible for taking action is strongly encouraged as they will likely have additional pain or failure points to share. Providing a forum with relevant individuals ahead of and throughout the planning process helps avoid calamity later.

Step #3: Discuss Possible Scenarios

You are now ready to take a particular goal and figuratively overlay it with these external and internal issues. The analogy that comes to mind is the transparencies used on an overhead projector—the bottom sheet is your goal, the next sheet is the external information, then the third sheet is the internal information, and so forth. You begin to overlay these factors to help you and other decision-makers visualize what could hinder and help accomplish the goal.

Discuss different situations and scenarios based on the internal and external factors, uncovering the impacts to the company’s ability to achieve a specific goal. This is essentially scenario planning, where you come to understand the internal and external dependencies and uncover what needs to accomplish the goal.

After more questions and analysis of the impacts and likelihood of each scenario, it may be determined the goal needs to be changed. For example, you may find that staffing and corporate processes are not sufficient to handle the goals and overall growth, so it may be best to pause and address these shortcomings before pursuing anything new.

The process of scenario planning helps test and validate assumptions so the company can proactively prepare for risks to achieving goals rather than bobbling and reacting from one crisis to the next.

Waiting until a crisis hits is a dangerous and potentially lethal way to force change, according to Ariel de Geus, former planning coordinator for Royal/Dutch Shell and author of “The Living Company.”

“Crisis management, by necessity, becomes autocratic management. The positive characteristic of a crisis is that decisions are quick. The other side of that coin is that the implementation is rarely good; many companies fail to survive,” de Geus believes.

Step #4: Measure Success for 1-3 Strategic Goals

At the end of this scenario planning, you should have finalized at least one but hopefully two or three solid goals for the next 1-3 years.

Simply having a carefully screened and informed goal in hand doesn’t mean it’s the end of the road. Before moving into annual planning to determine how you and implementers will accomplish the goal, metrics need to first be identified to tell if you have reached the goal or if you are falling short and need to adjust.

Example: The goal is to increase revenue by 50 percent annually over the next three years.

  • Year 1 Target: Current revenues multiplied by 150 percent.
  • Year 2 Target: Year 1 Target multiplied by 150 percent.
  • Year 3 Target: Year 2 target multiplied by 150 percent.

Then establish thresholds that can be checked at certain intervals. I like to call this the “getting nervous” point. If the data is approaching or reaches this number, investigations into root cause should be initiated and discussions should be had about potential action plans should the trend worsen. It is also possible to have an upper threshold (e.g., if revenues are increasing by more than 50 percent annually) where the company is doing so great that resources and infrastructure needs to be fortified to ensure the company has capacity to handle the demand and growth. (After all, there’s nothing worse than exceeding expectations just to watch it all go up in flames because you became overwhelmed.)

Then establish limits—what I call the “freak out” moment. Action must absolutely be taken by this point, and there are serious ramifications if the company reaches this number. While this may seem like an ordeal, it’s processes like these that Ariel de Geus and others say is how companies stand the test of time.

Taking steps like the ones outlined above turns the nemesis of risk on its head. Rather than trying to minimize, avoid and extinguish the fires as they come up, you are able to leverage risks and uncertainty and work actively with them to build a competitive advantage.

Getting there will take some time and effort, but considering the stress of a more reactionary approach and high potential for displacement or failure in today’s marketplace, little choice is left for P/C executives but to go for it.

Are you ready to begin charting a new course for your company?