The Persistent Myth of Five Year Plans

five year plan posterI marvel that the myth of the 5-year plan persists. Without the invention of the spreadsheet it might have already passed away. You would think that the “success” of 5-year plans in the former Soviet Union would have been a better clue. Regardless, managers continue to stress over their ability to predict the future and manage to those predictions.

There are only two ways to make plans that can survive a 5-year test. One is to operate in a stable/stagnant enough environment that the future can be seen in today’s reality. The second is to take so few risks that you convert your local environment into something that can pass for stable.

Smart organizations and smart managers approach planning differently. When we started Diamond in 1994 we talked about our 23 and 1/2 year plan. This “plan” was a simple picture that showed 3 1/2 years of high growth followed by a 20-year line of sustained, steady, growth. The point of that simple picture was to set a shared direction. The first task was to establish an organization and a culture. The second was to manage that organization for the long term.

There was no way and no point to make or believe predictions about what we would be doing in 5 years. But our aspirations gave us insights into the organizational capabilities we needed to build. Without the sense of direction, we would have no way to make choices about what to work on and what to ignore.

We were indeed trying to build a business but there were also insights to take over into building a body of work perspective. Chief among them was to focus on the skills and capabilities we needed to develop. Planning was about understanding the skills we had and the skills we hoped to develop next. If you have choices about what projects to take on, then one filter is what new paths does each project open up.

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