Scenario Planning—2 of 5 blog posts on Surviving a Financial Crisis
Scenario planning is used by organizations to make flexible long term plans. Some call it a rehearsal for future events. It is used in government and business to test out theories and model responses to possible future events. Most of us use scenario planning if we must choose between two or more viable alternatives or solutions to a problem. Scenario planning can be very useful to Main Street organizations if they anticipate there will be marked changes ahead. Purchasing rain insurance for an event is one kind of scenario planning. Having co-chairs for every event is another type of scenario planning.
However, when faced with serious challenges to budget shortfalls, many Main Street organizations would rather cope with the problem only when the problem actually confronts the organization. Some call scenario planning, rehearsed chaos, but we disagree. We would much rather know in advance how to react to the loss of a grant, or a stinging cut in our budget. That is the essence of scenario planning. Scenario planning can be very powerful means to focus a Main Street organization. If a budget cut threat is real, we will be far ahead of others with our plans to cope with the cut, if we have a rational discussion about possible solutions well in advance. We will be able to react faster to bad news, and be more confidence in our approach if we have thought through a variety of plausible (and unfortunately uncomfortable) options with your Brain Trust (mentioned in a previous blog post). In addition, by thinking through solutions in advance, we have the benefit of some distance, time and
Board leadership must first create a sense of urgency. John Kotter the Harvard Business School professor in his bestselling book Leading Change devotes an entire chapter to this matter. In 2007, Kotter published a book on getting people to act, called appropriately A Sense of Urgency to refine his ideas.
In his Sense of Urgency book, Kotter says that leaders must instill in the troops the need to win and to win, now. Nothing else will motivate people to go beyond their comfort zone or the status quo. To put it another way, without a burning building, no one will turn on the fire hose.
Some believe that scenario planning is a waste of time because they say, “Why would you spend people’s precious time worrying about something that might not even happen?” Since we cannot predict the future (alas!), we should not bother worrying about it. Board leadership will have to get beyond these naysayers in order to model solutions for a handful of potential future outcomes. Kotter calls these people NoNos (you probably call them something else!)
Picking scenarios to model
Once the Board commits to undertake scenario planning, they have to choose possible outcomes and thus, scenarios to model. For example, if we know that the Tourism grant we have gotten for the last three years is likely to be cut in half because tax receipts are down by that much, then we need to create a budget that eliminates the lost part of the grant. By making decisions in advance, we know how to act if the cut comes or not. Picking a small handful of the most likely scenarios is best, rather than taking a Chicken Little–the sky is falling approach. Since scenario planning does not predict the future, we can use it to help us adjust to a different narrative.
I used an exercise with Main Street Executive Directors at the Downtown Revitalization and Management Institute last week for Main Street New Jersey. See if you think this is helpful.
Tell us if your organization has used scenario planning and whether it worked for you.
The next two blog post in this series will identify 25 ideas for budget cuts for Main Street organizations, and then 25 ideas to expand revenue. Look for these posts later in the week.