STRATEGY SESSIONS  #15
 
CONTINGENCY PLANNING
 
by Dr. Steve Payne

I’ve tried to describe basics of strategic decision making in previous columns.  A four-step process has been emphasized:

1) internal analysis of personal goals, values, strengths, weaknesses, and capabilities;

2) external analysis of opportunities and threats in the general environment and particular markets;
3) development and choice of strategic options for personal pursuit; and
4) actual execution and controls for these chosen personal strategies.

 

Although I’ve spent a couple of sessions on each of these four steps or stages, it’s important to realize the interdependence of these steps.  For example, one particular market or opportunity for personal pursuit (Step 2) likely requires a somewhat different set of personal strengths or capabilities than another market might demand.  Another example of this interdependence is that effective execution and controls for a personal strategy (Step 4) probably leads one to develop new strengths and capabilities (Step 1).  Mistakes as well as successes in chosen strategies (Step 4) can also lead to an individual’s setting different and lower or higher personal goals (Step 1).   Other examples of this interdependence of strategy steps or stages could be mentioned.

 

I know that there are many people who have little or no experience developing personal strategies or making many personal plans.  They prefer more spontaneous, intuitive, or implicit approaches to planning and decision making.  Many also recognize that unforeseen future events could drastically impact or doom personal planning, and, thus, they hesitate to make many personal plans or to develop personal strategies.  Realizing that certain future scenarios or contingencies can radically affect personal planning and strategies, other people, instead, actually focus on contingency planning.
 
Let’s consider the example of starting a new business in a particular city.  One important contingency would probably be the general state of the local and area economy that the new business will be encountering.  The business entrepreneur might be facing possible contingencies or alternatives of a slowdown or continuing recession, a weak recovery or a 0-20% increase in general sales revenues over the next year for most local businesses, or a robust recovery with a 20-50% increase in general business sales revenues.  Personal and business strategies for this entrepreneur might vary significantly depending upon these different economic contingencies.

Contingency planning and strategy development in this example would suggest analysis of the more likely economic scenario for the next year or two.  However, the strategies developed would not be entirely based on only this more likely economic scenario.  Strategy set A would likely be based on this more anticipated economic contingency, but there would also be some thought and development of a strategy set B and a strategy set C based on the other two alternative economic scenarios.  While the entrepreneur would initiate strategy set A, he or she could quickly shift to alternatives B or C as soon as alternative economic trends were noted.

Contingency approaches to strategy development can be focused on other important types of contingencies.  For career and life strategies, the key contingency might be a completely different set of possibilities than economic ones.  The key contingency might be much more personal, such as your long-time girlfriend finally accepting your marriage proposal or your 90-year old grandfather dying and leaving you a large share of his personal estate.  When key events such as these, or many others, are important possibilities, but very difficult to predict when or if these will occur, contingency planning can be very helpful for personal strategy formulation.