Friday, June 17, 2016

Strategic planning for individuals and families, Part 4

This is part of a series of articles, which may be found at the following links, and should be read in numerical sequence:

You'll recall (from Part 1) that the name of the planning process we're using is P.O.S.T., which stands for Purpose, Objectives, Strategy and Tactics.  We've examined the purpose and objective of our strategic plan in the first three parts of this series;  what they are, how to derive them, and how to evaluate them against each other, discard the ones that conflict with each other, and come up with a set of objectives that sound rational and reasonable for the next five to ten years.

We now need to perform a reality check.  Under the circumstances and conditions in which we live, is it feasible to do what we want to do?  Are there factors that might prevent us doing so?  If not, good:  but if there are, maybe we need to revise our purpose and objectives in that light, before we put effort into planning how to achieve something that simply can't be achieved.

This reality check involves another process, known as S.W.O.T.  This stands for Strengths, Weaknesses, Opportunities and Threats.  I define them as follows.  Strengths and Weaknesses are internal factors, in your life, relationship(s), education, attitude, abilities, etc. that may help or hinder you in achieving your objectives.  Opportunities and Threats are external factors, in your location, employment, environment, etc. that may help or hinder you in doing so.  Let's look at each in turn, in the light of some sample objectives.

Joe and Mary may have agreed upon an objective to move closer to Mary's parents sometime during the next five years, so they can help them raise the children they hope to have during that period.  Is that objective feasible?  Let's find out.

Their strengths (i.e. internal factors affecting their decision) may include:
  • They have enough money saved to afford the deposit on a new home;
  • They earn enough to be able to afford higher mortgage payments.

Their weaknesses (also internal factors) may include:
  • When Mary stops work for a while to have children, their joint earnings will be less, and therefore they'll struggle to afford the higher mortgage payment until she can return to work;
  • They don't have enough furniture to set up rooms for the children they hope to have, and they'll therefore have to use some of their savings to buy it, or use a line of credit to do so - but that may affect their credit-worthiness for the mortgage financing they'll need to buy their new home.

Opportunities (external factors) may include:
  • Houses of the size and quality they want are more plentiful in the area they hope to move to than they are in their present location, making it easier for them to find something suitable;
  • A lot of people are moving out of their desired location, meaning that more houses are available, more cheaply - in other words, it's a "buyer's market".

Threats (also external factors) may include:
  • Mortgages are harder to come by under current economic conditions, and lenders are much 'pickier' about who they'll lend to than they would be in better times.  This may mean Joe and Mary won't be able to get the mortgage they need, or will have to pay a higher interest rate to do so;
  • Mary's parents are getting older and are in poor health.  They may have to give up their home and move into an assisted living facility in the short to medium term - but there are none in the area where they currently live.  If they move away to another area, Joe and Mary's proposed new home will no longer be conveniently situated for them;
  • The reason more people are currently moving out of the area they want to move to is that there are factors driving them out - for example, rising crime levels, or nearby industrial development that will mean more pollution of the local environment.  Do they really want to move to a place like that?

You can thus see that strengths, weaknesses, opportunities and threats must all be evaluated against each other.  If there are too many negatives (weaknesses and threats), they may outweigh the positives (strengths and opportunities), meaning that the objective in question probably isn't a good idea.  Under those circumstances, we can either reshape and reword the objective to be more practical and achievable, or abandon it altogether and try to find a new one to take its place.

Let's look at a second objective with that in mind.  Joe and Mary need a new vehicle, and want one that will be practical in the light of their soon-to-be-growing family.  Mary prefers a minivan, and presents the following S.W.O.T. analysis to defend her choice.

  • They can afford it based on their current income levels, even if she has to stop working for a while to have each child.
  • It'll give them enough space to carry around a couple of young children plus all the paraphernalia (child seats, diaper bags, toys, etc.) that go with them.  It's a very practical choice.

  • A minivan is basically designed for city and suburban streets, such as those on which they currently live.  However, it won't be the best choice for the dirt roads leading to her parents' farm, which they often visit.

  • There are many affordable models available, so they can shop for one that fits their budget.
  • Generous financing incentives are available from manufacturers who want to sell more vehicles.

  • If they finance a new vehicle right now, it may affect their credit rating.  That, in turn, may affect them getting the mortgage they need to buy their new home.  They may have to pay a higher interest rate to get it, meaning that the house they want will cost more than they can afford in terms of monthly payments.

Joe objects.  He doesn't deny the strengths and opportunities Mary has identified, but adds the following factors for consideration:

  • A minivan is socially less desirable than another type of vehicle.  It's looked down upon as a 'soccer mom' type of transportation.  Joe doesn't want to be associated with that stereotype.

  • They want to move closer to Mary's parents so the latter can help them raise their kids;  but that will mean more frequent trips out to their farm.  That's a safety issue if the minivan can't cope well with dirt farm roads, particularly when they're muddy and slippery after rain.  They don't want to put their kids or themselves at greater risk in that way.

After discussing the issue, Joe and Mary find a mutually acceptable compromise.  They decide to buy a medium-size SUV instead of a minivan.  It will be more expensive (a weakness), but offers almost as much space and practicality for their family as a minivan would (a strength), and also avoids the social 'stigma' of a 'soccer mom' minivan (a strength from Joe's perspective, if not from Mary's).  Furthermore, its four-wheel-drive capability and higher suspension will make it safer on dirt farm roads in all conditions (converting a threat - less frequent visits to Mary's parents, dependent on the weather - into an opportunity - more frequent visits, irrespective of the weather).  That minimizes the weaknesses Joe had identified, whilst simultaneously catering for most of the attributes Mary wants.  They run their choice through another S.W.O.T. analysis, and find that it passes muster.  Everyone's happy.

On the other hand, there might be a scenario in which they couldn't find an acceptable compromise.  What if Joe wanted a more 'manly' vehicle, such as a pickup truck?  It would have less space in the passenger compartment (even with a crew cab) than a minivan, and give Mary fewer of the features she, as a mother-to-be, regards as essential.  That would almost certainly lead to serious conflict in their relationship, as neither side would regard the other's objections as reasonable.  Their individual objectives are too far apart for their needs as a couple.  If that happens, to minimize conflict and preserve their relationship, it might be best to back off that particular objective for a while, work on others where mutual harmony is more easily maintained, and return to the question of transportation at a later date.  On the other hand, if the issue simply can't be postponed (for example, if Mary's present vehicle has broken down repeatedly and proved itself unreliable), then some hard choices will have to be made.  (Hint:  I'd say that the person who will most often use the vehicle should have the final say over what vehicle to buy.  That makes for greater domestic peace and tranquility.  Just my $0.02 worth...)

You can therefore see how the S.W.O.T. process acts as a 'reality check' on the factors identified during the P.O.S.T. process.  The latter is theoretical;  the former is practical.  P.O.S.T. says, "This is what I/we want to achieve."  S.W.O.T. says, "This is what is practically possible for me/us right now."  The two processes work hand-in-glove with each other.

This is where we have to be ruthless with ourselves.  It's pointless to waste our time and resources trying to achieve something that's utterly impractical under our present circumstances.  If an objective proves to be impractical, it must be either abandoned, or postponed, or (at the very least) amended in such a way that it becomes achievable.  No matter how badly we want that particular objective (and a young man wanting something like a sports car, so he can look good to the ladies he's trying to impress, can want that objective very badly indeed!), we have to be realistic.  At first, while we're getting used to the planning process, we may find that half (or even more) of our objectives are not achievable as stated, once we run a S.W.O.T. analysis on them.  We'll have to go back to the P.O.S.T. drawing board, redefine our purpose in the light of modified and alternative objectives, then run another S.W.O.T. analysis to see whether we're closer to reality this time.

Remember, planning is an exercise in self-discipline, and in discipline as a couple.  It gives us a framework within which we agree to operate, in order to accomplish the things that are important to us.  In terms of a couple, it's a mutual agreement, in which we commit to each other to work together to achieve what we've planned.  If we build the framework, then immediately bust through it and go on our merry way without bothering to suit our actions to the plan, then why did we waste our time developing the plan at all?

We've now (hopefully) developed our purpose and objectives (using P.O.S.T.), and tested them in the light of reality (using S.W.O.T.).  In the next article, we'll discuss how to take an objective and develop strategies and tactics that will help us achieve it.  Those strategies and tactics will then also be tested against reality, to make sure they're achievable, before we implement them.



Old NFO said...

Yep, the reality check portion IS critical... And often overlooked...

B. Durbin said...

Oh, that car scenario. Right now we're a one-car family, after the family vehicle (a crossover that was an awesome car while it lasted) wore out its transmission. That would not have necessarily been an issue, except for the fact that the style of transmission was somewhat experimental with that model, was later dropped from the model line, and then the model itself was discontinued. The upshot there is that a replacement transmission would have cost $6K for a *used* transmission, possibly bot not assuredly rebuilt, and with no guarantee that it was going to last any length of time at all.

We had that car for ten years, and I put almost all of its approximately 140,000 miles on it. Loved that car. Babied that car. It fit our needs *so* precisely. And our needs haven't changed, except that I'm now fitting three kids in the crew cab of the truck when I have access to it. (We're a bare five miles from my husband's workplace, but because of the way the public transit is designed, there is not a straight-line run down the major thoroughfare but a ride UP to a hub and DOWN from the hub and a roughly 90-minute commute for five miles. Not an option. Wish it were.)

Anyway. There has been one major change for the wish list when we replace the car (which will, by the time we get to it, be more than a year from the loss of the previous one): Not buying a car that is within the first three years of its model design. (And with a common transmission. Seriously broke my heart to sell our car off for, essentially, parts.)