Scenario Planning in Three Modes

I was introduced to the extensive “scenario planning” process by a Royal Dutch Shell executive at a business roundtable in New York City in the mid-1980s. I later introduced a modified version of Shell’s scenario planning as a strategic thinking and planning process in Berea College’s 2009 response to the Great Recession. I subsequently learned of Smith College’s 2012 scenario planning as a form of strategic thinking divorced from strategic planning. And most recently, “scenario planning” has become a common phrase in higher education describing colleges’ and universities’ fiscal and educational responses to the coronavirus pandemic. It is this background that has prompted me to reflect on these three related but quite different meanings and uses of “scenario planning” in higher education in America today. Each of these three modes of scenario planning described below can be effective if their different purposes, processes, and time frames are understood and applied accordingly. If these important distinctions are not understood, such processes can produce unintended and even unwanted outcomes.

1. “Scenarios” as Alternative, Time-Limited Financial/Programmatic Responses to a Crisis

Given the suddenness of college closures due to the coronavirus pandemic in the spring of 2020 and the unknown time line for a return to “normalcy,” most colleges and universities immediately finished the spring semester online and quickly developed alternative educational plans for online, on-campus, or blended learning environments to address the uncertainties of the 2020–21 academic year. These educational responses were typically called scenarios and were usually led by top academic and student life administrators with faculty and staff involvement and the plans were understood to be time-limited responses to the pandemic—not alternative strategic visions for an institution’s long-range future.¹

At the same time, colleges engaged in budget-based “scenario planning” typically led by chief financial officers who received input from other members of the leadership team (e.g., admissions, academic, and student life). The primary focus of these alternative financial scenarios has been to ensure short-term cash flows and financial viability of the college or university with the dominant factors being projected tuition and room and board income based on student on- or off-campus enrollments. These term-specific scenarios typically used financial assumptions (e.g., -5 percent, -10 percent, and -15 percent) to develop potential summer, fall, and spring budgets that project increasingly reduced enrollments and income along with requisite cuts in personnel, programmatic, and operating budgets. And as a time-limited, financial planning process, such “scenarios” were and are not intended to develop strategic, long-term business models for their colleges or universities. Such short-term, finance-based scenarios seem more and more to constitute the current meaning of “scenario planning” for most higher education institutions and commentators and their use in institutional planning has extended beyond the pandemic.²

Brief Overview: 

• “Scenarios” = alternative budget or academic program responses to an immediate crisis;
• Time frame = short-term, typically a one- to three-year time horizons;
• Creators = financial or educational officers with input from other administrative areas.

2. “Scenarios” as Strategic Thinking

Royal Dutch Shell has been an innovative creator of “scenarios” as a form of “strategic thinking” since the early 1970s. Every 10 years—or less—Shell spends millions of dollars developing between two and four “scenarios.” A Shell scenario task force is usually composed of diverse specialists—e.g., geologists, economists, environmentalists, historians, sociologists, natural resource engineers, humanists, etc., who seek to describe plausible, alternative, economic, cultural, political, and environmental “global futures” in narrative stories they call scenarios. Jeremy Bentham, a longtime leader of this process for Shell says, “Scenarios give us lenses that help us see the future prospects more clearly, make richer judgments, and be more sensitive to uncertainties…[and] the purpose of scenarios is to help people make better strategic choices.”³

Shell credits its scenarios with anticipating and shaping the company’s responses to the 1973 oil crisis in the Middle East, the fall of the Soviet Union, the opening of Russian oil markets, and the current environmental crisis and Shell’s increased investment in non- carbon alternative energy resources. Shell’s current website says their scenarios are “plausible and challenging descriptions of the future landscapes.” Shell’s website describes two current scenarios called (a) “Mountains” where political and economic power are consolidated in top global political and business leaders and (b) “Oceans” where power is shared, compromise common, and competing interests are accommodated. These scenarios describe two very different possible political/social/economic contexts in which Shell—and all businesses—will have to operate. And, building upon Mountains and Oceans, Shell has recently developed an ambitious scenario it calls “Sky” that seeks to achieve the goals of the Paris climate agreement to keep global warming below 2 degrees centigrade by 2070.⁴

A main purpose of developing multiple scenarios is that they help their developers be open-minded. That is, scenarios are a form of strategic thinking about the future without being tied to a single mission-centered vision. In the higher education context and under the leadership of President Carol Christ, Smith College engaged in a scenario planning process in 2012 called “The Futures Initiative.”⁵ Similar to Shell’s scenarios, Smith’s Futures Initiative developed four alternative narratives about the external context and trends in which small or medium-sized colleges and universities would have to operate in the future. Their four scenarios were named:

• College Unbundled, which envisions higher education in 2030 as discontinuous, with students taking courses and degrees from multiple providers and institutions;
• A New Financial Landscape, which focuses on a national economy in which traditional funding sources for a college education (such as enrollment/tuition, financial aid, and gifts) are reduced significantly and permanently;
• World College, which foresees global competition among colleges and universities for a considerably more diverse and less affluent student-admissions cohort; and
• Virtual College, which projects online studies and technological advancements as real competition for place-based, and face-to- face learning environments.

Christ concludes, “The initiative was not a strategic-planning process; it was a strategic-thinking process: an assessment of trends, a judgment about their implications for Smith, and a reflection on the options before us.” Smith’s Futures Initiative was very much a higher education application of Shell’s notion of scenario development as a mode of strategic thinking, in this case imagining plausible alternative and often overlapping “educational futures.” Smith’s scenarios focused on different trends that would impact the programmatic and/or the financial context in which Smith College would seek to thrive without linking these insights directly to the College’s strategic plan.

Brief Overview: 

• “Scenarios” = strategic thinking that produces complex narratives about plausible, alternative-future external environments in which higher education will operate;
• Time frame = typically 5- to-10-year projections;
• Creators = multidimensional strategic thinking teams.

3. “Scenarios” as a Mode of Strategic Thinking and Planning

In my book Strategic Thinking and Planning in Higher Education: A Focus on the Future (AGB, 2017), I describe an eight-step process whose first four steps comprise a “strategic thinking” process that culminates in a strategic vision that then is developed through the next four planning steps into a strategic plan.⁶ Below is a graphic representation of this eight-step strategic thinking and planning process:

Simply put, strategic thinking seeks to produce a “strategic vision” (steps one to four) that will guide an institution’s long-term future. The strategic planning that follows (steps five to eight) creates initiatives, goals, and assessments that seek to implement the chosen vision. A credible vision for the future requires deep dives into the educational and financial data and trends of the external environment as well as honest, fully informed, and mission-sensitive internal institutional analyses. Scenarios that include both strategic thinking and planning can be used to offer alternative, “open-minded,” visions of an institution’s educational mission that are then set within internal and external financial realities. This is yet a third kind of “scenario planning” that colleges and universities can use.

The 2008–09 Great Recession created a significant financial crisis for Berea College’s no-tuition, endowment-funded financial model. Given its 12-quarter spending rate, it was determined that Berea’s total income would decline between 20–25 percent by June of 2010. Berea’s scenario thinking and planning process was designed to provide alternative visions from which one (or a combination) scenario vision would incorporate the college’s educational aspirations in a financially sustainable way into the future. Berea’s Scenario Planning Taskforce (SPT) was composed of four faculty, four senior administrators, and one student and led by the dean. The SPT was charged to bring back to the campus in nine months three different scenarios for a Berea College that (a) retained Berea’s no-tuition policy, (b) strengthened the learning environment for students, and (c) reduced the E&G budget base by -20 percent. Berea’s scenario planning process integrated academic/student learning, administrative/organizational, and financial/budgetary considerations within a nine-month integrated strategic thinking and planning process.

While the chief financial officer and other senior administrators were key members of the SPT, it was led by the dean, which ensured that the final scenarios were primarily focused on educational objectives, not simply the urgent and significant reduction of the annual budget. The final scenario chosen was called “Engaged and Transformative Learning” and combined two of SPT’s three proposed scenarios. Like the SPT’s three alternative scenarios, the chosen scenario integrated strategic thinking and planning by requiring an integration of the scenario’s long-term, educational vision with its difficult -20 percent budget-reduction reality.⁷

In 2019 and in response to the rapidly changing educational, enrollment, technological, cultural, and financial challenges all higher education institutions face, Eastern University developed a “transitional” strategic plan, “Eastern U in Motion: 2019–2022.”⁸ The first “imperative” of this plan is to “Articulate EU’s role and responsibility in Christian Higher Education.” The four action goals of this imperative are as follows: “(1) Clarify our vision, mission, and identity statements; (2) Identify three to five viable long-range scenarios for a future EU; (3) Evaluate EU’s position within the higher education environment; and (4) Finalize a three- to five-year university strategic plan.” It is clear that the three to five scenarios are expected to present alternative, strategic visions for an educationally focused and financially “viable” future Eastern University. This is a second example of how an integrated scenario planning process can include both strategic thinking and strategic planning that looks to the future and differs from the first two models presented above.

Brief Overview: 

• “Scenarios” =plausible, holistic narratives of a college’s educational programs, structures and budgets that provide alternative visions shaped by external realities and trends;
• Time frame = typically “long-term” (3–5 or 5–10 year) projections;
• Creators = strategic thinking and planning teams that reflect campus shared governance norms in composition and decision-making.

4. Conclusion

Especially in our COVID-19 era when many colleges and universities discovered scenario planning as a good way to deal with both educational delivery options and financial planning alternatives it is clear that:

• Small colleges and universities must both manage Covid’s multiple challenges short-term and must plan strategically—and not just incrementally—for 2026 and beyond (See Pierce’s comments below);
• Faculty at many institutions have already claimed that their schools have failed to honor “shared governance” in their institution’s Covid response plans. Therefore, long-range strategic planning of any kind should include faculty participation, which most financial scenarios do not (e.g., Maxwell’s essay);
• With presidents’ guidance, boards of trustees and campus leaders, including faculty, must understand the limitations of the Covid-induced and short-term scenario planning processes and expect more holistic, long-term strategic planning—including mode three scenario planning—that encourages innovative and alternative visions that situate their college and students in a 21st-century world.

What this short essay suggests is that the urgent and pervasive educational and financial scenario planning prompted by the COVID-19 pandemic should not be conceived as a sufficient model of decision-making for the more comprehensive and long-term strategic planning that current enrollment, educational, affordability, and technology trends require. In this context, Susan Resnick Pierce in her important recent Trusteeship essay “Beyond Incrementalism” speaks of mode-one financial scenario planning as an important “tactic” “to understand the financial and reputational implications of current decisions but then says immediately, “Few seem to be thinking about the long-term, strategic implications of the tactical decisions that they are now making.”⁹ What this essay also suggests is that scenarios that incorporate both strategic thinking and planning can address all three imperatives—long-range strategic planning in response to a crisis or challenging external trends; combined leadership by administrators, faculty, and trustees; and campus leaders’ willingness to support innovative and consequential changes (the cultural conundrum on most “shared governance” campuses). But what is clear is that it matters (a) whether scenarios primarily emanate from financial, educational, or combined programmatic and budgetary concerns, (b) who is leading and involved in the creation of the scenarios, and (c) what a scenario’s time horizon is. Answers to these three questions can help presidents, trustees, and campus leaders choose an appropriate type of scenario planning process that will meet their institution’s needs.

Larry D. Shinn, PhD, is an AGB senior consultant, a former president of Berea College in Berea, Kentucky, and a trustee emeritus of the University of Mount Union in Alliance, Ohio.

Endnotes

1. Carol Christ, “Tomorrow, Tomorrow, and the Day After: Reflections on Planning in a Pandemic,” Trusteeship, July/August 2020, 40–41.
2. David Maxwell, “Shared Governance and Financial Exigency,” Trusteeship, January/ February 2021, 37–39.
3. Larry Shinn, Strategic Thinking and Planning in Higher Education: A Focus on the Future (Washington, DC: Association of Governing Boards, 2017), 28.
4. “Sky Scenario,” Shell, accessed August 13, 2021, https://www.shell.com/.
5. Carol Christ, “The Power of Strategic Thinking,” Trusteeship, March/April 2014, 11–15.
6. Larry Shinn, Strategic Thinking and Planning in Higher Education: A Focus on the Future, 40–45.
7. Larry Shinn, “Inside the Eye of the Perfect Storm: Leadership in Rough Financial Seas,” The Presidency: The ACE Magazine for Higher Education Leaders (Fall 2010), 30–34.
8. “EU in Motion: Strategic Plan 2019-2022,” Eastern University, accessed August 13, 2021, https://www.eastern.edu/motion.
9. Susan Resnick Pierce, “Beyond Incrementalism,” Trusteeship, January/February 2021, 27.