We Beg To Differ: Argenti Does It Better
1. Strategic Planning: Where do you start?
‘Every journey starts with a single step’, it is said. So you’d better make sure your first step is in the right direction! We believe that the correct first step for almost every organization is to form a Planning Team (details above).
But where should that team start its discussions: what is its first step? Today the most popular starting point is to make a Vision or Mission Statement. We believe that is a fatal mistake.
2. The Vision Statement
If you start with a Vision Statement the very word demands that you say something ambitious, pompous or pretentious. You almost cannot make a low-key, down-to-earth Vision Statement! ‘To become the world’s leading company for automotive products and services’ boasts Ford in their website but they used to be nearly that about fifty years ago and manifestly are never going to be again. Let us admit it, the best strategy that many organizations can hope for in this brutal world is just avoiding a disaster! One crumb of advice for strategic planners might be be a little bit sensible.
When a CEO, on his own, makes a Vision Statement, without the restraining influence of a team of colleagues around him, it is an open invitation for him to go on an ego-trip. Most CEOs do not need any encouragement in that direction!
3. The Mission Statement
This word (which, like Vision, is seldom defined) probably means; ‘What this organization does’. So these mission statements often look like this: ‘We are a leading German machine tool producer exporting around the world’. The problem here is that just because this is what this company does today, it may not want to do it in the future. In fact that is exactly the question a strategic planning exercise should ask. What an extraordinary thing to do: start an exercise to answer a question with the answer to the question!
In any case it is the wrong first question. A far more crucial question for your organization than ‘what does it do?’ is ‘What does it do for whom?’
4. The Purpose Statement
Every organization that has ever been formed, or ever will be, has been founded to deliver an explicit benefit to a specific, named, group of people who Argenti calls The ‘Intended Beneficiaries’. Thus a school is there for its students. They are who it is for; they are its ‘raison d’etre’; why it exists; why someone founded it. No one founds a school to benefit its teachers of course they do benefit from the employment, but they are not who it is for.
A hospital is for its patients. They are why it exists; if they emerge less healthy than they went in, it’s a failure. A company is for its shareholders if it does not make them a profit it ‘goes bust’; it ceases to be a company. Defining exactly what your organization is supposed to be doing for whom and how much of that is satisfactory - is surely the crucial first question for your planning team.
Aims and Means: your Aim is to satisfy your ‘Intended Beneficiaries’; the Means are what you do to achieve this aim. Define the Aim first, surely? For whose benefit is your organization working for?
5. Two Strategic Aims
Every strategic plan we have ever seen aims to achieve some ambitious goal - companies want far more profits, schools want far better exam results, hospitals much quicker cures and so on. Ambition is splendid, but often these aims are not just ambitious but absurdly so. They take little account of the world we live in being perverse or that our plans always go wrong especially long range ones. Long range plans are based on long range forecasts; you have to make your plan knowing your forecast is wrong but you do not know how wrong.
The Argenti System therefore suggests that you should design a set of strategies which will achieve not one target, but two. You need strategies that will take your organization (1) to a satisfactory performance but (2) will protect your organization from a miserable one. Few ‘experts’ in this area have understood that organizations not only have to perform well but they must also not become a disaster.
6. Planning Teams
Using a planning team to prepare a strategic plan is common practice. However, they vary widely in composition for no obvious reason. We employ four strict rules for our teams: (1) The CEO must be the team leader - a strategic plan defines the destiny of your organization for years or decades ahead; it is inconceivable that the CEO should be absent for a task of such significance.(2) The rest of the team should consist of the CEO’s top colleagues. The total membership should be more than 3 but never more than 7. (3) One member must be a Facilitator whose task is to guide the team through the planning process and so should preferably come from outside the organization and have expertise in strategic planning and/or be familiar with your organization. At a defined stage in the process our 4th rule is to invite the next level of management to join the team.
Follow these rules and your plans will be professional, rational - and inspired by your own people, the very people who are going to put the their - strategies into action.
We suggest consultants should never be asked to ‘do’ a strategic plan for an organization (as opposed to facilitating it). Our reason is that your management team knows far more about your organization than any consultant can ever know. Moreover your people will have in mind the kind of future they would like to see for their particular organization and its culture. In contrast consultants tend to offer complex or ‘exciting’ strategies to impress you or to justify their fees.
Argenti System clients often report a marked jump in management morale at the end of the Argenti planning process. This arises mainly because we insist on you using your own top management to move through the entire planning exercise subject only to a Facilitator to show you the way. This is a far-reaching advantage: The outside Facilitator will ensure the plans are professional (complete with a proper Risk Analysis and other technicalities) but the data and the bright ideas will come from your own people.
8. Gap Analysis
Few strategic planning systems include a Gap Analysis. This is where you should compare your top corporate target with a forecast. (By the way, a target is ‘what you want to happen’ and a forecast is ‘what you expect to happen’ we find that most people still confuse the two yes, even MBAs). So, suppose a company wishes to see a profit of $10m by Year 5, and suppose it calculates that its current strategic plan will take its profits to $6m by then. It has a Gap of $4m. So it is looking for a set of strategies that will deliver an extra $4m over and above its current plans by Year 5.
Gap Analysis tells you how severe your on-coming strategic problems are going to be and how soon they will cause your performance to decline. It is impossible to devise a strategic plan unless you know these numbers; you will neither know how powerful your strategies will need to be nor how much time you have to prepare them and put them into action.
It’s important for NPOs too. The Global Warming scientists currently tell us we must cut CO2 by 80% by 2050. That’s the target. The forecast for 2050 is that it will rise by 80% due to population growth and rising living standards. The Gap is clear disturbingly so. But would you have seen it so clearly without the figures?
9. Long Range and Short
Few managers, even those with MBAs, have understood that strategic planning is significantly different from all other forms of planning. The difference lies mainly in the time span: ‘strategic’ describes decisions that are very large in size and of long duration; tactics are less significant and more ephemeral.
This especially affects the quality of any forecast. The inaccuracies in long range forecasts are so huge that the errors themselves are as important as the central figure. The Argenti System uses a simple but powerful device which brings ‘risk’ into the strategic discussions right from the start. Your team will devise their strategies from scratch knowing that risk is a vital element in their decision.
10. A Far Wider Strategic Reach
Almost all the books and articles on strategic planning assume it has to do mainly with getting the business portfolio right products, markets, customers, suppliers. But what about the quality of the management itself? How good is your R&D? Your finances?
We have seen dozens of companies develop ambitious plans an attitude we strongly applaud. But not if one of the SWOTs happens to be ‘weak top management’. Or ‘We need to re-new massive loans next year’. Or ‘Marketing Director out of touch’.
We find it amazing that the management literature concentrates so heavily on the product/market area when, unnoticed and unmentioned in their plan, an organization’s pension fund is millions or billions of dollars in deficit and is clearly a strategic elephant which will hogtie this organization for years ahead!
Our SWOTE includes a survey of everything that might matter. This would make it impossibly long and tedious but, of course, we ask the planning team to search only for those items of elephantine significance.