The goal of long-term planning is not a strategy, but; prepare key minds to make the right decisions.
Background.
Most companies invest a significant amount of time and effort in a formal annual strategic planning process, but many managers receive little from investment. One of the managers told us: “Our planning process is like a primitive tribal ritual, there are a lot of dancing, waving feathers and beating drums. Good will come of it. ” Another said: “This is similar to the old communist system.
pretend to follow him. "
Managing thinker Henry Mintzberg went so far as to call the phrase "Strategic planning an oxymoron." He notes that the real strategy is carried out informally, in negotiations in the corridor, in working groups and in quiet moments of thinking about long flights on airplanes even on the golf course, but rarely in panel meeting rooms where formal planning meetings are held.
Our strategic planning research supports Mintzberg observation. We concluded that several truly strategic decisions are made in the context of a formal process. We also found that when handling the right
the goal is that formal planning should not be a waste of time and can be a real source of competitive advantage. Successful companies used strategic planning not to create strategic plans, but as a learning tool to create “prepared minds” within their management teams.
The former senior executive director of GE Capital explained the logic of such thinking. Business is often unpredictable. Two competitors merge, the other is developing a new technology, the government issues new rules and fluctuations in market demand in another direction. Often during these events, the company’s most important strategic decisions are made in real time. Too often, companies react poorly under pressure because they are ill prepared for these unpredictable events. Discussions between top managers are often based on opinion rather than fact, and subsequent decisions are ultimately based on gut instinct, rather than thoughtful analysis. However, GE Capital believes that it gains a competitive advantage by following a disciplined strategic process that focuses on preparing it for the upcoming uncertainties.
As our analysis shows, the real strategy is carried out in real time. It follows the goal of a formal strategic planning process to ensure that key decision makers have a clear understanding of the business, share a common base of facts, and agree with important assumptions. These elements of the trained mind provide the basis on which good strategic decisions can be made throughout the year. One of the most important ways to build this framework is to obtain the central elements of the process right.
How to create prepared minds?
Most strategic planning processes are based on a set of annual or other meetings dedicated to the time period at which the CEO and senior corporate group analyze the strategies of the company's business units or divisions. The CEO and top team usually meet separately to discuss corporate strategy.
We found that the key to transforming these review meetings from the dog and pony show into effective training vehicles was to treat them not as executive director reviews, but as conversations. The difference is that a conversation is a two-way street in which participants learn and challenge another. The goal is that everyone can better leave the room than when they entered. Achieving this exit requires a lot of training for all participants.
Who should attend reviews?
At Ed Smith in Canada, they believe that real conversations take place in groups of three to ten people, no more. Ed Smith simply does not believe that effective results will be achieved in large groups for logistic and political reasons. Llewellyn Smith, former president and chairman of ED Smith, believes that once a group grows, it is difficult to ensure that everyone can participate in importance, so that hierarchical forces are more likely to come into play. Instead of frank discussion, in larger groups, most likely, they see posturing and politicking. Some companies in our study were tempted by inclusion values, leading groups of thirty or more to their strategy reviews. These discussions were suppressed, and people left, feeling that this exercise was more revealing than a real dialogue about important business matters.
In fact, there are only two main participants in the analysis of a business unit; CEO and Head of Business Unit. All others are discretionary and should be included only if he or she truly is a decision maker. The number of decision makers varies from company to company, but typically includes a financial director for corporate finance, a team leader to whom a business unit reports, a human resources manager, one or two senior managers, and from two to three high-level business members. command. A corporate strategy leader is also usually involved as the person responsible for ensuring that the conversation is effective. Thus, the total number of participants can be from five to ten, with a maximum of twelve. People will fight for participation in these meetings, but other forums can be set up to keep them informed and receive their purchase.
How long should reviews take?
It is not possible to hold an in-depth discussion of a significant business strategy in less than one day. There are too many topics for issues such as customers, competitors, technology, regulation, risk, investment, market segmentation, resources, and more. Spending less time in these areas prevails by gently pushing and pushing the questions needed to get the full benefit of the effort. It may seem like a lot of time for each large business unit, but most of the managers we spoke with said they wanted to spend about a third of their time on strategy.
For two hundred and forty working days a year, which takes eighty days to devote a strategy. In this context, it seems reasonable to expect the executive director to spend ten to thirty days on intensive, well-prepared policy discussions. As one head of Emerson Electric told us: “At first, I was outraged by the Emerson process, because it was such a big commitment to time, but then, after several cycles, I realized that it makes me and my team better managers, and the meetings themselves made us that we have not learned otherwise. " Former executive director Charles F. Knight said that “more than half of my time every year is blocked strictly for planning,” a commitment to the strategy that was transferred to his successor, David Farr.
Where should planning meetings be held?
It is best to hold planning meetings from the site. Holding off-site meetings will minimize the distractions of everyday business at the corporate headquarters, allow participants to focus on the task and provide participants with free time to attend meetings in an environment free from everyday problems.
What needs to be discussed?
Many companies combine their strategy reviews with discussion of budgets and financial goals. This is a big mistake. When the two are combined, the discussion is dominated by emphasis on quantity and short-term problems; long-term strategy issues receive only superficial attention. Similarly, if there is no other forum at which financial indicators could be discussed, they will inevitably appear at strategy meetings. Ideally, companies should have two clearly demarcated meetings: one full day for the business unit strategy and another meeting at another time of the year to set financial goals. These two should then be linked to a three to five year overall financial plan, which links strategic initiatives with budgets and financial goals. Such a strategic link is crucial.
The focus is on long-term trends, opportunities, challenges and solutions. In those enterprises where solutions have a long life and are difficult to cancel, for example, in the aerospace or telecommunications industry, the long-term period can be from five to ten years. In those where commitments have a shorter lifespan, such as software or consumer goods, this can mean two to four years.
The discussion should focus on questions in the relevant time horizon, for example: What are our aspirations? What are the critical trends in terms of customers, competitors, technology and regulation? How does our business model work and how will it evolve? What are the main challenges and opportunities we face? What opportunities do we need for the future? What are the main risks and uncertainties that we face? What can we do to ensure our flexibility and flexibility?
How should the conversation be related?
The main purpose of the discussions is to challenge the strategy, analyze market assumptions, check that the full range of strategic decisions is being considered, examine potential opportunities and risks, and make honestly assess the strengths and weaknesses of the business,
The culture of organizations will dictate the tone of the discussions, and there is no proper culture for planning. Good strategic planning may arise from your Emerson Electric or Hewlett-Packard more noble culture. However, of course, there are some wrong ways of negotiating strategic planning. Sometimes business leaders, outraged by what they see as “corporate interference”, try to reveal as little information as possible; on the other hand, senior corporate leaders from time to time turn meetings into a “gotcha” game, looking for all the skeletons in the cabinets of a business unit.
Exploring the boundaries of strategy and promotion of a business team to study worst-case scenarios.
Negotiations can be tough, but it is important to create an environment that does not become “the opposite of us.” In a company like Emerson, where employees can challenge each other, this is done by exploring the boundaries of a strategy — pushing away business teams to study the worst-case scenarios and understanding what can make them come true. Testing to see if you can aspire upwards; or research into the competitive effects of drastically reducing costs or improving product performance.
It is also great to create a collegial atmosphere if it is not transmitted to such an extent that inconvenient problems are obscured or buried. One of the companies we studied never made an effective strategic plan, since it was oriented towards consensus. Hard questions were simply postponed until the next meeting, because the members of the management team could not resist each other, and there was an emotional management relationship.
What training is needed for these meetings?
The preparation of principals is the key to complete the discussion of the strategy for the whole day. Tasks should not be outsourced to personnel. A document containing detailed information about the strategy should be sent at least one week before the meeting, which will allow participants the time they need to study. This will allow people not to waste time reading and understanding slides for the first time. Instead, participants will come ready to ask questions and discuss questions.
A corporation must provide a business unit with a template that serves as a guideline for analysis. Templates should determine the company's current position in terms of customers, products or services, and market segments; an assessment of the future direction of the industry, including customer trends, competitor actions, technology changes and globalization; and identify the main opportunities and threats facing the business. It is also useful to share with the units the best plan of the previous year to create a gold standard for what is expected.
Each device must be given a large latitude. Each business unit is different, and one size does not fit all, because in some cases templates may hide more than they show. In addition, strategy reviews are a great way for a manager to control the quality of company managers. If there is too much corporate leadership, it becomes harder to tell a real strategist from those who are simply good at filling out templates.
What follow up is needed?
Disciplined observation is essential. Long-term strategic objectives should be linked to short-term budgets, financial objectives, operational plans and human resources strategies. In companies that had a good process, the executive director personally made detailed comments; wrote a three- to four-page note to the business unit of the unit management, which sets out the main themes, implications and obligations; and used the notes as a starting point for the next review. Targets should also be included in the compensation plans of the management team. The follow-up ensures that strategic plans will not be ignored in the executive bookshelf. Rather, these are living documents that stimulate action and productivity.
Prepared minds in action.
How to evaluate the success or failure of the strategic planning process? Not that the written plans were good, or everyone felt good afterwards, or even when any important decisions were made during the meetings. The final criterion is that all participants left the process, which was more prepared for real work on making strategic decisions. In our studies, we have seen many examples in which the correct result led to this result.
Consider how rigorous planning has helped firms specializing in manufacturing industrial goods to expand their operations internationally. Suddenly, his automotive parts division was faced with the possibility of acquiring two large enterprises in Germany, where he was not a significant player. Since the company was new to the market and it needed to allocate significant resources to succeed in it, the decision was risky.
Fortunately, the chief executive officer, the team members of the corporate team and the business units had intensive discussions in strategy, and before that she already had a point of view on the German market and the strategic suitability provided by this opportunity. In addition, a deep understanding of the economics of the product area under consideration was hardened. The company was able to make a decision fairly quickly and negotiate with a low competitor who was not so well prepared. Acquisitions were important to the success of a company's growth strategy.
Similarly, Stryker Canada, a medical device company, used its strategic planning efforts to focus on a new growth area. A review of the strategy showed that the main business units, taking advantage of a large market share and high profitability, gradually become the subject of compromise. Considering demographic factors, company executives realized that orthopedic applications would become increasingly important. More weekend athletes Baby Boomers blew his knees and hips. For several years, the company engaged in various activities as a result of this understanding. This led to breakthroughs in the laboratories, which offered innovative ways to create orthopedic devices, acquired a business that could become a home for further sports — medicine, and pursued licensing opportunities to expand product offerings. The management team tried to combine the pieces of the puzzle, because it was clear in which area of growth opportunities and the need to act in the face of a potential decline in the existing business.
Hard work is the key to the prepared mind in action.
Реверс двух вышеупомянутых сценариев наглядно проиллюстрирован в приобретении ED Smith, Canada GEM, Миссисипи. Старшим должностным лицам руководства ED Smith сообщили надежные источники пищевой промышленности, которые они должны были расширить до Соединенных Штатов, чтобы оставаться в курсе клиентов, поскольку они расширили свой рынок и стали более глобальными в своих стратегических задачах. Llewellyn Smith, тогда президент и председатель правления ED Smith оставил задачу одному человеку принять все решения, связанные с расширением. Не хорошо подготовленный к задаче (не по своей вине), человек, совершивший ED Smith, приобрел GEM Industries в Byhalia, штат Миссисипи, у делового человека в Торонто.
Немногие, если члены команды бизнес-подразделения были вовлечены в обсуждение стратегии. Стратегического анализа приобретения не было, и полное понимание экономики продуктов, технологий, рынка трудовых ресурсов и географической культуры не оценивалось. В результате, потратив приблизительно десять миллионов долларов и различные корпоративные ресурсы в течение двух лет, ED Smith продал все свои интересы в компании и вернулся в Канаду.
Хотя Д. Д. Смит укрепил WalMart, Sams Choice и HEB. Джем-бизнес для южных Соединенных Штатов, позднее Ллевеллин Смит заявил, что это можно было бы сделать, используя канадские ресурсы на существующем заводе в Вайноне. Компания исторически восстановилась и сумела вернуться к прибыльности, но при значительных затратах.
Подготовленные умы также могут помочь компаниям отказаться от ходов, которые не имеют смысла. Компания с большим аэрокосмическим и оборонным подразделением инвестировала много времени в свои обзоры стратегии, чтобы топ-менеджеры поняли экономические последствия консолидации в своей отрасли. Вместо того, чтобы принимать стандартную линию от отраслевой прессы и ученых-консультантов, участники подробно рассмотрели, что это означает для их конкретных подсекторов отрасли и их собственной будущей экономики.
Они не были доверчивы, когда их инвестиционные банкиры пришли в город, утверждая, что компания нуждается в большей экономии за счет масштаба, чтобы выжить, и предложила конкретную цель приобретения, которая скоро будет продана. Вооружившись оценкой бизнеса и осознавая сильные и слабые стороны конкурентов, топ-менеджмент предпочел не делать сделку, что в ретроспективе оказалось правильным решением. Их подготовка позволила им разобраться в разумных событиях от глупых и избежать потенциально дорогостоящей и отвлекающей ошибки.
Сравните этот выход с событиями в агрохимической фирме, где плохо подготовленные руководители должны были реагировать на проблемы рынка. Рост в отрасли компании произошел в основном за счет разработки и продажи генетически модифицированных семян (GMS).
В какой-то момент семеноводческое подразделение компании провело мозговой штурм, чтобы рассказать о новых возможностях роста. Европейские коллеги подняли возможность обратной реакции в своих родных странах против продуктов питания, выращенных из GMS, но корпоративный старший исполнительный директор, который присоединился к обсуждению, был недоволен этим негативным взглядом на бизнес и снял эту тему со стола.
Позже европейские потребители действительно возражали против продуктов GMS, и компания была ослеплена быстрым снижением своего европейского семенного бизнеса. Этого результата можно было бы избежать, если бы у компании был формальный процесс для основанных на фактах открытых дискуссий о рисках бизнес-единицы среди лидеров высшего руководства корпораций и бизнес-единиц. В отсутствие такого процесса прихоть одного из руководителей превысила озабоченность бизнес-единицы.
Резюме.
Как показывают эти примеры, нет никакой причины, по которой стратегическое планирование должно быть прикладом циничных шуток. Это одна из самых важных задач для руководителей корпоративных и бизнес-подразделений.
Компании, которые обрабатывают больше похоже на племенные ритуалы, теряют ценное исполнительное время как минимум и более серьезно, они могут оставить корпоративных лидеров неподготовленными к тому, чтобы правильно реагировать, когда возникают неизбежные моменты истины. Когда реорганизован как процесс обучения, формальное стратегическое планирование может помочь менеджерам принимать обоснованные стратегические решения в мире турбулентности и неопределенности.
