Scenario Lotharios
|
Scenario Lotharios
|
|
GIPI c Products
Knowledge
Fun
Links
© The Z/Yen Group of Companies 2008
|
Ian Harris, Z/Yen Limited
The Tale of the Ancient Chinese Strategist Once upon a time, about 400 BC in China, a man, Sun Tzu he was called, discovered strategy. Over the years, strategy as a managerial tool has settled down in its organisational place. We have begun to realise that strategy is not about the long-term rather than the short-term, but about the high-risk/high-reward decisions, rather than the day-to-day. Interestingly, the increasing acceptance of strategic planning coincides with growing academic scepticism about provable results. Objectively, we are unable to correlate performance and strategic planning, as demonstrated in one deep Z/Yen study six years ago. These troubles lead some organisations to classify planning as irrelevant or reject planning altogether. Yet at the same time, there are a lot of unprovable things in the world which we undertake in sincere belief or good faith. Much of the important work done by NGOs falls into this category. The Story of the Over Zealous Charity Finance Director We turn to the story of the new charity finance director who went to her first trustee meeting. Fired up with enthusiasm for her new role and full of strategic planning advice got on the cheap from an inebriated Z/Yen consultant she met at an NGO Finance drinks party, she was determined to make her mark. Her trustee presentation was filled with eyeball-popping pie charts, fantastic flip charts and detailed spreadsheets incorporating real option theory. You know the end of this story - the trustees didn't understand a word and did what they felt like doing anyway. She might as well have asked the trustees to rub a magic lamp and utter three wishes. What she needed, what we all need, is a way of making strategy and planning with numbers mean something to real people - hence the focus on scenarios, a fancy strategy word for stories. A Stereotype is Going to Tell You a Story? One of the biggest problems we face doing strategies and scenarios for clients is developing stories with the right spread of events to help the business. We need to be able to 'map' the universe of useful scenarios, not just make up tales. We also need to guess which story will most help which type of individual in a given situation. John Adams, in his work on risk structure, and others, such as Geert Hofstede work on culture, have begun analysing perceptions of risk as ways of classifying views and cultures. Adams' first axis, the horizontal, divides people into those who look at collective risk versus those who look to themselves. His second axis, the vertical looks at those who see the world as one at the top where authority sets the rules, equally applied even if unfair, and the bottom where people make the rules themselves. The four resulting risk character types, each view a different world (see diagram below).
People exhibit different risk profiles at different times and in different situations. Organisations can also have different risk profiles within different functions, e.g. accounts versus fundraising, etc. Still, let's summarise these stereotypes:
Risk profile stereotyping is a crude tool. Individuals inhabit different positions at different times in different circumstances for different decisions. One might be a fatalist about comet disasters, an individualist about one's children's education, a hierarchist about corporate rules and an uber-egalitarian about corporate pollution. Scenarios for the year 2020 At the CFDG conference in May, Michael Mainelli presented three possible scenarios for the sector in the year 2020, based on the Hierarchist (Power Brokers), Individualist (Free For All) and Uber-Egalitarian (Control Freaks) risk profiles. Michael left out the fatalists, but they might have known that would happen to them so why bother to complain? In the hierarchist world of 2020, the voluntary sector has grown to 15% of GDP and exerts pressure on the IMF and the World Bank, with over £162 billion in managed funds. Expenditure limits have been agreed in many countries, but rogue organisations operate from charity havens. In the UK, fit older people are required to help with care after the passing of the National Service Act of 2010. Some pensioners are unfortunately caught by National Service both coming and going. In the individualist 2020 scenario, the EU has closed down 50,000 rogue NGO's for illegal activities. EU activist and relief organisations have been banned in Southern Africa since they set off a small war in 2017 leading to 1800 fatalities. NGO tax exemptions have been abolished. Many NGOs now renounce all government funding. Growth has been middling. 2020 in the Uber-Egalitarian world has NGOs as the new glamour sector. UK high fliers are migrating to NGOs now that the House of Lords is powerless. AAA (Aid and Administration for Africa) now runs three African countries and has done pretty well in two of them. 20% of OECD GDP is now voluntary sector. Some say that larger charities are too cost obsessed to take risks. Special interests seem to rule. The Legend of the Gifts from Z/Yen The above scenarios are not gospel (or even apocrypha), they are merely thought tools. Z/Yen is happy to supply NGO Finance readers, free of charge, copies of the full text of the three scenarios, together with a page of ideas on characters, drivers, events and some provocation which may help you develop these scenarios further. Feel free to use some of the material in an informal workshop with your own organisation. Develop scenarios you believe illustrate plausible tales for you - and then use this 2020 vision to see how you could prepare today for tomorrow's uncertainties. Skilled practitioners can wring out a bit extra, but you can get a lot on your own as long as you manage the expectations. Just remember, there is little point in any strategic planning, including scenarios, if the organisation does not genuinely wish to change. Stories can be a lot of fun. But finance people need to turn these subjective risks and rewards into numbers and plans. This is a deep subject. Suffice it to say that scenarios are an excellent way to get your senior team to give you their real views on risk and rewards. All that's left for you is to find a few tools to help you turn those views into semi-quantifiable outcomes. The tools do exist and Z/Yen would be happy to point those of you who are interested in the right directions. The Tale of the NGO Finance Reader who Facilitated and Improved Scenarios and story-telling can help senior management teams to generate consistency amongst perceived risks and rewards and to share a shorthand internal set of stories which encapsulate these risk and rewards in comprehensible units. Scenarios can help organisations, including yours, to deal with the uncertainty of the future by helping to measure the unmeasurable. When you have the day job of debits and credits, SORP, VAT and other things under control, this whole world of storytelling can help you deploy new stochastic tools and techniques. Many of you already have made the transition from critics to decision facilitators, improvers and integrators of your organisations. Some of you may be a bit apprehensive about this touchy-feely story stuff, but remember that as finance people most of you are trained in one of the few professions where the key skill is how many creative stories you can tell from just one set of numbers. So start to tell a story or two. Michael Mainelli and Ian Harris are directors of Z/Yen Limited. Z/Yen specialises in the application of risk analysis and return incentives to strategic, systems, human and organisational problems in order to improve performance. Z/Yen clients to date include blue chip companies in banking, insurance, distribution and service companies as well as many charities and other non-governmental organisations. |
|
