Slide 1

Michael Mainelli, The Z/Yen Group

[A version of this article originally appeared as "Strategist’s Survival Plan", Strategy,  The Strategic Planning Society (May 1999) pages 9-10.

 

Measure Success or Fail:
Corporate Political Strategy for Strategic Planning Units

Strategic planning units are hard to measure.  Because of measurement problems, business process re-engineering (BPR) affected strategic planning units differently than most other business functions.  Strategic planning units were often among the initiators of BPR and often among the very first victims.  Several strategic planning units exhibited all the political savvy of turkeys voting for Christmas by both proposing BPR and having their heads on the block first.  The following discussion between two work colleagues over lunch might seem more appropriate in a Dilbert cartoon than in Strategy, but is an amalgamation of some actual organisations:

Strategic Planner: "Oh, you might be interested to know we're conducting a strategic review of the role of the Corporate Strategy unit." 
Operations Manager: (More head-office S&M - scratching & manoeuvring - it's always politics at HQ) "Isn't that a bit like bringing coals to Newcastle?" 
Strategic Planner: "Sort of.  But there is a serious side to this.  We've been asked to see if we can radically re-engineer our unit.  In my opinion, it's a bit of a wasted exercise because we do so many different things within HQ, but you know the routine." 
Operations Manager: (At last, somebody's asking a few hard questions about corporate strategy) "Sure, we're constantly trying to re-engineer what we do.  Who kicked this review off." 
Strategic Planner: "Oh, nobody in particular, we just thought it was a good idea to do this sort of thing periodically." 
Operations Manager: (What a porker, obviously someone on the board got wind of how large the unit has become) "Isn't that non-executive director, Sam, always asking for re-engineering reviews?" 
Strategic Planner: "Sure, he made a big fuss about how we're always too busy in Corporate Strategy to conduct his reviews.  Even now he's making a few suggestions to my boss, the Head of Corporate Strategy, about some of his wacky ideas, but he really doesn't understand what we do.  Anyway, this is mostly our review.  In fact, my boss has arranged a brainstorming workshop for tomorrow where we're going to focus on the question of where we add value to the corporation." 
Operations Manager: (What a good question - about time these folks faced our daily treadmill of finding ways to increase value) "By the way, who does your boss report to these days?" 
Strategic Planner: "That too is part of the review.  We do so much that is unappreciated by anyone but the Chief Executive, when he has the time.  All of us in Corporate Strategy do a bit of work with most of the directors - finance, the various operations directors, international, marketing - because the Chief Executive often forces them to clear things with us.  Most of the time we help directors to improve things.  In fact, I even did a small study for the Chairman last year after the Chief Executive told the Chairman he needed to use us." 
Operations Manager: (Bet the Chairman was pleased - looks like they depend totally on the Chief Executive's clout) "Does your boss get on well with the other directors?" 
Strategic Planner: "Definitely.  Well, except for Francis who heads up International.  Complained that we stuck our noses in and were just lackeys for the CEO.  I mean the rest of them understand that we need to give guidance on the big, holistic, long-term, overall picture, the total Weltanschauung, as we say in strategy.  It can take some time.  The directors may not be our friends, but they know how useful we are and don't mind waiting for our assessments.  Just the other day, Clara, that special project director for New Zealand, mentioned to the board that we should get involved in the feasibility study for Azerbaijan.  It's dragging and they need our input.  She's too tied up to help." 
Operations Manager: (Interfering busybodies with no friends whatsoever - not surprising without a power base) "How do you even start to work out how many people you need to work with all these directors?" 
Strategic Planner: "An excellent question.  With so much going on we never have enough quality people.  It's been that way for years.  Always too much to do - annual budgets, directors' strategy weekends, corporate plans, project appraisals, etc.  Strategic planning touches everything" 
Operations Manager: (Definitely over-staffed and over-nosy) "Getting back to this review, don't you think it would be helpful if you could measure the value of what you contribute?" 
Strategic Planner: "That's not a bad thought.  Although we're not on the front line, we are absolutely essential.  If we could measure our contribution concretely then some of these politically-inspired reviews (oops) might not get started.  I can see that you folks in operations need to do that sort of thing.  On the other hand, we're very busy.  This is hardly the right time to open up that can of political worms.  Further, with the sheer variety of our projects I'm convinced it's impossible to measure the value of what we provide." 
Operations Manager: (He doesn't want to change - he hasn't got a clue) "For what it's worth, my tuppence of advice is 'without measurement it will always be politics'.  But enough business.  So, what's for lunch?"

Too frequently, strategic planning units scurry about doing their master's bidding, like a bunch of presidential aides who, being close to power, get carried away by the illusion of having power.  They rarely see themselves as others do.  When times are good and the Chief Executive hobnobs with his or her fellow wizards in the boardrooms and dining salons of the corporate world, he or she adores the social cachet of phrases such as "I'll have my strategic planning bods look into that idea" or "With all our acquisition activity, I keep my strategic planning team busy just checking out all of the fringe opportunities".  When times are bad, strategic planning units are just an expensive overhead.  Strategic planning units are particularly expendable when their sponsor needs to show the ability to take cuts him- or her-self.  Are there alternatives?

A good place to start looking for alternatives is in four key reasons organisations do anything - it makes money, it's politically expedient, it's legally required, without it we grind to a halt - e.g.  respectively - sales commissions, much human resources, most health&safety, toilet cleaning.  The last two reasons probably don't matter.  Strategic planning is unlikely to be legally required soon.  Without strategic planning, firms hardly grind to a halt.  There are large numbers of organisations (35% in one survey we conducted) who shun all strategic planning.  So strategic planning units need to link themselves firmly with money-making or political expediency.

There are a number of possible models for strategic planning unit measurement.  Few of the models put a strong emphasis on money, possibly because direct contribution to performance is a tough measure, as anyone who has set sales commissions knows.  In practice, only the first two of the following six models are common and they both have strong political overtones:

Model

Measurement

Pros

Cons

cost-centre: strategic planning is just a corporate overhead

¨       largely political, possibly supplemented with customer satisfaction surveys or structured feedback

¨       easy to do - the organisation subsidises all strategic planning

¨       subject to all politics

¨       size set arbitrarily

¨       no power - decisions made politically

consultancy (profit centre): strategic planning projects are costed as if done by an outside consultancy firm and possibly partially subsidised

¨       organisational units' expenditure

¨       project appraisals

¨       customer satisfaction benchmarked against external consultants

¨       people may buy to get reinforced corporate knowledge

¨       simple measures - utilisation for instance

¨       size partially set by demand

¨       consultancy is not a core organisational competence

¨       people may be compelled by corporate policy to buy or to buy at non-market rates

¨       difficult to remain a strategy unit rather than a consultancy business

¨       why shouldn't people buy from outside

 

value-added advisor: a sometimes used strategic planning unit, typically for complex projects

¨       measured on a portfolio sampling of projects and their relative success rates with and without group strategy’s involvement

¨       unit size kept low

¨       identifiable specialist expertise

¨       self-selection of flattering projects

¨       too easy to avoid involvement in core organisational problems, e.g.  improving customer service

¨       little or no power

¨       easy to become an internal Machiavelli

internal capital charge rating unit: setting a cost of capital varying from the corporate cost of capital that business units are charged for projects and acquisitions

¨       return on its slice of capital, i.e.  if it partially underwrites the risk of a project, it gains or loses with the project

¨       focuses on worthy projects

¨       projects come to strategic planning unit for added value

¨       good advice has a value

¨       bad advice is analysed

 

¨       can be esoteric

¨       may not be motivated to help internal start-ups or small projects with large, but uncertain returns

risk management unit: charges insurance premia  (e.g.  to business units, sites and projects)

¨       performance in managing group risk - ideally quantified

¨       benchmarks against other firms and insurers

¨       strong risk control with teeth

¨       helps key projects and units avoid major pitfalls

¨       spreads best practice

¨       will work throughout the organisation - not just for mega-decisions

¨       focused on the negative rather than the positive

¨       a natural extension for finance and internal audit

risk/reward units: combines capital charge and risk management

¨       as a venture capital fund merged with an insurer

¨       shareholder value enhancement

¨       strategic advice matters

¨       strategic planners have controlled power

¨       looks at the totality of the opportunity or risk

¨       an emerging model

¨       complex measurement

¨       not a quick fix - need for management continuity

The final model, risk/reward, does connect the strategic planning unit with a key reason for existence - making money.  Risk/reward models are used in some of the larger multi-nationals, particularly those which have evolved structured finance operations yet realise the importance of sound strategic thinking.  Results have been largely positive, sometimes very positive.  However, some hard-won lessons show that risk/reward models require sophisticated management, need a strategic planning team with a keen eye on increasing shareholder value and must be led by a politically-astute strategic planning unit manager who knows how to say "no" to directors.

Strategic planning units will never have an easy ride.  Few operational directors want anyone second-guessing their decisions.  At the same time, few strategic planning units want to spend their time devising intellectual justifications for other people's gut feelings.  Unless the strategic planning unit wishes to remain the Chief Executive's lapdog, it must stand up and state how it proposes to measure its own success in comparison with the rest of the organisation.  Publicising a clear measure of success, and meeting it, attracts political power in its own right.  If there is a corporate political strategy lesson for strategic planning units, it must be to agree with the organisation a rigorous way of measuring their own contribution to corporate success.


Michael Mainelli, Director, Z/Yen Limited and former Vice-Chairman of The Strategic Planning Society.  Michael has been both a corporate strategist and a strategic consultant since 1985.  Z/Yen is a risk/reward management firm which uses risk analysis and reward enhancement techniques to improve organisational performance.  Z/Yen has advised many organisations on the role, structure and measurement of strategic planning units.