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Making strategic planning work for BOTH Head Office AND the Frontline

Siva Shankar Corporate Finance Director SEGRO plc

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Look for the signs

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THE BAD NEWS: Harvard Business School study (Kaplan)

× 95% of a typical workforce do not understand their organisation’s strategy and business model

× 90% of organisations fail to execute their strategy

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BUT THE GOOD NEWS: Harvard Business School study (Kaplan)

"   5% of a typical workforce understand their organisation’s strategy and business model

"   10% of organisations execute their strategy

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Observations from 3 businesses …….

  1997 – 2002: Construction materials - £5bn capital employed - Got taken over

  2002 – 2006: Construction materials - £20bn capital employed

  2006 – 2011: Real estate - £5bn capital employed

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Strategic planning may be ‘working’ well if …

Business Units:

  Don’t see it as a ‘chore’ but as an ‘essential’

  Regularly explain their success in executing the initiatives from the last plan

  Feel that Head Office ‘understands’ the business

Every employee can tell you – in 90 seconds – the key strategic initiatives and their role in delivery

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Strategic planning may not be ‘working well’ if …

×  Lot’s of talk about the ‘labour’, not of the ‘benefits’

×  ‘Doorknob polishing’ plans

× Business units feel entitled to receive same level of funding received in previous year

× Outputs from process end up as paperweights

From 10 employees, you get 10 ‘different’ versions of what the key initiatives are, and that ‘someone else’ is taking care of it

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If its not ‘working well’ ……. two words come to mind:

Frustration: a. the prevention or hindering of a potentially satisfying activity

b. the emotional reaction to such prevention that may involve aggression

Delusion: a belief held in the face of evidence to the contrary, that is resistant to all reason

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If it’s not ‘working’ well ……..need to get on the same ‘wavelength’

?  Gaps in expectations and capability

?  Gaps in process

?  Gaps in follow-through

Organise an effectiveness audit led by the Business Units

The Business Units will tell you what ‘commercially’ works for them

….. and that’s probably likely to work for Head Office too

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No quick ‘fixes’

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Consultants Strategic planning cannot be outsourced

•  Consultants rarely have first hand experience of the company’s history, markets, customers, products, culture and true capabilities

•  Consultants are for ‘consulting’ only – choose them wisely

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Systems Get the process right before automating

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Mindsets, capabilities and motivations

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‘On the same page’ through definitions Purpose of strategic planning

“95% of a typical workforce do not understand their organisation’s strategy and business model” Kaplan

•  Strategy is the means of achieving a vision

Strategy has to be kept simple for a typical workforce - and for the rest of us - to understand it

•  Strategy is about making choices:

  Which customer needs?

  Which customers?

  Which products / services?

  Which markets?

  Which capabilities?

•  Strategy is about deciding what NOT to do

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Don’t assume everyone knows how to think ‘strategically’

•  Basic frameworks for all business units

  Understanding market trends and segmentation

  Understanding product life cycles

  Understanding competitors

  Understanding own capabilities

•  2 x 2s to translate bewildering complexity into understandable simplicity

Needs intense ‘handholding’ at the start and then regular ‘maintenance’

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External focus ……prevents navel gazing

•  Benchmarking against competitors

•  Getting ‘out of the office’

•  Head office takes senior operational leaders to meetings with investors / analysts

•  Frontline takes senior head office leaders to meetings with customers / suppliers

•  Working against subconscious denial

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No ivory tower planning at Head Office

  Head office planners should have had operational ‘reality check’ experience

  Operational leaders should have had head office ‘big picture’ experience

  High level planning discussions should be with BOTH senior Head Office AND Operational leaders present

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Strategic planning should NOT become an incapacitating ‘annual ritual’

•  Respect demands on the frontline - time intensive, deep thinking exercise

•  Apart from high velocity industries, unlikely that most companies need a major strategic re-direction every year

•  Executing initiatives from the last plan can take 24 to 36 months

•  Forcing business units to do ‘strategic planning’ every year could be very distracting

•  A major strategic re-think every 3 years should normally suffice

Use ‘triggers’ to decide if a business unit needs a major strategic re-think sooner

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Incentive schemes ….. that don’t encourage ‘gaming’

•  Stay away from ‘big pay out’ short term incentive schemes

•  Make the long term incentive scheme simple

•  Tie compensation to progress on initiatives

Motivates people to flag up flaws early in strategic thinking and implementation plans

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Process and interaction

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Prioritisation of the big issues ……don’t miss the 900lb gorilla in the room

•  Interviews with senior leaders on long term strategic issues

  Not for the ‘here and now’ but for ‘3 to 5 years from now’

  Prioritise and give accountability for exploration of issues and feedback

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Ground rules for strategic planning meetings

And two more:

•  Are the most knowledgeable and experienced participants present?

•  Business unit leaders should take part in the strategic reviews of their peers

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“In god we trust; everyone else brings data to the table” Verifiable fact bases

•  No more ’80% of time on speculating about what the facts may be’

•  No more ‘hearsay’ and no more ‘it’s common knowledge’

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Potent questioning to trigger potent insights What, how, why, and if …..

•  How has your industry environment and business changed since the last review?

•  How and why is this plan different from the last one?

•  How accurate were your last forecasts and what has been learnt from them?

•  What is the business unit’s distinctive strengths?

•  If you are taking market share from competitors, how will you do it and how will competitors respond?

•  How different is your strategy from that of your competitors?

•  What will it take to double revenues or double growth?

•  What would an acquirer do differently?

•  How will you monitor execution of strategy?

Don’t assume that people can do what they say they can do, especially if it’s something they have never done before

The one page – 3 minute – test prevents ‘bamboozlement by PowerPoint’

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Meeting uncertainty with flexibility Informal speculation about ‘alternate futures’ is not the same as flexible planning

The process

•  Two plausible scenarios that could torpedo your competitive standing

•  Force the business to do intense ‘High level’ flexible planning

•  Force the business to do intense ‘Detailed’ operational flexible planning – this is intense but ‘no pain, no gain’

•  Sobering realisation of inflexibilities, incapabilities and blockages - urgently fix them

The benefits

•  Devil is in the detail - You don’t know how inflexible you are until you plan in detail to be flexible

•  Prevents over-attachment to yesterday’s success formula

•  Builds flexibility into cost structures

•  Know which events will trigger move from ‘primary’ to ‘alternate’ scenario – track with KPIs

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Are all the boxes ticked?

Mindsets, capabilities and motivations

  ‘On the same page’ through definitions

  Organisational training on thinking ‘strategically’

  External focus

  No ivory tower planning

  No incapacitating annual rituals

  Incentive schemes

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Are all the boxes ticked?

Process and interaction

  Prioritisation and in depth understanding of the big issues

  Ground rules for meetings

  Verifiable fact bases

  Potent questioning and the one page – 3 minute – test

  Being ready to take on uncertainty through flexibile planning

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The danger of feeling more strategically robust than we really are

Find that Achilles Heel

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A pre-mortem is less painful than a post-mortem

The Klein method:

Look 12 to 18 months into the future and ask:

"   Why was the strategy so wrong? "   What led to implementation failure? "   What led to disaster?

Manage those risks

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Follow through

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Execution of strategy

•  No radio silence

•  Keep repeating until its repeated back

•  No distraction through unnecessary annual ‘rituals’

•  Tailored metrics to track progress

•  ‘Off course’ KPI thresholds and escalation

•  2 to 4 hours per month on progress at the Exec Committee

•  Incentive schemes tied to progress on initiatives

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Question Time

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About SEGRO

SEGRO plc is a commercial property investment and development company that has become Europe’s leading provider of flexible business space by focusing on delivering what our customers want, where they want it and by working in partnership with them as their requirements evolve.

Operating in ten countries, our property portfolio includes offices, light industrial, logistics, warehouses and datacentre properties.

For nearly 90 years, we have specialised in acquiring or constructing buildings that provide the space our customers want, in the places they need to be; industrial estates, business parks, edge-of-town developments and more, right across Europe and always in major cities or at key infrastructure junctions in areas of economic growth.

Headquartered in the UK, SEGRO plc has a listing on the London Stock Exchange and is one of the largest REITs in the world.

1,700+ customers

£5.3 billion in property assets

5.6 million sq m in lettable area