13 October 2009 • 7:00 am

Turning Sense into Dollars – Part IV (Conclusion)

In the previous posts, I introduced a case which offers a practical, real world example of how risk analysis can enrich the strategic planning process.  We learned of PrimeCorp (a disguised name), a large company with a national presence in the U.S., and met Jim and Curtis, PrimeCorp’s head of Strategic Planning and CEO, respectively. If you haven’t read Parts I through III of this series of posts, please do so now. It contains background needed to understand this post.

Outcomes at PrimeCorp

As a result of the risk-adjusted forecasts, both the baseline and with leadership expectation of the impact of the proposed strategic management system, PrimeCorp had satisfactorily completed its cost-benefit analysis and projected payback. Curtis (PrimeCorp’s CEO) soon thereafter approved the project as proposed, and our work was underway. Working closely with Jim (PrimeCorp’s head of strategic planning), we undertook to transform the way in which PrimeCorp managed its strategy. The transformation took about two years.

During the first year, we used the discipline of balanced scorecard strategy maps and measuresto capture and refine a vision of strategy for the PrimeCorp enterprise, as well as its several divisions. The process revealed cultural tensions; resistance to change (even though no one on the management team really liked the existing strategic management process), and tension between corporate-level governance and a tradition of division-level autonomy. Both in one-on-one discussions and leadership meetings, the appropriate role of the corporation was portrayed variously as simply that of a holding company and a bank providing capital, to a necessary facilitator of innovation, synergy, and simple scale economies between division accustomed to operating with limited oversight. While neither extreme was realized, there was a perceptible shift towards more robust corporate governance, with integrated strategic planning and financial forecasting at its core.

Our comprehensive program of strategy communication brought the message of strategy and personal participation in execution to hundreds of middle-level managers across the organization; a population to whom the content of corporate and divisional strategy had previously been opaque.

While our effort to justify the initial investment introduced the dimension of risk into financial forecasting, the idea of risk did not become part of the everyday vocabulary of forecasting. Our mandate was to transform strategic planning; budgeting and forecasting was outside of our scope. Exposure to the idea of risk management was simply not enough motivation to re-design PrimeCorp’s tradition financial forecasting.

Over the following years, the improvement in PrimeCorp’s financial performance well exceeded even the most liberal of the scenarios used to justify the effort in the first place.It wasn’t our work that created the improvement; it was the tenacious effort of hundreds of executives, senior and middle managers, front-line supervisors and employees; armed with a clear vision of PrimeCorp’s strategy that made it happen.

The Offer to You

I have developed a spreadsheet-based model of the risk-adjusted forecast approach to share with you, in the hope that you too will make a better business case for enhanced strategic management. As promised in the first post, the first five people to send a note to me describing your situation at will receive a copy of the tool, and an hour of guidance in its use by telephone at no charge. I am looking forward to hearing from you.

Needless to say, this series of posts has been much lengthier and detailed than most posts here. Was this useful? Too much? I need your feedback. Please offer your questions and comments below.

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