Application of The Argenti System of Strategic Planning in Pegler Yorkshire Ltd
by Glen Ford, Argenti Planning Facilitator, UK
A few years ago Aalberts Industries NV acquired two UK businesses, Yorkshire Fittings Limited and Pegler Limited. Both businesses operate in the plumbing sector, with Yorkshire supplying copper fittings and Pegler supplying brass products, such as valves, taps and fittings. Both businesses enjoyed century-old positions in their market place. Mike Saunders was appointed as a new Group MD, whose immediate task was to integrate the two businesses and to develop a new strategy for the combined group.
Recent financial performance had been good, but both businesses faced a number of long-term threats to their competitive position and they needed to become more active in exploiting new opportunities. Both had been through major changes in recent years, including a proportion of their manufacturing capacities having been relocated away from the UK to lower-cost economies. Here was a classic case of an established business that needed to develop new strategies for the future.
The complicating factor to this process was the integration of the two businesses. Ideally, the integration would have been completed, followed by a strategy process - but the business needed to develop its strategies now, not wait another 12 months. The processes needed to be run together.
Stage 1 of the Argenti process ('Form the Planning Team') was reasonably straight-forward as the membership of the planning team was self-evident from the outset. This included the Group MD, as chair of the planning team, and his four main directors (manufacturing, commercial, finance and development). The marketing director was also included in the team. They chose an outside consultant to guide them through the process, Glen Ford of HobsonFord Associates, (whom the Group MD already knew well). Glen worked with Roger Ablett, the Business Development Director, to facilitate the overall process. The combination of an external facilitator paired with one of the planning team worked well, as it meant the process went to plan even with the back-drop of an integration programme, which inevitably was a busy time for all concerned.
Stage 2, 'Define Corporate Aims', proved to be one of the key issues facing the combined business. The discussions highlighted some strong differences in the level of expectations across the planning team. These differences were partly a reflection of the fact the board for the combined company was new, and some of the directors had not worked with each other before. The process helped to at least air these differences and then make way for an alignment of expectations.
The Gap Analysis, using Argenti's 'Tmin' (the minimum acceptable long term profit target) and 'Tsat (the satisfactory target) together with the forecasts, proved to be a key moment in the overall process. The business had performed well over recent years and this had built up expectations with the new owner. However, the reality was that the business needed to address some critical areas if this level of performance was to be sustained, let alone enhanced. Threats to their current performance were significant, but equally the business saw numerous opportunities, although so far they had not been wholly successful in exploiting them.
One challenge was clear: the business needed to deal with the risk of under-shooting 'Tmin'. However, there was also an expectation of further strong performance. While there was no shortage of opportunities, the business needed to be more focused if these were to be realised. By the end of Stage 2 it was already clear what type of strategy would be required. The business needed a strategy that would deal with some significant threats, which had been around for some time, and it also needed to build a platform for further growth.
Stage 3 ('The SWOTs') was an opportunity to include additional senior managers in the strategy process. Many of these were only just beginning to meet managers from the other business and there was an element of 'you and us'. However, the SWOT workshop proved an effective way of getting the various managers to think about the greater business as a whole and helped the integration process: clearly corporate strategy has to be seen as a whole, not as individual parts. Initially, the lists of strengths, weaknesses, opportunities and threats were quite long - but it was an invaluable process to filter them into the really big issues. Inevitably, everyone had their own pet issues, but the Argenti process enabled the team to put these into the wider perspective.
Most of the managers and directors found the task of identifying the SWOTs relatively straight-forward, even if there was a need to refine the list into the key areas. But the task of deciding what should be done about them was much, much harder. We held a half-day follow-up session with the senior managers, to feed back comments from the planning team and to ask them for their input to the strategies.
Everyone struggled with this part – 'Stage 4'. We held two further sessions with the planning team before the right strategies started to emerge. Use of the Argenti System, and its strong focus on the key issues - known as Strategic Elephants - meant the conversation was always taken back to these issues: "so will this strategy deal with any of the elephants, because if it won't then we need to think again."
However, after a couple of sessions, and no doubt some informal conversations and thinking in between, a number of items started to fall into place. It became clear the business had to focus more of its effort to deal with some of the very real and significant threats to its competitive position; but equally it needed to be adventurous in exploiting new opportunities, an area that had not been as successful in the past as people had hoped. One factor that had been identified at the outset, but was not initially regarded as a major issue, was one of their capability to implement. The implementation process needed to be beefed up if it was to succeed.
By Stage 5 the business had identified 5 clear strategies, which were then formed into discrete project teams to implement. The use of project teams, each one headed by a board director, was in recognition that these strategies were critical to the development of the business, and without this level of senior direction they would simply not get passed the drawing board.
Nearly a year on, the Mike Saunders, the Group MD, is happy with the outcome of the process. There were some concerns about how the strategy process would work alongside the integration, but it had helped not hindered - and it meant the new team had to start thinking about overall strategy from Day One. They now have a clear strategic plan, which has gained momentum and financial performance over the past year has also improved.
Mike is now looking to use Argenti with the US business he manages during the course of 2008, as it provides a tried and tested way to focus efforts on key strategic issues and requires ownership and commitment from the senior team – two essential ingredients to make any strategy process a success.