Articles
Business Review Weekly
When Michael Chaney arrives at the National Australia Bank, chances are he will be carrying the business manual he swears by.
By Tim Treadgold, Australian Business Review, March 2005
It has been NAB's abysmal performance and widely criticised culture of arrogance that led to the appointment of Stewart, the temporary elevation of Graham Kraehe to chairman and the anointment of Chaney as chairman-elect with the September changeover date.
Stewart would be a wise man to familiarise himself with Argenti, even if he finds the $4200 price tab a bit steep for a set of manuals. It may also be a good idea to understand how deeply Chaney has immersed himself in the system, starting with his original acquisition of a set of Argenti manuals in 1983 (they were just $400 then) when he was finance director at Wesfarmers, just before Trevor Eastwood was appointed chief executive.
Chaney, in a speech on "the importance of corporate planning in school governance" delivered to a school heads conference in 2002, said the unusual power of the Argenti system lies in its simplicity and its clarity around issues such as objectives and strategies. "The system is very good at helping you focus on the big issues; namely, what is the real objective of the organisation, how is it currently faring, what are the major internal and external factors bearing on its success, and what do we need to do in order to achieve the objectives?"
What Chaney did not tell the conference, but which people who worked with him 22 years ago now tell, is that his $400 Argenti manuals gathered dust on his bookshelf for some time until noticed by Eastwood. One witness to the event says Eastwood visited Chaney in his office and saw the Argenti manuals on Chaney's bookshelf, after skimming through then, he said "This is just what we need". Whether by accident or design, Chaney had achieved step one of the Argenti system, it must be approved and led by the chief executive. There is no room for outside consultants. The system is entirely an internal process designed to capture the hearts ad minds of not just the management team, but the entire workforce.
Strategic planning is a bit like an elephant hunt," John Argenti told BRW in an interview from his home in Suffolk. "It is a process of looking for the really big issues, and showing them to the entire workforce so that everyone can understand the sues facing an organisation. But the starting point for every profit making company is that question of profit".
Eastwood was quick to grasp the simplicity of Argenti and how profit, and the related question or return on capital employed, had to be the single focus of a business. Chaney followed the same path when he became chief executive in 1992, demonstrating how profit transcends everything else. In 2003 he sold, for a profit of $400 million, the cornerstone 90 year old rural trading operations of Wesfarmers to AWB. In effect, under Argenti, even a company's history is for sale at the right price.
"You really have to think very deeply about why you're in business" John Argenti says. "Managers can get caught up in an awful lot of detail, and often can't see the big issues because they're so busy dealing with today's emergency, whereas what they should do is find the time to take a look at the really big issues affecting their business."
Argenti discovered that personally more than 40 years ago when he was a senior executive at Fisons, one of Britain's oldest fertiliser makers. "I was asked to come up with a plan for them," he says. "This was a time when corporate (strategic) planning was at its beginning. No one really knew what it was, or how to do it, so I had to invent what was needed.
"There was a feeling among various people I asked that the plan had to be fairly comprehensive - lots of detail, rather like a five-year budget - which I did. It was an absolute disaster, because it didn't answer all the big questions, but it was what the board wanted. I learned a very bitter lesson there, and it stayed with me for the rest of my life."
Argenti says his Fisons experience taught him that strategic planning is an elephant hunt. "It's really about looking for the huge things that are going to have a massive effect on the long-term future of the company. That is damned difficult for executives to do because they're usually rushing about doing their normal jobs."
One of the earliest examples used in his 1968 book, Corporate Planning, A Practical Guide, is of a pesticide manufacturer that has captured 20% of its market. But a competitor with a 30% share is seen as potentially feeling threatened and may "act against our interests". The solution is to diversify into fertiliser, foodstuffs and pharmaceuticals to avoid a head-on confrontation and to maximise the return to shareholders.