Case Studies
Barrington Limited in The Smaller Companies Version
Barrington Limited employs just 60 people, many of whom are highly qualified scientists in the specialised field of anti-corrosion. They offer their expertise and advice to a range of customers in the public and private sectors. They work in small specialist teams which are grouped into four sections under their Section Heads. One of these Heads, Dr Susan Smith, has just been promoted to Managing Director by the owner and Chairman of the company, Mr Charles Barrington.
"Dr Sue" decided to start her new job by forming a planning team with four of her colleagues to develop a strategic plan. In accordance with The Argenti System advice they started by asking themselves who were the intended beneficiaries of the company and what did they want from it. The answer was, obviously, the Barrington family who were looking for a satisfactory return on their on-going investment. Moreover Mr Barrington had often stated that he would like to see profits growing over the years at an average of at least 10% per annum –4% would be unacceptable. With current profits at $1.8m this implied a profit of $2.9m would be considered satisfactory by Year 5. But, by implication, a profit below $2.2m would represent a serious threat to Dr Sue"s job prospects.
Also at Stage 2 The Argenti System suggests that two forecasts are made (an optimistic one and a pessimistic) of the probable profit growth based on the company"s performance over the past few years and taking account of current strategies. When the team did this they were alarmed to discover how widely the two forecasts diverged. Barrington"s profits in the current year are $1.8m: by Year 5 the forecasts suggested they might be anywhere between $1.6m and $2.4m. Part of the reason for this divergence was a new product invented in one of the Sections which, in trials, had shown remarkable qualities. If its development went well it could have a dramatic effect on profits in future years; if it failed the costs of development could drag profits down for many years. Although everyone was already aware of these possibilities, actually seeing the figures was a revelation. They implied that there was a distinct possibility that Mr Barrington"s minimum target of $2.2m might be missed while the satisfactory one would not be achieved even if the new product was a success.
The team entered Stage 3 with some anxiety. Mercifully, when the planning team was joined by a number of their subordinates at the "SWOT Workshop" (a major event in the planning process described in detail in The Argenti System), a number of strengths were highlighted in the discussions including the fact that, although the new product was discovered in one Section, its capabilities extended to the specialisms of two other Sections. Moreover the skills resident in all four of the Sections were relevant to the development of the product.
Subject to the agreement of the family, the central core of the strategy was, then, very clear: all the resources of the company that were relevant to the development of the new product should be made available to the lead Section under the direction of the Head of that Section. Development of all other new products should cease. The Marketing Department, which had lately been highly effective, should concentrate on preparing a strategic marketing plan for the new product. Great care was required to ensure that the secret of the new product did not leak until its patents had been secured. And so on; a considerable number of decisions became apparent, some were strategic but also, in a torrent, a number of actions were seen that had to be taken immediately. With almost all these highly regarded resources concentrating on this product the chances of an accelerated success were deemed extremely high.
The team then prepared a new set of forecasts (again an optimistic and a pessimistic). These showed that, if the development of the product did not go well, or was abandoned, profits would remain below $2m for the next five years. If they went only reasonably well, however, profits could start to rise next year and then hit $3.6m by Year 5. Mr Barrington accepted these figures with enthusiasm, especially as the most recent trials suggested the new product development was progressing better than expected.
The team again followed The Argenti System"s advice and set up an effective Monitoring System by which they could keep a close eye on the company"s progress over the following years compared to the plan. This monitoring system would alert them to any variance – not just financial ones, as tends to be the function of business plans and budgets, but also to any long term trends and events which may start diverging from those assumed in the strategic plan. This would give advanced warning of a need to modify the plan.