Practical Corporate Planning

John Argenti

• Publisher: Routledge
• Year: 2018
• ISBN:
  9781351347426
• Edition: 1
• Topic: Business
• Subtopic: Business generale
• Index: Business

In this book, originally published in 1980, John Argenti deliberately and systematically strips away the sophisticated methods for corporate planning to get down to a practical corporate planning process that works. This accessible book uses no jargon or maths, and will be of interest to students of management and business studies. It is also aimed at chief executives, managing directors and other very senior executives in companies and non-profit-making organisations.

CHAPTER 1

What Is Corporate Planning?

For over three decades corporate planning has been in use in organizations of all shapes and sizes all over the world, and yet it is still the subject of a number of absurd misconceptions.

There was some excuse for these in the early days when, for example, its exponents liked to boast that all you had to do to make a company grow was to apply corporate planning to it like a magic fertilizer. Another, very contrary, notion put about by its detractors was that corporate planning was just an elaborate version of budgeting or business planning, a belief that is still widely held today. Another school of thought asserted that it is necessary to be very clever indeed to do corporate planning and to have degrees from at least two universities; some of its current practitioners uphold this claim with understandable loyalty.

These fantasies are so unhelpful and damaging to its reputation that I am going to take the whole of this chapter to explain what I think corporate planning really is and is not.

What it is not

As its name suggests, corporate planning involves planning for an organization as a whole - as a corporate whole. So corporate planning is not the same as product planning, production planning, cash flow planning, manpower planning or any of the dozens of other sorts of planning conducted in organizations today. All these are designed to plan parts or sections or departments of organizations. Most companies, even quite small ones, already employ product managers, marketing directors, production planners and finance controllers to look after the planning of these various parts, and when you do corporate planning you certainly do not want to do all these again under a fancy new name.

As soon as a corporate plan starts to spell out detailed production plans, manpower plans, finance plans, and so on, it is in grave danger of overreaching itself and becoming a busybody. Corporate planning is corporate planning. You can only have a corporate plan for an autonomous or quasi-autonomous organization; you cannot have one for any section, part or fragment of an organization unless it is quasi-autonomous, like a profit centre.

Some planners seem to think that corporate planning means planning the whole company and so they produce vast schedules showing what is going to happen to every tiny corner of the organization for years ahead in solemn detail. What a ridiculous thing to do! It is possible to plan ahead in great detail for short periods of time; it is also possible to plan ahead for very long periods, although only in outline. To try to plan in meticulous detail over long periods, however, is quite impossible. No wonder they claimed you needed to be academically brilliant to do corporate planning. No wonder top executives in companies with corporate planning departments became increasingly irritated by ‘academics’ in their ivory towers, striving for perfection in an uncertain world. No wonder the Russian economy is such a snail.

So that is another misconception out of the way: corporate planning is planning for the corporate whole, not planning the whole corporation.

Corporate planning and marketing

Here is another fallacy. Everyone seems to think that a corporate plan is the same as a marketing plan, that a corporate planning exercise results - indeed that it should result - in the repositioning of a company in its market-place, or the introduction of a range of new products, or a shift into a new market. Virtually all the best-known writers in this field have fallen into this trap from Ansoff (1964) to Porter (1985). It would be ridiculous for me to suggest that most corporate plans do not contain marketing decisions; most of them do call for a major new marketing strategy, but not all of them.

Corporate planning is not marketing. Distinguished entrepreneurs are frequently reported as saying: ‘Successful products do not come from corporate planning.’ Of course they do not; that is not what it is for. That is what marketing is for. I said above that as soon as a corporate plan starts to spell out partial or sectional plans it becomes a busybody and ought to be put in its place. That holds for product plans. This is not its job.

Yet this myth is all-pervading. Look at any so-called ‘corporate plan’; it will be a market plan. Look at any case study in a business school; it will relate to a market plan. Inspect the data they give the student; it is all to do with products and market growth and agents and selling prices; it is nothing to do with the factory, the employees, the finances or the tax situation. When someone says the word ‘strategy’ what they invariably mean is marketing strategy. (You have to hand it to them, those marketing men have done a splendid marketing job on ‘marketing’.)

I see this bias towards marketing as nothing less than a disaster. Companies always seem to do corporate planning in order to develop a new marketing stance. They go through the process and out comes a new marketing strategy. Fine, but some companies do not need a new marketing strategy; what they need is to smarten up their factory, or install new computer systems, or move to a tax haven, or sack the chief executive, or dispose of their subsidiary in Brazil.

Even companies who do need a new marketing strategy also need these other strategies, but, because they think marketing is everything – because the marketing experts have told them that this is so, and have gone on saying so for four decades now – they completely fail to address these other issues. For some companies marketing is more important than anything else, but for others it is not, something else is. Such as what? Lots of other things. I mentioned a few above but the variety has to be experienced to be believed. I hope it will be reflected in this book.

A further, minor, misconception is the belief that strategies relate to physical things only, that they have to do with information technology, products, factories, distribution networks, or whatever. Of course, this is not so. Many strategies are about attitudes and emotions. I shall give a number of examples later of strategies to improve morale, to strengthen customer confidence, to raise the level of innovation and to change the attitude of a parent company. Psychology is an important element in management and so it frequently features in strategies.

The technology of planning

Another of those damaging misapprehensions I mentioned above was the assertion that corporate planning is enormously sophisticated and advanced, calling for such techniques as computer models, experience curves, cross-impact analysis and directional policy matrices. My strong impression is that none of these are much use and that very few top decision-makers think they are either. I am not merely doubting whether they work: some do, some do not. I am going much further than that. I hold the view that if you are using these techniques then you are not doing corporate planning at all, you are doing business planning or marketing or manpower planning or one of those other types of planning with which, as I suggested above, corporate planning is so often confused. Most of these are partial planning techniques, planning for parts of an organization, as opposed to corporate planning, planning for the whole. They are very important and very useful, you cannot run a modern organization without them – but they are not corporate planning.

If a planner is using these techniques, which are designed to help him sort out complex problems, then he is standing too close to his company to be able to do corporate planning. To do this properly you have to stand much further back so you see only the half-dozen things that really matter. The whole idea in corporate planning is to study the wood, not the trees. This is an extraordinarily difficult thing for executives to do at the best of times and the more they use advanced techniques the more difficult it will be for them. It is like using a microscope instead of a telescope: it will focus your eyes on the wrong things entirely.

Corporate plans and strategic plans

Some people think that corporate planning and long-range planning are synonymous. Not quite. You can make a long-range plan for almost anything. It takes many years to sink a new coal mine, for example, or to design a new aircraft, and the plans by which these projects are scheduled and regulated would rightly be called ‘long-range plans’, but they are plainly not corporate plans. Not all long-range plans are corporate. On the other hand, corporate plans are about major changes to be made to an organization; major changes take time, so most corporate plans are long-range.

There is a similar differentiation between a corporate plan and a strategic plan. You can have a strategic plan for any major part of an organization. You can have a production strategy, a marketing strategy, a finance strategy – any plan that calls for a major change in a major part of a company could be termed ‘strategic’.

A typical corporate strategy would be: ‘We will go public.’ I suggest that this statement, because it concerns a massive change to the company as a corporate whole, is an order of magnitude different from such strategies as, ‘We will launch a new product in the European market’, or ‘We require additional loan capacity’ because these, although undoubtedly important enough to be termed ‘strategic’, each relate only to a part of the company. In corporate plans the whole company is changed, in the others only parts of it are.

What does a corporate strategy look like in a non-profit-making organization? The same principle applies. A corporate strategy for a town would be to privatize large segments of its activities – cleaning, parks, sheltered homes, and so on. It would assuredly be a corporate strategy to privatize the whole town.¹ Would the designation of a road as One Way be a corporate strategy? I think not – unless it was the High Street. The decision to move 60 per cent of all handicapped children out of institutions into the community would probably not be corporate; closing down the town’s only hospital presumably would.

As will be noted by now, this book is solely concerned with methods of devising corporate strategies and is interested in other strategies only as second-level products of the corporate planning process. The reader will also have picked up that the author believes that the attempt to develop these other strategies without developing a corporate plan first is an absurd aberration. I see these other strategies as the intended by-products of a properly constituted corporate plan. I do not believe it is possible to devise these properly without first going through the corporate planning process.

While on definitions, I am quite happy about the word ‘corporate’ in the title ‘corporate planning’ and I feel no urge to use ‘strategic’ instead, as others seem to do – I explained the distinction above. But I do regret the word ‘planning’. A plan is rightly seen as something drawn up in considerable detail; a proficient plan is one that is comprehensive, where little is left to chance; a shoddy plan is one where some bungling planner has left great gaps in his schedules indicating a lack of clear, accurate foresight. But that would be a good corporate plan! A corporate plan – indeed any long-range plan – complete in every meticulous detail would be the work of an idiot.

Planning and co-ordinating

That leads me to forecasting. People still confuse ‘planning’ with ‘forecasting’. A forecast is what someone thinks is going to happen. A plan is what someone is going to do. Quite different. They are connected because you often cannot plan until you have made a forecast, you cannot rationally decide what to do about the future until you have had a look at what might happen there. You forecast first, then you plan. Certainly they form a sequence, but that hardly makes them synonymous.

Here is another thing corporate planning is not. It is not ‘coordinating’. Some organizations prepare their so-called ‘corporate plans’ by first inviting the various parts – departments, sections, areas - to make their plans and then, having collected these together they ‘co-ordinate’ them; that is, they make sure that all the plans add up correctly, that no two departments are going to use a scarce resource at the same time, and so forth. This then becomes the ‘corporate plan’. What a lazy way to run an organization! All that will happen, if they do it this way, is that the organization will gradually become what the parts or sections want it to become – the tail wags the dog.

This phenomenon can most clearly be seen in groups of companies. The group chief executive tells his managing directors to prepare plans for their divisions. Let us say there are ten of them. They duly send their plans to head office where they are all added together and there you are – a group corporate plan. But all it will do is to move the group in the direction that these divisional managing directors want it to go – probably in the direction that the largest of them wants. There will be no group content in the plans; the group chief executive will not have addressed such questions as ‘Why have we got ten divisions?’ and ‘Why have we got these ten?’ and dozens more issues that may face his group as a corporate entity, such as its riskiness, its geographical spread, the management structure and so on.

This is the famous ‘top down or bottom up?’ controversy. My answer is quite clear: not bottom up. (And later I shall say not top down either!)

Why does all this matter? Who cares if some organization has misunderstood what corporate planning is? Well, the answer is simple: if they do what they call ‘corporate planning’ and instead they merely ‘co-ordinate’, or ‘forecast’, or plan a new product, or modify their market posture - or indulge in any of the misconceptions listed above - they will merely tackle those specific problems that are addressed by the specific technique they are using and will not tackle their corporate problems at all.

Budgeting and business planning

These misconceptions are nowhere more serious than in the case I have left to last, the confusion between corporate planning and business planning. The reason why this matters so much is that virtually every organization today does business planning and, having done it, solemnly announces: ‘We’ve done corporate planning.’ Alas, they most certainly have not. They will have made a careful and highly professional study of the trees and will have missed the forest completely.

Historically, the ‘business plan’ arose from the ‘budget’. A ‘budget’ is a set of figures, usually prepared just before the end of one financial year, showing, for the coming year, how all the company’s revenues and costs add up and hence what the surplus, or profit, is likely to be. It shows what every section and department proposes to earn and to spend each month (or four-week period). When the new year begins, each manager, and his boss, can see month by month if he is sticking to his budget. As well as being the most successful and most effective management tool ever invented, budgetary control must also have been the first example of really participative management:...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Dedication Page
• Contents
• Introduction
• 1 What Is Corporate Planning?
• 2 Who Should Do It?
• 3 Corporate Objectives and Corporate Conduct
• 4 Objectives for Non-profit-making Organizations
• 5 Setting the Corporate Targets
• 6 Forecasts and Gap Analysis
• 7 Strengths and Weaknesses Analysis
• 8 Threats and Opportunities
• 9 Alternative Strategies
• 10 Selecting the Strategies
• 11 Evaluation, Action Plans and Monitoring
• 12 The Woodcock Group
• Appendix A The Introductory Seminar
• Appendix B Mistakes to Avoid
• Appendix C Definitions of Terms Used
• Appendix D Brief Outline of the Argenti System of Corporate Planning, and Protection Against Errors in Forecasts
• Appendix E Tern’s Trucks Ltd - A Case Study
• Notes
• Bibliography
• Index