Successful Strategic Planning: The CFOs Role

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Successful Strategic PlanningThe CFOs Role

• A Presentation to St. Louis FENG
• Financial Executives Networking Group
• March 12, 2008
• Bill Finnie
• [phone]
• wcfinnie_at_TheFinnieGroup.com
• www.TheseAreTheRules.com

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Roles for a Successful Strategy Process
CEOWe must have a clear vision and strategy

• CFO Hard Strategy
• Strategy process
• Implementation Dept. Plans, performance
  measures incentives

• ??? Soft Strategy
• Communication bottom-up commitment
• Creating a high- performance culture

The entire top management team must be involved
in strategy development, and everyone must be
involved in implementation
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The Roles of the CEO and CFO in Strategic Planning

• The CEO was my primary contact in all but a few
  of my 91 projects
• The CEO is responsible for ensuring a compelling
  vision and strategy
• Employees at all levels expect the CEO to be the
  leader of the strategy process
• But CFOs can play three important roles in the
  strategy process

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Bill Finnie FENG March 12, 2008
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Three Important Roles for CFOs in the Strategy
Process

• Providing advice to the CEO on the strategy
  development process
• When to do strategy
• How to do strategy (process)
• Ensuring a solid hard strategy
• Taking a lead role in implementation
• Ensuring strong department plans, performance
  measures and incentives
• Tracking performance vs. plan

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Bill Finnie FENG March 12, 2008
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What Is Strategy?

• Strategy is concerned with developing a vision
  and a coherent set of action plans for achieving
  it that reflects your unique realities
• Strategy means change

The ultimate purpose of strategyis to increase
sales and profits
Bill Finnie FENG March 12, 2008
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A Great Strategy Must Work for Four Stakeholders

• Employees In the information age, getting the
  right people is the foundation for success
• Customers Creating superior perceived customer
  value is key
• Owners The ultimate stakeholder
• The Organization itself To provide even more
  value for employees, customers and owners in the
  future

Bill Finnie FENG March 12, 2008
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Develop a New Strategy If

• Strategy doesn't fit competitive realities
• Performance is much less than potential
• The time is right if
• New CEO,
• Major internal changes,
• Major external changes, or
• Organization is focused internally instead of on
  customers and competitors

Bill Finnie FENG March 12, 2008
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DONT Develop a New Strategy If

• None of the four reasons for strategic planning
  exist
• Only have one or two messy problems
• The clear need is survival (e.g., first cut costs
  to survive then develop a strategy to thrive)
• The CEO is not yet convinced that strategic
  planning can work

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Bill Finnie FENG March 12, 2008
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The St. Louis FENG Survey Supports Using a
Consultant

• Half of Non-users recommend Use next time
• Only 16 of Users recommend against Use
• ? Users increase from 31 to 62

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Why Using an Outside Consultant Is Desirable
Facilitating your own strategic planning is like
giving yourself a haircut The results can be
really ugly

• Executive facilitators may be defensive since
  they cant afford to be wrong
• Few executives will argue with the CEO
• Good consultants provide process, use the
  expertise of all senior executives, and know best
  practices from many industries

Bill Finnie FENG March 12, 2008
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Management Focuses on ResultsThe Facilitator
Provides Process
High
Results
Low
Low
High
Process
Source Rath Strong Management Consultants, Inc.
Bill Finnie FENG March 12, 2008
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Dont Do Strategic Planning Until You and the CEO
Believe

• Strategic planning is important
• You can develop an effective strategy
• You can implement your strategy

Surveys support these statements
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Bill Finnie FENG March 12, 2008
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Strategy Is ImportantPlanners Succeed
Bill Finnie FENG March 12, 2008
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Many FENG Companies Have Implemented a Solid
Strategy
Percent of respondents who responded somewhat
agree or strongly agree instead of
strongly disagree, somewhat disagree or just
average
Bill Finnie FENG March 12, 2008
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Any questions before we get into developing and
successfully implementing a great strategy?
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Elements of a Great Strategy

• Mission/Business definition What you will and
  wont do
• Vision/BHAG Big Hairy Achievable Goal
• The 3 to 5 essential key moves for achieving the
  BHAG
• Several broad action plans for each key move
• Soft strategy People/culture changes for
  achieving the BHAG

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Bill Finnie FENG March 12, 2008
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BHAG Big Hairy Achievable Goal

• Put a man on the moon by 1970
• Increase company value 5 to 10-fold in 10 years
• Bonus pool equals two months salary
• Anheuser-Busch, 1977-87 Kill Miller

The right BHAG produces amazing results by
getting people to work together to 100 of their
ability
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Bill Finnie FENG March 12, 2008
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A-B's Share of Big 4 Nationals
(A-B, Miller, Schlitz, Coors)
65
60
55
Extra Gain 8 Share Points
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A-B Share of Big 4 Nationals
45
40
35
30
86
47
50
53
56
59
62
65
68
71
74
77
80
83
89
92
95
98
Demonstrates the Power of the "Kill Miller" BHAG
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Bill Finnie FENG March 12, 2008
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Good to Great companies develop a simple strategy
that reflects three keys and then aggressively
implement it for decades. Jim Collins (Harper,
2001)
The Mission/Business Definition and Vision/BHAG
Must Reflect 3 Circles
Bill Finnie FENG March 12, 2008
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The Culture-Change Matrix For Addressing People
Issues
People strategy needed to achieve the BHAG
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Bill Finnie FENG March 12, 2008
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The 4 Key Moves for Achieving GEs BHAG
GEs market value grew from 13 billion to over
300 billion in 1981-2001 under Jack Welch

• Attract and retain the right people (20, 70, 10)
• Internal transformation
• Acquisitions and divestitures to be 1 or 2
  (1981-86)
• Change culture, EVATM, selling solutions, six
  sigma quality, the Internet (1 or 2 at a time in
  1986-2001)
• GE Capital Corporation
• International
• Limit yourself to 3 to 5 key moves!

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Bill Finnie FENG March 12, 2008
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A Process for Developing a Good Strategy That
Will Be Implemented

• Consultants develop a coherent, fact-based
  tentative strategy
• Read all past studies
• Survey management on strengths weaknesses and
  culture
• Private interviews with participants
• Quantitative analysis as needed
• Develop a coherent tentative strategy that
  addresses each strategy element

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Bill Finnie FENG March 12, 2008
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2. Management Team Changes the Strategy in a
2-Day Retreat

• Its their job to change the strategy so each
  person believes it is 8
• Consultants do the best they can
• But management knows the industry and company
  better than any consultant
• Open discussion of each step until they reach
  agreement
• At the end they are committed to a BHAG, the key
  moves for achieving the BHAG, and several action
  plans for each key move

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Bill Finnie FENG March 12, 2008
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Benefits of Strategy Developed by Entire
Management Team

• Better strategy because it reflects all
  perspectives and open discussion
• Awareness of benefits of the new strategy and the
  costs of not changing
• They have ownership of the strategy and enough
  understanding to lead development and
  implementation of department plans

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Bill Finnie FENG March 12, 2008
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Department Plans Are the Missing Link in
Implementation
CYCLE 3 Performance Measures and Action Plans
Within 90 Days
CYCLE 2 Department Strategies Departmental SMART
Goals
Within 45 Days
CYCLE 1 Strategy with 3 to 5 Key Moves Strategic
Objective/BHAG
Today
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Bill Finnie FENG March 12, 2008
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A Solid Strategy Performance Measures
Incentives ? High Performance Organization
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Bill Finnie FENG March 12, 2008
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In Summary

• Strategic planning is important,
• Your organization can develop an effective
  strategy, and
• Your organization can implement the strategy
  successfully

With proper leadership from the CEO and CFO
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Thank You!

• I would be delighted to meet with any of you to
  discuss how these ideas can work for your company
  no cost or obligation
• Contact me at [phone] or
  wcfinnie_at_TheFinnieGroup.com

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Bill Finnie FENG March 12, 2008
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SMART Goals Vs.Balanced Scorecard

• Balanced Scorecard
• Developed in 1992 and used by 70 of Fortune 500
• SMART Goals
• Specific, Measurable, Achievable,
  Results-oriented, Time-based
• Goals needed to achieve the BHAG
• SMART Goals can be more effective in
  departmental planning

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Bill Finnie FENG March 12, 2008
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The Balanced Scorecard
Owners
Customers
Company
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Performance Measures Incentives

• What gets measured and rewarded gets done is
  the 1st law of strategy implementation
• Corollary WII-FM (Whats In It For Me) is the
  most popular radio station in America
• The Best-Laid Incentive Plans by Steve Kerr
  (January, 2003 HBR) is a chilling story of what
  happens when you have bad incentives