APM - Strategic planning and control

Rational Model / Mission / Mendelow

PRIORITISING STAKEHOLDERS:

Organisations have a long list of stakeholders:

- Employees; - Lenders;
- Managers; - Pressure groups;
- Customers; - Local community;
- Suppliers; - Government;
- Shareholders; - Other stakeholders.

Sometimes there can be conflicts amongst different stakeholders, for example:

- Shareholders may want a higher dividend, but employees may want higher salaries;
- Suppliers may like to be paid more for the goods they supply, but customers would prefer to pay less.

Compromises need to be made, and priorities need to be set. To do this, we can use Mendelow’s stakeholder
map:

MISSION STATEMENT:
Mission statement is the starting point for strategy formulation. Decision-makers can use it to help them decide
what to do next. However, too often mission statements are a public relations exercise and they are ignored as
they cannot be used to help formulate strategy. As a result, the head of finance struggles to define what good
performance is, and hence struggles to measure performance and manage it.

A well worded mission statement should:

- Capture the purpose of an organisation;

- Serve as a guiding light for decision-making in the organisation;
- Communicate the values and priorities as well as objectives of the organisation;
- Serve to attract like-minded stakeholders- Investors, customers, suppliers and employees.

According to Campbell et al., a mission statement should address four specific areas:

1) Strategy;
2) Purpose;
3) People and behaviour standards;
4) Values.

RATIONAL MODEL:

The rational model is an example of detailed planning in advance:

Strategic

Strategic choice Strategy into action

1) At the strategic analysis stage, benchmarking to the competition can highlight organisational strengths and
weaknesses, and any gap between desired and expected performance will be quantified.
2) At the strategic choice stage, finance can be involved in quantifying the likely impact of any ideas to see if
they are suitable and feasible.
3) At the strategic implementation stage, finance can turn strategic choice into detail plans and budgets, define
key performance indicators and benchmark what level should be achieved, as well as track progress with
the performance measurement system and recommend performance management actions that need to be
taken to keep the strategy on track.
Note: Some organisations don’t plan at all if they feel that the environment is fundamentally unpredictable. This
approach is known as freewheeling opportunism.

THE ROLE OF FINANCE PROFESSIONAL:

The finance professional can help with every stage of the rational planning process:

a) At the strategic analysis stage:

- Carrying out a benchmarking to the competition which can highlight organisational strengths and
weaknesses;
- Quantifying the size of any gap between desired and expected performance.
b) At the strategic choice stage:
- Quantifying the likely impact of any ideas to see if they are suitable and feasible;
c) At the strategic implementation stage:
- Turning a strategic choice into detailed plans and budgets;
- Defining key performance indicators and benchmarks;
- Tracking progress with the performance measurement system;
- Recommending performance management actions that need to be taken to keep the strategy on track.