In recent posts, we’ve taken a look at two critical questions senior executives need to be asking themselves as they undertake the strategic planning process in emerging markets. First, we questioned whether the planning process may be too reliant on faulty assumptions or incomplete data. Second, we challenged the traditional industry-specific and insular planning processes that fail to take into account the rapidly changing external market and macro environment. Today, we wrap up this series of posts by posing a third critical question: Are mid- and lower-level managers placing enough priority on strategic planning, and am I doing enough to improve their planning capabilities?
Senior emerging markets executives are likely managing a very different team than just a few years ago. Companies have sharply reduced the percentage of expatriate managers in their emerging markets organizations and shifted more decision-making to local teams. A recent survey of Frontier Strategy Group’s clients indicated that more than one in ten of their mid-level managers were expats two years ago. Two years from now, our clients expect this number to be reduced by one third. The same survey data has also shown us that decentralizing decision-making around setting prices, developing marketing strategies, and managing human resources is highly correlated with more rapid growth. However, decentralization and local empowerment can come at the cost of so-called “corporate DNA” and can loosen ties between front-line management and corporate or regional headquarters.
For senior emerging markets executives, the strategic planning process presents an opportunity to leverage the front-line teams’ local knowledge for strategic advantage in the market, but it also requires executives to spend more time and energy ensuring that local teams are bought into and aligned with the strategy. The challenge, of course, is that time and resources are precious commodities, and asking the team to spend more time on planning could be interpreted as asking them to spend less time on execution.
Many companies have therefore looked to external consultants as a way to lighten the load. Unfortunately, FSG’s clients report mixed results at best after spending hundreds of thousands of dollars to outsource strategic planning to well-respected consultancies. At the conclusion of these engagements, executives inevitably recognize that they cannot outsource areas of their own teams’ core competencies, such as deep knowledge of customers, products, and markets. These executives have told FSG that external consultants add the most value when they provide the methodology and rigor necessary to ensure that the team is spending its time in the most efficient and effective way possible to bring these competencies to bear.
Consultants can also play an instrumental role in ensuring that individuals and planning committees are being held accountable for hitting key delivery milestones. One company that FSG works with in the consumer healthcare space used an external consultant to help define the framework for the strategic planning process, but then to ensure that its internal teams were following through on execution, the company built milestone-based KPIs into the incentive structure for managers, thus ensuring that managers felt personally accountability for executing on the plan. One aspect of the planning framework is an 18-month rolling planning cycle. Compensation is tied to setting and achieving milestones in the 12-month time horizon, and the remaining 6-months of the 18-month time horizon are intended to allow for a more strategic and forward looking perspective.
In summary, strategy and execution are not mutually exclusive.
A common view among executives is that time spent on planning is time taken away from execution. What we have seen among the most successful companies stands in stark contrast to this view: leading companies have demonstrated that prioritizing strategic planning results in superior execution in emerging markets. Leveraging the perspective of front-line teams, overcoming the scarcity of hard data, securing buy-in and alignment from organizational stakeholders, and holding individuals accountable for delivery are hallmarks of a successful strategic planning process and directly translate into improved results.