Why Wesfarmers should heed the guru
Three decades ago, an unusual piece of advice – “watch out for elephants” – proved a game-changer for Michael Chaney as he began the task of converting a small farmers’ co-operative called Wesfarmers into an Australian success story.
The man behind that pivotal tip, British consultant John Argenti, is 90 years old – but Wesfarmers may need him back, after this month delivering its worst profit in 20 years. With Chaney recently back as chairman, he may look again to Argenti’s system for answers.
These days, Argenti lives in rural Suffolk. But even with credentials and a client list that many international consulting firms would kill for, he’s not resting on his laurels. He is still up for skewering the muddled thinking and failure of nerve that hampers success in setting corporate strategy. And he’s keen to debate why good business strategy hinges on ruthlessly identifying signature strengths or weaknesses – “elephants” – rather than orthodoxy with the latest trend.
“Never start with mission or vision,” he warns. “Always start with a definition of what you are trying to do for whom and then honestly measure the extent to which you are actually doing it.”
The Argenti System of Strategic Planning, which would come to have such an impact on corporate Australia, began in 1963 when Argenti was working for Britain’s largest fertiliser company. He hadn’t set out to be a management consultant – the job barely existed at the time. Argenti had left school to join the RAF, which sent him to Oxford, where he completed a PPE (philosophy, politics and economics) degree after the war. He started out at Fisons Ltd as a production trainee, and was running a fertiliser factory with 250 employees when he was called in by senior management.
“They invited me to their head office to help them introduce something called corporate planning into their group,” he recalls, speaking from his home in Pettistree, 150km from London. “Of course I had never heard of this technique – very few managers in Europe had either – but, as it was explained to me, I became increasingly intrigued. I accepted their offer.”
He admits it didn’t go particularly well. Over the next three years, Argenti says he made too many mistakes to list but eventually came up with a practical-looking plan backed by the senior team. In 1968 he decided to write a book, Corporate
planning – a practical guide (Allen & Unwin). The book was one of the first in what is now the crowded genre of strategic planning. The response was immediate.
“My postbox was soon full of demands for my new skills from companies all across the world … a major car-dealer in Birmingham, a wine producer in Italy, two British cities, a Scottish engineering manufacturer with 12 employees, a Mexican steel company with 40,000 employees.”
Once the client list got to 68, Argenti realised he couldn’t meet the demand on his own. But instead of building up a team of consultants, he did something rather more practical, and generous. He wrote up a manual, launching it in 1980, to help companies begin the process.
And that’s where Wesfarmers comes in. As Argenti recalls, Chaney, then CEO of the small co-operative in Perth, bought a copy of the manual in 1984. He has been so vocal in attributing Wesfarmers’ success to the Argenti System, he is quoted on its website as saying it “has undoubtedly played a big part in our company’s average annual 30 per cent returns since 1984”.
While he’s delighted at the impact Chaney credits his work with, Argenti says he has had little direct contact with either the CEO or the company management over the years. “I only made a number of comments, as opposed to a full review,” he says. He didn’t even realise the full extent of Wesfarmers’ growth until relatively recently, partly due to a hectic travel schedule with international clients. He did the same for another WA firm, Bunnings, now part of Wesfarmers. Other Australian clients include Woodside, Iluka, and Minter Ellison.
But Argenti is careful to delineate his impact: “I played no part in this [Wesfarmers’] achievement other than very brief visits to Perth. If the Argenti System played any part in this remarkable performance it is because this extraordinarily generous gentleman [Chaney] says it was 50 per cent due to the Argenti principles.”
Argenti assumes it was the three main principles that had the most impact at Wesfarmers: the twin targets; the Elephant concept; and the Who Does What procedures (see box). And he notes that some other early clients have had a fair bit of success too: Banco Santander, now a global bank; the Sydney Opera House and the Botanical Gardens; one of the world’s largest food companies, Sodexo; and leading UK health insurer BUPA.
The manual he wrote all those years ago has three parts: an “Introduction for the CEO” on how to launch the program and the need to select a planning team from among their closest colleagues, with advice on who to select. Then there is “The Planning Team Manual” explaining the five stages of the Argenti process. The third part is a guide for an Argenti facilitator to steer the team step-by-step through the process.
And the key to its sustained success? The simplicity of the approach, Argenti says, which is largely unchanged since he devised it decades ago. He’s not keen on long lists of elephants and recommends developing no more than six strategies.
Now that every MBA syllabus includes strategic planning, and business book lists are overflowing with new titles, is the concept of corporate planning better understood now?
“No,” says Argenti. “It gets worse as more and more academics add ‘stuff’ to make it all more complicated so they can charge their clients more. Strategy certainly isn’t simple or easy, but that doesn’t mean it has to be complex. First find your elephants.”