John Ar­genti

Why Wes­farm­ers should heed the guru

The Australian - The Deal - - News - Story by: Cather­ine Fox Por­trait by: Si­mon Buck

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.”

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