Aligning Strategy Across Multiple Business Units II

…provide a common set of planning assumptions that the businesses ought to be using

Another place where we strive for alignment is simply on facts that we use within the businesses. For example, about three years ago, I was reviewing strategies with a couple of our businesses. One of our businesses was making the assumption that for the next three years steel prices would continue to rise, while another business unit was making the exact opposite assumption: that over the next three years steel prices would fall. Clearly, one of them had to be wrong. Even if both were wrong or both were right, at least we would be consistent in our views and could at least understand the impact of being wrong.

One of the things I’ve found very helpful for us to do at the center of the company is to at least provide a common set of planning assumptions that the businesses ought to be using. What’s likely to be happening with overall economic activity in the markets we operate in? What’s likely to happen to commodity prices? What’s likely to happen with respect to the risks in the various businesses we operate? I think it’s a valuable thing for the center of any company to do for its businesses. Get that off the table so that, A. the assumptions are consistent and, B. the business units get more time to focus on what it is that they do best, which is focusing on their customers and their products.

ACTION POINT: To align business units with strategy, companies must consider value creation when allocating resources and must base decisions on facts.