M&As, Piecing together Strategies

Effective corporate strategy involves planning to enable actions that respond to market opportunities, exploit company strengths, neutralize threats and avoid internal weaknesses. It focuses on the market, uses all available resources and provides all the company’s customers, shareholders, management, and employees with a positive value proposition.

A strong strategic planning process involves an integrated set of activities using the understanding of an organization’s performance and goals to develop its most effective strategic path. The process can take many forms, but in most cases, begins with a critical review of the company’s current position and success in doing business. Performance indicators, or explicit measures used to determine achievements, are crucial to an organization’s success and internal alignment because that which is measured becomes the focus of the organization, not just for senior managers but for everyone who is aware of the performance indicators. When performance indicators are made clear to all members of an organization, everyone gets on board.

Case in point

L’Union Canadienne, a Quebec-based insurance company specializing in personal lines, faced with the prospect of joining forces with another insurance firm under the umbrella of the Co-operators Group, chose to go through a strategic planning process in advance of joining with Calgary-based Sovereign General.

Martin-Eric Tremblay, General Manager of L’Union Canadienne, hired Universalia, a Montreal-based management consulting firm specializing in strategic planning, team building and corporate change, to guide his senior management through the planning process. His objective was to ensure that L’Union Canadienne had defined its own corporate objectives, and had developed the necessary strategies to achieve them. The strategic planning process involved exercises carried out by the managers throughout the company.

Hugh Mitchell, a partner at strategy consultants, Universalia, worked with Tremblay in identifying the potential benefits of the process. This began by focusing all those involved on both the long term vision and on the short term actions needed to get there. As Mitchell observes, “It’s important that those involved in a strategic planning process share a common understanding of the marketplace and the company, and that these people obtain relevant data that can help them to develop strategies based on specific issues and the market position of the company.”

Taking form

Over the course of several months, Universalia guided L’Union Canadienne through strategic planning sessions during which they set performance indicators for broker relations, effectiveness in achieving the corporate vision, as well as efficient use of human, physical and financial resources – all of these objectives taken in perspective to the financial health of the company. Issues such as leadership, structure, technology, organizational culture and the investment of human capital were all explored. “L’Union Canadienne was in need of a long-term vision and a strategic plan that reflected not only what the company had become but also the new direction it was taking. I knew we needed external help to do the strategic planning,” says Tremblay.

Efficiency is the most easily measured marker of an organization’s success in attaining its strategic vision, Mitchell notes. Efficiency is best defined in terms of when a company uses its resources well, namely financial, human, physical and information. Also of great importance is the financial health of the business and its ability to generate sufficient profit, cash and capital to finance operations and satisfy investors. Every company regularly measures financial health, but the focus must be on determining which measurements are most significant, and which are indicative of areas needing improvement, says Mitchell.

The process

An analysis of the marketplace and the key success factors in the industry is conducted first. Based on this information, a definition of the company’s core competencies, competitive advantages, and market position is developed, followed by a definition of the vision of the company, priority issues, and the strategies necessary to deal with these issues.

The management team is then familiarized with the concepts and applications of “change management”. An integrated analysis of the sources of the company’s competitive advantages, constraints, the implications and the trade-offs in the company’s business, is then developed. The last steps in the process involve finalization of the strategies, the creation of the action plan to execute them, and development of a monitoring process to stay current.

Kathy Bardswick, chief operating officer of Sovereign General and L’Union Canadienne, arranged a strategic planning/organizational analysis for the Sovereign General senior management team. Like L’Union Canadienne, Sovereign General modified its planning process to use the Universalia way of doing things, with management exploring the operation’s strengths and weaknesses against the vision set for the new company.

Corporate cultures

With these separate analyses complete and the companies already starting to function in tandem, the two management groups began a delicate combining of corporate cultures.

Mitchell facilitated the team-building exercise. “In order for two teams of people to come together and form one, you have to create a climate of trust, and that takes some careful management and planning. There is always uncertainty and worry involved, so it’s important for people to feel confident about expressing their feelings of vulnerability. Participants assume various roles in this exercise, some challenge, some contribute, some collaborate and some communicate… often, these roles echo the parts that people play within the company. The important thing is to make people aware of the roles they assume, and how they will function as part of the new team.”

Bardswick was reassured by the similarities in strategic vision that came to light as the two groups worked together. “Although we come from two different companies, work in two very different areas of the insurance business, live in two different parts of the country, and in some cases, speak two different languages, we aren’t really that dissimilar. When we compared the issues that each management team had identified in their separate strategic planning sessions, we were amazed to see how much alike the lists were. Knowing that we shared the same concerns and had similar visions for our company gave us a sense that we were on the same wavelength,” he adds.

The challenge

Combining L’Union Canadienne, a company with a strong identity in the Quebec personal lines marketplace with Sovereign General, a commercial insurance company with a presence in nearly all other provinces, had not been easy, Bardswick admits. “Dealing with the emotions that have surrounded the restructuring process has been frustrating, but you can’t ignore them.”

A key factor in overcoming such challenges is that management have to help people to deal with their fears and feelings of loss that sometimes come about as the result of change. There is still tension, he notes, “no strategic planning process or team-building exercise can be a panacea for all ills. We’ll always have our differences in terms of language and corporate culture, but we know that we’re all heading in the same direction.”