The report, sponsored by Arup, the global design and consulting business, examines how organisations can close the gap between the effort put into strategy and its impact. It investigates what private equity firms do differently from existing managers when they take over a company, and asks whether there are any lessons that could be applied to other organisations, irrespective of their ownership model.
Based on interviews with people who have worked side by side with private equity firms, the report identifies five distinct advantages to working with private equity firms. Fiona Czerniawska, author of the report and Director of the MCA Think Tank commented: "Our research suggests that private equity firms have five distinct advantages when it comes to developing strategy: the clout that comes from ownership, the ruthless weeding out of poorly-performing managers, single-minded focus, objectivity and speed of execution. While these factors are not exclusive to organisations owned by private equity, they are less likely to occur in publicly-owned or public sector organisations and they may therefore go some way towards accounting for the gap between the effort people put into their strategy and the value they obtain from it."
Managers lack the ability to implement strategy
The MCA report also found that organisations were half-hearted when it came to judging their senior managers’ ability to implement strategy. Although a third thought the latter had improved significantly compared with five years ago, nearly a quarter (24 per cent) rated them as poor or hopeless.
Where the input for strategy comes from
On average, the report found that 80 per cent of input into strategy comes from a combination of owners’, directors and senior managers, whilst middle managers and junior staff account for around a fifth of the input. Also, consistent with this, is how much people want this to change, with around two-thirds of people wanting to see more input from middle managers and junior staff.
Demand for objective advice
A common theme that also emerged from the report is the need, not just for more information, but for more external and objective information. However, the report found that nearly half (49 per cent) of organisations do not use consultants. The report does point out that consultants are by no means the only source of input, but this figure does suggest that many organisations do not use the process of developing strategy to stand back and see their businesses through others’ eyes.
Although the report found that private equity firms’ approach to going in with a clear strategy and new team often delivers success, the downside is that people can feel disenfranchised. The report found whilst nearly two-thirds (59 per cent) of managers gather more information than they did five years ago; they lack a sense of ownership of their organisation’s strategy and therefore don’t feel responsible for its successful implementation.
John Miles, Chairman Global Consulting from Arup commented: "Ownership isn’t just about having a financial stake in a business, but about individuals taking responsibility for getting things done. Strategy shouldn’t be a high-level vision statement or a detailed blueprint, but a statement of the values an organisation holds dear and which are the standard against which every decision is judged. It should, in the words of one of the people interviewed here, be an "arc of certainty."
About the Report Sponsor
Arup is a global design and business consulting firm providing a diverse range of professional services to clients around the world. Outstanding solutions, innovation and value characterise its work. As professional consultants it has a vast pool of expertise, enabling it to achieve the best possible results for its clients. Arup improves performance for its clients by combining business acumen and technical excellence with in depth knowledge of client industries. It is this combination that defines its distinctive brand of consulting.
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 The report is based on a survey of almost 300 members of the Strategic Planning Society (SPS) and around 30 interviews with senior executives and strategy experts, many of whom who have also worked alongside private equity firms.