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Unbiased Strategic Audit and Analysis: the realistic approach for ‘good times and for bad times’.

The development of any business or government organization relies on its ability to identify and solve issues and problems the consumer is facing. The consumer and citizen simply wants their demand satisfied. In turn they will support the business or political party that they perceive provides the best solutions and offers the highest degree of social satisfaction. Consequently, issues and problems are not only negative - they also create opportunities.

This paper addresses the importance of identifying the real long and short term issues facing a company or government institution. It is obviously impossible to formulate and implement long and short term solutions in an organization if we lack accurate knowledge of the problems the company or organization is, or will face. It is just as difficult if we are focusing on the wrong issues or on the ‘symptoms instead of the disease’.

The problem is that the conditions that applied last year, or to the eighties, may not be relevant for today or for the future. During the nineties we are facing the end of the post war economy and marketplace. The stable, tariff-regulated, resource, essential goods, and inflation driven conditions are giving way to a rapidly changing knowledge and technology driven economy and marketplace. Subsequently, financial statements tell much less of a company’s future. When market, organizational, and technological problems show up in the financial statement it is often too late. The rapid changes make equity and assets less secure - empty buildings and obsolete equipment having limited or no value.

Are the issues obvious?

Every era has its trendy solution to successfully develop a business and how to become successful in all occasions. In the seventies it was sensitivity training, in the eighties it was goal setting, and in the nineties it is positive thinking and the belief that attitude solves everything.

This is not to discredit the value of these approaches. One cannot dispute that positive thinking stimulates our overall well-being and performance or that negative thinking can become self-fulfilling. A positive thinker certainly has a greater possibility to reach obtainable goals such as: earning a degree, developing a business, making a sale, or climbing a mountain. The problem develops when positive thinking and other ‘universal solutions’ become wishful thinking that ignores our market, financial, organizational, and other realities.

Being positive will not help if the marketplace rejects our product -- if there is no demand for our product or service - - or if our organization, platform, or technology is obsolete or ahead of its time.

It is critical for banks, investors, employees, shareholders, board, and management to be aware that a positive attitude and a happy countenance in an organization may be only a facade which masks the realities. It may or may not be with purpose. BreX is an extreme example where positive impressions deceived intelligence and realities.

The problems in BC’s fishery, mining, forest, and allied industries are other examples where realities have been masked. The fundamental economic and environmental problems, and the market and socio-psychological shift occurring in BC have been well known since the seventies - yet have not been addressed. These are now becoming acute during the nineties.

In our own organization: Is our past success masking market, financial, and organizational issues that could become acute; eroding cash flow, balance sheets, and share values? Do we identify the strategic issues before the problems show up in the financial statement? Are smiling faces in our organization a superficial impression that deceives market, financial, and organizational realities?

Have we identified the underlying cause? Do we know the root cause of poor financial results? Is the answer in the market, human resources, control systems, or the organization? Why do we over consume medical services? Is it because we are old and lonely, because our health demands it, or does the system encourage it?

If there is no demand for our product and service in the market; if our organization, platform, manufacturing or technology is obsolete or ahead of its time; if our product is out-competed in price, quality, or service -- positive thinking and attitude will not save the organization. If government strategy, policies, and programs are not aligned with the reality in the market and community then joyous acclamation of jobs and aluminum smelters will not help. Of course neither will negativism.

The critical factor, whether things are apparently going well, or the financial statement already shows problems, is to know and recognize the strategic issues the organization is facing and revise the business plan to adapt to reality.

We want to encourage positive thinking and attitudes in ourselves and in our organization. At the same time we want to prevent positive and wishful thinking from deceiving reality and masking the real issues in the marketplace, finances, organization, or technology. Once we have identified the real issues we can direct positive thinking toward positive solutions.

 

What steps can we take to ensure that we are identifying and recognizing the real issues and are formulating and implementing the best possible solutions?

The first step is to ensure that we have a strategic audit and analysis system to positively identify the issues the company and organization is facing across all disciplines. A strategic audit, analysis, and planning process across the organization from the market to MIS, human resources, manufacturing, and technology will ensure that the strategic issues and long and short term problems are identified; preventing wishful thinking from deceiving reality.

All interest groups: the owners, shareholders, employees, investors, directors, management, banks, suppliers, employees, and the community rely on management knowing the strategic issues the company is facing, and secondly that they apply realistic solutions.

In the same fashion, the community and taxpayers depend on each level of government to have a similar process.

In order to detect, recognize, and adapt to the reality in the economy and marketplace, business and governments will need to refine their strategic analysis, planning, budgeting, and control systems. An unbiased Strategic Audit and Analysis is the imperative reality check.

The second step is to recognize the behavioral factors involved.

What makes management invest in promotion and advertising which is out of touch with the company’s profile in the marketplace? What drives (or kills) the demand for a particular service? What makes people believe in revenue and profit projections that are pure guesswork? What makes shareholders, investors, and banks invest in and lend to companies which lack an audited strategic analysis and planning process?

The answer is found in basic psychology. It is people’s socio-psychological behavior that drives the economy and marketplace, causes social, political, and environmental problems, and affects the choices and actions of employees and management. Being aware of these factors can sometimes help us avoid a negative outcome, and turn deceptive thinking into positive realistic thinking.

Human desire and ambition are endless, but the resources and time available to us are limited. That means the self-interest of the present generation may not always harmonize with the needs of future generations -- and the objectives of management and politicians may not always coincide with the best interest of the long-term survival of the company or community.

Ultimately, it is only by altering the economic and organizational behavior that we can solve economic and business problems. That requires adapting the organizational behavior to the changing conditions in the marketplace; making the psychological factors driving consumers, employees, and other interest group behavior increasingly more important for the management and development of any company and organization.

For example, when people have insufficient knowledge of the issues an organization faces, they are unable to align their own needs and objectives with those of the organization. Subsequently, they cannot be expected to behave in a rational way that will benefit the organization.

The only way that management and government can solve ‘labor relations’ and ‘public relations’ problems is by providing open genuine information and a dialogue with the personnel and people in the economic, market, financial, and organizational issues. That of course presumes that the management has a strategic audit and business planning process in place, which includes communication with the business interest groups.

In this rapidly shifting economy and marketplace, the issues an organization is facing across the disciplines from the market, to human resources, production, and technology, are becoming increasingly mutually important for the management, shareholders, banks, and other interest groups. As stakeholders we want to be confident that the management knows the strategic issues the organization is facing and that they are implementing viable solutions.

Identifying and adapting to changes in the economy and marketplace is imperative for any organization. This is obviously only possible with an understanding of the real issues in the marketplace and within the organization. For example: why is the consumption of health care on the increase and the standard of living on the decrease? Why is our organization failing to keep up with the changes?

There will always be some problem which is unexpected or impossible to forecast. We cannot accurately forecast every pothole in the road but it sure helps to know when the bridge is out.

Strategic audit and analysis and strategic business and economic development are a positive and realistic problem-solving process -- satisfying the present, without compromising sustainable long-term development. It is the foundation for the development of any small or large organization and for all modern business planning.

If you would like more information on strategic audit, analysis, business planning, and control, or have an opinion, we would be pleased to hear from you.

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