Based on the feedback from the workshops and the support of the two regional presidents, the next phase was to move forward with a global rollout of the ERM program.
For 2005, we targeted 17 units for workshops to assess the risks of their 2006 Operating Plans. China, Australia, Russia, and virtually every general manager from the seven units in the European project asked to be included in the rollout.
Here again our design principles were reaffirmed. Management believed the process created value, helped units become less risk averse (view risk as an opportunity), and encouraged alignment and accountability among the participants. Our remit to work within the annual operating plan reaffirmed "work within an existing organizational structure."
Many companies would find their planning process similar to Mars. Business units begin developing their annual plans nine to 12 months before January 1, based on their long-term strategies within the context of the broader segment and corporate strategies. They receive input from their segment management teams. Mars has six segments: Chocolate, Drinks, Food, Petcare, Symbioscience, and Wrigley. Late in the year they present their plan to management. ERM represents one component of their presentations.
For the rollout, the ERM team developed formalized interview templates. Although we always interviewed the GM first, the team began to have joint interviews with the GM and S&F head (CFO), who acts as the GM's copilot. We found that these joint interviews provided much more detail and reduced the number of other business unit (BU) team members we had to interview. The workshops were time consuming to build, each taking approximately one person-week, or more for larger, more complex units. Any time savings proved beneficial, as the team had very limited resources. It also represented an evolutionary step in our process.
The ERM team entered the process with only three facilitators skilled in our new process – our consultants (Bill and Greg) and me. As we wanted to internalize the process, we had to train an adequate number of internal facilitators. Optimally, two facilitators would run a workshop with one operator, the person responsible for operating the voting technology, updating the templates as we spoke, and keeping notes.
These ERM workshops require atypical facilitation skills. A facilitator needs a great deal of knowledge of the business, good facilitation skills, and the ability to challenge participants. We found over time that some people, recognized as good facilitators for most activities, proved ineffective in ERM workshops as they lacked the ability to aggressively challenge the management teams from an operational or strategic perspective.
Oscar instructed both regional and functional S&F staff officers, who reported to him, to support us. (Regional S&F staff officers support the Mars CFO in the region, while functional staff officers oversee specific functions – e.g., Treasury, Risk, Control, Strategy, etc.) Oscar directed the regional S&F staff to help us schedule the sessions and to act as our cofacilitators in their regions. Several nonregional S&F staff officers and George, who worked for me, were also to be trained and act as facilitators. All of these associates had the requisite skill set to be effective in the ERM workshops. The use of S&F staff officers to assist us reaffirmed both "work within an existing organizational structure" and "leverage unique strengths."
We kicked off the rollout the first two weeks of August, conducting workshops at our three U.S. units – Food, Snackfood, and Petcare. All three were successful and we identified serious risks or (better said) opportunities for each plan. We trained George and Elizabeth (the Staff Officer of Strategy) during the Food and Snackfood workshops.
The votes at U.S. Petcare revealed a lack of alignment around the probability of success of several key initiatives to their plan. The GM complained that the team had just spent two weeks, including an off-site planning session, making major additions and revisions to the plan, but no one had raised the issue, which arose during the workshop; however, we pointed out that the intent of the ERM process was to identify these issues prior to the implementation of the operating plan. This would enable units to address these issues in time to increase the likelihood of success.
The following week, Elizabeth ran the Mexican workshop, training the regional staff officer and Jim, her direct report. In the meantime, I went to Asia for the China, Japan, and three Australian workshops. In Asia, the point of early supporters played a key role in our success. Mars China had found great value in our initial workshop and began to use the program as a key component of its operational and strategic planning process.
The new general manager in Japan had participated in the pilot workshop in Canada and in the UK project workshop as one of the GMs. He was keen to use ERM as a tool to help his team reinforce their growth and market position.
In Australia, we began the following week with our Snackfood unit. It was the first day on the job for the general manager, who was new to Mars. He felt the workshop proved quite beneficial as not only did he become familiar with his direct reports, but he gained an understanding of the issues confronting the business, which he felt would have otherwise taken months to learn.
In Australia, we had a major learning: We needed a process to ensure followup on issues identified during the workshops. John, the CFO for Australia with operational responsibility for the petcare unit, noted that in his preparation for the workshop he reviewed the output from the prior year. The team had actually identified their major risk for 2005 and the treatments to address this issue. Unfortunately, they had not used the prior year's solutions, and had not met their targets for the issue. John became one of the biggest advocates and supporters of ERM as he moved on to CFO of the Russia unit and then U.S. Chocolate.