How to solve a complex problem? Where to start? How to stay focused but still manage to incorporate stray, important pieces of information?

Complex thinking specialist Jane MacMaster’s list of 20 questions might help.

In late 2016 I participated in a mini roundtable with two people who have a lot to contribute to the subject of strategy design.

Mike Krzus is a senior adviser specialising in integrated reporting with BrownFlynn corporate sustainability and governance consultants, which is based in Cleveland, Ohio. He was one of the early influences on integrated reporting in the run-up to the IIRC’s framework.

Australia-based MacMaster (pictured) comes from a different background. She has worked in aeronautical engineering, in management consulting and as a strategist in Australia’s peak policy-setting government department, the Department of the Prime Minister and Cabinet.

This article’s key points:

– Strategy consultant Jane MacMaster has devised a list of questions which prompt coherent planning for people grappling with a complex challenge

– She uses the list as a tool in her workshops to help bureaucrats create better public policy

– Integrated reporting consultant Mike Krzus has adapted the 20 questions for use in his work with companies

– The 20 questions foster focus and rigour in any kind of strategic planning

Using the questions to tackle integrated reporting

Today MacMaster runs workshops and seminars, mainly for public servants and university students, to enable and to teach better planning and policy.

But integrated reporting is another example of a complex problem that benefits from clear analysis. It can be baffling, especially the first time a company does it. Krzus believes MacMaster’s questions could ease companies into the journey.

“For me, the questions were incredibly helpful,” he said during our discussion. “They helped frame my own thinking about how I help organisations understand integrated reporting practice. I want to see whether I can use the questions to get companies thinking more strategically about what they’re trying to do.”

MacMaster’s list starts with a question that can, she says, spark a discussion that lasts half a day. Namely, “What is the issue? And what is the change you want to see as a result of what you do?”

“It’s just pausing to think about what the problem or issue is, what you’re thinking about and what you’re trying to achieve,” said MacMaster. “I am always surprised by how little this is done well, but it can be harder than it sounds. In the public sector especially, policy is usually nests of many problems.”

“It’s the same thing in a corporation,” said Krzus. “What we want to do, what we want integrated reporting to do – we’ll get a different answer from investor relations, from general counsel, from operations, from finance. Pick a department and they’ll all have a different perspective. It’s hard to even think about the idea of integrated thinking if none of these people are on the same page.”

Krzus has taken Question 1 and, he said, “baked in some of the language of integrated reporting”.

In Krzus’s hands MacMaster’s Question 1 becomes: “What is integrated reporting? Define it in your own words. What changes will integrated reporting bring to your organization? What problems will integrated reporting solve?”

Arguably, the biggest problem that a good integrated report can help combat is short-termism.

Myopia: the enemy of good planning

Short-term corporate thinking bedevils every part of the global financial system. It’s a problem for which no one is to blame and everyone is to blame. It frustrates employees, it annoys customers, and it concerns investors, small and large. And yet investors still consistently assess companies on short-term performance.

“I’m beginning to think that it’s not always intentional,” said MacMaster. “I’m not sure that people are taught, in our education systems, for example, how to problem solve, how to think critically, how to think strategically. At least, in Australia I’m not convinced that we’re taught how to think in this way.

“So, the short-termism is the result of a few things. First, we’re not really taught the tools and techniques to think any differently. Plus, incentive structures can make it easier to think in a short-term way.”

MacMaster once worked for BAE Systems, a corporation in which short-term, non-rigorous thinking was not an option. So she knows it’s possible.

“When I worked in engineering I worked on a missile defence system for 10 years. People in my seminars are surprised to hear that not only did the system take ten years to develop, but that the majority of designers stayed on the project for the full ten years. The retention of corporate knowledge was huge compared to public policy, where it’s common for people to be on a project six months or less at a time.

“So while public policy issues represent much more complex design challenges than technological design challenges, it’s rare to have a design team working on a policy problem for anywhere near 10 years.”

Prescriptions for short sight

MacMaster says her 20 questions draw on three main themes or theories. “One is the theory of strategy. One is systems theory. And the other one is complexity theory.”

Some quick definitions. Theory of strategy is a structured way to think about how to achieve outcomes. Systems theory considers outcomes as the result of parts interacting with each other in a particular way – so if you design those parts and how they interact, you can influence the outcomes. Complexity theory recognizes that there are complex systems which learn and adapt, and this introduces a level of uncertainty which makes everything more difficult.

“Systems thinking offers a lot,” said MacMaster. “But we need to understand what complexity really is and what it means. And we have to understand what a theory of strategy looks like in the 21st century. Theories about strategy are changing, because strategy needs to be more adaptive than it used to be. Complex systems are learning and adaptive themselves.”

At the government level, which is MacMaster’s main focus, there are clear structural obstacles in the way of long-term thinking. Electorates that expect quick returns from election promises; politicians desperate to get re-elected. Entrenched self-serving networks that pose enormous obstacles to both policy and implementation – in developed as well as undeveloped countries.

But you’d think that listed corporations, particularly in a low-interest environment, would want, and would be able to have, more control over their own destinies.

Not necessarily so, says Krzus. “Just pushing the time frame out from the last quarter to three years from now – that’s  very difficult. Making those changes requires taking risks. It requires the board and CEO telling the market: this is what we’re going to embark on. On one hand our earnings may suffer slightly over the next two years. On the other hand, we’re trying to build a plan to be here in fifty.”

Getting to ‘how’

Yes, good communication with investors is important. But making the changes Krzus is talking about also requires a degree of transparency with employees that many companies are unused to. Anyone who’s ever worked in a modern corporation knows how executive declarations of transformation can lead to feelings of fatigue, suspicion and helplessness at all levels.

And that’s not just because employees have heard it all so often before, says MacMaster. It’s also because the “how” is missing.

“Quite often we hear, in speeches, in books and at conferences, these good words, like agility, and learning and adaptive design, and being strategic and thinking things through,” agrees MacMaster.

“I think they’re good statements. But when we hear them all the time, people who are responsible for doing that on a day-to-day basis don’t have a clear sense of what those rather ambiguous terms actually mean. There’s not much practical guidance around what it means to be ‘agile’, for example.  And so that was another motivation for the 20 questions. Just trying to provide some detail underneath those big, important, ambiguous words, and helping people try and put them into practice.”

At her workshops MacMaster provides practical techniques to help answer the questions.

“One example would be, for question 11 (How will the things you plan to do lead to the changes you want?), I show them a very simple policy logic diagram.

A policy logic diagram maps how the things you plan to do will lead to your expected outcomes.

“A simple policy logic diagram has numerous benefits.

“It’s a summary of strategy on a page, it can be useful for communication purposes, for diagnostic purposes, for evaluation purposes and for design purposes.”

MacMaster emphasises that her questions are intended to be asked iteratively. “The idea is that you ask the same questions in the first week of a project. And the same twenty questions in the last week of the project, and any time in between. What changes is the answers. For multi-stakeholder projects, getting consensus on question one is ideal, but it won’t happen straight away.”

We’re a long way from the point where long-term strategic planning (and reporting on those plans) is the norm in corporations.

The theory behind integrated reporting is that if investors favour companies which have good long-term value creation plans, that will encourage all companies to take long-term planning more seriously.

But first investors have to value the long-term plans.

Some powerful names – BlackRock, McKinsey, Dow Chemical – have thrown their weight behind another project to encourage long-term decision making. It’s called FCLT Global, and you can read about it here.

Mike Krzus has responded to the concerns of the FCLT group with a publication that links FCLT’s recommendations to improve long-term strategy with the IIRC’s framework.

For companies bewildered by all the theories and the advice, one temptation may be to resort to simplification. MacMaster thinks that’s a mistake.

“In a way I’m trying to push back against over-simplification. I’m trying to encourage people to think more deeply. We have this tendency to simplify things into threes, or sevens. But the real world’s more complex than that.”

No one said that good, long-term planning was easy work. It’s not, it’s tough.

– January 18, 2017