Looking forward Our medium-term strategy to 2020
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Context
Our Vision 2020 and strategic framework were launched to Barloworld’s senior leadership team at our global leaders’ conference (GLC) in March 2015, providing inspiration and guidance into the future with specific focus on the strategic planning period from October 2015 through September 2020.
A participative approach was adopted in developing the vision and strategic framework. This included accessing the collective wisdom of senior executives on our 2014 Executive Development Programme as well as other executives and senior employees who participated in an initiative to revitalise the group strategic planning process.
Barloworld’s Worldwide Code of Conduct was also revised to align with our strategy and provide individual and collective values and behaviours guiding how we conduct business.
Growth industries underpinning our 2020 ambitions have been identified as mining, infrastructure, power, automotive, logistics and agriculture. While some of these are cyclical industries we believe they all offer good long-term growth potential and targets have been set for all key business segments.
Our five-year strategic plan builds on the successes of our past while expanding the scope and magnitude of stakeholder value creation into the future.
Vision 2020
Our Vision 2020 articulates a balanced desire to create shared value for all stakeholders, while recognising the primacy of shareholders as the owners of the company. It is deliberately broad in its scope to encompass our diverse business units and stakeholder groupings. It envisages innovative and customised solutions that make a “world of difference” for our stakeholder groups.
Central to our vision is a broader concept of value creation in which economic value creation in turn creates value for a broad range of stakeholders, ultimately to the benefit of society at large. We aim to enhance business competitiveness while simultaneously advancing social and environmental outcomes.
Strategic focus areas (SFAs)
In order to achieve our Vision 2020 we have again identified six SFAs through which we aim to deliver shared stakeholder value in all our divisions and business units. While generally consistent with our previous SFAs, two areas have evolved to align with our 2020 ambitions.
Key performance indicators (KPIs) to 2020 as well as related aspirational targets have been identified for each SFA, against which progress will be measured and reported. These are central to aligned performance throughout the group and will be incorporated in individual performance management through our integrated employee value model.
Our SFAs are consistent throughout all operations and align group activity, inform risks and provide a framework to identify opportunities. Top imperatives are determined for each SFA to facilitate prioritisation and resource allocation. This approach is duplicated in all divisions and functions, ensuring a structured, and aligned shared value creation approach for all stakeholders.
Delivering a world of difference through our strategic focus areas
| STRATEGIC FOCUS AREAS |
STRATEGIC INTENT |
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|---|---|---|---|---|---|---|---|---|---|
 People |
To attract, develop and retain the people and skills required to deliver on our strategies and create shared value through innovation, collaboration and continuous improvement | ||||||||
 Diversity andinclusion |
To maintain and enhance our competitiveness, credibility and legitimacy in the eyes of all stakeholders by leading in diversity and inclusion across all of our businesses | ||||||||
 Sustainable development |
To lead in sustainable development through respectable corporate citizenship and by delivering products, services and solutions that generate sustainable outcomes and realise commercial opportunities for revenue enhancement and cost savings | ||||||||
 Innovativecustomer solutions |
To drive market leadership by ongoing transformation of our business model from product-focused to service and solutions-focused, leveraging technology to deliver productivity and performance benefits to our customers | ||||||||
 Profitable growth |
To double revenue and achieve targeted growth in total shareholder returns (TSR) over the five years to 2020 | ||||||||
 Financial returns |
To achieve financial returns above our cost of capital through the cycle and in the top quartile of our peer group in each of our strategic business segments | ||||||||
Values and Worldwide Code of Conduct
The Barloworld Worldwide Code of Conduct, incorporating our values, informs individual and collective behaviour throughout the group. To support the group’s Vision 2020 and objectives, “Sustainability” has been added as a fifth core value alongside Integrity, Excellence, Teamwork and Commitment. This recognises the central role of sustainability in the group’s value creation approach.
Strategic planning process
During the period we revitalised our strategic planning approach, which underpins the implementation of our Vision 2020. A world-class strategic process was developed using a collective and interactive approach involving leading strategy consultants, senior executives and other relevant individuals within the group. The process is codified in a handbook together with all the relevant material and is being institutionalised throughout the group.
Overall strategic framework
The elements of our strategic framework are consolidated in a holistic and concise overview reflecting the group’s vision; our shared value aspirations; our strategic growth segments and the industries in which we participate; our strategic focus areas that underpin our value creation; and our Worldwide Code of Conduct which informs our behaviour and how we conduct business.
The three models outlined below are also essential components of our strategic framework.
- Integrated Employee Value Model (IEVM) – defines how Barloworld creates value for employees and their role in making a world of difference to our stakeholders
- Integrated Financial Value Model (IFVM) – identifies our financial value drivers, the key levers in the business that need to be managed to deliver enhanced financial returns
- Strategic Planning Model – institutionalises a structured strategic planning process throughout the group which identifies business opportunities and directs the allocation of both human and financial resources to capitalise on them
This framework is appropriately replicated at divisional level to achieve alignment, while accommodating flexibility and the diverse nature of our operations.
Implementing our Vision 2020 and strategy
The strategic planning process conducted during the year incorporated our 2020 strategic goals and was conducted according to our revitalised strategic planning approach.
During the period the group started a comprehensive process to communicate and entrench its Vision 2020, related objectives and strategic plan. This began with the Global Leaders’ Conference in March, followed by the roll-out of a detailed communication programme to all employees. Our revitalised strategic planning process further entrenched the key elements of our vision and strategy in the group and our integrated employee value model will ensure individual and collective alignment through performance management, recognition and reward.
10 pillars of sustainability
Our 10 pillars of sustainability will continue to guide us towards achieving our 2020 ambitions and aspirational targets.
Group aspirational targets for 2020
We have set group aspirational targets for 2020 for each of our strategic focus areas. They will focus our efforts, guide activities and inform progress over the five-year strategic period. Although we do not envisage achieving our targets in a linear year-on-year fashion over this period, we will report our progress annually. Related internal objectives are set to support operational management and implementation of our strategic intent and these will be incorporated into performance management processes and appropriately inform remuneration and reward.
Divisions’ projections have informed group targets. The diverse and decentralised nature of the Barloworld group requires unique divisional approaches based on relevant industry and regional realities, requirements and expectations.
Our group aspirational intensity-based targets are set against a business-as-usual scenario that tracks revenue as a proxy for business activity.
We will regularly review our targets to ensure that they remain relevant and appropriate in light of legislation and regulation, and that they balance the intents of our six strategic focus areas over the five-year period.
Aspirational group-level 2020 targets
| STRATEGIC FOCUS AREA, INDICATOR AND METRIC |
GROUP ASPIRATIONAL 2020 TARGET |
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|---|---|---|---|---|
PEOPLE |
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| Safety | ||||
| Work-related fatalities | Zero | |||
| Lost-time injury frequency rate (LTIFR) | ≤0.5 | |||
| Employee engagement | ||||
| Overall IPM score | ≥80% | |||
| Employee productivity | ||||
| Operating profit per employee (R000) | ≥350 | |||
| Employee development | ||||
| Total direct training spend per employee (Rand) | ≥8 000 | |||
DIVERSITY AND INCLUSION |
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| Gender | ||||
| % Women of total headcount | ≥35% | |||
| % Women in middle management level and above | ≥40% | |||
| Race SA | ||||
| % AIC* employees of total headcount | ≥75% | |||
| % AIC* employees in middle management level and above | ≥50% | |||
| B-BBEE | ||||
| Rating level (dti codes) | 3 or better | |||
SUSTAINABLE DEVELOPMENT |
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| Energy | ||||
| Non-renewable energy intensity (GJ/Rm revenue) | 10% efficiency improvement by end 2020 off 2015 baseline | |||
| Renewable energy (MWh) | 2 000 or more per annum | |||
| Greenhouse gas emissions (scope 1 and 2) | ||||
| GHG emissions intensity (tCO2e/Rm revenue) | 10% efficiency improvement by end 2020 off 2015 baseline | |||
| Water | ||||
| Water intensity (KL/Rm revenue) | 10% efficiency improvement by end 2020 off 2015 baseline | |||
| Waste | ||||
| Responsible waste disposal | 100% solid and liquid waste disposed through formal waste | |||
| disposal service providers | ||||
| Corporate citizenship | ||||
| CSI spend | 1% of net profit after tax (NPAT) | |||
INNOVATIVE CUSTOMER SOLUTIONS |
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| Customer loyalty | ||||
| Market leadership in targeted segments | Leadership in customer satisfaction and loyalty | |||
FINANCIAL RETURNS |
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| Profitability | ||||
| Operating margin (%) | ≥6.5 | |||
| Return on capital | ||||
| Return on equity (%) | ≥15.0 | |||
| Return on net operating assets (%) | ≥20.0 | |||
| Return on net assets (%) | ≥18.0 | |||
| Asset efficiency | ||||
| Net asset turn | ≥2.8 | |||
PROFITABLE GROWTH |
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| Scale of business | ||||
| Revenue growth (Rbn) | Double revenue in five years | |||
*African, Indian and Coloured.