Corporate planning : differentiation and Integration of the process

Dr. D.S. Withane
Professor of Management
Odette School of Business
University of Windsor, Windsor, Ontario,

PLANNING: There are various descriptions of corporate planning methodology and each is done in accordance with the professional and/or academic preferences of the writer.

Regardless of the model selected, the corporate planning process can be adopted successfully if it is applied after studying the internal and external environment in which the company or the authority exists.

Regardless of how successfully it was adopted elsewhere, the implementation of a patent model without careful investigation of the environment and the management systems, command practices and culture of the organisation will certainly lead to a marginal process.

Therefore, the model to be described cannot be put into operation without tailoring it to the focal organisation’s idiosyncrasies.

The framework of integrated corporate planning we try to introduce here assists the manager or the team of change managers in defining the environmental domain and how to navigate through that broad domain in order to accomplish the changes that are desirable for long term success of the organisation.

The corporate planning process comprises several essential elements. As shown in Figure 1, several of these elements are developed sequentially while a couple of the early steps are concurrently accomplished.

Corporate strategists will find that the flow of the activities is not definite and continuous iteration of forward and backward skipping gives better results. Allowing room for emergent changes would often make sure that the organisation achieves realistic outcomes.

The sequential process

* Assess the previous period’s plan which includes:

a. a review of the organisation’s progress against the plan.

b. an examination of specific aspects / problems encountered.

c. a review of the planning material which is current.

d. an examination of the issues that needs to be included in the future.

* Analyse the customer’s/ user’s level of satisfaction with products / services provided. All noticeable problems or prospects must be considered during this stage.

* Set the direction of the organisation’s strategy. CEO or the top manager of the organisation provides the insights of the planning process to all his or her assisting staff.

* Assess the organisation’s internal environment. This includes the examination of physical, human and financial resources of the company. Internal assessment deals with the organisational climate, culture and general working conditions. The strengths and weaknesses of the organisation are usually addressed at this, level.

* Assess the organisation’s external environment.

This includes the economic, legal, political and social factors, financial and budgetary constraints, and community and government regulations. The threats and opportunities are usually addressed at this stage.

* Forecast the kinds and amounts of goods/services needed of the organisation and the levels at which such products must be provided. This includes future market projections, constituency needs as well as internal performance targets —— ROI, productivity enhancement, and improvements in responses to customer needs. The main focus here is to align the top management’s goals with the environmental responses.

* Identify and evaluate the strategic goals.

The goals must relate to the SWOT factors. Also the goals should address a range of performance outcomes the organisation could achieve in order to fulfill its mission. For example : to increase the market share of product ABC.

Generally there goals are broad statements that guide the further planning efforts of the organisation.

* Choose the goals from among the list of long range goals that will form a framework for this period’s operational planning.

* Prepare the “corporate plan.” In essence, this step deals with documenting the planning process up to that point. Basically the plan is comprised of:

a. the top manager’s assessment of the company and his/her specific direction under which the company must move.

b. a concise analysis of the company’s environment.

c. a detailed discussion of the SWOT factors.

d. listing of key goals including how various short - range goals will provide guidance to support the long - range goals and illustrating its value as a vehicle for communication.

e. develop operational plan to guide the execution of the goals. These short - to intermediate term objectives define the major results that should be accomplished for the organisation to march closer to the goals. For example: to achieve sales of 500,000 units of product ABC by Dec. 2007.

These operational objectives are supported by detailed action plans. The action plans provide details such as how and by whom the objectives will be met.

* Monitor the execution/implementation of the objectives through regular and periodic reviews with the responsible individuals/offices.

* Evaluate progress / results against the objectives, and evaluate the extent to which the movement toward the goals has been realized.

* Recognise or reward the accomplishments that support the long-range direction of the organisation.

Essential variables for effective

corporate planning

The central theme of the contemporary organisational environment is change and renewal. Much has been written on this theme. Critics have described today’s change and renewal as volatile, pervasive and significantly discontinuous.

While many strategists discuss how change is affecting us psychologically, socially and organisationally the “futurists” emphasise what changes the future will bring.

The centrality and necessity of change, hence, should be a fundamental consideration in the management of contemporary organisations or a part of an organization.

Also, it is essential for the strategists of organisational change to understand the continuous organisation - environment interactions and to respond to such environmental fluctuations.

Communication

The most important variable needed for successful corporate planning is communication. Vertical as well as horizontal commutation systems should be in place for any organisation to adopt the necessary changes.

Vertical communication can be both upward and downward while horisontal communication addresses the lateral movements of information across the organizations.

The key to information flowing is the participation of the employees who are responsible formulation and implementation of the corporate plan several experts argued that the corporate tight coupling between there two iterative activities is a sine qua non for the organisation’s overall goal accomplishment.

Integration of stratify formulation and execution is the province of the strategist or the coalition of strategist. At the operational level participation should be as wide as organizationally possible.

Organisational flexibility and control are the other two vital components essential for corporate planning. Quinn and Rohrbaugh, Ackoff and Mintzberg have discussed the high level of turbulence that organisations face today.

They argue that shifts in political, economic, cultural and technological factors have significant impacts on corporate planning and implementation process.

There critics also emphasise that strategists must anticipate change and thus minimise the related pitfalls in today’s volatile environments. Practically, strategists cannot accurately forecast all change and avoid the related pitfalls.

Corporate planners of organizations working in less stable environments such as the one we have in Sri Lanka should employ flexible approaches to plan formulation as well as implementation.

Mintzberg subscribes to the notion that in creating a corporate future, the strategists must be flexible in designing a suitable organisation structure and the plans which pull that structure along.

In a country like ours if flexibility is not built into the system, if the organization (public / private or not-for-profit) cannot adapt to fluctuating situations, if the organization in reluctant to listen periodically to input from is environment and make course corrections based on those reassessments, then the entire corporate plan will be derailed.

In fact, the organisations must be able to stand the shock of sometimes volatile and unforeseen changes emerging from the internal and external environments in which they interact.

Concurrently the strategists should look into the effective ways of controlling the various activities involved in corporate planning. Whether one talks about strategic or operational aspects, without control of the organisation’s progress toward is goals, planning will be a waste of time.

In several instances Sri Lankan organisations have made elaborate plans, have them printed and illustrated, bound and distributed, and then sat back and waited for the magic to happen.

When the employees of the organisation do not get moving in response to the plan and bring about superior results by the end of the planning year, often top management complains that the system just does not work.

If the team of strategists is persistent, they might try corporate planning again. However, unless the important ingredient called control is involved this time around, getting substantial results world certainly be a forlorn hope.

Controlling involves many activities

In its broadest sense, controlling means making sure that what you have planned is carefully carried out. It usually involves : spelling out the strategic goals with sufficient details to track the goals, ensuring that the specific work assignments are made for the major portion of the plan; clarifying the relationships with the various personnel responsible for the major steps, establishing time limits for the intermediate steps of the plan, reviewing the progress toward intermediate steps regularly; making adjustments to the plan to accommodate circumstances; periodically assessing whether or not the goal is valid and should be pursued and asserting the progress toward the goals to make sure whether the expected results were achieved, the outcomes received were worth the cost incurred and follow - on goals are actually necessary.

Unless this sort of a systematic approach is adopted concurrently with the formulation of the plan, chances of the organisation moving forward in the desired direction are remote. In addition, the employees participated in the planning process will realize that their efforts were in vein.

Such an outcome would become a significant demotivation and frustration to those who were actively involved in the process.

However, one has to be cautious in addressing the steps involved in controlling. In this regard the managers must be careful in assessing the amount of oversight to exercise with each individual.

If we just give a lip service to the control function, the implemention will turn into a very chaotic process and if the person in charge of execution of the corporate plan will not oversee the activities on a regular basis, the subordinates will treat the control process less important, and often it can be put into the backburner.

At the same time the boss should not over do the controlling.

If so the employee motivation would be vanished, they might resent the boss’s interference and the deadlines of the plan will not be effectively met. Hence, keeping a fine balance between flexibility and control in order to accommodate various expected and necessary changes in the implementation process.

Another major problem regarding control is the tendency during progress review to focus predominantly on what has happened with regard to the steps of the plan to date.

Often it is easy to look back and see what has been done. From a comparative point of view little value can be added by a control system that is always concerned with the past.

Strategist of the corporate plan should not forget however to examine what has happened in terms of its effect on the future.

Most successful strategic planning processes must address the consequences of the progress to date how the decisions made in the past have changed the results, whether the plan should be revised according to the emerging needs and how to get on with the action in the most appropriate way.