A SYSTEMATIC APPROACH TO
CORPORATE PLANNING
APPROVED:
Graduate Committee:
C.
Major P r o f e s s o r /
/VI IVfinor P r o f e s s o r
Commit tee Member
LU Commit tee Member
Dean of the School of Business
Dean of the Graduate School
A SYSTEMATIC APPROACH -TO
CORPORATE PLANNING
DISSERTATION
.Presented to the Graduate Council of the
North Texas State University in Pa r t i a l
Fulfi l lment of the Requirements
For the Degree of
DOCTOR OF PHILOSOPHY
By
Richard C. Johanson, B. B. A. , M. B. A.
Denton, Texas
May, 1969
Copyright by
Richard C. Johanson
1969
TABLE OF CONTENTS
Page
LIST OF TABLES . ix
LIST OF ILLUSTRATIONS . x
Chapter
I. INTRODUCTION 1
Influences Which Cause Corporations to Formal ize Planning
Significance of the Dissertat ion Topic Hypotheses Scope and Limitations of Dissertation Methodology of Research General Organization of Dissertat ion
II. HISTORY OF CORPORATE PLANNING FUNCTION 14
Comments on Relationship of Planning to the Management P r o c e s s
Evolution of Planning F i r m s Formal ize Their Planning Ear ly Experiences in Formal Planning Authorities Cite Need for More
Effective Management The Planning P r o c e s s and the Motivational
Climate Accountability Management as Related to the
Planning P r o c e s s P res iden t ' s Role in Designing and Implementing
a Formalized Planning and Decision-Making Framework
Current Formalized Planning P r o c e s s Summary Review of Strategic Development and
Operation Planning General Pa t te rn of Corporate Planning P r o c e s s e s
IV
Chapter Page
III, ORGANIZING FOR FORMALIZED CORPORATE PLANNING . 58
Chief Executive 's Role Top Management 's Active Support and
Part icipation Starting Forma l Planning Responsibili t ies and Functions of Staff
Corporate P lanners Position Description for Corporate
Vice Pres ident of Planning Important Accountabilities of Planning Staff Centralization vs. Decentralization of the
Planning Function Compatibility of Management P r o g r a m s ,
P rocedures and P rac t i ce s with the Planning P r o c e s s
IV. ENVIRONMENTAL ANALYSIS 76
Utilization of Environmental Data Environmental Analysis and Evolutionary
Phases of Planning Identifying the Corporat ion 's Position in
the Environment Fac tors Which Determine When to Assess
Environment Corporate Personnel Involved in Prepara t ion
of Environmental Analysis Personnel Involved with Continuous Monitoring Prepara t ion of Broad Industry Studies Sources of Information for Industry
Environmental Studies Corporate Information Bank Special Studies - Products , Acquisitions,. P r o c e s s e s Formulation of a Continuous Environmental
Monitoring System Relationship between Environmental Analysis
and Corporate Objectives
Chapter Page
V. ASSESSMENT OF CORPORATE STRENGTHS AND LIMITATIONS . , . . . . . 106
Appraisal Techniques Utilized in Assessment Endeavor
Personnel Part icipating in Corporate Assessment
Example of a Corporate Assessment Study-Relationship between Capability Assessment
and Other Facets of Planning P r o c e s s
VI. CORPORATE OBJECTIVES, GOALS, ASSUMPTIONS AND CRITERIA 129
Definition and Explanation of Objectives, Goals, Assumptions, and Cr i t e r i a
Establishment of Quantitative and Qualitative Objectives and Goals
Data Inputs Attendant to Formulation of Objectives and Goals
Hierarchy of Objectives/Goals Standards of Pe r fo rmance Derived f rom
Objectives/Goals Objectives, Goals, and Standard of Pe r fo rmance
as Basis for Management by Results
VII. CORPORATE STRATEGY AND PREPARATION OF THE LONG-RANGE PLAN 169
Corporate Strategy Reasons for Strategies Design of Strategies Conditions Causing the Reformulation of
Corporate Strategies Corporate Long-Range Plan Time Span of Corporate Long-Range Plan Example of a Corporate Long-Range Plan Techniques Involved in Prepar ing a
Corporate Long-Range Plan Organization Components Involved in
Prepara t ion of the Formal Plan Benefits Derived in Prepar ing Forma l Plan
vi
Chapter Page
VIII. IMPLEMENTATION OF FORMAL PLANS, PROGRAMS AND PROJECTS . . . . . . . . . . . 197
Guidance Provided by the Corporate Planning System
Relation of Pol ic ies and P rocedures to the Implementation of Plans
Implementation of the Corporate Forma l Plan Through P r o g r a m s and P ro j ec t s
Implementation of Short-Range Plan •Through P r o g r a m s and P ro jec t s
Management Systems, Pol ic ies , and P r o g r a m s Which Compliment the Formal Planning P r o c e s s
IX. APPRAISAL OF PERFORMANCE WITH CORPORATE PLANS AND RECYCLING OF PROCESS 220
Corporate Appraisal System for Monitoring Attainment of Objectives and Goals
An Example of a Corporate Appraisal System Appraisal Techniques Utilized by Responding
Corporations in Monitoring Attainment of Objectives
Appraisal P rog ram Related to Long-Range and Short-Range Plan <•
Appraisal of Company Pe r fo rmance Through Utilization of the Computer
Considerations Leading to a Recycling of the Forma l Planning P r o c e s s
X. SUMMARY AND CONCLUSIONS 240
Summary Highlights of Each Facet to the Forma l Planning P r o c e s s
• Long-Range or Developmental Plan Short-Range or Operational Plan State of the Art of P lanning- -Presen t <
and Future Conclusions Areas for Fur ther Research
Page
APPENDIX A 271
APPENDIX B 286
APPENDIX C . 292
APPENDIX D 295
APPENDIX E 301
APPENDIX F 310
APPENDIX G 312
APPENDIX H 315
APPENDIX I 320
BIBLIOGRAPHY 324
Vlll
LIST OF TABLES
Table Page
I. Industry Studies by Responding F i r m s 93
II. Utilization of Industry Studies by Responding F i r m s . . 93
III. Sources of Information for Environmental Studies. . . 95
IV. Pa t t e rns of Corporate Self-Appraisal . 108
V. Areas of Corporate Assessment 112
VI. Planning Organization for Corporate Assessment . . . 117
VII. Corporate Self-Appraisal 122
VIII. Corporate Assessment Techniques and P rac t i ce s . . . 125
IX. Corporate Assumption Base
X. Use of Objectives and Goals by Responding F i r m s . . 149
XI. Industry Capability Prof i l e Continental-Emsco Company (1961) . . . . . . . . 178
XII. Product /Market Prof i l e Continental-Emsco Company (1961) . . . . . . . .
IX
LIST OF ILLUSTRATIONS
Figure Page
1. The System of P lans 40
2. Formal ized Planning P r o c e s s 42
3. A St ruc ture and P r o c e s s of Business Planning . . . . 44
4. Dynamic F o r m a l Planning P r o c e s s 48
- 5. F o r m a l Planning Organization P h a s e s 64
6. Environmental Impact on Corpora te Planning 81
7. Planning F ramework fo r Objective and
Goal Setting 103
8. Comparat ive Analysis Guide ' . .. 120
9. Umbre l la Approach to Planning . . 152
10. Sales and P r o f i t s ,
Cont inenta l -Emsco Company 174
11. Planned Sales Growth 176
12. Interre la t ionship between F o r m a l Plan . . . . . . . 199
13. Overview of Corpora te Development Plan 200
14. Overview of Corpora te Operat ional Plan 202
15. Planning and Control P r o c e s s e s in Organization - - In te rna l ly Oriented P r o c e s s . , . . . . . . . . 221
CHAPTER I
INTRODUCTION
Man, during the past two decades, has experienced a phenomenal
change in his environment; and in this t ime , the human universe of
knowledge, capacity, and achievement has been expanding rapidly in
all direct ions.
On a world-wide scale and on a United States scale , one sees not
mere ly a steady advance along a single line, but an explosion of change
and growth in almost every a rea of human endeavor: social , polit ical,
economic, and technological. In this great human challenge the p ro fe s -
sional managers , who have done so much to c rea te these unprecedented
conditions, will have both the opportunity and the responsibil i ty to p ro -
vide creat ive vision and responsible leadership as man s t r ives to fulf i l l
his needs and wants.
The importance of leading has never been g rea te r than it is- in
the business world of today; and more than ever these dynamic fo rce s ,
molding our economy, call for an equally dynamic vision if management
is to cope with tomorrow 's demands of society. Likewise, there is '
every indication that tomor row ' s management will be equally concerned
with the survival and growth of the business enterpr ise . To do this
businessmen must anticipate long-range t rends and avoid "c r i s i s man-
agement" based on spot decisions, inadequate knowledge, and strictly
intuitive judgment.
The current emphasis on advanced planning has been occasioned
by the dynamics of our society; and as discussed by Steiner (4), the re
is no substitute for long-range planning in the development of profi table
and healthy organizations which are functioning within an ever changing
and extremely dynamic environment.
The entire a rea of long-range planning is a relat ively new top-
management process that has recently increased by geometr ic p ropor -
tions in its utilization by business and governmental organizations.
Market planning, economic planning, product planning, etc. , have been
widely accepted as necess i t ies of management for the past severa l yea r s .
However, the development and acceptance by management of a fo rma l -
ized integrated planning system which encompasses both short and long-
t e rm planning is of recent origin and, in great p a r t , r e su l t s f rom the
need of a corporation to respond rapidly to fas t moving changes.
Influences Which Cause Corporations To Formal ize Planning
i
The authors Dale and Kami give the following three principal !
reasons for the increasing trend of formalized planning:
1. The increased speed of technological change. 2. The growing need for coordination as companies
grow la rge r .
3. The g rea te r emphasis on pinpointing accountability, which tends to become blurred as company size increases (2, p. 252).
Technological Change
Writing on "The E r a of Radical Change, " Ways has said:
Within a decade or two it will be generally understood that the main challenge to U. S. society will turn not around the production of goods but around the difficulties and opportunities involved in a world of accelerating change and ever-widening choices. Change has always been a par t of the human condition. What is different now is the pace of change, and the prospect that it will come fa s t e r and f a s t e r , affecting every par t of life.
The break between the period of rapid change and that of radical change is not sharp; 1950 is an a rb i t ra ry starting date. More aspects of life change f a s t e r until it is no longer appropriate to think of society as mainly fixed, or changing slowly, while the tide flows around it. So many pat terns of life a re being modified that it is no longer useful to organize d iscus-sion or debate mainly around the relation of the new to the old (5 , pp. 113-115).
Simple observation of our environment revea ls the impact of
change, and observation also re f l ec t s that many people today operate
on the assumption that society is relatively static. At best these indi-
viduals or organizations attempt to plan by making simple s t ra ight- l ine
project ions of present t rends . The resul t is an unreadiness to meet
the fu ture when it a r r ives .
Man's sense of the future is not enhanced by such an exposure'
to rea l i ty , and the re is no her i tage of the future . Since man does not
possess a t ime-spanner to give a sense of the fu ture , the re is a r equ i re -
ment to develop one. In pa r t , this can be done by examining the fo rces
of change existing within the concerned environment and by trying to
understand how the fo rces of change originated, where they are likely
to be going, and the opportunities made available by the fo rces of change.
The dynamic forces of change cause a corporation to see itself
in a somewhat different relationship to t ime than it is accustomed.
There is not much which can be done to affect the pas t , and the present
is fleeing at an ever f a s t e r ra te ; consequently, it is the fu ture that is
most amenable to the plans and actions.
Prepar ing the corporation for the future should be a mat ter of
great concern, according to Marsh (1) of the American Management
Association, and it is his contention that in the early 1960's business
experts conceded that fo rmal corporate,planning was vital for a fu ture
edge over competition. Today these same experts now rea l ize that
effective long-range fo rmal planning is essent ial for corporate survi -
val and growth.
Marsh states in a le t ter :
In effect , our age of rapid social , economic, political and technological change has presented an ultimatum to corpora te leaders . To remain competitive, you must ensure that your f o r -mal planning program not only predic ts t rends in marke t s , p ro -ducts, and methods, but also gives you a clear picture of how your company will have to operate to achieve continued growth in the business environment of the future .
It lets you keep your future objectives in mind at all t imes and determines , as accurately as possible, what r e sources will be needed and how these r e sources can best be used (1).
A ma jo r cause of corpora te change is the need for the f i rm to
maintain and improve the marke t acceptance of its product or service
if it is to continue to exist and experience growth. The impact of social ,
economic, political, and technological change means that last year's
products and serv ices will not meet the demands of this y e a r ' s cus tomer .
Through the utilization of a formalized planning p r o c e s s , the corporation
can readily determine if it is at a disadvantage in the marke t place. If
so, it must institute change, and the response may be a marketing inno-
vation, a change in distribution or manufacturing methods, a cost saving
due to changes in financing methods, or a new or improved product r e -
sulting f rom innovations.
Recently, Schriever noted in a newspaper ar t ic le :
As technology becomes more important in American bus iness , management is moving toward more advanced planning and sys tems analysis. American management has learned the value of planning five or ten yea r s in advance, whereas one yea r used to be the rule. Former ly many managers simply looked at the past and then projected on a straight line bas i s into the fu ture . The importance of technology - the dynamic aspects of it plus the need for planning five to ten y e a r s into the fu ture and the need for using a sys tems approach - evolved in the mil i tary af ter World War II.
It is now becoming a more important consideration, management-wise in all l a rger companies because technology " continues to be dynamic.
Shor t - term planning isn ' t so prevalent anymore, because technology plays a big role in business and industry and techno-logy takes , general ly, two to five y e a r s to be developed into something usefu l (3, p. 5).
It is becoming more evident that the management philosophy for
the fu ture should evolve to accommodate the decisions and actions of
managers to a changing economic, social , poli t ical , and technological
environment; and it must meet the c r i t e r i a of change and vi ta l i ty .
Growth and Requirement for Coordination
Many United States corporat ions in recent y e a r s have experienced
a period of accelerated growth due, in pa r t , to the growing number of
m e r g e r s , acquisitions, and consolidations. This growth can be also-
attributed to the increasing trend toward diversifying into international
marke t s , and in many instances corporat ions a re diversifying the domes-
tic operations into various industr ies within the United States.
Concurrent with the increasing size of many corporat ions and the
trend toward g rea te r complexity and diversi ty of operation, is the grow-
ing need for a planning and decision-making system which will permit
management and all other corporate personnel to attain targeted corpo-
ra te and individual objectives and goals.
Need for Pinpointing Accountability
In addition to the requirement for more effective coordination
of corporate operat ions, the re is a need for g rea te r emphasis on the
pinpointing of organizational components and individual accountabilities.
As corporat ions grow la rger and more complex, new organizational
concepts should evolve in o rder to permit a more effective program of
decentralization and delegation and the attendant means for monitoring
accomplishment in relation to the delegated accountabilities. Some be-
havioral scient is ts fo resee man ' s requirement for satisfying his mani-
fold needs, which in great par t will be accomplished through his occupa-
tional endeavors. Aware of such motivational considerations management
is beginning to real ize the requirement for delineating and pinpointing
a reas of opportunity and accountability which will permit the incumbent
to share in the action.
Significance of the Dissertat ion Topic
The fundamental purpose of this disser tat ion is to determine the
extent to which many of the corporat ions within the United States a re
implementing formalized planning processes . The conditions surround-
ing the corporat ion, as previously reflected in this chapter , have caused
the movement toward a more systematic approach to corpora te planning
since the re appears to be no better substitute for a formalized planning
p rocess to help assure the survival and growth of the f i rm .
Also to be recognized is the t imel iness of this study since the
concept of the planning process is the last of the known subfunctions of
management to receive the concerted attention of scholars and r e s e a r c h -
e r s . The investigation revealed that there is a limited amount of l i t e ra -
tu re on the subject of fo rmal planning. The f i r s t books on the subject
of planning began to appear in 1961. In recent i ssues of the professional
journals there is evidence of the growing interest in planning, especially
in long-range planning. The concept of the fo rmal planning process and
the current r e sea rch on the elements and nature of planning will provide
future managers with a valuable conceptual f ramework for the design of
fu ture actions to keep the economy dynamic.
8
Hypotheses
1. A subs tant ia l and growing number of corpora t ions
within the United States a r e involved in implementat ion of m o r e
fo rma l i zed and sophis t icated planning techniques than in the pas t .
2. The fo rmal i zed planning concepts may va ry f r o m
one corpora t ion to another , but t he re is a common sequential
pa t t e rn preva len t in each concept.
3. The co rpo ra t i on ' s chief executive p o s s e s s e s an
accountabil i ty fo r providing a gene ra l f r a m e w o r k of manage-,
men t , and th i s can be g rea t ly fac i l i ta ted through the implemen-
tat ion of a fo rma l i zed planning p r o c e s s .
4. T h e r e a r e indications that the evolving fo rma l i zed
planning p r o c e s s p e r m i t s management the opportunity of becom-
ing m o r e or iented to the fu tu r e surv iva l and growth of the f i r m
than in the pas t .
5. The co rpo ra t i on ' s long- range and s h o r t - r a n g e plans
a r e being in tegrated on a m o r e effect ive b a s i s through u t i l i za -
tion of the fo rmal i zed planning p r o c e s s .
E f fec t iveness in implement ing the planning p r o c e s s concept has
i ts effect upon the probabil i ty that an e n t e r p r i s e will be able to survive
and grow within the domest ic and in ternat ional economy under conditions
which should provide fo r the maximum re tu rn f r o m commit ted r e s o u r c e s .
Scope and Limitations of Dissertation
The context of this disser tat ion is pr imar i ly the current f o rma l -
ized corporate planning process of United States corporat ions. The
r e sea rch will not take into account the formalized planning of govern-
mental organizations or the non-profit category of organizations. Ex-
cluded f rom the r e sea rch is a depth analysis of corporate shor t - range
planning, which normally includes the annual budget management p ro -
gram of a f i rm . Likewise, a depth analysis of supportive management
p rograms or aids which are allied with the formalized planning p rocess
will not be discussed; e .g . , incentive compensation, sys tems manage-
ment , electronic data processing. Additionally, the investigation does
not take into account the extent to which the formalized planning process
is compatible with the implementation of management by objectives,
management by exception, and part icipative management concepts. To
a limited extent the investigation ref lec ts upon the var ious management
p rograms , policies, procedures , and prac t ices of a corporation which -
requi re revamping to allow for a more integral relationship with the
formalized planning process . Since the formalized planning concept
re la tes to the broader aspects of the planning function, the investigation
dwells upon the more salient considerations of the state of the art foi*
planning. The past and current state of the art for planning, plus ob-
servable future t rends , a re presented in relation to the corporat ion 's
introduction and use of the fo rmal planning p rocess .
10
Methodology of Research
To benefit f rom the p r imary sources of information, the scope
of the investigation necessi tated a program of r e s e a r c h which was
conducted throughout the United States.
Due, in par t , to the currentness of the formalized planning pro-
ces s concept, the re exists within the United States a smal l vanguard
of individuals who are involved in researching and fur ther developing
the theory attendant to this a rea of management.
The pr imary r e sea r ch for this dissertat ion included extensive
personal conferences and consultation with the following persons who,
in most pa r t , compr ise the above mentioned vanguard of individuals;
Dr. H., Igor Ansoff, Dean Graduate School of Management Vanderbilt University Nashville, Tennessee
Mr. Edward J. Green, Pres ident Planning Dynamics Incorporated Pi t tsburgh, Pennsylvania
Mr. Morr i s Katzen Manager, Learning Center American Foundation for Management Research American Management Association Hamilton, New York
Dr. Treadway P a r k e r , Psychologist American Foundation for Management Research < American Management Association • New York, New York
Dr. Milton Rock, Managing Pa r tne r Edward N. Hay and Associates Philadelphia, Pennsylvania
11
Mr. Robert Stewart Manager Planning Research Long Range Planning Services Stanford Research Institute Menlo P a r k , California
Additional p r imary r e sea rch was accomplished through the
mailing of a comprehensive questionnaire to two hundred of the lead-
ing United States corporat ions. The questionnaire, as shown in
Appendix A, was designed to provide an insight into the p rog res s
being attained by the responding f i r m s in instituting the formalized
planning process . The response included sixty-six f i r m s , which
represen t s 32 per cent of the corporat ions receiving the question-
nai re .
An important source of information has been f rom the writings
of authorit ies and r e s e a r c h e r s . This includes books that have been
concerned with the long-range planning movement, books concerned
with the general aspects of economic planning, ar t ic les f rom leading
business magazines, company written mate r ia l , newspaper a r t i c les ,
and ma te r i a l acquired through graduate courses of study.
General Organization of Dissertat ion
The disser tat ion contents have been arranged in accordance i \
with what appears to be the sequential pattern of the fo rmal planning
p rocess and tend to follow the logical interrelat ionship between its
var ious facets . The f i r s t th ree chapters provide background information
12
about the planning p roces s , p repara tory to a chapter-by-chapter depth
analysis of each aspect of formalized planning. Chapters IV through
IX are arranged in the general sequence involved in the implementa-
tion of a formalized planning p rocess within a given corporat ion.
An overview of the dissertat ion is provided in Chapter X through
means of a general summary and a reflection upon salient conclusions
pertaining to the formalized planning process .
CHAPTER BIBLIOGRAPHY
1. American M.anagement Association, Letter f rom JVIilo J. Miarsh, New York, 1966.
2. Dale, E r n e s t and Michael J. Kami, " L o n g - R a n g e Planning, "
Readings in Management, New York, McGraw-Hill Book Co. , (1965), 2152.
3. Denver Pos t , August 27, 1968.
4. Steiner, George A. , "The Cri t ical Role of Top Management in Long-Range Planning, " repr int f rom Arizona Review, (1966).
5. Ways, Max, "The E r a of Radical Change, " Fortune, 69 (May, 1964), 113-115.
13
CHAPTER II
HISTORY OF CORPORATE PLANNING FUNCTION
An overview of corporate planning will be presented in this
chapter , with emphasis on the place of planning in relation to the
t radi t ional management p rocess . Also to be considered is the man-
agerial philosophy attendant to the fo rmal planning process concept,
which will be introduced in conjunction with the var ious facets of the
planning process . Various types of fo rmal planning p rocesses are
presented to help introduce the thought that there appears to be a
common pattern when designing a corporate fo rma l planning process
for a given organization.
Comments on Relationship of Planning To the Management P r o c e s s
During the past thir ty or more yea r s the concept of the man-
agement p rocess has provided the foundation for management r e sea rch
and study, and today many of the management texts a re writ ten within
the context of the management process .
Henri Fayol f i r s t presented the management p rocess concept i
in France in 1916 and included the following management subfunctions:
planning, organization, command, coordination, control(7, pp. 43-110).
14
15
Ralph C. Davis, in 1935, p resen ted a concept of the management
p r o c e s s and noted that management funct ions may be divided into t h r e e
re la ted p h a s e s : planning,organizing, controll ing {4, p. 35).
In acknowledging the management p r o c e s s , John F. Mee noted:
Management philosophy for the fu tu r e will evolve to ac -commodate the dec is ions and actions of m a n a g e r s to a changing economic, soc ia l , pol i t ical , and technological environment . Creat ive- thinking and innovation will produce a supe r io r con-ceptual f r a m e w o r k for the intelligent u s e of fu tu re m a n a g e r s . * * • • • * • • • • • • * * • • • • • * • « • * « • • • • * • • • * * *
An operat ing philosophy of management mus t provide, prac t ic ing m a n a g e r s with an effect ive approach to the solution of p rob l ems which prevent or impede the reaching of p r e d e t e r -mined object ives .
A four th s tage of management thought is emerging. The management thought s t r e a m s that or iginated f r o m va r ious r e -lated disc ipl ines during the f i r s t half of the twentieth cen tury , have developed and converged to such a degree that they can be identified and integrated with the gene ra l concept of a manage -ment p r o c e s s .
The t rend toward fu tu re management philosophy p r o m i s e s a much b r o a d e r pe r spec t ive which will include value concepts of the purpose of bus ines s en t e rp r i s e .
A four th s tage of management thought is fo rming , with a b r o a d e r pe r spec t ive of the conceptual f r a m e w o r k fo r the fu tu r e mis s ion of management in the economy. The emerging concep-, tua l pa t te rn of management philosophy can be i l lus t ra ted as hav-ing a s t r u c t u r e which is composed of e l emen t s , the p e r f o r m a n c e of which in a web of re la t ionsh ips g ives a l i fe p r o c e s s of the p u r -pose of management in organized society (17, 53-109).
In ref lec t ing upon the thoughts of John Mee, it is exciting to think
that the fo rma l i zed planning p r o c e s s may occupy a s t ra teg ic posit ion in
moving f r o m the prevai l ing philosophy of management . It would appear
that the m o r e signif icant developments in the concepts of management
16
thought will be in the a reas of planning and decision-making, since
both planning and decision-making a re concerned with the external and
internal corporate uncertaint ies of the future. It is often recognized
that a formalized planning process will not insure desired resu l t s , but
planning can establish the foundation for understanding the uncer ta in-
t ies of the fu ture and make provisions for adapting to them. Manager-
ial planning can establish the courses of action that a re essent ial if the
desired resul t is to be realized within a f ramework of predict ions, a s -
sumptions, and uncertaint ies .
Inadequate Attention Given to Planning
Of the m a j o r functions inherent in the management p rocess :
planning, organizing, directing, coordinating and control , the re is con-
cern that planning has not received the proper attention. The Long Range
Planning Service of Stanford Research Institute (19) noted that corporate
planning has been the most neglected and has proved to be the least
amenable management function to respond to fo rmal t rea tment . Elab-
ora te management methods and mechanisms have been developed for
the other functions of the management p rocess , including specialization
of var ious subfunctions, such as production, market ing, budgeting
and control, engineering, f inance, r e sea rch and development. The
long-range aspects of planning, however, have remained almost ent i re-
ly in the domain of top management with little delegation of responsibil i ty
17
and only minor deference to fo rmal procedures . Only in recent y e a r s
have steps been taken to develop guidelines and procedures for planning
which compare with procedures developed long ago for other manage-
ment disciplines.
Evolution of Planning
In evaluating the evolution of planning it is noted that before
World War II planning was applied for the most par t to separa te p ro -
jects or cer tain organization elements of the corporation. Planning
in this period concentrated on operations and not on company-wide anal-
ys i s and project ive study which would contribute to a m o r e effective
general management of the corporation. The problems and challenges
of World War II, according to Scott (20, p. 52), were the grea tes t s in-
gle f ac to r s contributing to the development of formal ized corporate
long-range planning.
The various mil i tary branches and corporat ions supporting the
World War II effort were faced with possibly the greates t challenge in
the his tory of the United States. The General Elect r ic Company se rves
to i l lust ra te the significance of this . Cordiner observes , "From the
beginning . . . it was apparent that the company was going to require
increasingly bet ter planning, g rea te r flexibility, and f a s t e r , more in-
formed decisions than was possible under the highly central ized organi-
zation s t ruc tu re , which was suited for ea r l i e r and different conditions"
(3, p. 45).
18
In a r e sea r ch study Ginzberg and Reilley (9, p. 27) observed
that many managers of the present generation have had considerable
expedience in government, civilian, or mil i tary service . This experi-
ence provided these managers with an exposure to the rel iance that
many government depar tments , par t icular ly the Armed F o r c e s , place
on long-range planning, use of staff, and development of objective m e a -
sures of per formance .
During World War II the Air Force maintained an internal con-
sulting group which, in pa r t , comprised the following distinguished
management personnel: Charles B. Thornton, fo rmer ly Director of
Planning for the Ford Motor Company and, current ly , Chairman of the
Board for Litton Industr ies , Inc. ; and Robert McNamara, f o r m e r
Pres ident of the Ford Motor Company and later United States Secretary
of Defense. These two men, as well as thei r other associa tes , have
contributed to the his tor ica l evolution of the formalized planning move-
ment throughout the nation (15).
The Rand Corporat ion 's contribution to mi l i tary planning has
also benefited corporate planning, and the greates t contribution appears
to center on the application of management science to complex manage-
ment situations. The Rand Corporation employed many persons with
extensive mathematical backgrounds, such as H. Igor Ansoff who,
through quantitative analysis and calculations with computers , focused
increased attention on the expression and manipulation of planning
19
information with numbers or other abstract ions which a re easily
compared (1).
The conditions of World War II demonstrated the need for formal-
ized planning; likewise, the postwar e ra saw the ensuing popularizing
of the subject. Since the 1950's, the planning function has received
continual attention by educators, r e s e a r c h e r s , corporate and govern-
ment personnel , and such organizations as the American Management
Association and the National Industrial Conference Board.
According to the Stanford Research Institute, the initial idea to
formulate a more formalized planning program originates eight t imes
in ten with top management personnel . This fact clearly indicates the
crucia l role that executive management occupies in foster ing and es -
tablishing a fo rmal planning program (19).
F i r m s Formalized Their Planning
During the late 1950's and the early portion of the 1960's, f i r m s
throughout the United States commenced to institute p rograms of f o r -
malized planning. A Stanford Research Institute (19) survey in 1960
showed that of the 3600 U. S. manufacturing f i r m s with year ly sales ex-
ceeding ten million dol lars , no more than 700 f i r m s followed fo rmal
planning procedures . Fewer than 200 of these f i r m s had been planning,
formal ly , fo r longer than four yea r s . The survey also revealed two
important fac to rs which appear to influence a f i r m ' s setting up a fo rmal
20
planning organization: the size of the company and the f i r m ' s market
orientation, The survey established that among Fortune magazine ' s
500 group of corporat ions, nearly 300 f i r m s , or about 60 per* cent,
were involved with p rograms of fo rmal planning.
Ear ly Experiences in Formal Planning
During the early 1960's, business planning was viewed as a way
of thinking ahead on an annual or bi-annual basis about the many ele-
ments of the corporat ion 's business for an ensuing period of usually
five yea r s . Many f i r m s settled on the f ive-year planning period since
general planning beyond five y e a r s reached out into an a rea of vast un-
certainty and r i sk , whereas a long-range planning period of l ess than
five yea r s did not provide the futuri ty of thought needed for the commit-
ment of corporate resources .
As an example of the approach to fo rmal planning during the
early 1960's, Continental-Emsco Company (2) prepared the tradi t ional
type of f ive-year plan which included a consolidated projection of sa les ,
prof i t s , and capital fund requirements by year for each of the ensuing
five yea r s . The long-range plan was based on a minimum of environ-
mental data and a meager assessment of company strengths and l imita-i
t ions. Only a few m e m b e r s of top management part icipated in p r e p a r -
ing and finalizing the f ive-year project ion, and upon completion of this
endeavor, the f ive-year plan was filed for discussion one year la ter unless
21
some interested person desired to re la te a given situation to the long-
range plan.
Edward J. Green(lO), Pres ident of Planning Dynamics Inc. ,
expressed the opinion that in these early at tempts, many corporat ions
formal ized a f ive-year long-range plan without benefit of a depth analy-
s is of the environmental influences which would tend to c rea te oppor-
tunities or contraints for the corporation. Likewise, there was a
minimal and insufficient assessment of the s t rengths and limitations
of the corpora t ion 's r esources . In many instances the objectives and
goals of the future were determined through a straight-l ining of past
y e a r ' s sa les , expenses,and prof i ts . For example, a f i rm with an exist-
ing annual sa les volume of $150 million would project a volume five
y e a r s hence of $210 million, based upon an extension of the past sa les
curve into the future. This pract ice eventually was labeled "the num-
be r s game, " and the prac t ice reflected an inadequate approach to f o r -
malized planning since it usually led to the adoption of unrel iable and
invalid objectives and goals.
Another concern voiced in this discussion was the fact that very
often the recently prepared f ive-year long-range plan for a given c o r -
poration would be labeled "confidential ," and it would be retained in ;
the P re s iden t ' s office. Under such an arrangement the organization
derived a minimum of benefit f rom the formal corporate plan.
22
An additional disadvantage of the early efforts to p repa re the
fo rmal long-range plan is that management elected to follow a rigid
policy of updating the f ive-year plan once every year . A corporation
in following such a pract ice soon found that the f ive-year plan was in-
valid due to a rapidly changing environment or a ma jo r change in the
corpora t ion 's r e sources .
Authorities Cite Need for More Effective Planning
The formalized planning concept of management is the philoso-
ply of management that d i rects and encourages the commitment of
personnel in a corporation toward the specifically determined objec-
t ives and goals which are in the interest of the f i rm . Such a phi loso-
phy takes into consideration that the direction of the planning p rocess
should be upward, not downward. The p rocess is not amenable to a
highly central ized management effor t , because as Galbraith notes:
. . . in modern industry a large number of decisions, and all that a re important, draw on information possessed by more than one man. Typically they draw on the specialized scientific and technical knowledge, the accumulated informa-tion of experience and the art is t ic or intuitive sense of many persons . The final decision will be informed only as it draws systematical ly on all those whose information is relevant. There must , additionally, be a mechanism for testing each pe r son ' s contribution for its relevance and reliabili ty as it is brought to bear on the decision (8, p. 61). ; •
In fu r the r consideration of the management philosophy and con-
siderat ions attendant to the formalized planning p roces s , Galbraith notes
23
that the rea l accomplishment of modern science and technology consis ts
in taking ordinary men, informing them narrowly and deeply and then,
through appropriate organization, arranging to have their knowledge
combined with that of other specialized but equally ordinary men. F i -
nally, following from the need for this variety of specialized talent is
the need for its coordination. Talent must be brought to bear on the .
common purpose (8, pp. 62-63).
Thus decision in the modern business en terpr i se is the product not of individuals but of groups. . . .
Grroup dec is ion-making extends deeply into the business enterpr ise . Effective participation is not closely related to rank in the fo rmal h ierarchy of the organization. . . .
. . .group power can be rendered unrel iable or ineffec- „ tive by external interference. Not only does power pass into the organization but the quality of decisions can easily be impaired by effor ts of an individual to retain control over the decision-making process .
The efficiency of the group and quality of its decisions depend on the quality of the information provided and precision with which it is tested. . . .
With the r i s e of the modern corporat ion, the emergence of the organization required by modern technology and planning and the divorce of the owner of the capital f rom control of the en terpr i se , the entrepreneur no longer exists as an individual person in the mature industrial enterpr ise . . . . It embraces all who bring specialized knowledge, talent or experience to group decision-making. This , not the management, is the guid-ing intel l igence--the brain--of the enterpr ise . There is no name for all who part icipate in group decision-making or the ; organization which they fo rm. I propose to call the organiza-tion the Technostructure (8, pp. 65-71).
These thoughts of Galbraith focus on the requirement fo r a dy-
namic organizational f ramework which recognizes that the corporation
24
of today is no longer an organization in which there is a handful of top
managers who make all the decisions. Many of the country 's corpora-
tions are organizations of profess ionals and technicians of highly spe-
cialized knowledge, exercising autonomous, responsible judgment.
Within the organization everyone--whether manager or individual ex-
per t cont r ibu tor - - i s constantly making entrepreneual type decisions.
These decisions affect the economic charac te r i s t i cs and r i sks of the
entire corporation; and they are made, not by specific "delegation f rom
above," but inevitably in the per formance of the incumbent 's own pos i -
tion and work. The creat ive power inherent in a corporation can be
focused upon the organizat ion 's objectives and goals on a decentralized
bas is when management provides a dynamic organizational f ramework .
' F o r such a corporation and its member contr ibutors to function
effectively, at least two things a re needed,according to Drucker (5 , p. 242):
.Knowledge by the entire organization of what the d i r ec -
tion, the goals , and the expectations are.
Knowledge by top management of what the decisions, com-
mi tments , and effor ts of the people of the organization are . The
needed focus- -one might call it a model of the re levants in in ter -
nal and external environment--only a long-range plan can provide.
There has existed in recent y e a r s , according to Planning Dynamics
Incorporated (18), a requirement for top management to reor ient its
25
philosophy toward decision-making and planning. Most corporations
until recent years have utilized a framework of management which is
characterized as follows:
1. The employees, other than top management were pro-
vided a minimal opportunity to participate in the decision-making
process.
2. The corporation's objectives and goals were estab-
lished by a few individuals, usually utilizing an inadequate infor-
mation bank.
3„ The opportunity to participate in the planning activi-
t ies of the corporation was .reserved for the top management
staff. Results of the planning efforts were labeled "confidential, "
and distribution was restr icted to top management.
4. The employees were recipients of budgets and ex-
pectations which had been formulated without benefit of the in-
cumbents participation.
5. The management system did not provide an opportunity
to reformulate the standard of performance structure when there
was a material change in the corporation's environment, r e -
sources, assumptions, objectives, or goals. i
6. The creative talents and drives of most employees
were not exploited to the greatest possible degree.
26
7. The effor ts of employees to fos te r a g rea te r degree
of teamwork often proved to be most difficult since a unity of
action and adequate information was lacking.
Formalized Planning Required to P r e s e r v e Initiative and Maintain Direction
According to Green (10), the re is a requirement for an adequate
management sys tem, under today's conditions of complexity and change,
which will permit a means of seeing the corporation c lear ly , as a whole,
plus providing a f ramework for a high level of achievement motivation.
It is noted that formalized management planning should be pro-
vided if a corporation is to successfully cope with a dynamic operating
system acting in a t ransforming world, requiring management by action .
and participation ra ther than reaction. This philosophy is based upon
a cl imate which demands strenuous comprehension ra ther than instant
or intuitive response.
Management must concern itself with the individual's motivation-
to part icipate and accomplish resu l t s . When a man ' s motivation to
achieve is aroused, accomplishment of the accountability will be its
own best reward. The signif icance of achievement motivation revolves
around the notion of se l f - re inforcing performance . !
Men with a high need to achieve, says Stringer (24), tend to
1. See and assume high degrees of personal responsibili ty.
2. Take calculated r i sks .
27
3. Set challenging, but real is t ic goals for themselves .
4. Develop comprehensive plans to help them attain
their goals.
5. Seek and use concrete , measurab le feedback of the
resu l t s of thei r actions.
6. Seek out business opportunities where their des i r e s
to achieve will not be thwarted.
Stringer (24) also notes that high achievers will be attracted to
those business environments which offer
1. Pe r sona l responsibili ty for accomplishments.
2. Freedom to pursue goals by means of one 's own
choosing.
3. Prompt and unbiased feedback of the resu l t s of action.
4. Moderately r isky situations.
5. Consistent rewards and recognition for jobs well
done.
The Planning P r o c e s s and the Motivational Climate
A review and analysis of these high achiever charac te r i s t i c s
delineates top management 's responsibility for creating a planning and,
decision-making cl imate that wil l provide incumbents with new sources
of satisfaction and new opportunities to achieve; thereby. arousing
achievement motivation. Management under such a concept can deviate
28
f rom a philosophy which involves the need to exercise constant and
forceful res t ra in t on the individual's activities. The corporate plan-
ning and dec is ion-making cl imate , in great pa r t , is determined by the
s t ruc ture and the implementation of the formalized planning process ;
and if motivation is aroused within this f ramework of management, a
new spiri t of dynamic growth can be fostered. Along with this growth
will come new'challenges and new r i sks as a corporation becomes com-
mitted to new and expanding a reas of opportunity.
The late Douglas McGregor recognized the inadequacy of the
management techniques which rely heavily upon authority and control
as the sole, or even the p r imary , method of accomplishing organiza-
tional objectives through people. Also of concern was the fact that the
dependence downward was to excess and led to individual f rus t ra t ions .
The philosophy of management by direction and contro l - -regard less of whether it is hard or soft—is inadequate to motivate because the human needs on which this approach r e -lief a re relatively unimportant motivators of behavior in our society today. Direction and control a re of limited value in motivating people whose important needs a re social and ego-istic (14, p. 49).
The writ ings of McGregor offer the principle of integration con-
cept which is based upon the creation of conditions, such that the m e m -
be r s of the organization can achieve their own goals best by directing!
their ef for ts toward the success of the enterpr ise . Being cognizant of
the magnitude of the situation, McGregor (14, pp. 5 3-54) fo r e see s that
29
management will be challenged to innovate to discover new ways of
organizing and directing human effort .
The implementation of management by integration and sel f -
control which best pe rmi t s the achievement of organization objectives
is predicated upon a corporate environment and management system
which will encourage individual commitment to these organization
objectives. Additionally, such a concept should provide opportunities
for the maximum exerc ise of initiative, ingenuity, and self-direct ion
Implementation of the formalized planning p rocess helps provide
a f ramework of management which is compatible with the job enrichment
motivating concept recently described by Herzberg (12). Job enrichment
provides the opportunity for the employee's psychological growth based
upon the ver t ica l loading of a given position, instead of the usual tech-
nique, which involves the horizontal loading of an incumbent 's delegated
accountabilities.
Accountability Management as Related To the Planning P r o c e s s
The formalized planning process concept in many respec t s
r ep resen t s a fu r ther ref inement of the management by objectives or
accountability concept of management as advocated by such authori- ;
t i e s as Drucker (6) and the late Edward N. Hay (11). These and
others have helped bring about one of the great advances in management
thought and pract ice since World War II by encouraging the acceptance,
30
understanding, and use of the concept of accountability or management
by objectives as a ma jo r factor and means of managing a corporat ion.
According to Drucker (6, pp. 119-121), management should not
be an end in itself. It is looked upon as being an organ of the business
en te rpr i se , and above all it consis ts of individuals. It is his opinion
that the f i r s t requirement in managing managers is that the vision of
the individual managers be directed toward the goals of the business ,
and that the wills and effor ts of management be bent toward reaching
these goals. Another thought is that the f i r s t requirement in managing
managers is management by objectives and sel f -control , and in so do-
ing management has no choice but to anticipate the fu tu re , to attempt
to mold it and to balance shor t - range and long-range goals. Concern-
ing the individual's position and the pe r son ' s relationship with a corpo-
ra te group, Drucker contends that a corporation must build a t rue team
• and weld individual ef for ts into a common effort , recognizing that each
member of the enterpr ise contributes something dif ferent , but all should
contribute toward common corpora te goals. These effor ts must pull in
the same direction with all contributions fitting together to produce a
"whole" —without gaps, without f r ic t ion, and without unnecessary dupliT
cation of effort . !
Accountability management requ i res the establishment of re l iable
and valid corporate objectives and goals, along with the balanced s t r e s s
on these objectives by the executive management of a corporation.
31
The formalized planning p rocess concept of management, as
well as the management by accountability approach, ru les out the p r ac -
t ice of management by "cr is is , 1 1 which re l i e s heavily on the intuitive
judgment of management. The p rocess gives ful l credibility to indi-
vidual strength and responsibili ty and, concurrently, provides common
direction of vision and effort , as there is the establishment of t eam-
work and a harmonizing of the individual's goals within the corpora te i
f ramework of goals.
The investigation will explore the fact that the current ly evolving
formalized planning process provides the means for a m o r e effective im-
plementation of the accountability management or management by objec-
t ives p rocess . The management by objectives is becoming, in many
corporat ions , a managing "way of l i fe" and has or is being merged into
the var ious facets of the management process . Introducing such new
managing concepts which change long-existing habits and ideas is not
easily or effor t less ly accomplished. It has taken severa l yea r s to intro-
duce the management by objectives or accountability management philo-
sophy. The nation's management has experienced some difficulty in t r y -
ing to implement this philosophy,* mainly due to the following reasons :
1. The member s of management often possess c r i s i s - j
oriented habit pat terns .
2. The corporat ion 's planning effor ts r e la te , normally
to operational planning of a one-year forward duration.
32
3. The corporation maintains insufficient information
about the external environmental influences which tend to shape
and form the destiny of the corporation.
4. The management in formulating objectives and goals
uti l ize inadequate information about the s trengths and l imita-
t ions of the corporat ion 's resources .
5. The employees a re not t rained to be able to par t i -
cipate in the formulation of objectives and goals; consequently,
the formulation of objectives is car r ied out on a highly cent ra l -
ized bas is .
6. The integrated effor ts of organization components
and individual employees a re not fully identified, and this p r e -
vents the rea l i s t ic establishment of a h ierarchy of objectives.
7. The corporat ion 's ability and means for communi-
cating objectives and accountabilities a re not fully developed,
causing a problem with the downward and upward communica-
tions of objectives.
8. The management tools necessary to support a man-
agement by objectives or accountabilities philosophy a re not
fully developed, and this hinders a more complete implemen- j
tation of the concept. Examples might re la te to position descrip-
t ions, job evaluation, employee compensation, per formance
appraisal , individual per formance planning, etc.
3 3
9. The corporat ion 's control system in many instances
is not designed to be compatible with the concept of manage-
ment by objectives. Reporting of resu l t s is extremely co-
mingled, and it is difficult to pinpoint with any degree of
accuracy the end-resul t contribution of organization components
or individuals.
P re s iden t ' s Role in Designing and Implementing a Formalized Planning and Decision-Making Framework
The role of the chief executive is of p r imary importance in the
formulation and adoption of a formalized planning and decision-making
type of management system. Such a sys tem, through which all facets
of the corporation operate , r ep resen t s a set of interacting and inter-
dependent managing p rocesses which as system components combine
in a conceptually unified program or approach for managing the corpo-
ration. The formalized and dynamic planning process provides a con-
ceptual f ramework of coordinated principles or guidelines that weld
together the component managing p rocesses . Functioning as par t of the
p rocess or sys tem, each individual process has leverage because its
effect iveness is multiplied. The resul t is a hard-hit t ing total effort
that is m o r e powerful than the sum of the pa r t s . The chief executive^
formula tes such a f ramework of management for the corporat ion, taking
into account that employees can act more effectively when the re are
34
principles to guide them. When the principles a re united by a clearly
understood sys tem, action becomes even more purposeful and produc-
tive.
Drucker , in talking about the need for the establishment of a
f ramework of management which would permit the implementation of
management by objectives or accountabilit ies, said:
No business is likely to be bet ter than its top manage-ment , have broader vision than its top people, or per form bet ter than they do. . . . A business needs' a centra l governing organ and a centra l organ of review and appraisal .
The chief executive thinks through the business the com-pany is in. He develops and sets over -a l l objectives. He makes the basic decisions needed to reach these objectives. He com-municates the objectives and the decisions to his management people. He educates these managers in seeing the business as a -whole and helps them to develop their own objectives f rom those of the business . He measu re s per formance and resu l t s against the objectives. He reviews and rev i ses objectives as conditions demand (6, pp. 161-162).
Drucker , writing on the manager of tomorrow, makes note of
some very salient considerations which give fu r the r credibili ty to the
formal ized planning p rocess :
. .. . the manager will have to acquire a whole new set of t oo l s - -many of which he will have to develop himself . He needs to acquire adequate yards t icks for per formance and resu l t s in the key a reas of business objectives. He needs to acquire eco-nomic tools to make meaningful decisions today for a long-range tomorrow. He will have to acquire the new tools of the decision-making process .
We can summar ize by saying that the new demands r e -quire that the manager of tomorrow acquit himself of seven new t a sks :
35
1. He must manage by objectives. 2. He must take more r i sks and for a longer
period ahead. And r isk-taking decisions will have to be made at lower levels in the organization. The manager must therefore be able to calculate each r i sk , to choose the most advantageous r i sk-a l te rna t ive , to establish in advance what he expects to happen and to "control" his subsequent course of action as events bear out or deny his expectations.
3. He must be able to make strategic decisions. 4. He must be able to build an integrated team
each member of which is capable of managing and mea -suring his own per formance and resu l t s in relation to common objectives.
5. He will have to be able to communicate infor-mation fast and clearly. He will have to be able to moti-vate people. He must , in other words , be able to obtain the responsible participation of other managers , of the profess ional special is ts and of all other workers .
6. The manager of tomorrow must be able to see the business as a whole and to integrate his function with it.
7. The manager of tomorrow will have to be able to re la te his product and industry to the total environ-ment to find what is significant in it and to take it into account in his decisions and actions. And increasingly, the field of vision of tomorrow's manager will have to take in developments outside his own market and his own country. Increasingly he will have to learn to see econo-mic , political, and social developments on a world-wide scale and to integrate world-wide t rends into his own decisions (6, pp. 372-373).
Based on these thoughts of Drucker , it becomes quite evident
that the role of the chief executive is of extreme importance in creating
and maintaining the dynamic and formalized planning p rocess as a f r a m e -
work through which each incumbent can pe r fo rm designated accountabili-
t ies . During a recent speech to a group of top managers in P a r i s , France,
Ansoff (1) took the view that it is the centra l job of top management to
36
determine what business the f i rm should be in through matching the
present position and the capabili t ies of the f i rm to opportunities offered
by the environment, and selecting a product-market position which best
fulf i l ls the objectives of the f i r m .
The ser iousness of establishing a formalized planning and
dec is ion-making f ramework was in evidence recently through the action
of Sherman M. Fairchi ld , the ma jo r stockholder of Fairchild Camera
and Instrument Company.
Throughout his l ife, Fairchild seems to have been in-fluenced by his association with IBM. . . . His long service on IBM's executive committee and board of d i rec to rs (since 1925) obviously influenced his approach to management.
He was dissat is f ied , in par t , with the f o r m e r Chairman John Car te r and Pres ident Richard Hodgson of Fairchild Camera because neither was as committed to long-range planning as IBM is. . . .
His philosophy as a chief stockholder has always been to h i r e a strong chief executive who was then allowed to run the company without outside in terference (16, p. 114).
Current Formalized Planning P r o c e s s
This investigation explores the dynamic formal ized planning
p rocess which current ly r ep resen t s the state of the art for corporate
planning. Also it appears feasible that this dynamic planning p rocess
may significantly reshape the decision-making, planning, and control i
p rocess of many corporat ions in the yea r s ahead.
Outlined below a re the more important charac te r i s t i c s of the
evolving formalized planning p rocess as they were presented by the
37
Planning Dynamics Incorporated staff during a recent conference on
corpora te planning:
1. Planning cannot be a one-shot-and-re lax affair . I t 's a continuous, dynamic p rocess .
2. Planning is an essential and inseparable par t of every management position and is not the exclusive accountability of executive management. In its absence the job manages the p e r -son, ra ther than the manager speriding his t ime making certain that the right things happen.
3. Planning as a. formalized dynamic and continuous p roces s provides a bet ter method of reaching agreement between a manager and his associa tes , super io rs , and subordinates.
4. Planning must be totally integrated with the exist-ing management sys tems and management aids within a corpo-ration.
5. Planning as a continual p rocess requi res a most effective intelligence and information-gathering sys tem, r epor t -ing, and decision-making process .
6. Planning as a p rocess provides more effective man-agement over a secular period through the more complete uti-lization of management by objectives.
7. Planning as a formalized dynamic system is coor-dinated by a well-qualified staff planning coordinator who does not do the planning; but a s s i s t s member s in the per formance of the individual's planning accountability.
8. Planning as a dynamic system must have the intelli-gent and enthusiastic participation of key personnel , and it would be understood that the chief executive was responsible for inst i-tuting the formalized planning process .
9. Planning p rocess should be designed to permit em-ployees to sat isfy their motivational requirement concurrent with the commitment of r e sources to the attainment of the cor -porat ion 's objectives and goals. The continuous and dynamic planning p rocess pe rmi t s an environment conducive to a higher level of participative management (18).
Design'of the Fo rma l Planning P r o c e s s
Designing the formalized planning p rocess for a given corpora-i . \ i } |
tion involves selecting the elements to be contained in the system and
1 1 ' • J • I 'I,! i . , '
' > J-' 1 • > . > , i ,
38
determining their arrangement and relat ive emphasis . The chief
executive, in conjunction with key personnel , coordinates this major
undertaking with the ul t imate accomplishment being the design of a
basic format that r ep resen t s the stable f ramework within which the
corporation is managed for the immediate and secular per iods. It is
often recognized that one of the most important accountabilities of the
corpora te chief executive is the formulation of a planning p rocess which
provides a f ramework for s t ra tegic , developmental, operational, and
project planning.
The basic building blocks of a planning system are a s e r i e s of
predetermined courses of action for a par t icular purpose , and there
may be a basic pat tern of t a sks into which the p roces se s of developing
any complete actionable plan can be arranged. When viewed as a dynam-
ic p roces s , formal ized planning becomes a means of establishing objec-
t ives and of defining the s t ra teg ies , policies, and sequences of events to
achieve these objectives. It defines the organization for implementing
the planning p rocess and a s su re s an evaluation of per formance as feed-
back in recycling the planning process . The formalized planning con-
cept may be viewed in t e r m s of s t ruc ture , since planning requ i res the -
development of a comprehensive and reasonably uniform program of '
plans for the entire company or organization components, reaching out
over a long period of t ime. This concept r e l a t e s to an integrating
39
f ramework within which each of the functional or operational plans may
be tied together aqd an over -a l l plan developed for the entire organi-
zation.
During the past few yea r s the Stanford Research Institute has
evaluated in depth the formalized planning pat terns and p rocess atten-
dant to a f ramework for corpora te planning. In searching for a f r a m e -
work of formalized planning, both the l i te ra ture and actual prac t ice
were analyzed to see whether meaningful pat terns could be detected.
The resu l t s of the Stanford Research Institute studies uncovered the
following:
There is a meaningful pattern into which individual plans for the various kinds of activity in any business can be arranged. In its entirety this pat tern represen t s the total scope of planning for a f i rm. In this study, the total pattern is r e f e r r e d to as "The System" to distinguish it f rom the individual plans of which it is composed.
The basic building blocks of a planning system are a se-r i e s of predetermined courses of action for a par t icular purpose--plans. There are severa l essent ia l questions which any action-able plan must answer.
There is a basic pattern of t a sks into which the p rocesses of developing any complete actionable plan can be arranged (22, p. 3).
The Stanford Research Institute study conveyed a general pattern
or f ramework for a comprehensive fo rmal planning system as shown in
Figure 1 (22,, p. 4). In this formalized planning p rocess the individual
face ts a re the building blocks and a re arranged in echelon fo rm. Each
echelon rece ives guidance from a p r io r facet and re f ines it by focusing
on groups of activities having a common purpose. The pattern in Figure 1
40
Strategic Plan
Corpora te Development Plan '
Divestment Plan
Divers i f icat ion Plan
Acquisition & Merge r Plan
Resea rch & Develop-ment(R&D) Plan
Operat ions Plan
> Basic Resea rch Plan
Product R&D Plan
Market R&D Plan
R&D Financia l P lan
R&D Administrat ion P lan
L .JU iPJsi_ __r
^ Product ion Plan
Marketing Plan
Financia l Plan
£ Administrat ion Plan
Fig. 1 - -The sys tem of p lans*
*Source: Stanford Resea rch Insti tute, A F ramework for Business Planning, Confidential Report by Long Range Planning Serv ice , Menlo P a r k , Cal i fornia , F e b r u a r y , 1963.
41
covers all of the ma jo r activities car r ied on by any corporat ion, and
the system as shown encompasses formalized planning for the entire
f i r m . It covers all t ime periods planned for and allows for plans at
all levels of the organization, and includes plans for all the different
functions of the f i rm . A formalized planning process of this magni-
tude faci l i ta tes order ly subdivision of the total effor ts of planning into
tasks which can be performed separately; but which, collectively,
a s su re the integration and accomplishment of the required effor ts
(22, p. 5).
The International Minerals and Chemical Corporation has de-
signed and implemented the very extensive formalized planning process
shown in Figure 2 (21). A review of this i l lustration denotes that f i r s t ,
the re is the identification of challenges facing the corporation. Exis t -
ing knowledge of the company's position in this environment helps to
identify potential challenges and opportunities. In o rder to gain a depth
insight and understanding of these challenges, it is necessa ry to conduct
an analysis by gathering relevant fac ts and conducting studies which
provide a g rea te r insight and information bank for fu r the r use within
the planning and decision-making process . With an improved compre-
hension the g rea te r challenges to the organization come into c l ea re r j
focus. Additionally, as shown in Figure 2, it is important to identify
the s trengths and weaknesses in the corporat ion 's ability to handle the
delineated challenges.
J
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42
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In formulating objectives and goals for achievement, a l terna-
tive s t ra tegies should be created and devised. Within the formalized
planning p rocess these proposed s t ra tegies may be evaluated and com-
pared , and it might develop that the "means" to achieve the desired
re su l t s may not be available. As an example, it may be financially
impossible to double sales in two y e a r s , if this were set as an objec-
tive. Figure 2 shows that the corporat ion 's t a rge t s or aspirat ions must
be made rea l i s t ic . Once a strategy has been selected by member s of
the organization and reviewed with appropriate approvals, a thoroughly
defined action-plan is formulated. Within the f ramework of the fo rma l -
ized planning p roces s , conclusions a re made by dec is ion-makers who
possess the authority to commit to the allocation of r e sources . The
implementation aspect or action-plan is scheduled and a reas of account-
ability will be pinpointed on a h ierarchy bas is (21, p. 7).
Over the past severa l yea r s George A. Steiner of the Graduate
School of Business Administration, University of California, Los
Angeles, has r e sea rched , wri t ten, and consulted in formalized plan-
ning and decision-making. Steiner (2 3) proposes that formalized plan-
ning be viewed in t e r m s of a s t ruc ture or an integrating f ramework
within which each of the functional plans may be tied together and an j
over -a l l system developed for the ent i re organization, providing the
means for a fur ther decentralization and delegation of corpora te ac-
countabilities.
44
Observing the requirement for a conceptual formalized planning
model as-a guide, Steiner o f fe r s a model s t ruc tu re , Figure 3 (2 3, p. 56).
This s t ruc ture includes four ma jo r e lements , and the f i r s t consists of
s t rategic plans which are essential ly a loose, written and unwritten set
of ma jo r objectives, s t ra teg ies , and policies. The second element in
this i l lustrat ion is a detailed, uni form, and ra ther complete medium -
range set of plans which in most corporat ions t r ansp i r e over a period
of five y e a r s . This element normally per ta ins to the ma jo r a reas of
organization activity. Next, the third element in the fo rmal planning
PLANNING stupes
FUNOAMOWL ORGANIZATION
STRATEGIC SHORT TERM BUOGETSfl DETAILED FUNCTIONAL PLANS & CONTROLS MEDIUM-RANCE PROGRAMMING EVALUATION OF
EXTERNAL ANO INTERNAL PROBLEMS. OPPORTUNITY STRENGTHS AND WEAKNESSES
SUBOBJECTIVES, SUBSTRATE: GlES, SUBPOLICiES GOALS, TACTICAL PLANS
STRATEGIES FIXED ASSETS MANPOWER PRODUCTION SALES ETC.
DISTRIBUTION RESEARCH AND DEVELOPMENT PRODUCTION ORGANIZATION ETC.
• DIVESTMENT PLAN • DIVERSIFICATION PLAN
RAD PLAN • ETC
VALUES OF TOP MANAGERS
FEASIBILITY TESTING
MONEY FACILITIES PERSONNEL MANAGEMENT TIMING ETC.
Fig. 3--A s t ruc ture and p rocess of business planning*
*Source: Steiner, George A. , "Long-Range Planning: Concept and Implementation, " Financial Executive, {July, 1966),
45
system consis ts of one-year plans and operating budgets. The last
element consis ts of comprehensive planning studies which frequently
are project ions of fu ture corporate events, and these studies provide
valuable input data for the planning process . Development and imple-
mentation of such a planning process becomes feasible when the chief
executive rea l izes the requirement for a systematic and continuous
planning program (23).
Summary Review of Strategic, Development, And Operation Planning
The Strategic Plan
The highest level of planning within a corporation is the s t r a t e -
gic plan, and it provides a f ramework for the establishment of the cor -
porat ion 's miss ion and broad objectives. Additionally, through the
s trategic planning endeavor the s t ra tegies of the corporation a re f o r -
mulated and t ranslated into specif ic , attainable goals. It usually em-
braces a longer t ime span of planning than either of the other types and
has a p r imary purpose to get the f i rm star ted toward attainment of its
miss ions and broad objectives, leaving to subsequent plans the details
of execution. In effect , the re are five separate but necessar i ly inte-
grated aspects of s trategic planning: ;
1. The effor ts required in estimating the future .
2. The setting of objectives and goals in the context of
that future .
46
3. The de te rmina t ion of, the s t r a t egy n e c e s s a r y to
achieve those objec t ives and goals .
4. The implementat ion of those s t r a t e g i e s .
5. The appra is ing of the c o r p o r a t i o n ' s p e r f o r m a n c e in
t e r m s of both the s t r a teg ic act ions and end r e s u l t s .
The Development P lan
Functioning within the f r a m e w o r k of the c o r p o r a t i o n ' s s t r a t eg ic
plan through which the chief executive of the f i r m has de te rmined the
f i r m ' s potent ia l and broad c o u r s e of action which can be rea l i zed with-
in ce r t a in envi ronmenta l inf luences , the development plan is the p r i m e
move r in pu rpose fu l modif icat ion of a f i r m ' s c h a r a c t e r i s t i c s and p e r -
f o r m a n c e . Development planning prov ides a fo rma l i zed planning f r a m e -
work fo r conceptual iza t ion and evaluation of a l t e rna t ive ways of making
m a j o r changes in exist ing co rpo ra t e bus iness o r the development of new
bus ines s . This f ace t of planning p e r m i t s a select ion of the bes t com-
bination of act ions to achieve the r e s o u r c e potent ial . In conjunction
with s t r a t eg ic planning, the development plan wil l specify the c o r p o r a -
t ion ' s s t r a t egy .
The Opera t ions Plan I
Opera t ions planning is concerned p r i m a r i l y with the conduct of
c u r r e n t c o r p o r a t e ac t iv i t ies and prov ides a f r a m e w o r k f o r specifying
accountabi l i t ies based upon the immedia te ut i l izat ion of c o r p o r a t e
47
r e s o u r c e s . T h u s , t h e r e i s the e s t a b l i s h m e n t of m a n a g e m e n t c o n t r o l s
to a s s u r e tha t o r g a n i z a t i o n a l r e s u l t s m e e t qua l i t a t ive and quan t i t a t ive
expec t a t i ons . O p e r a t i o n s p lanning i s tha t f a c e t of the f o r m a l i z e d p l a n -
ning p r o c e s s which i s c o n c e r n e d with t h e r e s o u r c e r e q u i r e m e n t s of t he
s t r a t e g i c and d e v e l o p m e n t a l p r o g r a m s and p r o j e c t s , along with t h e ex-
pec ted p e r f o r m a n c e and r e s u l t s of t h o s e p o s s e s s i n g de lega ted accoun t -
ab i l i t i e s .
G e n e r a l P a t t e r n of C o r p o r a t e P l a n n i n g P r o c e s s e s
B a s e d upon d i s c u s s i o n with a u t h o r i t i e s in t h e f ie ld of c o r p o r a t e
p lann ing , along with pub l i shed m a t e r i a l r e l a t i n g to the f o r m a l p lanning
concep t , t h e r e i s in ev idence a log ica l i n t e r r e l a t i o n s h i p be tween t he
v a r i o u s m a j o r f a c e t s of t he f r a m e w o r k a t tendant to t he f o r m a l i z e d plan-
ning p r o c e s s concep t . T h i s f r a m e w o r k , r e f l e c t i n g the log ica l a r r a n g e -
m e n t , i s shown in F i g u r e 4; and it deno te s a ph i losophy and s y s t e m of
m a n a g e m e n t which can be i m p l e m e n t e d by t h e chief execu t ive in h e l p -
ing with t h e chief e x e c u t i v e ' s accountab i l i ty f o r e s t a b l i s h i n g a p lanning
and d e c i s i o n - m a k i n g s y s t e m . E a c h f a c e t of t he p lanning p r o c e s s i s of
su f f i c i en t i m p o r t a n c e to a l loca te a c h a p t e r , t h e r e b y p e r m i t t i n g an o p -
po r tun i ty to exp lo re in depth i t s m a n y r a m i f i c a t i o n s .
i i
Sequent ia l A r r a n g e m e n t of P lann ing F a c e t s
A r e v i e w of F i g u r e 4 r e f l e c t s tha t t he e n v i r o n m e n t a l a n a l y s i s
p r e c e d e s a l l o t h e r f a c e t s of t he f o r m a l planning p r o c e s s . Recogniz ing
48
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that the corporat ion 's environment of fers opportunities or constraints ,
management faces the need for f i r s t developing an environmental data
bank which includes macro- inputs and micro- inputs on economic, social ,
political, technological, competitive, and other considerations. The
completed environmental analysis provides management with signifi-
cant information which can be utilized in the assessment of corporate
s trengths and weaknesses. This environmental f r a m e of r e fe rence
allows for a more meaningful assessment of corporate r e sou rces than
in existing environmental assessment and helps management in pin-
pointing corpora te strengths and limitations. Such an assessment will
center upon the following r e sou rces : human, f inancial , physical fac i l i -
t i es , equipment, machines , natural r e sou rces , patents or uniqueness,
and product lines. This assessment will help establish a position r e l a -
tive to the tangible and intangible asse ts of a corporat ion, with empha-
sis upon the quantitative and qualitative measurement of such asse ts .
Recognizing that a corporation functions within a very dynamic
environment and that the composition of corporate r e sources often
change, management c a r r i e s out a third sequential phase of the fo rmal
planning process . As shown in Figure 4, this phase requ i res the es -
tablishment of an assumption base and the formulation of corporate
c r i t e r i a which guide the fu ture commitment of r e sources . The dynamic
conditions inherent in the environmental analysis and assessment of
corpora te s trengths and limitations establishes a need for the formulation
50
of assumptions which provide the underpinning to the projection of
future environmental and assessment t rends and pat terns .
The fourth and probably one of the more significant facets of
the fo rma l planning p rocess is the establishment of corporate goals
and objectives. Utilizing information gained f rom the successful
completion of the f i r s t th ree face ts , the organization is able to f o r -
mulate on a h ie ra rch ica l bas i s quantitative and qualitative objectives.
The objectives will re la te to the immediate and fu ture survival and
growth of a corporation. Likewise, such objectives provide a basis
for the future commitment of r e s o u r c e s , taking into consideration the
strategy which will be followed in the attainment of objectives and goals.
The targeting of objectives and goals helps provide a f ramework of man-
agement which allows for the decentralized attainment of such goals;
consequently, there is a des i re to establish re l iable , valid, and mean-"
ingful objectives and goals. Within the f ramework of the fo rma l plan-
ning process concerned personnel can part ic ipate in setting objectives
and goals on a participative and synthesizing bas i s , recognizing that
the p rocess allows for the flow of information f rom face ts one, two,
and three .
The r i sk exposure, which is prevalent when committing corpo-
ra te r e s o u r c e s , necess i ta tes the adoption of s t ra tegies which are
designed to permit the attainment of corporate objectives and goals.
The s t ra tegies also provide the bas is for the fu ture commitment of
5 1
corporate r e sou rce s , and this commitment is projected through the
preparation of long-range and short-range plans.
The fifth facet , as shown in Figure 4, is t h e formulation
of s t ra tegies and the preparat ion of a long-range plan based upon the
adopted s t ra tegies . Since the fourth facet is the establishment of
objectives and goals , it is logical for management to become involved
with designing a s t rategic plan which provides the bas is for attaining
the adopted objectives and goals. Concurrent with ma jo r changes in
the previous facets of the fo rmal planning p roces s , the re is a r equ i re -
ment for redesigning the corporate s t ra tegies and the long-range plan.
The^flexibility inherent in committing corporate r e sources to the attain-
ment of objectives and goals in accordance with adopted s t ra tegies
necess i ta tes the periodic updating and revision of the long-range plan.
The immediate commitment of r e sou rces is targeted through a
shor t - range plan which is utilized by the corporation as a guide in the
planning and decision-making necessary to the attainment of targeted ~
objectives and' goals. Normally, the f i r s t year of a long-range plan
provides the basis for the preparat ion of a shor t - range or one-year
plan, with the la t ter including var ious corpora te budgets. The short -
range plan, which is prepared , communicated, and implemented on ,
a decentralized bas i s , is usually more quantitative and action oriented
than the long-range plan.
52
The sixth and last facet of the fo rma l planning p rocess is the
establ ishment of an appra isa l or control system which p e r m i t s the con-
tinuous and periodic comparison between actual and des i red resu l t s .
The appra isa l phase of the planning p rocess includes the design of a
mechanized and manual control system which highlights the var iances
requir ing management ' s attention. Additionally, the appra isa l or
control system permi t s the consolidation of r e su l t s generated by the
numerous accountability or p ro f i t / l o s s center points within a corpo-
rat ion. This last phase of the f o r m a l planning p roces s provides the
means for the continuous or periodic recycling of any or all p r o c e s s
phases . Since the planning p rocess involves var ious dynamic influ-
ences and considerat ions , a recycling of the p r o c e s s is necessa ry to
the success of such a planning and dec is ion-making system of manage-
ment. It should be recognized that the state of the art of formal ized
planning has not developed to a point where t he re is a wel l -ar t icu la ted ,
published, conceptual f r amework for systematizing information about
the var ious face t s of planning.
The r e s e a r c h attendant to this d isser ta t ion has permit ted a con-
ceptual evaluation of the philosophy, logic, pol ic ies , p rac t i ces and
t r ends relat ing to the implementation of a corpora te formal ized plari-j
ning p rocess . The design and s t ructur ing of a so-cal led typical dy-
namic f o r m a l planning p r o c e s s , as shown in F igure 4, r ep r e sen t s a cul-
mination of thoughts resul t ing f rom extensive r e s e a r c h into this subject.
53
A review of the g lossary of t e r m s contained in Appendix B
should help clar i fy. the many t e r m s used in describing each facet of
the planning process . Additionally, a g rea te r insight can be acquired
through review and analysis of the ensuing chapters of the d isser ta t ion ,
which will explore in considerable depth each facet of the p roces s and
the interrelat ionship between each facet .
CHAPTER BIBLIOGRAPHY
1. Ansoff, H. Igor, "Planning at the Level of an En te rp r i se in the U. S. A. , " presented to the 2 e m e Congres National De Gestion Previs ionnel le , P a r i s , F rance , September, 1966.
2. Continental-Emsco Company, Planning Policy Manual, Dallas, 1960.
3. Cordiner , R. J . , New Fron t ie r s for Profess ional Managers , New York, McGraw-Hill Book Co. , Inc. , 1956.
4. Davis, Ralph C. , Industrial Organization and Management, New York, Harper & Bro thers , 1940.
5. Drucker , P e t e r F. , "Long Range Planning: Challenge to Manage-ment Science," Managerial Science^ 5 (April, 1959), 238-249.
6 . , The Prac t i ce of Management, New York, Harper & Row, Publ i shers , Inc. , 1954.
7. Fayol, Henri , General and Industrial Management, t ransla ted by Constance S to r r s , London, Sir Isaac Pi tman & Sons, Ltd. , 1949.
8. Galbraith, John Kenneth, The New Industrial State, Boston, Houghton Mifflin Co. , 1967.
9. Ginzberg, E. and E. W. Reilley, Effecting Change in Large Organi-zations, New York, Columbia University P r e s s , 1957.
10. Green, Edward J. , P res iden t , Planning Dynamics Incorporated, personal conversation, Pi t tsburgh, September, 1968.
11. Hay, Edward N. , "Accountability Management, " speech to the annual Personnel Conference, American Management Association, New York, Februa ry , 1956.
54
55
12. H e r z b e r g , F r e d e r i c k , "One More T ime : How Do You Motivate
E m p l o y e e s ? , " Ha rva rd Bus iness Review, 46 ( J a n u a r y - F e b r u a r y , 1968), 53-62.
13. Koontz, Harold and Cyr i l OnDonnell , P r i n c i p l e s of Management,, 2nd ed. , New York, McGraw-Hi l l Book Co. , Inc. , 1959 ,
14. McGregor , Douglas, The Human Side of E n t e r p r i s e , New York , McGraw-Hi l l Book Co. , Inc. , 1960.
15. McKee, John, Ford Motor Company, p e r s o n a l conversa t ion , Dal las , 1955.
16. "The Mas te rmind Behind the Coup , " Bus iness Week, (October 5, 1968), 114.
17. Mee , John F. , Management Thought in a Dynamic Economy, New York , New York Univers i ty P r e s s , 1963.
18. Planning Cour se , p resen ted by Planning Dynamics Incorpora ted , Hidden Valley, Pennsy lvan ia , September 8-13, 1968.
19. "The Planning Organizat ion, " Long Range Planning Serv ice Report No. 133, Stanford R e s e a r c h Inst i tute , Menlo P a r k , Ca l i fo rn ia , May, 1962.
20. Scott , Br ian W. , Long Range Planning in American Indus t ry , New York , Amer ican Management Associat ion, Inc. , 1965.
21. S m a l t e r , D. J . , "P l anne r s : M o b i l i z e ! ! , " Corpora t e Long-Range Planning Cour se , New York , Amer ican Management Associa t ion, Inc. , May, 1965.
22. Stanford R e s e a r c h Inst i tu te , A F r a m e w o r k fo r Bus ines s Planning, Long-Range Planning Service Repor t , Menlo P a r k , Ca l i forn ia , 1963.
23. S te ine r , George A. , "Long-Range Planning: Concept and Imple- / menta t ion , " F inanc ia l Execut ive , 34(July, 1966), 54-61.
24. S t r i nge r , Robert A. , J r . , "Achievement Motivation and Manage-ment Control , " Notes & Quotes, r epr in ted f r o m P e r s o n n e l Adminis t ra t ion , (November -December , 1966), 1.
CHAPTER III
ORGANIZING FOR FORMALIZED CORPORATE PLANNING
Since the concept of a dynamic formalized planning process is
of recent origin, most effor ts in designing fo rmal organization a r range-
ments for planning have evolved within recent yea r s . Few companies
have experiences in organizational activities attendant to fo rmal plan-
ning; consequently, some corporat ions are involved with experimental
organizational ar rangements . Despite this newness, some useful data
and pattern t rends about the subject can be formulated on the basis of
corporate experience.
While the t e rm "formalized planning p roces s " may sound r e -
s t r ic t ive , in pract ice quite the r e v e r s e is t rue . The p rocess f r e e s
employees to work on their own within the organization f ramework of
this concept. It allows persons a g rea te r degree of self-direct ion and
self-control . This style of management is also advocated by Drucker ,
who says, "If the manager , however, is controlled by the objective r e -
quirements of his own job and measured by his resu l t s , t he re is no need
for the kind of supervision that consis ts of telling a subordinate what to
do and then making sure that he does it" (4, p. 139). He goes on to say;
What activities and tasks the en te rpr i se requ i res is indeed worked out f rom the top down, so to speak. The analysis has to begin with the desired end product: the objectives of business
56
57
per formance and business resu l t s . F rom these the analysis determines step by step what work has to be performed. But in organizing the manager ' s job we have to work f rom the bot-tom up. We have to begin with the activities on the "firing line" - the jobs responsible for the actual output of goods and se rv ices (4, p. 140).
Management has experienced a di lemma in attempting to adjust
itself to a philosophy of management s imilar to that r equ i r ed for the
implementation of a fo rmal planning process . This di lemma re la tes
to the day-to-day action oriented habit pattern of management, wherein
top executives have been hard p ressed to find enough t ime to devote to
the establishment and implementation of a fo rmal planning process .
There a re many fac to r s that help explain why these p r e s s u r e s exist
among top management and which, in tu rn , tend to in te r fe re with the
introduction of a formalized planning p rocess :
1. Physical overload. Top executives a re extremely
busy individuals; and, despite effor ts to decentral ize, top man-
agement sti l l is involved with many t ime-consuming tasks . X
Drucker notes, "The bottleneck is at the head of the bottle. . . .
No business is likely to be bet ter than i ts top management, have
broader vision than its top people, or per form better than they
do" (4, p. 161).
2. P r e f e r ence for routine. Another fac tor , limiting
the t ime which can be devoted to planning, is not so widely appli-
cable but is advanced by March and Simon: "When an individual
58
is faced both with highly p r o g r a m m e d and highly unp rog rammed
t a s k s , the f o r m e r tend to take p recedence over the l a t t e r even
in the absence of s trong o v e r - a l l t i m e p r e s s u r e " {6, p. 185). In
co rpora t ions which a r e not cha rac t e r i zed by p r o g r e s s i v e and
fu tu r e -o r i en t ed top management , the p r e f e r e n c e may be to r e -
f r a i n f r o m introducing a new concept of management .
3. Uninformed management . In some corpora t ions top
management has neglected to mainta in a cu r r en t insight into new
techniques , concepts , and ideas fo r managing the f i r m ; conse -
quently, t h e r e is a lack of awareness of the impor tance and u s e -
f u l n e s s of a sys temat ized planning and dec is ion-making p r o g r a m
(5, p. 4).
T h e r e a r e indications that the co rpora t ions which do not imple -
ment the fo rma l i zed planning p r o c e s s often need it the mos t . Maines
s a y s , "In the c a s e s of both high-growth and low-growth companies ,
t hose that now support planning p r o g r a m s have shown a supe r io r growth
r a t e in r ecen t y e a r s " (5, p. 4).
Chief Execu t ive ' s Role
Corpora t ions , rea l iz ing the r equ i r emen t f o r and benef i t s to be
der ived f r o m a m o r e comprehens ive planning and dec is ion-making con-
cept , will normal ly conduct an extensive p r e p a r a t o r y investigation to
de t e rmine the exist ing s ta te of the ar t of planning and how it might be
applicable to a corpora t ion .
59
Chapter II dealt with the chief execut ive ' s accountabil i ty fo r
the es tab l i shment and implementat ion of a planning p r o c e s s to a s s i s t
in meet ing the respons ib i l i ty f o r the broad s t r a t eg ic guidance in the
commi tment of r e s o u r c e s to the at tainment of c o r p o r a t e objec t ives
and goals . According to Bower:
Of c o u r s e , the grand design (i. e. , makeup by b u s i n e s s -es) and other m a j o r s t r a teg ic plans of the company as a whole should be approved by the board of d i r e c t o r s ; and divis ional chief execut ives will need m o r e detailed approvals f r o m c o r -po ra t e top management . But any chief executive mus t decide o r r ecommend the s t ra tegy for his organiza t ion , and that r e -sponsibi l i ty cannot be delegated. It is a command decis ion (-2, p. 57).
The chief executive may not develop s t r a t eg ic p lans h i m s e l f , but he should be sens i t ive to t he i r impor tance and see to it that they a r e developed and implemented . He m u s t , fo r example , d i rec t the company so as to cope with inc reas ing c o m -petit ion on an in ternat ional sca le and with rapid technological , pol i t ica l , and soc ia l change. And s ince continuing s u c c e s s r e -qu i res growth, he mus t p r e p a r e it to cope with the p r o b l e m s of e v e r - i n c r e a s i n g s ize and complexity.
The chief executive of a succes s fu l bus iness is also the chief a rchi tec t of the company ' s sys tem of management . And a f t e r the sys tem is buil t , he mus t a r t i cu la te it and see that it is u s e d , suppor ted , and rev i sed as changing conditions r equ i r e . -
r Thus , I bel ieve that any chief executive will do a b e t t e r job if he thinks of himself not only as a l eader and f ina l decis ion m a k e r but also as an a rch i tec t with two broad re spons ib i l i t i e s : (1) keeping the company attuned to ex te rna l f o r c e s , and (2) build-ing and maintaining a sys tem of management (2, p. 148).
Top Management ' s Active Support and Par t i c ipa t ion
The chief executive in conjunction with the c o r p o r a t e executive
management group should enthusias t ica l ly support and pa r t i c ipa te in the
design and implementat ion of the planning p r o c e s s . This involvement
60
is v i ta l s ince fo rma l i zed planning is concerned with f a r - r e a c h i n g
decis ions which affect the su rv iva l and growth of the corpora t ion . L ike -
wi se , if m a n a g e r s a r e to coopera te in the development and execution of
c o r p o r a t e planning, t h e r e is a need fo r a s s u r a n c e by top management
that the m a n a g e r ' s f u t u r e p e r f o r m a n c e will be m e a s u r e d on the b a s i s
of both long- range and s h o r t - r a n g e contribution and not s imply on the
b a s i s of c u r r e n t - y e a r opera t ing r e s u l t s . A f u r t h e r cons idera t ion is
that subordinate management in p a r t pa t t e rn s i ts a t t i tudes toward p lan-
ning on the b a s i s of the atti tude it s e e s re f lec ted at the top level of the
organizat ion.
Recognizing that the design and ca r ry ing out of a co rpo ra t e p lan-
ning p r o c e s s r e p r e s e n t s a m a j o r under taking, it becomes evident that
the bes t method of introducing o r extending planning within an o rgan i -
zation mus t be ca re fu l ly thought out. Normal ly a "plan fo r planning"
is developed by the executive management groups in conjunction with
the chief executive.
Bes se says :
The f i r s t step toward adequate planning is the e s t ab l i sh -ment of a planning c l imate . Best r e s u l t s a r e achieved when this , begins with top management - the ve ry top - the cha i rman of the boa rd , the p r e s i d e n t , the executive v ice p r e s iden t , and the im-por tant vice p re s iden t s . They must buy the proposi t ion that planning, per se and as such, is an ident i f iable , control lable function essen t i a l to the health of the e n t e r p r i s e . And they will be completely convinced only if they do a l i t t le work on the sub-ject . They mus t study some of the per t inent l i t e r a t u r e to f a m i -l i a r i z e t h e m s e l v e s with planning techniques that have been
61
successfully applied in other companies, attend some high-level conferences , take a little t ime to think and talk about the sub-ject. And they ought to wri te down their conclusions for every-one to see and approve. Somebody has said, "If you haven't writ ten it out, you haven't thought it out. " That is as t r ue of planning as it is of any other fundamental pr inciples (1, p. 46).
Line and Staff Personnel
The concept of fo rmal planning as described in this study envi-
sions that planning shall be a way of life in a corporation. It cannot be
confined to executive management alone or to a smal l specialized staff
group. Rather , it should involve everyone who posses ses leadership
responsibil i ty for the effective operation of any facet of the corporation.
Fo rma l planning accountabilities embrace not only executive manage-
ment concerned with the nature and basic product or se rv ices of the
f i r m , but also member s of management who a re concerned with the
survival and growth of the business .
It becomes evident that planning is an integral par t of the man-
agement. If a manager is to be held accountable for end resu l t s p e r -
formance measured against a p i a n , then, basical ly, the incumbent
manager must be involved in the planning functions. If the design and
implementation for a formalized planning p rocess are formulated in
cloistered seclusion by planning staff special is ts and then submitted j
to line management fo r execution, the re is denied the fundamental p r in-
ciple of organization responsibil i ty.
62
Through mobil izing the know-how and imaginat ion of key line
m a n a g e r s throughout the corpora t ion in the at ta inment of common ob-
jec t ives and goa l s , a to ta l organized planning ef for t of th i s magni tude
develops cons iderab le co rpo ra t e power . But u n l e s s the planning is
p rope r ly organized and coordina ted , it is l ikely to become unwieldy
and demora l iz ing to the organiza t ion . Individual planning e f fo r t s should
be pulled toge ther into the in tegrated f o r m a l planning p r o c e s s ; o t h e r -
wi se , t h e s e individual e f fo r t s may become mean ing le s s and was te m a n -
age r i a l ene rg ie s and p rec ious co rpo ra t e r e s o u r c e s .
Since it is a p r i m a r y respons ib i l i ty of l ine execut ives , planning a f fec t s the organizat ion of a company to the extent that it funct ions m o r e effect ively in one f o r m a l a r r angemen t than in
, another . The line m a n a g e r can plan only those act iv i t ies with which he is d i rec t ly charged . If informat ion concerning the ac t iv i t ies and intentions of another segment of the bus ines s is n e c e s s a r y fo r his own planning but is unavai lable , e i ther o rgan i -zat ional c la r i f ica t ion is needed or the other component i s not communicat ing sa t i s fac to r i ly .
The f o r m a l organizat ion of a company e x p r e s s e s both l onge r - r ange planning and cu r r en t operat ing re spons ib i l i t i e s . Planning and doing a r e s epa ra t e p a r t s of the s a m e job, they a r e not s e p a r a t e jobs (3, p. 181).
Assuming that c o r p o r a t e management has es tabl ished the need
fo r a fo rma l i zed planning p r o c e s s , some p e r s o n or group should be
m a d e respons ib le fo r coordinating the development of the plan f o r p lan-
ning. This coordinated action would help to ensu re that the planning ;
was executed by line management ; and within the f r a m e w o r k of the p r o -
c e s s , the individual planning e f fo r t s would be pulled toge ther into an
in tegrated c o r p o r a t e plan.
63
Starting Formal Planning
In many instances the initial suggestion to crea te a fo rmal plan-
ning process comes directly f rom top management and usually the chief
executive off icer . Installation of a formalized planning process may
cover a period of f rom two to eight yea r s ; and according to a Stanford
Research Institute (9) survey, the corporation will cycle through a f ive-
phase planning evolution. This evolution is i l lustrated in Figure 5.
Phase L--Establishment of Executive Planning Committee
Establishment of a fo rmal planning organization r ep resen t s the
initial effort toward the implementation of a formalized planning p rocess ,
and it usually takes place under the direction of the chief executive off i -
cer . In most instances the corporate , key line and staff o f f icers a re
designated as m e m b e r s of the Executive Planning Committee.
No one person can possibly know enough or be objective enough by himself to do the entire planning for a company. If he t r i e s to do the job alone there will inevitably be a negative reaction to the plan regard less of its m e r i t s , among competing individuals in the f i r m , especially if they feel thei r in teres ts a re not adequately represented during the planning stages. By employing the team approach to the actual planning program, a company receives the benefit of its executives' collective experience (7, p. 20).
In general , the task force approach to organizing for long-range planning has some important advantages, even though it is essentially of a temporary nature. It o f fers great flexibil-ity for shor t - t e rm intensive studies. It allows the assignment of pr ior i t ies and the direction of concentrated effort to problems which seem of cr i t ica l importance. It also appears to be a most usefu l approach in getting long-range planning acitivities s ta r ted ,
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' *
giving them an initial momentum and providing background acquaintance with relevant subject a reas while demonstrating top management 's active support (8, p. 177),
The initial phase in the formulation of a long-range planning
process as presented by the Stanford Research Institute (9, p. 15}
represen t s a most cr i t ica l period in the evolution of the formal ized
planning organization. Through this initial effort corporate manage-
ment is introduced to many new management concepts and begins to
shape an attitude toward a formalized planning and decision-making
process . During a period of approximately one y e a r , the executive
planning committee, in conjunction with the chief executive off icer
and the board of d i rec to rs , becomes involved in augmenting many sig-
nificant changes throughout the corporation. If a corporation has ne-
glected the following manager ia l activities the re exists a requirement
for an updating of the corporat ion 's management philosophy, p rac t i ces ,
techniques, and sys tems:
1. The depth analysis of the salient external influences
upon the corporation.
2. The required insight into the corporat ion 's r e sources .
3. The formulation of the corporat ion 's miss ion , ob-
jectives and goals on a more quantitative, qualitative and :
formalized bas is .
4. The development of an assumption base attendant to
formulation of objectives and goals.
66
5. The delineation of corporate strategy required in
the attainment of objectives and goals.
6. The formalization of increasingly effective manage-
ment sys tems to permit commitment of corpora te r e sou rces
in attainment of end resul t s .
7. The establishment of a control and recycling system
which is more compatible with the formalized planning process .
Phase II--Designation of a Planning Director
Upon completion of the extensive planning effor ts accompanying
the f i r s t phase, the Stanford Research Institute (9, p. 16) notes that
the corporation reaches a point where there is a requirement to appoint
a planning director who is capable of providing fu r the r coordinative
support for the executive planning committee. '
In many instances a member of the corporat ion 's management
group is promoted to the position of director of planning. On occasion
some corporat ions must employ a director of planning when an indi-
vidual f rom within the corporation is not available for assignment to
this new position,, The newly appointed di rec tor of planning is given
the opportunity to acquire a staff of a few highly qualified individuals
who function together as a planning department. The planning depar t -
ment opera tes as a staff group in assist ing with the fur ther development
and implementation of the formalized planning p rocess .
67
Scott s t a t e s :
The organizat ion a r r angemen t for long- range planning which is mos t widely adopted among l a rge companies ca l l s f o r the es tabl i shment of a co rpo ra t e staff planning unit . This unit r e p o r t s d i rec t ly e i ther to the chief executive or to another senior top management execut ive, and it mos t commonly t akes the f o r m of a commit tee or depar tment .
The unit best exemplif ied the fo rmal i z ing changes which have taken place during recen t y e a r s in re la t ion to long-range planning ac t iv i tes , and it i s obviously of g r ea t s ignif icance (8, p. 177).
A review of F igu re 5 r e v e a l s that the planning staff p rovides the
corpora t ion with a p ro fes s iona l approach to f o r m a l planning, and th i s
know-how a s s i s t s management in designing and implement ing an e f fec -
t ive planning p r o c e s s .
P h a s e I I I - -Es tab l i shment of Planning Staff
This phase in the evolution of the c o r p o r a t e planning e f fo r t s
normal ly happens t h r e e y e a r s a f t e r the init ial action toward e s t ab l i sh -
ing a fo rma l i zed planning organizat ion. According to the Stanford
R e s e a r c h Inst i tute (9, p. 17) study, the planning group at the co rpo-
r a t e management level becomes a pe rmanen t pa r t of the f o r m a l o rgan i -
zation s t r u c t u r e . I ts m a j o r ass ignment r e l a t e s to the p repa ra t ion of
the co rpo ra t i on ' s f i r s t comprehens ive f i ve -yea r plan, with a p r i m a r y '
accountabil i ty f o r the coordinat ion and integrat ion of the fo rma l i zed
planning p r o c e s s . This phase also r e q u i r e s a decent ra l iza t ion of the
planning funct ion, s ince a l a r g e p a r t of the planning effor t t akes p lace
at the opera t ing level , with the co rpo ra t e organizat ion components
68
submitt ing individual p lans which a r e coordinated and integrated into
the to ta l co rpo ra t e plan by the planning staff .
P h a s e IV- -Es t ab l i shmen t of a Division Planning Staff.
Having benefi ted f rom approximately f ive y e a r s of exper ience
in the design and implementat ion of a f o r m a l planning p r o c e s s , the
chief executive o f f i c e r , according to the Stanford R e s e a r c h Inst i tute
(9, p. 18), is inclined toward elevating the d i r e c t o r of planning to a
Vice P r e s i d e n t of Corpora te Planning. Additionally, within the l a r g e r
co rpora t ions t h e r e is a movement toward the es tabl i shment of a divi-
sion planning coordina tor posi t ion.
Concur ren t with the maturing, of the co rpo ra t e planning s ta f f ,
th i s group becomes m o r e involved with the acquisi t ion and m e r g e r p ro-
g r a m , capi ta l investment dec i s ions , d ivers i f ica t ion e f f o r t s , and o ther
s t r a t eg ic funct ions of the corpora t ion .
P h a s e V- -Es t ab l i shmen t of a Tota l Fo rma l i zed Planning P r o c e s s
Af te r s e v e r a l y e a r s of involvement with the f o r m a l planning
p r o c e s s the corpora t ion has the benefi t of managing, within a sophis t i -
cated f r a m e w o r k for planning. The Stanford R e s e a r c h Inst i tute (9, ;
p. 19), notes that such a planning f r a m e w o r k p e r m i t s a g r e a t e r decen-
t r a l i za t ion of the co rpo ra t e planning and dec i s ion-making accountabi l i -
t i e s . The chapter which fol lows prov ides an opportunity to explore in
69
g r e a t e r depth the many cons idera t ions re levant to phase f ive in the
evolution of f o r m a l planning.
Respons ib i l i t i es and Funct ions Of Staff Corpora te P l a n n e r s
Recognizing the scope of the fo rma l i zed planning p r o c e s s , it
becomes- evident that a need ex is t s to posit ion within a corpora t ion some
pe r son o r group who should be made respons ib le f o r coordinating the
development of th i s p r o c e s s , ensur ing that planning is executed by line
and staff management and then pulling t h e s e p lans toge ther into an inte-
g ra t ed co rpo ra t e plan. In a l a r g e corpora t ion , organized to c a r r y out
i t s bus ines s through div is ions , the planning s t r u c t u r e may consis t of
a c o r p o r a t e plan, divis ional p l ans , operat ing company p lans , and func -
t ional depar tment or unit p lans within the corpora t ion .
P e r m i t t i n g the planning p r o c e s s to function on a decen t ra l ized
b a s i s leads to the necess i ty f o r providing a combined c o r p o r a t e -
divis ional planning s t r u c t u r e . A c o r p o r a t e - l e v e l group coord ina tes
division p lans , p rov ides f lexibi l i ty,and p romotes executive management
support and par t ic ipa t ion . Also, mos t planning inputs mus t come f r o m
opera t ing d iv is ions , s ince p lans mus t be implemented at th i s level .
The na tu re of the planning e f fo r t s r e q u i r e s a planning staff at
both the co rpo ra t e and division l eve l s , compr i sed of a sma l l group
of highly qualified p e r s o n s ass i s t ing management with designing,
70
coordinat ing, and implementing f o r m a l planning which r e l a t e s to the
surv iva l and growth of the corpora t ion .
Pos i t ion Descr ipt ion for Corpora t e Vice P r e s i d e n t of Planning
Ste iner (10) ma in ta ins that the p rob l ems of the planning s t a f f ' s
ro l e within the corpora t ion often a r i s e in the development and c o o r -
dination of s t r a t eg ic plans by c e n t r a l planning staff and by operat ing .
d ivis ions . Corpora te planning s ta f f s a r e inevitably involved in the
in te r re la t ionsh ip between the planning act ivi t ies of va r i ous o rgan iza -
t ional components . The planning s t a f f ' s r o l e in coordinat ing the modi -
f icat ion of p lans to r e l a t e to the corpora t ion as a whole may r e su l t in
b i t t e r confl ict if important i s sue s a r e involved. No m a t t e r how c l ea r
staff r o l e s may be , th i s type of conflict wi l l a r i s e , but it is l e s s likely
to a r i s e and l e s s likely to be s e r i o u s if r o l e s a r e c l ea r ly specif ied and
c l ea r ly unders tood.
Since the planning p r o c e s s i s very complex it is n e c e s s a r y that
t h e r e be unders tanding of author i ty , accountabi l i t ies , p r o c e d u r e s and
t iming; with th i s being accomplished through the chief executive who
is r e spons ib le f o r es tab l i shment of the fo rma l i zed planning and decision-
making p r o c e s s . In many ins tances a Vice P r e s i d e n t or D i rec to r of |
Planning is avai lable to a s s i s t the chief executive with t h e s e planning
accountabi l i t ies .
? !
The posit ion descr ip t ion and designation of individual and t eam
accountabi l i t ies f o r the Vice P r e s i d e n t of Planning is often ut i l ized by
the chief executive when es tabl ishing a planning s taff . A posi t ion de-
scr ip t ion s i m i l a r to the f a c s i m i l e shown in Appendix C can be p r e p a r e d
by the corpora t ion p r i o r to the es tab l i shment of the chief planning pos i -
t ion; and, due to the s t ra teg ic impor tance of th i s pos i t ion , it would be
des i r ab l e to have the va r ious v ice p r e s i d e n t s approve the contents of
the posit ion descr ip t ion .
Important Accountabil i t ies of Planning Staff
Ste iner p rov ides an overview of the m o r e sal ient accountabi l i t ies
of a planning staff spec ia l i s t :
F i r s t , he develops and main ta ins an a c c u r a t e , deta i led, and up - to -da t e a s s e s s m e n t - an economic p o r t r a i t , if you will -of the corpora t ion as a whole, seen f r o m t h r e e points of view:
The economic point of view r e q u i r e s the co rpo ra t e p lan-ning o f f i ce r to mainta in a continuous r e c o r d of existing product l i nes , t he i r c u r r e n t , p a s t , and p ro jec ted growth; t he i r compe t i -t ive m a r k e t posi t ion, and the i r contribution to p ro f i t s . . . .
The opera t iona l view m e a n s that he mus t mainta in an inventory of opera t ing s t r eng ths and l imi ta t ions . It involves continuous examinat ion and a s s e s s m e n t of all opera t ing act ivi-t i e s to identify those a r e a s in which the company is pe r fo rming well and those in which i t s capabi l i t ies a r e inadequate. . . .
•*. This kind of analys is helps a corpora t ion to build on i ts s t r eng ths while co r rec t ing i ts weaknesses or l imi ta t ions . It a lso s e r v e s as a valuable guide in a c o r p o r a t e d ivers i f ica t ion p r o g r a m , s ince it indicates what the pa ren t corpora t ion mus t j do to supplement effect ively the s t r eng ths and weaknesses of < the company being acqui red , o r to s t rengthen i ts capaci ty to absorb additional product l ines or b u s i n e s s e s .
The f inancia l knowledge of the c o r p o r a t i o n ' s f inancia l t posi t ion and capaci ty is always impor tan t , and never m o r e so
72
than when management is preparing to embark on a program of expansion and diversif ication. . . .
The economic por t ra i t of the corporation embodying these viewpoints must naturally be derived f rom information gleaned f rom each of the company's operating activities and staff units. Only a person working at the top-management level is in a position to compose it in full detail and accurate perspec-tive. This then is his f i r s t basic task.
His second responsibility and a most important one, is to maintain a broad and sensitive understanding of the changing environment within which the corporation opera tes . . . .
The corporate p lanner ' s third responsibili ty is to help develop and crys ta l l ize corporate objectives. . . .
The fourth responsibili ty of the top corporate planning executive may be to develop diversification t a rge t s - promising opportunities in business a reas where the corporation does not yet operate. . . .
His fifth and final responsibil i ty, of course , is to c rea te and administer the planning system itself (11, pp. 40-44).
Centralization Vs. Decentralization of the Planning Function
The la rger corporat ions tend to have both a central planning
staff for the whole corporate operations and other planners for important
decentralized face ts of the f i rm. The more diverse the operat ions, p r o -
duct l ines , or the more sophisticated the technology, the g rea te r the
need for decentralized planning. Generally, the division planner se rves
under the line supervision of a division head and under the functional
guidance of the centra l planning staff. '•
When the company is organized functionally, according to Branch
(3, p. 182), coordination is affected and comprehensive plans are drawn
at the single proli t center which controls at least production and sales .
73
When management is conducted through mult iple prof i t c e n t e r s , com-
prehens ive planning of the ac t iv i t ies at each cen te r is the r e spons ib i l -
ity of the r e spec t ive line m a n a g e r . Depending upon the degree of decen-
t r a l i za t ion o r autonomy, each of the m a n a g e r s r e l a t e s organiza t iona l
component p lans to the other f a c e t s of the co rpora t ion , with the c o o r -
dinative e f fo r t s being handled by staff and divis ional planning groups . •
A sound pr inc ip le in e i ther single or mul t iple prof i t c e n t e r s is that only
those planning act iv i t ies a r e conducted at the co rpo ra t e level which can-
not be de legated , o r fo r o ther r e a s o n s , a r e be t t e r p e r f o r m e d cent ra l ly .
Compatibil i ty of Management P r o g r a m s , P r o c e d u r e s And P r a c t i c e s with the Planning P r o c e s s
Concur ren t with the implementat ion of a f o r m a l co rpo ra t e p lan-
ning p r o c e s s , the executive management group under the l eadersh ip of
the chief executive o f f i ce r has a r equ i r emen t to de t e rmine the need fo r
rev i s ion or or iginat ion of management a ids , p r o g r a m s , o r pol ic ies .
An example is the need fo r devising a sys tem which wil l p e r m i t the
downward communicat ion of objec t ives and goals to va r ious o rgan iza -
t ional components and eventually to such incumbents as s a l e s m e n , f o r e -
m e n , staff pe r sonne l , etc. The r e fo rma t ion of posi t ions desc r ip t ions
and individual accountabi l i t ies , in p a r t , wil l help augment the es t ab l i sh -
ment of the h i e r a r c h y of objec t ives and goals . Likewise , management
needs to implement an individual p e r f o r m a n c e planning p r o g r a m that
p e r m i t s the upward and downward communica t ions which a r e n e c e s s a r y
74
for the decentralized implementation of the fo rmal planning process .
Instituting an individual planning program can be accomplished after
concerned personnel have designed the p rogram, written the policy
guidelines, and arranged to communicate the program and t ra in all
persons involved with the implementation.
The m o r e difficult aspect of a formalized planning p rocess r e -
lates to the action required in decentralizing planning to a point of having
a f ramework of management which allows for the participation and in-
volvement of employees operating at all echelons within the organization.
Par t ic ipat ive management, management by objectives or resu l t s will be
more effective when management has taken the initiative and action to
formulate the total manager ia l f ramework necessa ry to maximum imple-
mentation of these concepts.
CHAPTER BIBLIOGRAPHY
1. B e s s e , Ralph M. , "Company Planning Must Be Planned, " Dun's Review and Modern Industry, 69 (April , 1967), 46.
2. Bower , Marvin, The Will To Manage, New York, McGraw-Hil l Book Company, Inc. , 1966.
3. Branch, Melville C. , The Corpora te Planning P r o c e s s , New York, American Management Associat ion, Inc. , 1962.
4. Drucker , P e t e r F . , The P r a c t i c e of Management , New York, Harpe r & Row, Pub l i she r s , Inc. , 1954.
5. Maines, N. R. , "Why Companies Grow, " Stanford Resea rch Insti tute, 1958.
6. March , J. G. and H. A. Simon, Organizat ions, New York, John Wiley and Sons, Inc. , 1958.
7. Payne, Bruce , Planning for Company Growth, New York, McGraw-Hill Book Company, Inc. , 1963.
8. Scott, Brian W. , Long-Range Planning in American Industry, New York, American Management Associat ion, Inc. , 1965.
9. Stanford Resea rch Insti tute, The Planning Organization, Long-Range Planning Service Report No. 133, Menlo P a r k , Cal i fornia , May, 1962.
10. Ste iner , George A. , "Long-Range Planning: Concept and Implemen-tat ion, " .Fin§££i<y: Executive, 34 (July, 1966), 54-61.
\
11. Ste iner , George A. and War ren M. Cannon, Multinational Corpora te Planning, New York, The Macmillan Co. , 1966.
75
CHAPTER-IV
ENVIRONMENTAL ANALYSIS
This chapter r ep resen t s the f i r s t of severa l chapters which will
permi t a depth analysis of each ma jo r facet of the dynamic formalized
planning process as shown in Figure 4. Each of these chapters will ex-
plore the requi rements for a given facet of the p roces s , the existing state
of the art attendant to the par t icular part of the p rocess , and the in ter -
relat ionships among the var ious facets of the planning process .
The contents for each of the ensuing chapters will follow a f o r -
mat that reveals the logical line of thought for each major and subor-
dinate aspect of the planning p rocess . Since these chapters will be
concerned with the state of the art of formalized corporate planning,
severa l sources of information are utilized when presenting a given
aspect of the process . These var ious sources of information are sum-
mar ized below:
1. Persona l consultation with planning special is ts
Several authorit ies who are special is ts in corporate
planning were interviewed at various locations throughout the
United States. These persons function as consultants to man-
agement, as educators , or as r e s e a r c h e r s , and most have
written extensively on the subject of planning. Many of the
76
77
individuals provided a prac t ica l and current insight into the fo rmal
planning process movement.
2. Conference and seminar participation
Relevant information was acquired through par t ic i -
pating in the following meetings relating to fo rmal planning:
a. American Management Association Corporate Planning
Course , one week; b. American Management Association P lan-
ning Workshop, th ree days; c. Planning Dynamics Inc. Planning
Course , one week. This r e source information on planning will
be utilized in the succeeding chapters since the conferences
centered on the corporate fo rma l planning p rocess .
3. Published ma te r i a l s
Some of the nation's leading management authors
have published books and ar t ic les on the subject of formalized
planning. Individuals like Drucker , McGregor , Steiner, Ansoff,
and Levitt have provided an important base to the fo rmal plan
ning p roces s movement. The writings of these authorit ies will
be utilized along with other sources of information when re f l ec t -
ing upon the complex aspects of the corpora te fo rmal planning
process* ;
4. Survey of fo rmal planning p rocess prac t ices
In order to obtain current information regarding
corpora te fo rmal planning prac t i ces , a select group of 206
78
United States corporat ions were requested to complete the
questionnaire shown in Appendix A. This appendix notes that
the survey sample of corporat ions covers a broad spectrum of
. industr ies , and the f i r m s display a wide range of sa les volume.
Sixty-six corporat ions responded to the survey, represent ing
32 pe r cent of the total sample. Fifty-two f i r m s completed and
returned the questionnaires; and this information, which re la tes
to specific aspects of the fo rmal planning p roces s , provides a
bas i s fo r appraising current prac t ices . Where feasible the co r -
porate responses were tabulated and presented on a quantitative
bas i s , and in some instances the corpora te responses have been
presented on a direct quote basis .
Utilization of Environmental Data
External environmental conditions affect a corporat ion 's surv i -
val and growth possibi l i t ies; t he re fo re , management needs rel iable
information about fu ture economic, social, poli t ical , technological and
other business conditionsto help serve as a guide in formulating assump-
t ions, object ives, goals , c r i t e r i a , s t ra tegy, and the eventual commit-
ment of corpora te resources . Since objectives, goals , and s t ra tegies
a re based upon a group of key assumptions, management can benefit by
devising a dynamic monitoring system which is capable of providing a
79
continuous appraisal of the salient influences which are considered
when formulating the planning p rocess assumptions.
To the extent that the environment consists of external fac tors
essentially beyond the control of management, it is evident that a co r -
poration should determine and monitor these environmental influences.
An accurate and continuous long-range environmental forecast ing system
is the re fore a vital ingredient of successful fo rmal planning, because it
enables management to make rat ional and t imely decisions and plans for
the survival and growth of the corporation. The environmental data as -
s i s t s management in adapting the corporation and corporat ion 's p ro -
ducts or se rv ices to the expected environment and helps when deciding
upon the nature , scale , and scope of future corporate operations.
According to Steiner (8) a corporation comes into contact with
the surrounding environment at many points. Fac to r s such as popu-
lation growth, income levels , buying habits, p r ice t r ends , and technolo-
gical developments affect product marke t s and over -a l l business condi-
tions and usually exert a corresponding influence on corporate sales and
operations. A corporation can adapt i ts operations to some of these
changes af ter the environmental changes have already occurred. But it
seems logical to assume that the adaptation is likely to be more success -
ful if these environmental changes can be anticipated, and the necessary
courses of action can be formulated through the fo rma l planning p rocess .
80
Dynamic Environmental Influences Upon Corporation
In a recent publication relating to long-range planning prac t ices
Henry noted:
In planning the future activities of a business f i r m , one of the most fundamental t asks is to predict the nature of the business environment in the coming yea r s . The social, politi-cal , economic, and technological changes which will occur in fu ture y e a r s should be anticipated as accurately and as soon as possible. Otherwise, long-range planning may be built on a crumbling foundation. Changes in the environment will be t r a n s -lated into cer ta in levels of demand for var ious types of products in each fu ture t ime period. There fore , a business f i rm needs to forecas t the demand for the products it plans to manufacture and market (3, p. 46).
The numerous environmental fo rces which can have a significant
impact on a corporation were provided in an overview chart by Steiner (8)
and are summarized in Figure 6. Often it is difficult for a corporation
to delineate and measu re these fo rces and establish the degree of influ-
ence on corporate operations. This i l lustration denotes how environ-
mental fo rces may affect different face ts of corporate operations and
the vital need to examine these influences. According to Steiner (8) the
difficulty that management experiences in keeping abreast of these in-
f luences is one of the important reasons for designing and implementing
a fo rma l planning p rocess with staff experts ( i . e. , economists and
staff planners) to specify, study and project environmental f ac to rs im-
portant to the corporation.
In observing the environmental changes as shown in Figure 6,
it can be noted that the consideration is f a r g rea te r than m e r e changes
81
in demand and in the tac t ics of competition. The changing pattern and
trend of competition needs to be understood, New technological devel-
opments that may threaten a par t of the corporat ion 's product lines or
provide an apportunity to strengthen i ts market position should be iden-
tified and analyzed. An understanding of demographic change, of
Environmental Forces
oIoStcal Nature of Impact
t Results
Achievement of
Objectives
\ <3-
X & %
Fig. 6 Environmental impact on corpora te planning*
^Source: Steiner, George A. and Warren M. Cannon, Multi-national Corporate Planning. New York, The McMillan Co. , 1966.
82
changing consumer t a s t e s , and of changes in consumer purchasing power
needs to be developed. The potential effects of government policy and
the potential impact of economic policy should be analyzed. Today
great international opportunities a re prevalent , and the re is a need to
re la te such potentials to the corporation through utilization of the corpo-
ra te fo rma l planning p rocess .
"1 Environmental Analysis and Evolutionary
Phases of Planning
A review of Figure 5, which por t rays the evolution of the corpo-
ra te planning organization as projected by Stanford Research Institute (7),
denotes that the five evolutionary stages place great emphasis on the need
for environmental data. In Phase I the Executive Planning Commit tee 's
f i r s t action is to secure comprehensive environmental information to
a s s e s s the corporat ion 's present position and to set a course for the
fo rmal establishment of a permanent planning organization. Entering
into Phase II, a corporation appoints a Director of Planning who pos- —
s e s s e s sufficient competence to permit even more formidable environ-
mental inputs than Phase I. As the corporat ion 's planning endeavors
proceed to Phase V, there is the establishment of a continuous type of
monitoring system which pe rmi t s continual appraisal of the economic;,
technological, social , and political influences upon the corporation.
83
Identifying the Corporat ion 's Posit ion in the Environment
Since all sound planning must start with a thorough understand-
ing of "where you a r e " as a corporation and "what you have" before the
corpora te management can intelligently determine "where you want to
g o , " many authorit ies have focused on some simple but extremely im-
portant questions which should be answered in conjunction with the de-
sign and implementation of the fo rma l planning process .
Drucker (2) says the initial step in determining what the corpo-
ra t ion ' s business is , is to be able to answer the question, "Who is our
c u s t o m e r ? " Attempting to answer this question, Drucker (2) notes,
leads to such other questions as:
Is he the actual cus tomer?
Who a re the potential cus tomers?
Where are the cus tomers located?
What a re their buying habi ts?
What is required in reaching the cus tomer?
What is value to the cus tomer?
The writ ings of Drucker (2), Levitt (4) and other authorit ies
who recognized the inefficiencies of corporate planning have helped man-
agement to more fully rea l ize the importance of environmental influences
upon the f i r m . Levitt notes in his famous ar t ic le "Marketing Myopia, "
"In every case the reason growth is threatened, slowed, or stopped is
84
not because the market is saturated. It is because there has been a
fa i lure of management" (4, p. 45).
Levitt also says:
. . . the organization must learn to think of itself not as producing goods or serv ices but as buying cus tomers , as doing the things that will make people want to do business with it. And the chief executive himself has the inescapable respon-sibility for creating this environment, this viewpoint, this att i-tude, this aspirat ion. He himself must set the company's style, its direction, and its goals. This means he has to know p r e -cisely where he himself wants to go, and to make sure the whole organization is enthusiastically aware of where that is. This is. a f i r s t requis i te of leadership, for unless he knows where he is going, any road will take him there (4, p. 56).
Levi t t ' s (4) thoughts focus on the requirement for a fo rmal plan-
ning p roces s , with the initial management action relating to a depth
analysis of the environmental influences which affect the purpose of
a f i rm . Due to the many dynamic and ever-changing fo rces of society,
Levitt (4) intimates that management, and especially the chief execu-
t ive, should design a system of management which will permi t the con-
tinual appraisal of the corporat ion 's products and serv ices at the marke t
place. Likewise, management can also benefit f rom the design of a
system which is capable of denoting new market opportunities for the
corporat ion. The input derived f rom such a sys tem, plus an assessment
of corpora te s trengths and weaknesses , will provide a foundation for the
formulation of corporate objectives, goals , assumptions, c r i t e r i a , and
s trategy.
85
Fac to r s Which Determine When To Assess Environment
The initial effor ts to institute a fo rmal planning p rocess neces-
si tate an orginal depth assessment of the relevant environmental influ-
ences upon the corporat ion. Based on the experience of Planning
Dynamics Incorporated (5), the following ma jo r influences cause many
corporat ions to turn to the fo rmal planning p rocess :
1. The increasing size and complexity of business
2. The number and rapidity of ma jo r changes affecting
business :
a. Industrial technology
b. National and international economy and marke t s
c. Social and political conditions
3. The increasing competit iveness of business f rom:
a. Diversification of other f i r m s
b. Saturation of marke t s and excess capacity
c. Competi tor 's innovations, improvements , and
s t ra tegies
d. Foreign production
4. The increasing size and t e rm of capital commitments
5. The decentralization and functionalization of manage-
ment
Planning Dynamics Incorporated notpH +k«+
86
the initial corporate fo rmal pla$. Also, the initial environmental data
is indispensable when implementing the other face ts of the planning
p rocess . The dynamic nature of the corporat ion 's environment r e -
quires a continuous probing for a deeper understanding of the forces at
work and their significance to the corporation. To support the formal
planning process accurate data should be periodically accumulated to
supplement and bring up to date the basic information gathered during
the original planning phase.
Steiner (8) gives the following examples of t rend data which a re
often included in the environmental information bank:
1. The growth or decline in industry volume by products
and marke t segments
2. The expansions and m e r g e r s of competi tors
3. The relation of industry capacity to demand "
4. The industry cost and pr ice t rends
5. The industry re turn on investment
6. The market share pattern
7. The pricing s trengths and weaknesses
The planning authorit ies for the past severa l y e a r s have been
communicating to corpora te management the above noted information
regarding the importance of assess ing the corporat ion 's environment.
In 1954, Drucker wrote The Prac t i ce of Management (2), and in this
book he suggested that management fami l ia r ize itself with its
87
environment in order to be in apposition of projecting rel iable and
valid objectives and goals.
Corporate Approaches to Environmental Analysis
An insight into the svarious corpora te approaches to environmen-
ta l analysis was accomplished through a review of written mate r ia l s
presented by authorit ies who have helped corporat ions design such sys -
tems . Additional information about the techniques for evaluating en-
vironmental conditions was acquired through the Survey of Fo rma l
Planning P r o c e s s P rac t i ce s since the questionnaire contained pertinent
questions relating to this f i r s t facet of the fo rmal planning process . The
responses to this survey tend to reveal that some corporat ions have es -
tablished environmental analysis systems which provide extensive infor-
mation for the remaining facets of the fo rmal planning process .
Several corporat ions provided an insight into the techniques
and considerations relat ive to the environmental analysis facet of the
fo rmal planning p rocess by answering the following question: "What f ac -
t o r s seem to be of key importance in determining when and how there
should be an assessment of the environmental influences upon the f i r m ? "
(9). A representa t ive listing of the corporate answers to this question
is given below, and these answers tend to indicate that many corpora -
tions at the present t ime a r e aware of the var ious environmental influ-
ences upon the f i rm (9):
88
Loss of sa les
Required to provide background for long-range planning
Main factor is to see that a regular review is made and our f i rm reviews environment year ly for both shor t - t e rm (1 year) and long-term (5 years ) .
We make a continual assessment .
Believe there should be a continuing assessment of world environment due to dynamic nature of society, but r ea s se s smen t becomes most important when governmental polit ics or policies change
Broad environmental studies a re made annually
Change in market potential
Decline in p ro f i t s - -unsa t i s f ac to ry profi t per formance
When present product lines no longer seem to have enough growth--usua l ly takes one year to conduct
Identification of potential diversif ication opportunities
In a cl imate of constant change management must con-stantly a s se s s environmental influences.
Any environmental change having an impact on the level, profi tabil i ty, or vitality of the operations requ i res an assessment . The environment is reviewed continually and evaluated at regu- . la r meetings.
Corporate Personnel Involved in Prepara t ion of Environmental Analysis
Steiner (8) comments that when the fo rmal planning in-:
volvement was added to the already crowded schedules of corporate exe-
cutives, the re developed a requirement for a res t ruc tur ing of accounta-
bi l i t ies and staff ass is tance. To alleviate the problem of overtaxed
89
executives in relation to the growing demands of a fo rma l planning p ro -
ces s , the chief executive established a planning staff. In addition some
f i r m s expanded the marketing r e sea rch organization; and, in many-
instances, fu l l - t ime economists were employed for shor t - range and
long-range forecast ing.
The Survey of Formal Planning P r o c e s s P rac t i ce s (9) has also
reflected that many corporate staff member s a re actively involved in
the preparat ion of environmental analysis studies based upon answers
to the following survey question: "What organization component(s) p r e -
pa res the industry s tud ie s?" (9). The companies answered:
Corporate Planning Department
Marketing Research
Business Economics Department
Corporate Staff Services
Divisional Staff Services
Technological Advisory Staff
Consulting F i r m s
This same survey (9) brought out that the relationship of corpora te
personnel to the environmental analysis aspects of the planning p rocess / /
tends to vary in accordance with the following types of environmental;
data needs:
1. The continuous monitoring of the f i r m ' s environment
as required in support of the operational or shor t - range plan.
90
2. The continuous monitoring of the ma jo r environmental
influences attendant to the s trategic or long-range plan.
3. The periodic environmental analysis appraisa ls r e -
required when preparing broad and complex industry studies in
support of the corporat ion 's ma jo r diversif ication and growth
objectives.
4. The periodic environmental analysis appraisa ls r e -
quired when preparing special studies relating to a new product,
r e sea rch and development p ro jec t s , or the acquisition of a com-
pany.
Personnel Involved with Continuous Monitoring
The Survey of Fo rma l Planning P r o c e s s P rac t i ce s (9) denotes
that some corporat ions have delegated to the corporate planning staff
the accountability for a continual monitoring of the salient environmental
influences upon the corporation. In some instances the analysis and r e -
porting of resu l t s is aided through use of electronic data process ing,
which is reviewed in Chapter IX. The corporate planning staff normally
ut i l izes the counsel of the corpora te economis ts , marketing r e sea rch
s taff , technical advisors , and other in surveying, analyzing, and r epo r t -
ing the impact of environmental influences upon the corporat ion.
91
Personnel Involved with Non-Recurring Type of Monitoring
As a corporation continues to direct its efforts toward the
accomplishment of objectives and goals , many opportunities for the
commitment of r e sou rces develop, and, according to Smalter (6),man-
agement reques ts the preparat ion of feasibili ty studies. Such a f ea s i -
bility study requi res environmental analysis input which usually re la tes
to a specific sector of a marke t . Smalter (6) notes that the task fo rce
type organization is often employed to assis t the corporate planning
staff p r epa re a product line study, patent shel ter study, or a study r e -
lating to the acquisition of the asse ts of another f i r m . Since direct
commitment of capital is at stake, the personnel assigned to the task
group need to possess the capability for prepar ing a rel iable study,
considering the r i sks and uncertaint ies of the environmental influences
and the internal influences upon such future endeavor.
Prepara t ion of Broad Industry Studies
Steiner (8) fo re sees that management techniques and prac t ices
in many corporat ions are character ized by a more analytical approach,
and this analytical approach is not necessar i ly an approach that ut i l izes
computers , mathemat ics or s ta t is t ics . The noted analytical approach
is one by which a manager , in looking at any par t icular problem, t r i e s
not to move on an intuitive bas i s but attempts to re la te a problem to
some body of fo rmal planning knowledge which the incumbent has
92
mas te red . The manager is then able to uti l ize a f ramework which
ass i s t s in managing in a thorough and planned manner . Planning
Dynamics Incorporated (5) reveals that in recent y e a r s management
and educators have developed a technique which is utilized in p r e p a r -
ing a depth evaluation of the pas t , p resen t , and future t rends and pat -
t e r n s existing with a given business or industry sector of society.
Corporate Responses to Broad Environmental Studies
The corporat ions responding to the Survey of Fo rma l Planning
P r o c e s s P rac t i ce s tend to confirm the authori t ies ' views as to the im-
portant role of broad industry type environmental studies. The ques-
tions and the respect ive answers as recorded in Tables I and II, plus
the response to the general question on this subject , demonstrate top
management ' s des i re and need for broad environmental information to
help in targeting a reas of opportunity.
"Does your company p repa re broad industry studies to determine
economic, technological, social , and political t rends and pat terns (e .g.
p las t ics , pollution equipment, recreation) ? " (9)
To this question, 88 per cent of the f i r m s answered "yes" and
12 percent answered "no. "
A summary of the industr ies studied by the responding corpora -
tions is shown in Table I and reveals that most of these industries r e -
present the higher growth a reas within the United States.
93
TABLE I
INDUSTRY STUDIES BY RESPONDING FIRMS*
Pollution Control' P las t i c s Electronics Data Process ing Data Communication Recreation Transportat ion Institutional Foods Oceanography-Paper
Continuing Education Chemic als Shipbuilding Petroleum Steel Photography Energy-Furni ture Medical Supplies Material Handling
*Source: Questionnaire sent to select group of corporat ions , November, 1968,
With a major i ty of the responding f i r m s demonstrating consid-
erable activity in the environmental assessment of broad industr ies , a
point of concern centers on how this environmental information is
utilized by these responding corporat ions. In reviewing Table II, it
TABLE II
UTILIZATION OF INDUSTRY STUDIES BY RESPONDING FIRMS*
Usage Number of F i r m s Percentage
Formulation of Objectives /Goals 39 86 Diversification 34 75 Product Planning 34 75 Acquisi t ion/Merger 33 73 Research and Development 3 1 7° Assessment of Corporate /
Per fo rmance 31 70 ; Manufacturing P r o c e s s Planning 21 47 Reallocating Investment 16 35 Divesture 10 22
*Source: Questionnaire sent to select group of corporat ions , November, 1968.
94
becomes evident that the re is a linkage between environmental analysis
and the establishment of objectives and goals since 86 per cent of the
respondents utilize such environmental studies when formulating ob-
jectives and goals. Additionally, according to the Survey of Fo rma l
Planning P r o c e s s P rac t i ce s (9), these studies a re utilized to support
other aspects of the fo rmal planning p roces s , such as diversif icat ion,
acquisition, r e sea rch and development.
Sources of Information for Industry Environmental Studies
Planning Dynamics Incorporated (5) revea l s that within the last
two decades the United States and other developed nations of the world
have built vast information banks of social , economic, polit ical, and
technological data. This public and private information is important
input for the fo rmal planning p roces s , and it can be utilized in conjunc-
tion with the continuous monitoring of the environment or is available
when an organization is preparing broad industry or specific studies.
Concurrent with the t rends in data processing technology the re appears
to be an ever expanding accumulation of data. According to Planning
Dynamics Incorporated (5), the challenge to those involved in implement-
ing the fo rma l planning p rocess is to properly isolate environmental I
data which is pertinent to a given planning requirement . The avail-
ability of environmental data on a decentralized bas is is also vital to
the planning p rocess .
95
Corporations Reveal Environmental Data Sources
The corporat ions responding to the Survey of Fo rma l Planning
P r o c e s s P rac t i ce s (9) tend to confirm the observation of Planning
Dynamics Incorporated (5) by revealing the utilization of many infor-
mation sources for use in conducting environmental studies attendant
to the formalized planning effor ts .
The participating corporat ions were asked to "check. . . the
sources of information utilized in prepar ing environmental s tudies"
(9), and a summary of these responses has been recorded in Table III.
TABLE III
SOURCES OF INFORMATION FOR ENVIRONMENTAL STUDIES*
Source Number of F i r m s Percentage
Company Directed Market Research Studies 45 100
Government Studies 44 97 Services of Consultants 40 88 Trade Associations 40 88 SIC Data 35 77 Company's Data Bank 35 77 Profess iona l Associations 20 44 University Faci l i t ies 19 42 Other F i r m s 16 35
*Source: Questionnaire sent to select group of corporat ions November, 1968. j
Corporate Information Bank
Henry (3) says that with the fo rmal planning p rocess functioning
as a dynamic system which is sensitive to the external and internal
96
influences upon the corporation and the per formance record of commit-
ted r e sou rce s , the planning staff and other groups involved with the
p rocess have experienced a requirement to develop an information data
bank. The planning staff , along with the marketing r e sea r ch staff and
the fu l l - t ime economists , become involved in building a data bank,which
Henry (3) notes usually includes
1. Corporation l ibrary
2. Planning staff re fe rence f i les
3. Marketing r e sea rch re fe rence f i les
4. Business economics re fe rence f i les
5. Electronic data processing information pertaining to
environmental influences
6. Advisory serv ices and inputs f rom consultants on a
re ta iner bas i s
On many occasions t ime becomes a cr i t ica l factor when corpo-
ra te management is involved with a potential acquisition or a ma jo r
commitment of r e sou rces ; consequently, those persons direct ly in-
volved with these special studies a re able to minimize the t ime required
to p repare a study by having available salient information in the data
bank.
Example of an Industry Study--Pet ro leum
With 88 per cent of the corporat ions which responded to the
Survey of Fo rma l Planning P r o c e s s P rac t i ce s (9) indicating the
97
preparat ion of industry studies, it becomes evident that such a repor t is
an important document in supporting the fo rma l planning process . Based
on the findings of the Stanford Research Institute (7) a member of the
planning staff is normally assigned the accountability for coordinating
the preparat ion of an industry study. The preparat ion period spans
f rom a few months up to approximately two yea r s . The business study
outline contained in Appendix D was utilized by the Continental-Emsco
Company as a guide in prepar ing a comprehensive analysis of the in te r -
national petroleum industry. A review of this outline revea ls and high-
lights the relationship between an environmental analysis and the var ious
pa r t s of the planning p rocess . The t rends and pa t te rns of social , polit i-
cal , economic, technological, and other important considerations pro-
vide a necessa ry underpinning to the assumption base which is required
in formulating objectives and goals.
Special S tud ies - -P roduc t s , Acquisitions, P r o c e s s e s
The developmental (long-range) and operational (short-range)
planning and, on occasion, the strategic considerations entail the s imu-
lation and depth analysis of alternative commitments of corporate r e -
sources (5). These special studies a re prepared within the f ramework
of the fo rma l planning process , and Smalter (6) mentions that in many
of the l a rge r corporat ions some of the special studies a re prepared on
a decentral ized basis pr ior to the upward dissemination of the study
for approval. The special studies which are of corporate-wide scope
98
are normally prepared by the planning staff. Planning Dynamics
Incorporated (5) notes that those persons involved in simulating a com-
mitment of corporate r e sources must utilize timely and accurate en-
vironmental data. The needed environmental information in great par t
is derived from the fo rmal planning information bank, and if additional
inputs a re required the serv ices of marketing r e s e a r c h , planning s taff ,
etc. , a re utilized.
Planning Dynamics Incorporated (5) suggests that i£ a corpora-
tion has a given objective and goal to diversify a par t icular product
line, there is a requirement to p repare a special study to determine
the impact of such a commitment of r e sources upon corporate end r e -
sults. For instance, what synergist ic benefit will the corporation de-
rive f rom an expansion of the product line in question. With a corpora-
tion possess ing limited r e sou rces , such special studies will aid
management in making trade-off decisions in regard to how corporate
r e sou rce s should be committed.
According to Planning Dynamics Incorporated (5) the table of
contents of a typical special study repor t , relat ive to a company acqui-
sition, might appear as follows:
1. Introduction , I
2. Recommendations and Conclusions
3. Personnel Information
4. General Review and Assumptions
99
5. His tory and Corpora te S t ruc tu re
6. P r o d u c t s / S e r v i c e s
7. Patent Shel ter and Uniqueness
8. Market ing Data
9. F inancia l Pos i t ion and Operat ing P e r f o r m a n c e
10. Compar i son with Industry P e r f o r m a n c e and Opera t -
ing P e r f o r m a n c e
11. Summary
12. Exhibi ts
Formula t ion of a Continuous Envi ronmenta l
Monitoring System .
Smal te r (6) comments that some co rpora t ions have fo rmula ted
comprehens ive and continuous environmenta l data accumula t ion , c o m -
pilat ion, co r r e l a t i on , and informat ion r e t r i e v a l s y s t e m s re la t ing to al l
exist ing and contemplated i ndus t r i e s , product l ines , o r va r ious a r e a s
of i n t e re s t and opportunity. It is noted that implementat ion of such a
sys tem encompasses a continual review of avai lable economic , m a r k e t -
ing, f inancia l , and technica l data per ta in ing to c o r p o r a t e opera t ions
and a r e a s of in t e res t .
A r ecen t book published by an assoc ia te of Leontief notes :
Many fundamenta l bus iness dec is ions which r each beyond the exigencies of the hour demand long- range , f i v e - o r - t e n - y e a r f o r e c a s t s to get at bas ic growth t r e n d s . This book d e s c r i b e s a new sys tem fo r making such f o r e c a s t s , a sys tem which inco r -p o r a t e s many detai led f o r e c a s t s into a cons is tent p i c tu re of the whole economy f ive or ten y e a r s hence (1, p. 1).
100
A planning manua l includes th i s thought on a continuous envi-
ronmenta l moni tor ing sy s t em:
It is advantageous and economical for the planning spe-c ia l i s t s to d i s t r ibu te a l imited amount of informat ion to key-management pe r sonne l throughout the organizat ion so they can plan within the s a m e f r a m e of r e f e r e n c e . As a m a t t e r of fact pape r work will be reduced and planning e f fec t iveness will be g rea t ly inc reased when guidel ines " ca scade" down to lower echelons as f a r as such informat ion is valuable and per t inent . . F o r example , the Di rec to r of Planning Serv ices at the co rpo ra t e level should provide (and rev i se ) bas ic envi ronmenta l and c o m -peti t ive data that a f fec t s two or m o r e divis ions . The planning spec ia l i s t s at division should d is t r ibute (and update) supplemen-t a l informat ion on a "need to know" b a s i s (5)
Monitoring System Concepts of Surveyed Corpora t ions
Since a continuous envi ronmenta l analys is p r o g r a m is v i ta l to
the f o r m a l planning p r o c e s s concept of management , the Survey of
F o r m a l Planning P r o c e s s P r a c t i c e s (9) pe rmi t t ed an opportunity to de-
t e r m i n e whether co rpora t ions have implemented such a continuous a s -
s e s s m e n t p r o g r a m . The following quest ions and va r ious r eco rded
r e s p o n s e s tend to es tabl i sh that many of the respondents have imple-
mented moni tor ing s y s t e m s , and t h e s e s y s t e m s a r e contr ibuting to the
c o r p o r a t e f o r m a l planning p r o c e s s .
"Have you formula ted a moni tor ing sys tem which p e r m i t s the
continuous app ra i sa l of the economic, technological , soc ia l , and pol i t i -
ca l inf luences upon the f i r m ? " (9)
Sixty-nine p e r cent answered "yes. " Th i r ty -one p e r cent
answered "no. " With so many f i r m s answering in the a f f i rma t ive , the
following answers a r e quite revea l ing (9):
101
We are decentralized and have severa l appraisal sys tems; coordination of these sys tems is ma jo r weakness.
W© have a data bank that is computerized and relates to a. forecasted federal government data, b. economic forecasted data.
Profess iona l economists, business planners , and techno-logical planners at corpora te level with inputs f rom subsidiar ies constantly evaluate world environments.
Continuous analysis of economic situation and evaluation of business conditions by the corporate economic department.
Each functional a rea is charged with the on-going account-ability for keeping abreast of all significant and potentially s ig-nificant developments. Regular r epor t s and meetings where data is disseminated and impact on plans is reviewed.
Monitoring system provides background data for profit plan (next 2 years ) and long-range plan (next 5-10 years) .
An important companion question to the one just reviewed p ro -
vides a fur ther insight into the value of such a system of monitoring.
"If such a monitoring system exists , under what conditions will it con-
tr ibute to the reformulat ion of your short or long-range p l a n s ? " (9)
The following quoted answers describe how severa l of the r e -
sponding corporat ions implement and util ize the environmental moni-
toring p rocess (9):
When reported data has changed the basic assumptions on which we are planning for the future of the company.
All plans must be based on assumptions which in turn must be clearly stated. If real i ty does not follow assumptions, la t ter must be re-evaluated, usually leading to a change in plans.
Resul ts of computer data bank (environmental) a re sup-plied to our operating divisions each year as a par t of our
102
guidelines for planning document. Also the system will provide for interim reactions to major environmental changes.
Short-range plans are adjusted constantly based on en-vironmental changes and long-range plans are adjusted twice a year.
Relationship between Environmental Analysis and Corporate Objectives
D. J. Smalter (6), Director of Strategic Planning for the Inter-
national Minerals and Chemical Corporation, is of the opinion that
management should possess a comprehensive understanding of the cor-
poration's position in the existing and forecasted environment. There
is a need to determine what is likely to happen in the environment and
what could be made to happen, and also to determine the corporation's
position as related to the environmental constraints and opportunities.
Out of this analysis the challenges that a corporation faces must be per-
ceptively identified. What are the market needs? What are the oppor-
tunities for the corporation? What threats must be overcome?
Environmental analysis input, plus the next step in the formal
planning process which involves an assessment of corporate strengths
and limitations, provides a basis for the establishment of corporate
objectives and goals. The environmental analysis and assessment of
corporate strengths and limitations provide a framework for the organ-
ization's involvement in projecting a hierarchy of objectives and goals.
This framework as shown in Figure 7 helps to communicate that there
1 0 3
c - S p
£ C»'i
'&<a> m i ;
. . . E l : % > a o>: ;: tale t £ i
a m i
&
104
is a hierarchy of objectives which are influenced by input factors as
well as by internal and external constraints that tend to limit these ob-
jectives.
CHAPTER BIBLIOGRAPHY
1. Almon, Clopper, J r . , The American Economy to 1975, New York Harper & Row, Publ i shers , Inc. , 1966.
2. Drucker , Pe t e r F. , The Prac t i ce of Management, New York, Harper & Row, Publ i shers , Inc. , 1954.
3. Henry, Harold W. , Long-Range Planning P rac t i ce s in 45 Industrial Companies, Englewood Cliffs , New Je r s ey , Prent ice-Hal l , Inc. , 1967.
4. Levitt, Theodore, "Marketing Myopia, " Harvard Business Review, 38 (July-August, 1960), 45-56.
5. Planning Dynamics Incorporate, Planning and Control Manual, Pi t tsburgh, 1968.
6. Smal ter , D. J . , "Planners : Mobi l i ze ! ! , " Corporate Long-Range Planning Course , New York, American Management Association, Inc. , May, 1965.
7. Stanford Research Institute, The Planning Organization, Long-Range Planning Service Report No. 133, Menlo P a r k , California, May, 1962.
8. Steiner, George A. and Warren M. Cannon, Multinational Corporate Planning, New York, The Macmillan Co. , 1966.
9. Survey of Fo rma l Planning P r o c e s s P rac t i c e s , unpublished survey by R. C. Johanson, Denton, Texas , November, 1968.
105
CHAPTER V
ASSESSMENT OF CORPORATE STRENGTHS
AND LIMITATIONS
One of the more salient aspects of the fo rmal planning p rocess
is the important part played by an intensive initial, corpora te se l f -
appraisal and a continuous program for assess ing corporate strengths
and limitations. The identification of environmental influences upon
the corporation as discussed in Chapter IV is of utmost concern to man-
agement. Additionally, it should be realized that objectives and goals
should be set not only in relation to the prospects of the business and
its environment, but should also be based on a rea l i s t ic appraisal of
the present strengths and limitations of the corporation.
Corporate se l f -appra isa l might appear to be a simple undertak-
ing; but as Drucker (5) observes , the question "What is our b u s i n e s s ? "
is almost always difficult to determine and can be answered only af ter
hard thinking and study. According to Scott (7) the difficulty in answer-
ing the above question helps explain why some corpora te managements
have gone to extreme lengths to determine usefu l ways of thinking about
the corpora te entity.
106
107
Scott notes the following about corporate se l f -appra isa l :
When planning executives undertake this type of analysis, they presuppose that their company has some predominant cha r -ac ter i s t ics which can be isolated. These charac te r i s t i c s may re la te to products , p roces se s , equipment, distribution, f inance, manpower, and/or r e s e a r c h , to name some of the ma jo r poss i -bil i t ies (7, p. 78).
In connection with corporate se l f -appra isa l , the objective evalu-
ation of s t rengths and l imi ta t ions--a t both corporate and other organiza-
tional l eve l s - - i s a vital ingredient in the fo rma l planning p rocess .
Without sound information of this type, objectives may be set and action
taken in ignorance of important face ts of the situation that will influ-
ence the outcome. As brought out in previous chapters the logical ap-
proach for a corporation is to seek to achieve the right balance between
r e sou rce s and object ives/goals by capitalizing on the company's special
competence or specific s t rengths and by minimizing the dependence
upon those fac to rs which will limit the achievement of corpora te objec-
t ives and goals.
The assessment of corporate s t rengths and limitations within
the f ramework of the fo rmal planning p rocess should precede the f o r -
mulation of objectives, since to establish objectives without regard to
the corporat ion 's s trengths is to r isk overlooking a profi table o p p o r - /
tunity or to fai l to adequately exploit a corporate resource . Converse-
ly, fa i lure to identify company weaknesses or to ignore l iabili t ies is
to r isk exposing the corporation to unnecessary hazards .
108
A Stanford Research Institute (9) study shows that corporat ions
usually follow the evolutionary pattern in the assessment of s trengths
and limitations that is shown in Table IV.
TABLE IV
PATTERNS OF CORPORATE SELF-APPRAISAL*
Phase Time Per iod Assessment Activity
I 6 months to 1 year General appraisal at corporate level of s t rengths/ l imi ta t ions
II 2nd year Depth analysis of corporate st r ength s / lim it at ion s
III 3 to 4 y e a r s Development of a method of evaluating per formance on a decentralized bas is
IV 4 to 6 y e a r s Implementation of a continuous monitoring system for a s s e s s -ment of internal environment
V After 6 y e a r s Same as Phase IV but continuous system is implemented on a decentralized basis
•Source: Stanford Research Institute, The Planning Organiza-tion, Long Range Planning Service Report No. 133, May, 1962^
Corporate Resources and Assets Requiring Assessment
The corporate se l f -appra i sa l p rog ram, according to Planning
Dynamics Incorporated (6), is not mere ly a compilation of the asse t s
109
available to the corporation but also an analysis to determine joint
effects of the following a reas of assessment :
1. The human resources
2. The financial r e sources
3. The corporat ion 's faci l i t ies , i . e . , plants , wa re -
houses, re ta i l locations
4. The corporat ion 's machinery, equipment, and tools
5. The natural r e sources , i^e. , petroleum r e s e r v e s ,
iron o r e , coal, etc.
6. The corporat ion 's product lines
7. The value of existing or potential patents , plus an
assessment of corporate uniqueness capable of generating a
shelter at the market place
8. The corporat ion 's other intangible a s se t s , i. e. ,
goodwill, f r anch i ses , l icenses , etc.
The r e sources assessed in one f i rm included the following:
We focused attention on present product lines and p ro -ducts, together with manufacturing techniques. In addition we assessed the raw mater ia l position in relation to product use , i. e. , purchased ma te r i a l s , captive mate r ia l s . . . .
We analyzed marketing strengths, including industries to which our products go. The products and market levels were appraised with a view to answering such questions as: Are the most needed products being provided? Is the f i rm geared to the ul t imate ra ther than the immediate use of products? Mar -keting personnel were evaluated as to experience, training and effect iveness, as well as present marketing capacity compared with potential.
110
Production facilities were evaluated as to major use, practical capacity, and quality and condition of equipment. We reviewed the experience level of production and engineering per-sonnel. We also assessed management skills. What kinds of problems could management solve? Research laboratory pe r -sonnel were similarly evaluated in t e rms of capabilities and accomplishments (4, p. 6).
The management consulting f i rm Planning Dynamics Incorpo-
rated, which has assisted several corporations with the installation of
a formal planning process , recommends that the following types of in-
formation should be included in the capabilities/opportunities assess -
ment when evaluating strengths and limitations:
1. Basic Capabilities--a listing of unique skills, tech-nologies, facilities.
2. Key Results Areas--an analysis of strengths/weak-nesses in the key result areas defined by Peter Drucker: cus-tomer satisfaction, productivity, innovation, resources , management development and performance, employee attitude and performance, public responsibility, and profitability.
3. Product/Service--rat ing strengths/weaknesses in three crit ical areas:
a. Design/quality /performance b. Cost /price/production
c. Marketing effectiveness (6, p. A3.1)
The requirement for a comprehensive assessment of corporate
strengths and limitations is necessary since the resultant information
provides one of the important foundations for the formulation of objec-
tives and goals. If a corporation has developed over a period of years
a broad, diversified, and decentralized resource base, the assessment
as noted by the authorities (4, 6) can become quite complex, and a com-
bination mechanized and mechanical system is employed.
I l l
In comparing the a reas of assessment as recommended by the
authorit ies with the actual assessment p rograms of the corporat ions
participating in the Survey of Fo rma l Planning P r o c e s s P rac t i ce s (10),
it is observed that the corpora te approach para l le l s the authori t ies '
(4,6) suggestions.
Respondents ' Comments on Areas of Corporate Assessment
Since the assessment of corporate s trengths and limitations
r ep resen t s a salient facet of the fo rma l planning p roces s , the Survey
of Fo rma l Planning P r o c e s s P rac t i ce s (10) permit ted an opportunity
to develop information regarding the key a reas of assessment . The
participating corporat ions were asked to: "Check below if your as -
sessment program encompasses the following:" (10).
Many of the responding f i r m s denoted that the corporat ion 's
analysis of strengths and limitations included an assessment of the
eleven key a reas as shown in Table V. The magnitude of these r e -
sponses por t rays an awareness of the importance of such an undertak-
ing when implementing the fo rmal planning p rocess . The more signi-
ficant a reas of assessment as shown by the repl ies include the following:
extent of annual dollar volume and growth ra te , market penetration /
including his tor ica l and anticipated t r ends , corporate profi t marg ins
and ra t e of re turn on investment, and dollar volume by product and
ma jo r cus tomer .
112
TABLE V
AREAS OF CORPORATE ASSESSMENT*
Specific Area F i r m s Conduct-ing Assessment
Percentage of F i r m s Reporting
Extent of annual dollar volume and growth ra t e 49 • 96%
Degree of market saturation present 45 88
Market penetration including h is tor ica l and anticipated t rends 49 96
Dollar volume by product and ma jo r customer 47 92
Technological pa t terns 43 84
Quality and depth of company organization 44 86
Corporate profit margins and ra te of re turn on investment 49 96
Product design, quality and per form ance 4 5 88
Product cost , pr ice and production 47 92
Marketing effectiveness 43 84
Patent she l te rs or identification of uniqueness 34 66 ;
*Source: Questionnaire sent to select group of corporat ions , November, 1968.
113
Appraisal Techniques Utilized in Assessment Endeavor
According to Scott (7) there a re two basic approaches to c o r -
porate appraisal which may be undertaken separately or in combina-
tion.
1. Examination of each functional activity. This exam-
ination consis ts of the analysis of each functional component of
the corporation to permit an identification of the var ious strengths
and limitations. By the functional approach there is an oppor-
tunity to formulate a comprehensive inventory of s trengths and
limitations in a systematic manner , thus providing assurance
that the important considerations were not overlooked.
2. Examination of the total corpora te entity. This
second approach to corporate se l f -appra isa l provides an oppor-
tunity to achieve a bet ter insight of the corporation as a cohe-
sive unit and to determine what charac te r i s t ics in its nature
may prove of special value in laying plans for the long-term
future . The "total entity" type of se l f -appra i sa l pe rmi t s man-
agement to become involved in a sensit ive and imaginative anal-
ys i s of not only the physical at tr ibutes but also the per formance
charac te r i s t i cs of the corporation. i i
Example of a Functional Assessment
The initial fo rmal planning efforts of the Continental-Emsco
Company (3) provide an opportunity to examine an actual functional
114
assessment which consisted of the implementation of the Phase I type
of approach as shown in Table IV. The original planning effor ts entailed
an assessment of s trengths and limitation inherent in each functional
activity of the company. This se l f -appra isa l was conducted by a task
force of company of f icers . To aid in the thorough appraisal of each
functional a rea of the company, the task force developed an extensive
check list fo r ' each of the following functional components: engineering,
manufacturing, market ing, finance and control, and personnel. The
comprehensive check list utilized by the planning task fo rce in conjunc-
tion with the functional assessment of corporate marketing is presented
in Appendix E.
The initial introduction of a .corporate fo rmal planning p rocess ,
s imi la r to the approach used by Continental-Emsco Company (3), usu-
ally encompasses the most complete assessment of corporate s trengths
and limitations which has ever been prepared for a given f i r m . The
original assessment of strengths and limitations is often a very labor i -
ous task and may span severa l months because the required input infor-
mation normally is not readily available. As previously noted this
initial assessment usually centers on the functional components of the
corporation and is followed by a "total entity" corporate se l f -appra isa l ;
the lat ter providing a broad appraisal of the combined strengths and
limitations of all the corporate r e sources with emphasis on the syner -
gistic capabili t ies of the f i r m .
115
"Total Entity" Type of Assessment
In most instances corporate r e sources a re committed on the
bas is of an interacting relationship concurrent with the intent that such
r e sou rce s a re combined together to permit attainment of objectives and
goals. Since the functional approach to the assessment of r e sou rce s ,
as described in the previous section, does not permit an assessment of
the s trengths or limitations when resources a re combined, there is a
need for the assessment of corporate r e sources on a "total entity"
bas is .
The concept of "total entity" assessment has been fos tered by
Ansoff (1), who has become a ma jo r contributor to the concept of syn-
ergy:
. . . we shall derive a method for qualitative estimation of joint effects. In the process it will be shown that measu re s of synergy are s imi lar in ways to what is frequently called "evaluation of strengths and weaknesses. " In synergy, joint effects a re measured between two product -marke ts ; in strength and weakness evaluation, the f i r m ' s competences are rated relat ive to some desired per formance level.
. . . by means of capability prof i les . . . which can be used to (1) evaluate any internal strengths and weakness within the f i rm (2) derive synergy charac te r i s t i cs which the f i rm can use in search for opportunities and (3) measu re the synergy potential between the f i rm and a possible acquisition (1, p. 76).
This type of corporate se l f -appra isa l is built upon the initial j
functional assessment base and pe rmi t s an appraisal which takes into
account not only an examination of the products being produced and
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the m a r k e t s being s e r v e d , but also a considera t ion of the m a n a g e r i a l
philosophy, a t t i tudes , and i n t e r e s t s of co rpo ra t e personnel .
P e r s o n n e l Par t i c ipa t ing in Corpora te Asse s smen t
Original P h a s e
When the co rpo ra t e chief executive init ial ly decides that a
f o r m a l long- range planning function is needed t h e r e is a tendency at
th i s phase to f o r m a top management t a sk f o r c e . The t a sk f o r c e group
is usual ly cal led the Execut ive Planning Commi t tee or Corpo ra t e
Development and Planning Commit tee . As r e f l ec t ed in Table VI, the
Stanford R e s e a r c h Inst i tute (9) notes that the t a sk f o r c e is compr i sed
of executive management personnel .who p o s s e s s the background which
wil l p e r m i t an accura te inventory of the c o r p o r a t i o n ' s s t r eng ths and
l imi ta t ions . At th i s s tage in the evolution of the f o r m a l planning p r o -
c e s s the t a sk f o r c e is involved in reviewing and analyzing all a spec t s
of the corpora t ion .
The Execut ive Planning Commit tee in conducting the co rpo ra t e
s e l f - a p p r a i s a l often will ut i l ize both the r e s o u r c e s of the corpora t ion
and the s e r v i c e s of consul tants . Th is commit tee normal ly p r e p a r e s
a comprehens ive planning r epo r t fo r submiss ion to the chief executive
o f f i ce r and the board of d i r e c t o r s , and one of the m o r e impor tant f a c e t s
of th i s r epo r t cons i s t s of the g r o u p ' s e f fo r t s in a s se s s ing the c o r p o r a -
t i on ' s s t r eng ths and l imi ta t ions .
117
TABLE VI
PLANNING ORGANIZATION FOR CORPORATE ASSESSMENT *
Phase Par t ic ipants Assessment Assignments . Executive Planning
Committee Pres ident Vice Pres iden t s of line
and staff divisions Staff advisors
1. Secure operating data, r e sea rch repor t s , project summar ies
2. Generate a reasonably accurate profi le of corporation
3. Assess corporat ion 's present position in the industry and strength and weakness of corporate r e sources
I I Executive Planning Committee
Director of Planning Staff advisors
The profess ional know-how of the Director of Planning pe rmi t s :
a. Development of a standard r e -porting procedure for divisions
b. A more complete analysis of corporate s trengths and weak-nesses including a depth as -sessment of decentralized organization components
I I I Executive Planning Committee
Staff Planning Department
Division Planning Committee
Corporate Planning Staff 1. Develop methods for a contin-
ual per formance evaluation 2. Develop a continuing program
for corporate se l f -appra isa l Division Planning Committees
1. Depth assessment of division-al s trengths and limitations
2. Utilize divisional assessment in preparat ion of a compre-hensive divisional 5 -year plan
IV, V Chief Executive Vice Pres ident
Planning Division Planning
Coordinator Corporate and Divi-
sion Management
1. Establish a continuous assess-ment program at corporate and decentralized organiza-tion levels
2. Establish per formance evalu-ation procedures
3. Determine synergist ic posi -tion of the corporation -
*Source: Stanford Research Institute, The Planning Organiza-tion, Long Range Planning Service Report , May, 1962.
118
Staff Planning Organization
As a corporation commences to implement the more sophisti-
cated aspects of the fo rma l planning p roces s , the staff planning depar t -
ment begins to coordinate the assessment activity. Initially there is
a periodic updating of the original corporate se l f -appra i sa l by the task
fo rce , and this updating is accomplished by the staff planning depar t -
ment in conjunction with the Executive Planning Committee.
Upon moving into the la ter phases of the fo rmal planning p ro -
cess evolution, the corporation has experienced a redesign of the
report ing and control system and a g rea te r utilization of electronic
data processing. These improved management aids allow the planning
staff and executive management to design and implement a continuous
assessment program which pe rmi t s a continuing analysis of corpora te
s t rengths and limitations.
Line and Staff Components
The Stanford Research Institute (9) s ta tes that an effectively
designed and implemented fo rmal planning p rocess provides a f r a m e -
work of management which allows for the decentralized assessment
of s t rengths and limitations by concerned line and staff organization . i
components throughout the corporation. The planning p rocess pe rmi t s
the delineation of object ives, goals , and s tandards of per formance ;
and it provides a bas is for the planned commitment of r e s o u r c e s and
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allows for information input which is designed to provide timely data
on a decentralized and centralized basis . Aided by the coordinating
effor ts of the planning s taff , the var ious divisional and sub-organization
components of a corporation are placed in a position of being more
actively involved in the continual assessment of the strengths and l imi-
tations attendant to a given organization component of a corporation.
Example of a Corporate Assessment Study
Singer Corporation
The Singer Corporation (8) has instituted a formalized planning
p roces s , and a rieview of thei r 1967-1971 Division Planning Guide indi-
cates that the corporation has developed a monitoring system which
pe rmi t s the t imely assessment of s trengths and l imitations. The divi-
sions util ize a comparative analysis f o r m , s imi lar to the type shown
in Figure 8, to provide an order ly approach for the divisional se l f -
appraisal . The divisional planning manual noted the following examples
and instructions attendant to the assessment :
The Division s trengths ( resources which will ass is t the Division in accomplishing its goals) and the Division weaknesses (limitations which will hinder the Division's ability to accom-plish its goals), will be identified and discussed.
Examples: i Strengths:
1. Strong field management. 2. Ability to sel l on installment t e r m s . 3. Local manufacturing facility 4. Reputation for quality, rel iabil i ty, and service . 5. As established selling organization and re ta i l
outlets,
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ORIGINATOR:
DISTRIBUTION; SUBJECT!
STRENGTHS
COMPARATIVE ANALYSIS
T H I S R E P L A C E S
FILE
DATE PAGE
< J..'
GL__
WEAKNESSES/PROBLEMS ACTION
Item: Rating: 0 1 2 3 4 5 6 7 8 9 10
Comparison: Competitors { ) Associates ( ) Similar group ( ) Independent ( )
Item: Rating: 0 1 2 3 4 5 6 7 8 9 10
Comparison: Competitors { ) Associates ( ) Similar ^roup ( ) Independent ( )
Item: Rating: 0 1 2 3 4 5 6 7 8 0 10
Comparison: Competitors ( ) Associates ( ) Similar group ( ) Independent ( )
Fig. 8--Comparative analysis guide*
*Source: Planning Dynamics Incorporated
121
Weaknesses: 1. Lack of management talent 2. , Non-competitive products . 3.- High level of selling and administrat ive expense. 4. Established channels of distribution are too
limited. 5. Lack of consumer awareness of Singer 's pa r t i -
cipation in the product line. 6. Excess turnover of personnel . 7. Inadequate management information (8, p. 6).
Another example noted is:
Strengths and weaknesses relat ive to the attainment of the factory goals.
Examples: Strengths:
1. Relatively new, efficient equipment. 2. Modern plant layout with efficient work flow. 3. Suff ic ient space available to meet fu ture demands.
Weaknesses: 1. Shortage of skilled workers . 2. Insufficient depth in management. 3. Projected demand will not increase operations
to optimum capacity levels (8, p. 15).
The corporate se l f -appra i sa l examples included in the Singer
Corporation Planning Guide (8) re la te to qualitative assessment consid-
eration. It should be noted that an appraisal of corporate s trengths
and limitations includes both a quantitative and qualitative assessment .
Continental-Emsco Company
A review of the Continental-Emsco Company's planning manual
reveals the utilization of quantitative and qualitative assessment con-,
s iderat ions as shown in Table VII.
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TABLE VII
CORPORATE SELF-APPRAISAL*
General Areas of Appraisal Nature of Appraisal General Areas of Appraisal
Quantitative Qualitative
Sales volume X
Prof i t s X
Industry comparisons X
Employee categories X
Manufacturing capacity X
Marginal and non-profi table products X X
Product acceptance x X
Research and development capabilit ies X X
Managerial capacity X
Financial r e sources X X
*Source: Continental-Emsco Company, Company Development and Planning Committee Report , Dallas, October, 1961.
The quantitative and qualitative assessment of s trengths and
limitations will help provide a more meaningful and constructive cor -
porate se l f -appra i sa l and also important input information for use as :
a bas is in setting objectives and goals for the var ious functional,
divisional, individual, and over -a l l corporate components of the f i r m .
12 3
As Bower notes:
It is not enough just to list and descr ibe the major prob-lems and opportunities. Each of them should also be quantified so that management can evaluate their re la t ive importance and the amount of attention and resources that should be devoted to each. For example, a problem might be stated in such t e r m s as these:
The Martinsburg plant has excess capacity equivalent to $3,000,000 of sales (or a 20 percent increase) . Achieving ful l utilization will also requi re an increase in plant personnel and other costs (exclusive of mater ia ls) of $750,000. (Not l i s t -ing the above a s ses smen t , "The Martinsburg plant has excess capacity. ")
A management program for one division stated its ma jo r problems in the following quantitative manner :
1. Need to increase volume by about 30 percent in o rde r to utilize capacity.
2. Need to reduce production cost by 15 percent to be competitive in major marke t s and to lower the break-even point to 50 percent of capacity.
3. Need to improve delivery per formance and shorten delivery lead t ime by at least 20 percent in order to be fully competitive in the commerc ia l vehicle marke t .
4. Need to reduce total capital investment in the division by $1,500,000 in order to achieve the re tu rn-on-investment goal. Requiring that ma jor problems and opportunities be iden-
tified and quantified as specifically as this provides, in effect , another type of goal. Thus, in a divisionalized company, this approach to planning requ i res division management to bring to the attention of top management, with suggested action s teps , all ma t t e r s of ma jo r concern and all opportunities for ma jo r advances (2, p. 205).
Assessment P rac t i ce s of Responding F i r m s
Recognizing that the re a re many techniques and approaches :
which may be utilized by a corporation when conducting an assessment
of s t rengths and l imitat ions, the re was included in the Survey of Fo rma l
Planning P r o c e s s P r a c t i c e s (10) a question which permit ted an insight
124
into the implementation of this facet to the fo rmal planning process .
The questionnaire included this question:
-Attendant to your long range planning p roces s , what approaches and techniques do you employ in evaluating the f i r m ' s relat ive s trengths and l imitat ions? P lease consider the following a reas :
Area Appraisal Techniques Frequency (a) Human Resources (b) Faci l i t ies (c) Financial Resources (10)
The survey information on this facet , as summarized in
Table VIII, denotes that the report ing f i r m s real ize a requirement for
establishing a corporate se l f -appra i sa l and assessment program which
will permit a corpora te and divisional analysis of existing strengths
and limitations on a "functional" and "total entity" bas is . Many of the
corporat ions have formulated approaches and techniques which allow
for the continuous and t imely assessment ra ther than a spasmodic or
periodic approach. Since the fo rmal planning process r ep resen t s a
dynamic system of planning and decision-making, i ts effect iveness
is enhanced through the design and implementation of a continuous as -
sessment program which pe rmi t s the cycling analysis of corporate
s t rengths and limitations.
Relationship between Capability Assessment j .
And Other Face ts of Planning P r o c e s s
The fo rmal planning p rocess char t , F igure 4 of Chapter II, shows
that the corporate capability assessment follows the environmental
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TABLE VIII
CORPORATE ASSESSMENT TECHNIQUES • AND PRACTICES*
Area Appraisa l Techniques Assessment Frequency Human
Resources Pe r sonne l repor t ing system Capability ma t r ix Manpower planning p rogram Comparat ive analysis P e r f o r m a n c e appra i sa l p rogram
based on management by object ives
Replacement tables Committee of 100 pe r sons who
conduct management audit Training needs survey Use of consultants Review by Staff Pe r sonne l Dept.
P r a c t i c e Annual Continuous Semi-Annual Quar ter ly Monthly Per iodica l ly
No. of f i r m s 12 7 2 1 1 1
Fac i l i t i es Pe rcen t uti l ization of fac i l i t ies Fac i l i t i es audit Annual fac i l i t i es plan Genera l conditions in economy
and corpora t ion ' s sha re of the marke t
Informal awareness Review by staff depar tment ' Fac i l i t i es adminis t ra t ion repor t P ro jec ted r equ i remen t s and
p resen t uti l ization Strategic plan New investment planning
Continuous Annual Semi-Annual Quar te r ly Monthly
15 9 5 3
.2
Financia l Reviewed by Finance Division Strategic Plan Comparat ive analysis Budgets and r e p o r t s Balance sheet model Pos t appra i sa l - inves tments Trade associat ion data Accepted ra t ios Elect ronic data analysis Financial consultants
Continuous Annu al Semi-Annual Monthly
18 4 3 1
*Source: Quest ionnaire sent to select group of corpora t ions , November , 1968.
126
analysis phase of the planning p rocess and precedes the formulation
of object ives, goals, assumptions, and c r i te r ia .
The scope and t imel iness of corporate operations necess i ta tes
the simultaneous per formance and interlinking of the var ious facets to
the fo rma l planning process . Additionally, the re is a requirement to
recognize the general sequence of events which tend to exist within the
f ramework of the fo rmal planning process .
Inputs generated through the environmental analysis ef for ts
help produce a r e fe rence base which management can util ize when con-
ducting an assessment of corporate s trengths and limitations. The
quantitative and qualitative identification of economic, social , politi-
cal , and technological influences upon the corporation permi t s the
identification of numerous considerations relating to the survival and
growth of the f i r m .
A comprehensive environmental information bank is utilized
as one of the bases of comparison by management during the a s s e s s - -
ment or corporate se l f -appra i sa l facet of the planning p rocess . A
case in point re la tes to the identification of the market t rend and pat-
te rn for a given product l ine, taking into consideration historic sa les /
and prof i t s for a past number of yea r s ; also the existing pat tern and;
an environmental forecas t of the sales and profi t t rends and pat terns
for the ensuing five or so yea r s . This environmental data provides
a bas i s fo r the internal assessment of corporate r e sou rces which have
127
or will be committed to the given product line. It appears that it would
be most difficult to conduct an assessment of corporate s trengths and
limitations attendant to a certain product line without the benefit of a
thorough identification of the previously noted environmental considera-
t ions. Such an environmental f ramework or r e fe rence seems to be a
vital and necessary facet of the fo rma l planning process .
Realizing the importance of the formalized assessment of co r -
porate s trengths and limitations Scott noted:
While se l f -appra isa l is only one par t in the complex process of s t rategic long-range planning, i ts importance is becoming clear to increasing numbers of planning executives. It helps in providing a sound bas is for determining fu ture courses of action. It encourages companies to face impending changes which might otherwise be ignored (such as the fact that a company's ma jo r products have reached a stage of maturi ty in their life cycles). In addition, the better understanding it provides of the company helps not only in long-range planning but also in day-to-day administrat ive activities as-well (7, p. 93).
CHAPTER BIBLIOGRAPHY
1. Ansoff, H. Igor, Corporate Strategy, New York, McGraw-Hill Book Co. , Inc. , 1965.
2. Bower, Marvin, The Will To Manage, New York, McGraw-Hill Book Co. , Inc. , 1966.
3. Continental-Emsco Company, Company Development and Planning Committee Report , Dallas, October, 1961.
4. Danielson, Clarence A. , "How We Took Hold of Long Range Planning ," N. A. A. Bulletin, 48 (March, 1962), 5-13.
5. Drucker , P e t e r , The Prac t i ce of Management, New York, Harper & Row, Publ i shers , Inc. , 1954.
6. Planning Dynamics Incorporate, Planning and Control Manual, Pi t tsburgh, 1968.
7. Scott, Brian W. , Long-Range Planning in American Industry, New
York, American Management Association, Inc. , 1965.
8. Singer Corporation, 1967-1971 Division Planning Guide.
9. Stanford Research Institute, The Planning Organization, Long Range Planning Service Report No. 133, Menlo P a r k , California, May, 1962.
10. Survey of Fo rma l Planning P r o c e s s P rac t i c e s , unpublished survey by R. C. Johanson, Denton, Texas , November, 1968.
128
CHAPTER VI
CORPORATE OBJECTIVES, GOALS, ASSUMPTIONS
AND CRITERIA
The establishment of objectives, goals , assumptions, and
c r i t e r i a is a mat te r of great importance whenever a corporation em-
barks upon the installation of a formal planning p rocess . According
to Scott (14),the formulation of objectives and goals is one of the more
difficult aspects of planning, and in some organizations widespread
confusion often exists about what objectives and goals a re , what they
should do, and how they should be expressed.
The formalized planning p rocess provides a f ramework of man-
agement which is capable of assist ing management in minimizing some
of the problems attendant to the formulation of re l iable and valid objec-
t ives and goals. According to a Stanford Research Institute (16) study,
few corporat ions have a well-defined set of corporate objectives and
goals pr ior to the installation of a formal planning process . Regarding
the formalizat ion of objectives and goals within the planning p rocess ,
Payne notes:
The p rocess of discard and synthesis by which such j objectives a re reached is not a simple one. Some managers have said the most important single thing that long-range plan-ning accomplished for their f i rm was that it forced them to agree
129
130
among themselves on a definition of company goals. The discipline involved in forcing each of them to channel his p e r -sonal aspirat ions toward objectives beneficial to the entire com-pany was worth the planning effort , by itself.
I am always surpr ised that many executives, who have never t r ied to formal ize corporate goals , pas s the job off as being a simple thing, almost elementary.
Where there has been no fo rmal effort to define objec-t ives based on factual analysis of the company's competitive strengths and weaknesses , there is seldom, if ever , any agree-ment among key m e m b e r s of management on fundamental goals (11, p. 50).
Corporat ions, like people, have individual cha rac te r s , person-
al i t ies , ideals, philosophies, aspirat ions, and economic des i res . The
corporation generally takes the charac te r i s t i cs of the men who manage
it; and conversely, the corporat ion 's charac ter tends to influence the
behavior and beliefs of those who manage it. Hence, the fo rmal plan-
ning p roces s should permi t the responsive c r o s s - c u r r e n t s of personal
des i r e s to ref lect upon the formulation of balanced objectives and goals.
Drucker (3) says the management of a business requires the balancing
of a var ie ty of needs and goals , and this necess i ta tes a high degree of
management judgment. It is also Drucker ' s (3) opinion that objectives
a re needed in every a rea of the corporation where per formance and
resu l t s direct ly and vitally affect the survival and prosper i ty of the f i rm .
The objectives will spell out what end resu l t s the f i rm must aim toward
and what is needed to work effectively toward these ta rge t s . !
The following quotation indicates the importance Drucker at-
taches to objectives:
131
Objectives in these key a reas should enable us to do five things:
(1) To organize and explain the whole range of business phenomena in a smal l number of general s ta te-ments
(2) To test these s ta tements in actual experience (3) To predict behavior (4) To appraise the soundness of decisions when
they a re st i l l being made (5) And to enable practicing businessmen to ana-
lyze their own experience and, as a resu l t , improve the i r pe r formance (3, p. 63).
Fur ther underscoring the importance of the proper formal iza-
tion of corporate objectives and goals a re the writ ings of Hughes (8).
It is his contention that the corporation and the individual employees
who compr ise the corporation should be able to operate more effect ive-
ly in an environment where there is. harmony of goals and a concept of
goal setting which will motivate persons to work together both for the
common corporate objectives and for personal reasons . Management
has an accountability to overcome the problem of trying to motivate
employees to meet objectives and goals that a re not known or impro- —
perly delineated. It is Hughes ' s thought that top-management is ac-
countable for setting corpora te objectives, and when this challenge
is proper ly per formed the employees will be more motivated to meet
the challenge of such a corpora te environment. Hughes s tates:
The organization, with the accompanying management sys tem, is the resul t of the pres ident ' s or l eade r ' s effor ts to accomplish the corporat ion 's purpose. It r e f lec t s his person-ality and needs. If he is goal-oriented and cognizant of a
132
purpose, then the organization should be able to achieve both individual and organizational goals--provided the needs of all concerned a re t ruly compatible (8, p. 19).
Definition and Explanation of Objectives, Goals Assumptions and Cr i t e r i a
Corporate Objectives
The word "objectives" often suf fers f rom a high degree of se-
mant ics fuzz iness , and its meaning has become confused part ly because
it is used in so many different organizational settings. There also '
appears to be a lack of c lear understanding about the concept of objec-
t ives , and in such c i rcumstances it is important to explain the meaning
of the word "objectives" as the t e rm is utilized within the f ramework
of the fo rma l planning p rocess .
Possibly the grea tes t semantic difficulty with the t e rm "objec-
t ives" r e l a t e s to the interchangeable usage of the two words , objective
and goal. Many authorit ies in fo rma l planning have distinguished be^
tween corporate objectives and goals. According to Planning Dynamics
Incorporated (12), objectives a re usually regarded as broad and general
and are pursued but never completely achieved in t e r m s of t ime. Ob-
jectives, such as profitabili ty and survival , a re continuous motivations.
Goals on the other hand a re t a rge t s or descript ions of things sought in
a given t ime span. Goals may be established for p rof i t s , sa les , share
of the marke t , mil i tary vs . commerc ia l bus iness , asset acquisition.
133
and a number of o ther m e a s u r e s used within the corpora t ion . Objec-
t ives wil l r ema in re la t ive ly s table over t i m e , w h e r e a s goals change.
The following defini t ions of objec t ives r e l a t e to the t e r m as
ut i l ized within the f o r m a l planning p r o c e s s :
O b j e c t i v e - - a hypothes is regard ing a very des i r ab l e fu tu r e r e su l t that cannot be predic ted with accuracy but which you expect to achieve through your e f fo r t s . Object ives should mee t eight speci f ic c r i t e r i a : f eas ib l e , su i table , acceptable , va luable , achievable , m e a s u r a b l e , f i r m de te rmina t ion (12, p. All. 81).
Corpo ra t e objec t ives : Broad , quali tat ive s t a t emen t s which provide bas ic guidelines for c o r p o r a t e act ivi ty; g e n e r a l s t a t emen t s of purpose (16, p. 3).
The objec t ives of a c o m p a n y - - o r i t s "miss ion , if the m o r e insp i ra t iona l synonym is p r e f e r r e d - - s h o u l d be set in b r o a d , enduring t e r m s that wi l l focus the attention of everyone on "what we a r e t ry ing to do" or "the kind of bus ines s we want to have. " The objec t ives or mis s ion should define how the o r -ganization wil l s e r v e people , and hence should be expres sed in s e r v i c e s t e r m s .
An object ive i s enduring, t i m e l e s s , never fully achieved. The advisabil i ty of dist inguishing between objec t ives
and goals i s impor tan t . Goals and subgoals a r e speci f ic t a r -ge ts fo r planning and action. Goals , as subobjec t ives , a r e t ied to objec t ives and subgoals a r e t ied to goals . Goals and subgoals a r e t a r g e t s quantified in value and /o r t i m e , and should be r e a l -is t ica l ly a t ta inable (1, pp. 63-64).
As a ra t iona l p r o c e s s f o r m a l planning p r e s u p p o s e s co rpo ra t e
objec t ives a s desc r ibed by the au thor i t i es , and in the speci f ic sense
the t e r m "objec t ives" according to Payne (11) r e l a t e s to the fundamen-
t a l s t a t emen t s of pu rpose which f o r m the answer s to such key quest ions
as t he se :
134
What does the corporation really want to be?
What business or businesses does the corporation want
to pursue?
What r a t e of growth is des i rable?
What a re the corporat ion 's f inancial goals?
What a re the expectations of s tockholders?
Drucker says there a re eight a reas in which objectives have to
be set:
1„ Market standing 2„ Innovation 3„ Productivity 4„ Physical and financial r e sou rces 5. Profi tabil i ty 6. Manager per formance and development 7. Worker per formance and attitudes
• 8. Public responsibil i ty (3, p. 63)
Corporate Goals
In defining the t e rm "goals" and in fu r ther distinguishing between
objectives and goals, it has been noted that corporate objectives a re
broad, genera l , and enduring s tatements of corporate purposes which
are always pursued but never completely achieved in t e r m s of t ime.
Objectives serve as a p r ime and continual motivating force within the
corporat ion. ; i
Likewise, goals a re the t a rge t s or the description of desired
accomplishment, or goals may be considered s tandards by which cor -
porate p r o g r e s s is measured . Corporate objectives a re the fo re runner
135
to the development of goals which may be established at the corporate
level, or divisions may develop goals within broad corporate objectives
and guidelines, or individual incumbents may develop goals.
Authorities have defined goals as
Specific qualitative and quantitative statements used to direct the pursuit of corporate objectives. Descriptive goals indicate the kind of business a company wants to be in, the type of markets it wants to serve, and the over-al l product mix. Quantitative performance goals provide specific c r i te r ia for measuring corporate progress . Included may be statements concerning sales and profit levels, percentage of industry sales, and similar measurements (16, p. 3).
Goals--used in dynamic planning to designate the inter-mediate "targets" enroute to achieving an objective (12, All. 81).
Goal--A measurable portion of an objective, which must include a date and be accompanied by assignment of responsibility (10, p. 36).
A goal is a specific quantitative or qualitative end estab-lished to direct the pursuit of an objective. A goal is measurable and has a time parameter . (Goals exist at all levels in a com-pany. ) (15, p. 2)
Hughes also provides a very comprehensive definition of goals:
A goal is an end, a result , not just a function or task or a function to be performed. It is a place in space and time that describes the conditions we want to achieve. It is a standard of achievement, a criterion of success, something tangible, measurable, and valuable that we are motivated toward. It is concrete and explicit, definitive and desirable and predetermined. It guides our actions and helps us plan as individuals and as man-agers. It can be long-range or short-range: Long-range goals help clarify our short-range goals, major goals determine minor goals, and the present is determined by the future—not the past (8, p. 8).
Goals represent an important aspect of the formal planning pro-
cess; and it seems axiomatic that to direct the corporation's resources
136
toward des i r ed key r e s u l t s , it is e s sen t i a l to know f i r s t exactly what
it i s that management and individuals a r e expected to accompl ish .
Cer ta in ly , the m o r e c l ea r ly and speci f ica l ly p e r s o n s can view goa l s ,
the e a s i e r it becomes to communica te them to o t h e r s and to devise
ways of attaining them. The f o r m a l planning p r o c e s s p rov ides a
b a s i s f o r the eff icient p e r f o r m a n c e of goa l -se t t ing which is becoming
one of the mos t impor tant and fundamenta l ac t iv i t ies of management
and individuals.
Lis ted below a r e the main c h a r a c t e r i s t i c s which Ewing (4) p o r -
t r a y s as being re levant to the goa l -se t t ing activity:
Specif ic: goals should be es tabl ished as concre te ly
as poss ib l e , and specif ic enough to help incumbents choose b e -
tween d i f ferent a l t e rna t ives of action. A goal to "double the
s ize of the organiza t ion" does not t e l l management whether to
expand s a l e s and product ion in the cu r r en t l ines of b u s i n e s s ,
in new l ines of b u s i n e s s , or in some other way.
2- Rea l i s t i c : goals a r e ut i l ized as a b a s i s f o r the e s -
tab l i shment of an individual ' s o r an organiza t ional component ' s
s tandard of p e r f o r m a n c e , and in many co rpora t ions s e r v e as
an underpinning to the management by r e s u l t s p r o g r a m , It i s
v i ta l that the formula t ion of goals be given the g r e a t e s t thought
and fo rmula ted as r ea l i s t i ca l ly as poss ib le . Unrea l i s t i c goals
137
may cause ser ious mora le problems and deter effective
implementation of the fo rma l planning process .
3. Time dimension: goals should be related to accom-
plishment within an established t ime period even though the
t ime period is not always prec ise . It should be definite enough
in the pe r son ' s mind so that the goal guides the individual in
choosing courses of action. The statement " increase sales 15
per cent" va r i e s considerably, depending on whether it is to
be done in one year or five yea r s .
4. Consistent: goals which a re normally formulated
on a multiple bas i s for the individual or an organization com-
ponent should be consistent with one another. If one objective
is to increase sales volume by a certain amount and another
is to increase profi tabil i ty, they may be in conflict. Any t r a d e -
off requirement should be recognized before formulation of spe-
cific goals.
Hierarchia l : goals a re of different levels , proceed-
ing f rom the broad and genera l a ims of top management to in-
creasingly specific goals for department units or individuals.
Which combinations of goals will do most to ensure corporate
success and how goals shall be used are decisions calling for top man-
agement 's best skill and judgment in using its fo rmal planning system.
138
Assumptions
Inasmuch as the fo rmal planning p rocess involves an environ-
mental analysis and assessment of corporate s trengths and l imitat ions,
which in par t a re based on cer ta in events and c i rcumstances expected
to apply in the fixture, the re is a requirement to identify the respect ive
assumption base. By definition the fo rmal planning p rocess is con-
cerned with the future ; and for the p rocess to be meaningful, it r e -
quires some est imate of the future setting for which object ives, goals ,
and commitment of r e sou rces is being designed. Consequently, man-
agement must depend upon the validity of an assumption base about the
fu ture when implementing the planning p rocess .
One planning authority notes;
The complexity of s trategic long-range planning would be great ly reduced if assumptions about the long-range future could be expressed clearly and precise ly . But clar i ty and p r e -cision in this regard a re usually difficult to attain for two ma jo r reasons : (1) The broad scope of s t rategic long-range planning requ i res assumptions about the future in all kinds of subject a r e a s , some of which defy effort at accurate predict ion, and (2) the t ime period encompassed by this kind of planning makes it exceedingly difficult to determine even outstanding charac-t e r i s t i c s of the fu ture with a high degree of confidence. Never-the less a systematic approach to the analysis of planning as -sumptions can be most useful (14, p. 104).
In an interview Green (6) revealed that the extremely rapid ra te
of change in the external and internal environment of a corporation
makes it extremely difficult to predict the fu ture with accuracy. This
dynamic environmental situation is rapidly outmoding previous methods
139
of planning, decision-making, and managing which have placed heavy-
rel iance on his tor ical data and the projection of past experience. To
fur ther compound the problem, management is faced with a requirement
to increase lead t ime in planning and decision-making; consequently,
it becomes imperative for a corporation to have a way of estimating
the fu ture environmental developments which will have a substantial
impact on the corporat ion 's business . Through the formulation of an
assumption base management is provided the means for identifying,
measur ing , and monitoring the more salient external and internal de-
velopments which could cause management to rev ise the previously
formulated object ives, goals, c r i t e r i a , and commitment of corpora te
r e sou rces .
The planning and control manual of Planning Dynamics Incor-
porated provides the following definition of an assumption:
An "assumption" is a t emporary hypothesis regarding a very important probable development which cannot be predic t -ed with accuracy and over which you have no significant control. Those listed he re should not be considered fo recas t s or predic-t ions, but they do ref lect the thinking of well-qualif ied, leading authorit ies in var ious f ields (12, p. A4.1).
Scott (14) fo re sees that assumptions, like objectives and goals,
usual ly-emerge as the resul t of analysis; the re fo re , assumptions must
be tai lored to meet the requirements for a given corporat ion. The 1
analysis used in developing the assumptions va r i e s widely, ranging
f rom emphasis on quantitative fo recas t s to emphasis on qualitative f ac -
t o r s as a corporation deals with the uncertaint ies and r i sks of the future .
140
With objectives and goals being related to the fu ture , uncer ta in-
ty is never completely absent f rom the fo rmal planning process , There-
fo re , an understanding of the problems r is ing f rom uncertainty helps
those involved with planning to visualize which uncertaint ies might be
reducible and which are i r reducible . Such an understanding also helps
management to bet ter interpret assumptions so that uncertaint ies can
be minimized when the corporation commits to objectives, goals , c r i -
t e r i a , and s trategy.
Planning Dynamics Incorporated highlights the importance of
assumptions:
In a complex, rapidly changing, unpredictable environ-ment it is impossible to plan without the use of assumptions. You cannot predict the future with accuracy . . . but you can-not plan for the future unless you crea te an est imate of what you think is going to happen . . . and your management team cannot plan together unless you all share the same est imate. That is why "assumptions" a re so essent ial . . . and the most important ones should be dynamically quantified so it is eas ier to identify, detect and measu re the deviation (12, p. A4.1).
Example of assumptions. - - T h e r e is listed below a sample of
the assumptions utilized by the Continental-Emsco Company:
The domestic petroleum industry will dr i l l an average of 30,000 wells per year over the next five yea r s .
The importing of foreign oil will increase to approxi- ' mately 20 per cent of United States domestic demand over the next five yea r s .
The domestic p r ice of oil should remain at the present ra te of $2. 85 to $3. 00 pe r b a r r e l for the immediate fu ture (2).
141
P r e p a r a t i o n of an assumpt ion base . - - B e c a u s e the f o r m a l p lan-
ning p r o c e s s is p r i m a r i l y fu tu r e or iented and it is never poss ib le to
p red ic t the fu tu re with a high degree of ce r t a in ty , it is n e c e s s a r y to
make a number of assumpt ions as suggested in a p r i o r sect ion of th i s
chap te r . The many f ace t s to the planning p r o c e s s a r e implemented
through employment of assumpt ions which a r e given c a r e f u l attention
as the planning p r o c e s s i s executed. In t h i s m a n n e r the ob jec t ives ,
goa ls , c r i t e r i a , s t r a t egy , and p r o j e c t s can be appropr ia te ly r ev i s ed
at the ve ry ea r l i e s t sign that an assumpt ion has changed and is no
longer valid.
Reflect ing upon the need fo r an assumpt ion base he lps focus on
the fact that f o r m a l planning is n e c e s s a r y because c o r p o r a t e conditions
a r e unce r t a in and changing. If t h e r e w e r e no change management could
continue i ts p r o g r a m of management without the need f o r f o r m a l p lan-
ning.
In g e n e r a l , assumpt ions can be divided into two catego-. . r i e s - - b r o a d assumpt ions about the world in which you live and assumpt ions speci f ica l ly concerned with your bus ines s or func -t ion. The f i r s t ca tegory might include m a n a g e r i a l socio-pol i t ica l , economic and technological assumpt ions . Assump-t ions applying d i rec t ly to your activity could include the fu tu r e na tu re of your bus ines s o r funct ion, f u tu r e environment and f u t u r e capabi l i t ies . A "potent ial" i s a spec ia l type of a s s u m p -tion commonly used in marke t ing planning but it should not be overlooked in o ther funct ions . It i s e s sen t i a l to identify the fu tu r e potent ia l because th i s helps to de r ive r e a l i s t i c objec t ives without such heavy r e l i ance on pas t exper ience .
Assumpt ions should always be s tated within a span of t i m e (i. e. be fo re the end of the y e a r , by December 31, 1973).
142
Whenever possible , they should be expressed in the form of a chart or graph with his tor ica l approach, cur rent status and
future projection (12, p. A4.1).
To ass is t in determining whether corporat ions util ize an as-
sumption base , the Survey of Fo rma l Planning P r o c e s s P rac t i ce s
contained this question: "Do you formulate specific assumptions
(quantitative and qualitative es t imates of fu ture developments which
will have a substantial impact on your business) to provide a f r a m e
of r e fe rence for planning?" (18).
The importance of an assumption base was re i te ra ted when
98 per cent of the responding corporat ions answered "yes" to the above
question.
To explore in g rea te r depth.the degree of sophistication inher-
ent in the various assumption bases of participating corporat ions , the re
was an opportunity to determine the extent to which the fif teen assump-
tion a r e a s , shown in Table IX, were included in a given corporat ion 's
base. The corporat ions were asked to: "Note below if t he re are a reas
where you quantify/qualify assumptions periodically or continuously:"
(18).
A review of the answers to the above quoted question of the
survey (18), as recorded in Table IX, indicates that many persons (
throughout the corporation are involved with the assumption base which
in many f i r m s is monitored on a continuous or periodic bas is .
143
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Today's complex, rapidly changing, and often unpredictable
environment makes it almost impossible to ca r ry on the activities of
the fo rmal planning process without the use of an assumption base.
As Green (6 ) notes it is difficult to predict the future with accuracy;
consequently, management cannot effectively plan for the fu ture unless
there is created an est imate of what is likely to happen. This is why
quantified and qualified assumptions a r e so essent ia l in detecting and
measur ing the concerned deviation.
Corporate Cr i te r ia
Certain c r i t e r i a a re needed to measure or evaluate fo rmal
corpora te plans, especially when it comes to establishing a pr ior i ty
of one specific plan or commitment over another or approving or d is -
approving pro jec ts attendant to implementation of the fo rmal planning
p rocess . Such c r i t e r i a vary with the nature of each corporation. F rom
the over -a l l standpoint, one of the most important cr i ter ion is re turn
on investment. It is not always easy to apply, according to Payne (11),
the re turn on investment measurement to individual p ro jec t s involving
commitment of r e s o u r c e s , but management should continually attempt
to ref ine the use of this and other c r i t e r i a which serve as guides in / I
the formulation of goals and the necessary decisions relating to imple-
mentation of p ro jec t s .
145
To i l lust ra te corporate c r i t e r i a as they re la te to the fo rmal
planning p rocess , the corporate c r i t e r i a established by the Continental -
Emsco Company a re listed below:
1. Acquisition of product lines that fit the manufactur-ing capabilit ies of the Houston plant.
Products that fit the Garland plant would be consid-ered , but would be of secondary interest .
2. Selection of product l ines that would not be sold to the m a j o r oil companies.
Products for drilling contrac tors would be considered. 3. Products that decrease the company's dependence on
the petroleum industry would be favored. 4. A gross profit of 30 % is the minimum re turn required. 5. The product should represent growth potential. 6. The acquired companies should have adequate man-
agement talent. 7. Cash payments must be acceptable in any acquisition. 8. An acquisition costing over $15,000,000 should be a
sizeable use r of Youngstown's products. 9. Products considered should not in te r fe re with the
sale of Youngstown products . 10. Ideally produce at least a minimum ra te of re turn
on investment of 10 per cent. Fur ther Work to be Done on Cr i te r ia
1. Develop additional c r i t e r i a needed to serve as m o r e complete guides for product or company acquisition.
2. Evaluate the more complete line of c r i t e r i a that is established to determine which are p r ima ry and which are de- -s i rable (2, p. 5).
Environmental Analysis and Corporate Strengths/Limitat ions As Basis for Objectives, Goals, Cr i te r ia
On the p r e m i s e that a significant relationship exists between
the fo rmal planning p rocess face ts of environmental analysis , plus
the assessment of s trengths and limitations and the formulation of co r -
porate objectives, each of the f i r m s taking par t in the Survey of Fo rma l
146
Planning P r o c e s s P rac t i ce s were asked: "Has the company, to an
increasing extent, derived objectives f rom a careful analysis of fu ture
developments and potentials based on environmental analysis data and
company s t rengths/ l imi ta t ions ? " (18).
The tabulated answers to this question revealed that 88 per cent
of the responding f i r m s derive objectives f rom a care fu l analysis of
the external and internal environmental considerations. This is an
encouraging trend since without sound information of this type, objec-
t ives may be set and action taken in ignorance of important face ts of
the situation that will influence the survival and growth of the corpora-
tion. Drucker says:
But if the decision to. go into a business is sound on the bas i s of marketing standing, innovation, and productivity, if it is sound according to what makes a bus iness , it is the r e -sponsibility of management to make it produce the needed mini-mum profi t . That, bluntly, is what managements a re being paid for .
This is simply another way of saying that a business must be managed by setting objectives for it. These objectives must be set according to what is right and desi rable for the en terpr i se . . . . Managing a business cannot, in other words , depend on "intuition. "
Similar ly, to reach objectives, detours may have to be made around obstacles . . . . This is one reason why all objec-t ives have to be re-examined continually. Yet, setting objec-t ives enables a business to get where it should be going ra ther than be the plaything weather , winds, and accidents (3, p. 60).
It becomes evident that the logical approach to the fo rma l plan-
ning p rocess is to seek to achieve the right balance between r e sou rces
and goals by capitalizing on the corporat ion 's special competence or
147
specific capacit ies and by minimizing the dependence upon those
fac tors which will limit the achievement of corporate objectives and
goals. To establish objectives and goals without regard to the com-
pany's strength is to r i sk overlooking a profi table opportunity or fa i l
to adequately exploit a corporate resource .
Arbi t rary objectives have been set and budgets designed to "meet" these objectives. When an effort was made to push behind these object ives, it was clear that very little had been done to (1) analyze project ions of expected goals so as to set desired goals real is t ica l ly , (2) analyze the specific problems standing in the way of filling the gap between expected and de-s i red , and (3) design a program of action s teps , not mechani-cal allocations of wishful thinking, designed to overcome these problems.
Because of inadequate forecast ing, the best possible picture of the expected future state had not been drawn. There -
, f o r e , objectives were , to begin with, necessar i ly a rb i t r a ry since they ref lect neither accurate project ions of the external environment nor in most cases an accurate projection of in te r -nal change (19, p. 77).
The fo rmal planning p rocess can provide an order ly means for
an objective assessment of the corporat ion 's r esource s trengths and
l imitations. To help prevent the formulation of blue-sky type objec-
t ives and goals , management should for t i fy itself with the resu l t s of
a comprehensive analysis of its financial, human, natural , and physi-
cal r e sources . The pinpointing of r e source strengths and limitations
and the inputs resulting f rom the environmental analysis , along with;
the design and utilization of an assumption and c r i t e r i a base, should
permi t management and individual incumbents to do a credi table job
of formulating quantitative and qualitative objectives and goals.
148
Establishment of Quantitative and Qualitative Objectives and Goals
According to Drucker (3) the difficulty l ies not in determining
what the corporate objectives should be, but in deciding how to set them.
The measurements used in each a rea of objectives and goals establ ishes
what the corporation pays attention to and helps management to become
more visible and tangible.
For the subject is brand new. It is one of the most ac-tive f ron t i e r s of thought, r e s e a r c h , and invention in American business today. Company after company is working on the de-finition of key a r e a s , on thinking through what should be mea -sured and on fashioning the tools of measurement (3, p. 65).
The resu l t s of the Survey of Fo rma l Planning P r o c e s s P rac t i ce s
(18), as recorded in Table X, bea r s out Drucker ' s (3) thoughts that co r -
porations are attempting to design more effective sys tems for measuring
p rog res s in attaining objectives and goals. The corporat ions par t i c i -
pating in the survey were given an opportunity to answer the following
question in relation to the use of objectives and goals: "Check below if
objectives and goal setting encompasses the following:" (18).
Of par t icular interest is the fact that over 70 per cent of the r e -
porting f i r m s have formulated quantitative and qualitative objectives
and goals for incumbents within the corporation. This appears to be
an important consideration since objectives and, especially, goals need
to be stated in a manner which will provide a guiding f ramework or t a r -
gets required by management when implementing the fo rmal planning
p rocess .
149
TABLE X
USE OF OBJECTIVES AND GOALS BY RESPONDING FIRMS*
! No. of How Utilized 1 F i r m s kPercentage
Quantitative and qualitative object ives/goals 37 : 72 % for individuals
Hierarchy or descending scale of object ives/ 36 70 goals
Standards of per formance 41 80 Basing management by resu l t s or management 35 68
by exception on objectives/goals Linking employee compensation plan to 36 70
object ives/goals Linking of per formance appraisal and the 37 72
individual 's object ives/goals
*Source: Questionnaire sent to select group of corporat ions , November, 1968.
Quantitative Objectives/Goals
If t a rge t s a re to be specif ic , they must be quantitative. A
quantitative goal is easily understood. For example, a goal to attain
a 15 per cent re turn on investment communicates both magnitude and
import f a r bet ter than just a goal to maximize re turn on investment.
Inclusion of the 15 per cent f igure reduces confusion and allows a p e r -
son to a r r ive at the same basic interpretation of the goal. According
to Bower (l),Du Pont has been notable for its pioneering in establishing
re turn on investment as a p r imary goal for i ts operating divisions and
other organizational components. Such goals prove to be a r ea l chal-
lenge in decentralized planning involvement, because division
150
management knows it will be judged by the r e t u r n shown in the ope ra -
t ional plan and by the r e s u l t s r eco rded against the plan. Quanti tat ive
goa l s , be s ides r e t u r n on inves tment , a r e es tabl ished within the f o r m a l
planning p r o c e s s ; and t h e s e might include s h a r e - o f - m a r k e t , dol lar
s a l e s vo lume, amount of capi ta l employed, r a t e of growth in p r o f i t s ,
growth in m a r k e t value of common stock, and common stock p r i c e /
earning ra t io .
. . . the job of management i s one of balancing a va r i e ty of goals . And even when goals a r e r a t h e r conc re t e , a g rea t dea l of judgment is e s sen t i a l in choosing f r o m among a l t e r n a -t ives to achieve t hem. When a va r ie ty of goa l s , quanti tat ive and quali tat ive a r e cons ide red , m a n a g e r i a l judgment obviously becomes an e s sen t i a l ingredient in dec i s ion-making . In th i s s ense objec t ives and goals not only set the pu rpose of planning;
, they cannot be separa ted f r o m the actual planning p r o c e s s i t -self (17, p . 43).
In es tabl ishing quanti tat ive objec t ives and goa ls , Scott (14)
f o r e s e e s that many co rpora t ions t r y to es tabl i sh a posi t ion between the
two conceptual po les , with one being the " c a r r o t " type of t a r g e t ; the
other i s the " r e a l i s t i c " type. The " r e a l i s t i c " t a r g e t r e l a t e s to the b e s t -
e s t ima te of what achievements can be accompl ished , taking into con-
s idera t ion the c u r r e n t s t r eng ths and l imi ta t ions of the r e s o u r c e s .
Genera l E l e c t r i c u r g e s i ts m a n a g e r s to set "opt imis t ic , d i f f i cu l t - to -a t t a in g o a l s , " and p lanners in o ther companies s i m i -l a r ly suggest t a r g e t s which a re "somewhat h ighe r " than p r e v i -ous ach ievements . A planning executive at IBM also expres sed th i s kind of approach that if you set objec t ives that a r e a l together out of r e a c h , they d i scourage . If you set them too c lose , then they a r e "consumed" too quickly. Object ives mus t be a t ta inable , but not too easi ly at ta inable (14, p . 100).
151
Additionally, a quanti tat ive object ive and goal denotes the
s t rength of the action p r o g r a m s and p r o j e c t s that wi l l be r equ i r ed to
achieve the t a r g e t . Thus , a t a r g e t of increas ing the c o r p o r a t i o n ' s r e -
t a i l d is t r ibut ion f r o m 25 pe r cent to 50 pe r cent wil l neces s i t a t e a d r a s -
t ic p r o g r a m of commit t ing co rpo ra t e r e s o u r c e s ; w h e r e a s , an i n c r e a s e
f r o m 8 to 10 p e r cent wil l not.
Quanti tat ive objec t ives and goals also help fac i l i t a t e b e t t e r con-
t r o l and m e a s u r e m e n t of p r o g r e s s as t h e r e is a commitment of r e s o u r c e s
in the at ta inment of co rpo ra t e objec t ives and goals . It i s e a s i e r to
m e a s u r e p r o g r e s s toward adding f ive new produc t , o r twenty new d i s -
t r i b u t o r s , o r increas ing the r e t u r n on investment f r o m 12 p e r cent to
15 p e r cent .
Quali tat ive Object ives and Goals
Since it i s imposs ib le to quantify all objec t ives and goa l s , c o r -
po ra t e management has r e s o r t e d to the formula t ion of quali tat ive type
objec t ives and goals . A c o r p o r a t i o n ' s broad objec t ives or m i s s i o n s a r e
amenable to being qualified in con t ras t with spec i f ic goals which r e l a t e
to m e a s u r a b l e p r o g r e s s by an organizat ion component or an incumbent,
Payne (11) sugges ts t he se examples of the quali tat ive type ob jec t ives : .
Improve the co rpo ra t e image '
Develop be t t e r r e l a t ions with vendors
Adhere to high e thical s t anda rds
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The difficulty in ut i l izing quali tat ive objec t ives and goals a r i s e s
when management a t tempts to moni tor the at tainment of such objec t ives .
Also some difficulty is experienced when commit t ing r e s o u r c e s to the
a t ta inment of a quali tat ive object ive .
Data Inputs Attendant to Formula t ion Of Object ives and Goals
The f o r m a l planning p r o c e s s may be implemented on a c e n t r a l -
ized or decen t ra l ized b a s i s , and in many ins tances the s ize and complex-
ity of a corpora t ion wil l tend to es tabl ish the pa t te rn fo r implementing
the f o r m a l planning p r o c e s s . The l a r g e r co rpora t ion , because of the
many organizat ion components , a r e inclined to decen t ra l i ze involvement
with the planning p r o c e s s . This f o r m of decent ra l ized planning, which
was suggested by Green (6) and Hughes (8), can be ca tegor ized as the
"umbre l l a approach to planning, " depicted in F igu re 9.
Vice P r e s i d e n t
I
Division Manager
Dis t r i c t Manager
Fig. 9 - - U m b r e l l a Approach to Planning
15 3
In the Figure 9 example the Pres ident evolves broad objectives
and goals , along with the fo rmal planning guidelines, which will give
the Vice Pres iden t s the opportunity and means to formulate , on an up-
ward bas i s , necessary goals , s t r a t eg ies ; plans, and recommended
commitment of r e sou rces within the context of future p rog rams and
pro jec t s . The umbre l la concept of formal planning also re la tes to the
other organizational levels below the Vice Pres iden t s . Green (6) f o r e -
sees that in the l a rge r corporat ions , ideally, fo rmal planning should
be decentralized to the lowest organizational level where planning capa-
bility and skill can be reasonably combined with the exper t ise required
in utilizing and implementing the facets of the fo rma l planning p rocess .
The umbrel la concept of planning is applicable to smal le r corporat ions;
but due to the c loser and continual relationship in a smal l f i r m , the
p rocess is not as formalized as in the la rger corporat ion. Unfortunate-
ly, except in the very smal les t organization, an "information gap"
usually exists between those who are implementing the fo rma l planning
p rocess and the respect ive "need-to-know" of the individual. To solve
the problem and to permi t effective planning, information has to be
moved within the umbre l la down to the planning, goal-set t ing, strategy
formulat ing, and commitment recommending point.
The Continental-Emsco Company (2) solved this problem through
the establishment of a corpora te planning department , comprised of
economists , market ing r e s e a r c h e r s , and other qualified special is ts
154
who were able to formulate and disseminate an information bank to
the respect ive incumbents involved with the decentralized implemen-
tation of the fo rma l planning process .
Incumbents, possessing the ability to implement the planning
p r o c e s s , a re supported by an information bank which pe rmi t s bottom -
up planning.
Without p r io r knowledge of company goals , individuals do not have the necessa ry information to set personal work t a rge t s that t ie into company plans. Thus companies must plan f rom the top down; otherwise personal objectives will not p a r -allel the company's objectives.
Major business objectives can be set only by people who a re in a position to understand the broad, long-range implica-tions of fo recas t s t rends and of the var ious s t ra tegies which
, can be expected to meet the company's requi rements . Obvious-ly, top management is the only group of individual employees that can have the necessary information, perspect ive , and ex-per ience. It does not follow, however, that knowledge of over -all company plans and the reasons behind them is not needed lower down in the organization. Just as top management needs cer ta in kinds of economic, f inancial , market ing, and product data to establish objectives for the company as a whole, individ-uals elsewhere in the organization need to have s imi la r informa-tion communicated to them in as much detail as makes sense in light of the t a rge t s they must meet . Bottom-up planning with-out p r io r knowledge of authorization and goal feasibil i ty is ineffective (8, p. 27).
P rac t i ca l Consideration When Formulating Objectives and Goals
Corporate Management
Ewing (4) sha res the point of view rela t ive to fo rma l planning
that l i t t le difficulty exists in setting and using goals when the chief
155
executive provides strong backing to the planning p rocess . If the
corporation is headed by a very strong one-man type chief executive,
the re may be an unwillingness on his part to phase, the objectives and
goals. At the other ex t reme, a f i rm experiencing the cumulative bene-
fit f rom planning and having many people participating in a general
democrat ic fashion may find it relat ively easy to formulate objectives
and goals on a part icipative bas is .
Should the super ior set the objectives for the individual groups that a re subordinate to him? It is apparent that he must at least approve them if he is to discharge his own duties. But he may or may not be the creat ive type who can visualize a whole range of subobjectives. . . ,. Some of his subordinates may be bet ter at this creation of al ternatives than he is. C e r -tainly they should have had g rea te r exposure in depth to internal and environmental constra ints , challenges, and opportunities.
Some sort of conceptual f ramework embracing the whole range of objectives seems necessary if we are ult imately going to use objectives more effectively. In some order ly way we must re la te the "grand design" type of objective with the much more limited objectives lower down in the organization (5, p. 64).
The corporate management group 's objectives and goals a re
broadly conceived; and by vir tue of top management ' s position in the
h ie ra rchy of management, personal goals will closely para l le l the co r -
porate objectives and goals. Hughes (8) says the challenge to manage-
ment is to provide an objective and goal-sett ing "umbrel la" where
personal t a rge t s can be projected and reached by individuals at all
levels of the corporat ion. This is important to motivation, and man-
agement should permit the f ramework to integrate the goals of the o r -
ganization with the goals of i ts m e m b e r s and make personal goals at-
tainable within this corporate f ramework .
156
executive provides strong backing to the planning process . If the
corporation is headed by a very strong one-man type chief executive,
the re may be an unwillingness on his part to phase the objectives and
goals. At the other ext reme, a f i rm experiencing the cumulative bene-
fit f rom planning and having many people participating in a general
democrat ic fashion may find it relatively easy to formulate objectives
and goals on a part icipative basis .
Should the super ior set the objectives for the individual groups that a re subordinate to h im? It is apparent that he must at least approve them if he is to discharge his own duties. But he may or may not be the creat ive type who can visualize a whole range of subobjectives. . . . Some of his subordinates may be bet ter at this creation of al ternat ives than he is. Cer -tainly they should have had g rea te r exposure in depth to internal and environmental constra ints , challenges, and opportunities.
Some sort of conceptual f ramework embracing the whole range of objectives seems necessary if we are ultimately going to use objectives more effectively. In some order ly way we must re la te the "grand design" type of objective with the much more limited objectives lower down in the organization (5, p. 64).
The corporate management group 's objectives and goals a re
broadly conceived; and by virtue of top management ' s position in the
h ierarchy of management, personal goals will closely para l le l the cor -
porate objectives and goals. Hughes (8) says the challenge to manage-
ment is to provide an objective and goal-sett ing "umbrel la" where
personal t a rge t s can be projected and reached by individuals at all
levels of the corporation. This is important to motivation, and man-
agement should permit the f ramework to integrate the goals of the o r -
ganization with the goals of i ts member s and make personal goals
attainable within this corporate f ramework.
157
So, if management: 1. Makes company goals known to the employees
a n c i
2. Provides opportunities for employees to p a r -t icipate meaningfully in meeting these objectives
3. In a way that gives employees a chance for identifying personal goals
4. The motivation to work that r e su l t s will achieve
a. Company goals as well as
b. Pe r sona l goals (8, p. 22)
It becomes readily apparent that the fo rma l planning p rocess
provides top management the opportunity for effectively formulating
an objective and goal-sett ing f ramework . This f ramework also p ro -
vides for the necessa ry synthesis inherent in objective and goal-
setting since without pr ior knowledge of company goals , individual or
organization components do not have the necessa ry information to set
personal work t a rge t s that t ie into company plans.
Individual Incumbents
The fo rma l planning process is built upon a concept that each
individual incumbent needs clear ly spelled-out objectives and goals ,
and Drucker (3) contends that these objectives should establish what
pe r fo rmance should be produced and should set forth what contribution
the individual is expected to make in helping other components obtain
the uni t ' s objectives.
This requ i res each manager to develop and set the ob-jectives of his unit h imself . Higher management mus t , of course , r e s e r v e the power to approve o r disapprove these ob-jectives. But their development is par t of a manage r ' s
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responsibil i ty; indeed, it is the f i r s t responsibil i ty. . . . There must be a "meeting of minds" within the entire management of each unit, This can be achieved only when each of the contr i -buting managers is expected to think through what the unit ob-jectives a re ; is led, in other words , to par t ic ipate actively and-responsibly in the work of defining them (3, p. 129),
Hughes (8) envisions the objective and goal-sett ing interplay
between different levels of the organization as a dynamic process which
usually t r ansp i r e s on an annual or semi-annual bas i s . Some corpora -
tions employ a philosophy or style of management which pe rmi t s a high
degree of individual involvement in formulating and recommending the
incumbent 's own s t ruc ture of objectives and goals. Other corporat ions
operate on a highly central ized bas is when establishing the hierarchy
of objectives; consequently, the re is a minimum of incumbent involve-
ment in the objective and goal-sett ing p rocess . Companies such as
General Elec t r ic Corporation, General Mills Corporation, American
Telephone and Telegraph, Continental-Emsco Company, Texas
Instruments Incorporated, e t c . , have implemented incumbent objective
and goal-sett ing p rog rams . Hughes suggests these s teps in goal se t -
ting for the.individual and for the organization:
1. Establishing specific goals to support stated purpose 2. Determining the importance of these goals 3. Making plans for action 4. Arriving at per formance s tandards and measurement
c r i t e r i a 5. Stating anticipated problems 6. Weighing the r e sources required to c a r r y out the
planned action
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7. Providing for the interaction of organizational and individual goals
8. Following up with actual per formance measurement and evaluation
The general model, then can be applied to both corpo-ra te and personal needs. Its eight steps are obviously relevant to goal-setting and planning for the total organization, and they can readily be adapted to provide a system for individual use (8, p. 102).
Whether a corporation uti l izes a system as proposed above or
some other type of system for objective and goal-sett ing is not as im-
portant as the extent to which individual employees a re permitted to
part icipate in upward formulation and recommendation of individual
and organizational unit objectives and goals.
Summary thoughts on individual involvement in the objectives
and goal-sett ing hierchical p rocess a re provided by McConkey:
Experience has proved that the best method of setting objectives is the one in which the objectives a re drafted and recommended by the individual managers and then approved by thei r super iors . To have his objectives simply handed to him makes a man a m e r e tool for implementing someone e l se ' s thinking and decision making and precludes the necessi ty for him to think through his own responsibi l i t ies . Also, it deprives him of the opportunity to develop one of the most important man-agerial sk i l l s - - the application of judgment to solving business problems. Setting his own objectives, on the other hand, r e -quires the manager to determine how his department f i t s into the company as a whole, size up its strong and weak points, determine its total capability, and reach his own conclusions. It permi t s him to exerc ise his own ingenuity and initiative (9, p. 54). ' ;
To help determine the extent of organizational involvement with
objective and goal setting, the Survey of Fo rma l Planning P r o c e s s
P rac t i ce s proposed this question: "What contributions a re made to the
160
formulation of objectives and goals by corporate s taff , division person-
nel, individual incumbents ? " (18)
Some of the representa t ive responses to this question have
been quoted below (18):
Full participation is encouraged on the par t of all man-agement and supervisory personnel.
G r a s s - r o o t s planning objectives a re established by individuals.
Sets own goals consistent with total corporate goals.
Par t ic ipa tes in an annual commitment p rogram.
Certain members of corporate management set corpo-ra te objectives and pass on divisional goals.
Pres ident ia l prerogat ive
Hierarchy of Objectives/Goals
In keeping with the concept of individual participation in setting
objectives and goals, it is interesting to note in Table X that 70 per
cent of the responding f i r m s have hierarchy type or a descending scale
of objectives and goals. By reviewing Appendix F there is an oppor-
tunity to observe the h ie rarch ia l relationship of the AMF Corporat ion 's
objectives and goals.
Normally, the organization s t ructure of a corporation assigns
accountabilities on a ver t ica l and horizontal bas i s to var ious organiza-
tional components; and within this h ierarchy type of organization s t ruc -
tu re , management and employees become involved in the formulation
of h ie ra rch ia l objectives and goals.
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This type of s t ruc ture provides for different levels of goals ,
proceeding f rom fai r ly broad and extensive miss ions to increasingly
specific departmentalized objectives and eventually to targeted objec-
t ives and goals for individual employees. An overview of this "grand
design" type of h ierarchy is made by Granger (5, p. 66).
Missions in fulfi l lment of the grand design
Char te r s of definitions of the business of operating units
that support miss ions
Pol ic ies or s tatements of common purpose
Desired resul t in key a reas
Long-range plans for given periods of t ime
Strategic p rog rams
Budgets
Shor t - te rm program usually relating to individual or
f i r s t - l i ne organization components
Standards of Pe r fo rmance Derived From Objectives/Goals
Planning Dynamics Incorporated (12) observes that the targeting
and measurement of individual and organization per formance is based
upon the formulation of re l iable and valid s tandards of pe r fo rmance .
which a re derived f rom the previously established h ie rarchy of objec-
t ives and goals . This exerc ise of setting s tandards of per formance is
another example of the interlinking relationship between the var ious
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face ts of the fo rma l planning p rocess . The thoroughness of manage-
ment and supervision, as permit ted through the implementation of the
fo rma l planning p r o c e s s , pe rmi t s the establishment of s tandards of
pe r fo rmance which a r e s tatements describing the conditions that will
exist when a key a rea of a job is being effectively pe r fo rmed . The
Statement of per formance for an individual or an organization compo-
nent, according to Payne (11), will normally include a yardst ick or
measurement to determine clear ly the extent to which the goal is a -
chieved. In many instances management and the incumbent will set
the target at a level of per formance high enough so that individuals and
organization components have to s t re tch in o rde r to achieve them. A
par t icu lar ly important aspect of standard of pe r fo rmance is that the re
should be a clearly discernible connection with corpora te objectives
and goals . The more direct the relationship between personal objec-
t ives and corporate object ives /goals , the g r ea t e r the potential for s t im-
ulating a high o rder of individual per formance .
The responders to the fo rma l planning p rocess survey as shown
in Table X indicated extensive utilization of pe r fo rmance s tandards , with
80 pe r cent noting that objectives and goal-sett ing also includes s tandards
of pe r fo rmance . Additionally, 70 per cent of the f i r m s noted the linking
of the employee compensation plan to object ives/goals and s tandards
of per formance .
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Objectives, Goals, and Standards of Performance As Basis for Management by Results
The Planning Dynamics Incorporated organization defines
management by resul ts as "a results-oriented system of management
based on a dynamic process of planning and measurement which con-
centrates on the more effective use of resources to achieve the most
important objectives and goals" (12, p. All. 81).
One of the more commonly used concepts of management within
the corporations participating in the Survey of Formal Planning Process
Prac t ices (18) is the management by resul ts approach, with approximate-
ly 70 per cent of the f i rms basing such a program on objectives and
goals formulated within the framework of the formal planning process .
Schleh (13) describes the origin of management by resul ts as an out-
growth of the dilemma which faced managers who were attempting to
coordinate and control corporate organizations of ever increasing size
and complexity.
An effective overview of the management by resul ts concept was
formulated by Westinghouse Air Brake Company as shown in Appendix G.
Having implemented a formal planning process , this corporation was
placed in a stronger position when instituting the management by r e -
sults program described in the appendix.
In recent years the above noted course of management action has
been labeled as: Management by Objectives, Management by Exception,
164
Results Oriented Management, Accountability Management, or Manage-
ment by Results,
This style of management is based on the concept that an organi-
zation's objectives and goals are most effectively attained by formulat-
ing and communicating, within the framework of the formal planning
process , specific accountabilities which relate to the hierarchy of
objectives/goals of the corporation. The indispensable prerequisi tes
of this management program, notes Green (6), are position descrip-
tion and accountability statements which are "results oriented. " Em-
phasis is placed on "what" an incumbent is to accomplish and not "how"
resul ts are to be accomplished.
In many instances these accountability statements provide a
means to determine if a corporation is fully organized to achieve cor -
porate objectives and goals since, together with a management audit,
there is revealed whether the corporation's human resources are ade-
quate to meet the expected resul ts . An effective management by r e -
sults program requires the pinpointing and measuring of accountability
and performance. On this subject Howell says:
Management by objectives should be thought of as a top management planning and control approach rather than as an aid to the personnel function.
When thought of in t e rms of this broader point of view, the effects on the over-al l organization may be very great. They would include a better integration of the objectives of the total organization, its subunits, and the individuals in it; im-proved communications to the individuals in the organization as to where the organization is going and how it is going to get
165
the re ; emphasis on what is most important , not what is most-expeditious, and thus the reduction of unnecessary work; and the elimination of overlapping responsibi l i t ies , reducing dupli-cation of ef for t , interdepartmental misunderstanding, and con-f l ic t . All these would improve per formance and boost mora le (7, P. 15).
Summary
According to the authorit ies mentioned and quoted in this
chapter and the responses to the Survey of Fo rma l Planning P r o c e s s
P r a c t i c e s (18), the fo rma l planning p rocess provides the most ef fec- -
t ive known means for the delineation and required continual revision
of corporate goals and objectives. Within the f ramework provided by
the planning p rocess important environmental data is accumulated to
help form an information bank required in the establishment of r e l i a -
ble and valid objectives and goals . Another required input re la tes to
the s trengths and limitations of corporate r e sou rces . Since the re is
manifold participation in objectives and goals throughout the co rpora -
t ion, management needs to make ar rangements to disseminate on a
decentralized and need-to-know bas is the data contained in the informa-
tion bank. Due to the uncertainty of some of the information inputs,
management faces a requirement to establish an assumptions base which
helps provide a strong underpinning for the targeting of h ie rarchy type
objectives and goals . The s t ruc ture of objectives and goals establ ishes
a bas i s for the preparat ion of per formance s tandards and the implemen-
tation of a management by resu l t s concept for directing corpora te
166
r e sou rce s toward the attainment of targeted objectives and goals. The
above noted relat ionships denote that object ives/goals a re an emergent
and interrelated par t of the fo rmal planning p rocess .
CHAPTER BIBLIOGRAPHY
1. Bower, Marvin, The Will To Manage, New York, McGraw-Hill Book Co. , Inc. , 1966.
2. Continental-Emsco Company, Minutes of Diversification Committee Meeting, Dallas, July 5, 1962.
3. Drucker , Pe te r F . , The P rac t i ce of Management, New York Harper & Row, Publ i shers , Inc. , 1954.
4. Ewing, David W. , The Prac t ice of Planning, New York, Harper & Row, Publ i shers , Inc. , 1968.
5. Granger , Charles H. , "The Hierarchy of Objectives, " Harvard Business Review, 42 (May-June, 1964), 63-74.
6. Green, Edward J. , P res iden t , Planning Dynamics Incorporate , personal conversation, Pi t tsburgh, September, 1968.
7. Howell, Robert A. , "A F r e s h Look at Management by Objectives,1 1
Business Horizons, 10 (Fall , 1967), 8-11.
8. Hughes, Char les L. , Goal Setting, New York, American Manage-ment Association, Inc. , 1965.
9. McConkey, Dale D. , How to Manage by Resul ts , New York.,
American Management Association, Inc. , 1965.
10. Motorola Incorporate, Planning Manual, Chicago, 1965.
11. Payne, Bruce, Planning for Company Growth. New York, McGraw-Hill Book Co. , Inc. , 196 3.
12. Planning Dynamics Incorporate, Planning and Control Manual, Pi t tsburgh, 1968. i
13. Schleh, E. C. , Management by Resul ts , New York, McGraw-Hill Book Co. , Inc. , 1961.
167
168
14. Scott, Brian W. , Long-Range Planning in American Industry, New
York, American Management Association, Inc. , 1965.
15. Singer Corporation, 1967-1971 Division Planning Guide.
16. Stanford Research Institute, The Planning Organization, Long-Range Planning Service Report No. 133, Menlo P a r k , California, May, 1962.
17. Steiner , George A. , editor , Managerial Long-Range Planning, New York, McGraw-Hill Book Co. , Inc. , 1963.
18. Survey of F o r m a l Planning P r o c e s s P r a c t i c e s , unpublished survey by R. C. Johanson, Denton, Texas , November, 1968.
19. Warren E. Kirby, Long-Range Planning: The Executive View-point, Englewood Cliffs, New Je r sey , Pren t ice-Hal l , Inc. , 1966.
CHAPTER VII
CORPORATE STRATEGY AND PREPARATION
OF THE LONG-RANGE PLAN
Introduction
Having formulated corporate objectives, goals , assumptions,
and c r i t e r i a , as discussed in the previous chapter , the next step in
the fo rmal planning process is to establish s t ra tegies for reaching the
targeted objectives and goals. While objectives are basic , they have
no life of their own and only come to life through the determination
and implementation of s t ra tegies . The initial phases of the fo rmal
planning p rocess produce the necessary foundation and information
bank required by management pr ior to a determination of the s t r a t e -
gies to be pursued in the attainment of corporate objectives and goals.
Determination and adoption of corporate s t ra tegies is a neces-
sary activity p r io r to the preparat ion of the corporate long and shor t -
range plan. In most corporat ions the long-range plan (or developmental
plan, as it is often called) usually spans a period of fiye y e a r s , and the
shor t - range plan encompasses a period of one year . As can be noted
in reviewing Figure 4, shown in Chapter II, the long-range plan provides
a f ramework for the determination and implementation of p rog rams and
169
170
p ro jec t s which resul t f rom the s t ra tegies required if the corporation
is to reach its targeted objectives and goals. Likewise, the long-range
plan provides the f ramework for formulating the shor t - range plan which
encompasses: capital budgets, sa les budgets, production budgets, and
profit budgets for an ensuing yea r .
This chapter provides an opportunity to explore in depth the
subject of corporate s t ra tegy and the many considerat ions attendant to
the preparat ion of a corporate long-range plan.
Corporate Strategy
Definition and Examples of Corporate Strategy
Based on the p remise that the fo rma l planning proces provides
a systemat ic approach for the making of decisions about m a t t e r s which
a re of fundamental and crucia l importance to the survival and growth
of a corporat ion, it is necessa ry for management to formulate strategy
which is designed to provide information as to the corporat ion 's basic ...
direction and purpose. Green (7) notes that these corpora te s t ra tegies
a re of sufficient importance whereby they provide the underlying and
unifying bas is for all other plans to be developed within the corporat ion.
The t e r m "s t ra tegy" has been defined by many of the formalized
planning authorit ies as follows:
S t ra tegy- -a broad course of action selected f rom among al ternat ives as the optimum way to attain ma jo r object ives, with due regard for the environment, current policies and anticipated
171
c o m p e t i t o r ' s act ions. Strategy should take advantage of s t reng ths ("things you do bes t" ) and min imize the effect of weaknes se s (11, p. All. 81).
Strategy is the pa t t e rn of ob jec t ives , p u r p o s e s , or goals and m a j o r pol ic ies and p lans for achieving t h e s e goa ls , s tated in such a way as to define what bus iness the company is o r is to be in and the kind of company it is or is to be. A complete s ta tement of s t ra tegy will define the product l ine (in funct ional , not l i t e r a l , t e r m s ) , the m a r k e t s and m a r k e t s egmen t s f o r which p roduc t s a r e to be designed, the channels through which t h e s e m a r k e t s will be r eached , the means by which the operat ion is to be f inanced, the prof i t object ive , and the s ize and kind of o r -ganization which is to be the medium of achievement . Strategy can be deduced f r o m behavior in the absence of conscious p lan-ning, for purpose is implied by action. It is e a s i e r , however , to work with ve r i f i ab l e s t a t emen t s of pu rpose (1, p. 5)
St ra tegic decis ions a r e p r i m a r i l y concerned with ex t e r -nal , r a t h e r than in te rna l , p rob l ems of the f i r m and speci f ica l ly with select ion of the p roduc t -mix which the f i r m wil l produce and the m a r k e t s to which it wil l se l l . To u s e an engineering t e r m , the s t r a t eg ic problem i s concerned with establ ishing an " impedence m a t c h " between the f i r m and i ts environment o r , in m o r e usua l t e r m s , it is the p rob lem of deciding what bus ines s the f i r m is in and what kinds of b u s i n e s s e s it wil l seek to enter .
Specific quest ions addressed in the s t r a teg ic p rob lem a r e : what a r e the f i r m ' s objec t ives and goals ; should the f i r m seek to d ive r s i fy , in what a r e a s , how vigorous ly ; and how should the f i r m develop and exploit i t s p r e sen t p r o d u c t - m a r k e t posi t ion.
. . . s t r a t eg ic dec is ions deal with a choice of r e s o u r c e commi tmen t s among a l te rna t ives . . . . The object i s to produce a r e s o u r c e allocation pa t t e rn which wil l o f fe r the bes t potent ia l f o r meet ing the f i r m ' s objec t ives (2, p. 5-6) .
Based upon the above defini t ions it can be concluded that corpo-
r a t e s t r a t e g i e s r e l a t e to the broad c o u r s e s of action which a r e usual ly
se lec ted by management f r o m many di f ferent a l t e r n a t i v e s a f t e r cons id-
e rab le de l ibera t ion . The designated s t r a t eg i e s r e p r e s e n t how m a n a g e -
ment intends to commit co rpo ra t e r e s o u r c e s to accompl ish co rpo ra t e
172
objectives and goals within the pe r ime te r of external and internal en-
vironmental opportunities and const ra ints .
Green (7) comments that corporate s t ra tegy in many respec t s
is synonymous with the long-range corporate plan since the la t ter p o r -
t r a y s how the corporation plans to achieve its objectives and goals over
a designated period of t ime .
Example of Corporate Strategy Continental-Emsco Company
The Continental-Emsco Company (5) in 1957, concentrated all
of i ts r e sou rces in the manufacturing and market ing of machinery ,
equipment, and supplies for utilization by cus tomers and potential cus -
t o m e r s operating throughout the world. As shown in Figure 10, the
company experienced a modest sa les growth f rom 1951 through 1957.
The growth ra te was slightly less than the growth in the United States '
g ross national product for the same period. During the period 1951
through 1957, Continental-Emsco Company (5) management was pur su - .
ing an unwritten s trategy of maximizing the f i r m ' s marke t penetration
into the petroleum equipment and supply marke t . Since a formal ized
planning p rocess was not in existence, the above strategy was based
upon the intuitive judgment of top management. In March 1957, com-
pany management, supported by the strategy of growth through fu ture
penetrat ion into the petroleum equipment and supplies marke t , intui-
tively forecas ted sales for an ensuing four -year period as shown by
173
the dotted line in Figure 10. By 1960, the f i rm planned to attain a sa les
objective of $210,000,000 f rom sa les of petroleum equipment and sup-
plies in fu r the r support of the company's s trategy to expand its marke t •
position through g rea te r sa les of existing equipment and supplies.
In 1958, a recess ion was experienced in the petroleum industry,
causing Continental-Emsco Company (5) sa les to drop to $98,000,000.
The ser iousness of the decline in actual sa les is fu r the r highlighted
when compared with the 1958 sa les goal of $180,000,000. It should be
noted that this sa les goal was established without the benefit of a f o r -
malized planning p rocess .
The company's existing strategy failed in 1958; consequently,
management faced many fa r - reach ing problems as the incumbent m a n -
agement group continued to concern itself with the survival of the com-
pany.
Concurrent with the fa i lure in the company's s t ra tegy, the
Pres ident appointed a Company Development and Diversification Com-
mit tee comprised of the of f icers over each of the functional a reas of
the organization,, This committee was delegated the accountability for
instituting a formalized planning p rocess which would provide a f r a m e -
work for the establishment of re l iable and valid company objectives,
goals , s t ra tegy, c r i t e r i a , assumptions, and the preparat ion of a long-
range five year plan. To provide the required information bank severa l
months were spent in prepar ing an environmental analysis of the
174
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opportunities or constraints within the international petroleum industry.
This broad industry study, as discussed in the environmental analysis
chapter , helped to pinpoint fu ture social , economic, poli t ical , and tech-
nological t r ends . Additionally, the Company Development and Divers i -
fication Committee expended considerable effort in assess ing the
s trengths and limitations of the var ious company r e s o u r c e s , namely:
human, f inancial , manufacturing plants , marketing fac i l i t ies , machine-
ry , equipment, patent she l t e r s , product-l ine life cycles as to dollar
sa les and prof i t , and company uniqueness applicable to the petroleum
or other industr ies .
The commit tee ' s work was fu r the r supported by the management-
consulting se rv ices of the A. D. Little Company, who provided a con-
tribution to the environmental data bank.
The commit tee, while finalizing its work in 1961, assumed that
the present commitment of company r e sou rce s would lead to a d e c r e a s -
ing total company sales t r end , as shown in Figure 11. This downward
t rend took into consideration the existing strategy of concentrating the
commitment of present company r e sources to the prevailing opportuni-
t ies in the international petroleum industry. Also ref lected in Figure 11
is the Continental-Emsco Company's (6) targeted sa les growth curve,
which shows the objectives and goals as established by the Pres ident
and the committee. Noteworthy is the long-range planning gap, this
being the shaded a rea between the existing downward t rend in sa les and
176
Sales (Millions)
1 8 0 "
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120-
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Fig. 11—Planned sa les growth*
*Source: Continental-Emsco Company, Long-Range Company-Plan t Dal las t 1965.
177
and the targeted growth for the company based upon adopted objectives
and goals.
Confronted with this planning, gap, the Company Development and
Diversification Committee assis ted the Pres ident in the formulation of
company strategy which would permit the closing of the planning gap.
The management soon recognized that the design of company strategy
represented one of the more important facets of the company's fo rmal
planning process .
In its deliberations the committee related the company's general
capabili t ies to existing and proposed a reas of opportunity which would
permit a closing of the planning gap. The comparative prof i le for the
company (5) is ref lected in Table XI; and it r e la tes existing capabilit ies
to possible a reas of in teres t , which would permit a diversification s t r a t -
egy necessary to the growth and survival of Continental-Emsco Company,
as targeted in Figure 11. In addition the committee evaluated the com-
pany's product and market prof i le , shown in Table XII. The product and
market profi le provided an opportunity to re la te existing products to
the present marke t s and the proposed diversification marke ts . This
prof i le also permi ts management to determine whether the company
strategy should involve market penetration, market development, pro-
duct development, or diversification.
In reviewing the Industry Capability Prof i le , Table XI, it becomes
evident that Continental-Emsco Company (5) did not possess the r e source
178
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capability to enter the plast ic , woodland equipment, industrial supplies,
or defense-miss i le handling equipment industr ies; consequently, the
formulation of s trategy must take into consideration the need for ac-
quiring, through acquisition or m e r g e r , the necessa ry entry capabil i-
t i es attendant to these industr ies . In some instances the required
capabili t ies might be developed over t ime f rom within Continental-
Em sco Company (5). Also the committee recognized that the company
could follow a diversification strategy of entering the industr ial supply
business through the acquisition or merge r of another f i r m .
Taking into account all of the relat ive information and the t a r -
geted objectives and goals for Continental-Em sco Company (5), man -
agement formulated the following company s t ra tegy:
1. To fur ther penetra te the existing product marke t s
of the petroleum industry.
2. To continue limited marke t development within the
petroleum industry by concentrating expansion of product l ines
where there is marke t growth. Acquire through acquisition or
a program of r e sea r ch and development product lines for d iverse
marke t s within the petroleum industry.
3. To rebalance and r e s t ruc tu re the commitment of ; I
company r e sou rce s to the petroleum industry by closing and
consolidating plans and marketing faci l i t ies .
180
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4. To diversify into governmental business by entering
the missi le handling equipment market. This to be accomplished
thyough the utilization of existing excess resources and the ac-
quisition of manpower and capital expenditure to offset any im-
balance.
5. To diversify into the plastics industry by acquiring
a company engaged in the manufacturing of reinforced plastics.
6. To diversify into the industrial supply business by
manufacturing certain select general purpose supplies and
through the offering of other manufacturer 's supplies and equip-
ment on a resale basis.
7. To diversify into the woodland equipment industry
through the acquisition of a f i rm engaged in the manufacturing
and marketing of a pulpwood t ree harvester .
The corporate strategy as designed and implemented by
Continental-Emsco Company (5) was accomplished within the f r ame- -
work of the formal planning process . This process was effective in
permitting the company to institute long-range plans which were designed
to close the planning gap portrayed in Figure 11.
Reasons for Strategies ' <
The Opinion Research Corporation surveyed the planning prac-
t ices of several f i rms within the United States; and according to this
182
study, the following reasons support the necessi ty for establishing
corpora te s t ra teg ies :
Established s t ra tegies allow g rea te r f reedom of action for all m e m b e r s of the management t eam. More decisions can be made at all levels with less checking "upsta i rs . "
The quality of decisions is enhanced because everyone has a sharper focus for his efforts .
With s t ra teg ies , executives have ru les to guide the search for new opportunities, both inside and outside the f i r m .
Executives have bet ter assurance that the company's over -a l l r e source allocation is efficient.
Companies have an improved ability to anticipate and p repa re for change (10,p. 32).'
Design of Strategies
In accordance with the above reasons for having s t ra tegies and
the example conveyed through the experiences of the Continental-Emsco
Company (5), it is noted that the activities of a f i rm are guided by some
sort of grand s t ra tegy. Additionally, this grand s t ra tegy, as mentioned
by the National Association of Accountants (9 ), is supported by other
s t ra tegies which a re not as universa l in scope as the grand strategy of
the f i r m , especially if the f i rm is la rge and diversif ied. The support-
ing s t ra tegies will usually concentrate on one par t of the f i r m ' s opera-
tions such as a division, a functional a rea , or a product line and will
tend to align themselves with the h ierarchy of objectives and goals a t -
tendant to a given organization component. Executive management p o s -
s e s s e s the accountability for the formulation of the grand s t ra tegies and
the approval of supporting s t ra tegies as recommended by various levels
of management and organization components throughout the corporation.
183
Conditions Causing the Reformulation Of Corporate Strategies
According to Ansoff (2, p. 143), management should periodically
make a comparison, such as every six months, to determine the plan-
ning gap between corporate objectives/goals and current forecast of
corporate resul ts based upon the existing and immediate future com-
mitment of resources . The discrepancy between aspirations and an-
ticipated attainment of objectives and goals may lead to a revision in
objectives or a revision in corporate strategy leading to a revised long-
range plan and its impact on the future commitment of corporate r e -
sources.
Recognizing the dynamic nature of the formal planning process ,
it seems logical to assume that f rom t ime to time there will be r e -
quired revisions in corporate strategy. The grand or over-a l l corpo-
rate strategy will seldom change except when there is a major
restructur ing of corporate objectives and goals. The National Asso-
ciation of Accountants (9) foresees that the supporting s trategies are
more apt to change each t ime the corporation updates its long-range
plan, and in most corporations this is accomplished every six months.
I h e latter portion of this chapter provides an opportunity to examine
the preparation of a formalized long-range plan and the interrelat ion-
ship which exists between corporate strategy considerations and the
commitment of corporate resources as prescr ibed through the corpo-
ra te f ive-year plan.
184
Corporate Long-Range Plan
Green (7) advises that in implementation of the fo rmal planning
p r o c e s s , management reaches a point where there is a requirement to
commit in writing or by input into the computer a formalized long-range
plan. It was noted that the various organization components at all lev-
els of the corporation normally part icipate in the preparat ion of r e s p e c -
tive component plans which are consolidated on an upward bas is with
the long-range plans of other organizational components. This modular
concept eventually leads to the over -a l l corpora te long-range plan as )
prescr ibed by the fo rma l planning p rocess .
In accordance with corporate external and internal environmental
data, object ives, goals , assumptions, c r i t e r i a , and s t ra teg ies , each
organizational component f inal izes this fo rmal organization plan for
the ensuing year and, usually, fo r four additional yea r s . The shor t -
range of one-year plan, the National Industrial Conference Board (12)
notes, is sufficiently p rec i se to serve as an operational plan. Due to
the prevail ing uncertaint ies the long-range plan represen t s project ions
which become less definite when related to future y e a r s , but anticipated
commitments of r e sou rce s and p rec i se fo recas t s a re also included.
The extent to which there is decentralization ififormulation of,
the long-range plan, Branch (3, p. 224) says , is contingent upon the
size and type of bus iness , as well as the corporat ion 's organizational
and operating charac te r i s t i c s . It is recognized that the re is a point of
185
equilibrium between the advantages of widespread organizational
participation in the corporate planning process and the cost , delay
and administrat ive complications of a management system that is too
elaborate.
Cohen and Robb.ins (4) noted that planning provides a sys tema-
tic and order ly means for shaping a company's future and involves the
discipline of putting future plans into written form.
Henry says:
The culmination of long-range planning activities in the companies which had formal planning sys tems was the p r epa ra -tion of a written long-range corporate plan. All planning did not cease at this t ime, however, for it was a continual process of evaluating company p rogress , forecast ing changes in the bus-iness environment, and replanning. Nevertheless , the long-range plan was a central focal point for much of the effort expended in long-range planning (8, p. 70).
The forementioned thought tends to highlight the importance of
formalizing the long-range plan for the corporation and each of the
organizational components where there is a requirement to p repare
a ' fo rmal plan. The long-range fo rmal plan which can be projected on
a manual or mechanized bas is permi ts management to simulate and
eventually target the expected resu l t s and accompanying commitment
of corporate r e sources . The long-range plan becomes an important
document which is used by management and other personnel in the fo r -
mulation of p rograms and pro jec t s , delegation and decentralization of
accountability, and the monitoring of organization performance.
186
Time Span of Corporate Long-Range Plan
According to a recent National Industrial Conference Board
(12, p. 7) survey most respondents to the survey on long-range plan-
ning noted that the planning period included the ensuing five yea r s .
The f i r m s noted a pat tern whereby the f ive-year plan was updated an-
nually, and the forthcoming y e a r ' s budget constituted the f i r s t year
of the plan. This became the f i r m ' s shor t - range plan. The survey,
however, revealed a considerable range in the duration of long-range
planning per iods for those f i r m s whose planning period extends beyond
five yea r s . Some of the part icipants reported that in cer ta in a r e a s ,
such as natural r e source requi rements , the planning period extends
over a t ime span of twenty yea r s .
Since there a re many uncertaint ies involved when projecting
the corpora t ion 's operations and per formance into the fu ture , a period
such as five yea r s could be considered as the maximum planning p e r i -
od and is consistent with feasible es t imates of fu ture per formance .
Concerning the length of the long-range planning per iod, the
National Association of Accountants notes:
In determining what is the most suitable length of t ime to be covered in the long-range plan, management usually seeks to identify the cr i t ica l f ac to r s in the bus iness , such as r e sea rch and development, and thinks in t e r m s of the horizon appropriate to the decisions to be made and the action to be taken. . . c e r -tain key fac to rs affect the choice of planning per iod, and t h e r e -fo re need to be considered.
Nature of the industry and its products . The choice of t ime-span covered in the plan is heavily influenced by the
187
special charac te r i s t ics of the business in which the company-is engaged.
. Amount of lead- t ime for making key decisions and put-ting them into effect .
Amount of t ime needed for achieving a ma jo r change in the business . . . t ime needed to build an organization, or to effect a change in basic production p rocesses influence thei r choice of planning period.
Product l i fe - -cyc le and turnover of capital. The length of the product cycle f rom initiation to matur i ty and the t ime needed for recovering capital invested in a product or project .
Amount of t ime needed for planning capital s t ruc ture and other financial needs (9•, p. 27-29).
Example of a Corporate Long-Range Plan
The long-range f ive-year plan prepared by Continental-Emsco
Company (6) tends to represen t the t radi t ional approach used by most
corporat ions in the preparat ion of a long-range plan. The company,
on an annual bas i s , p r epa re s a long-range plan which compr ises the
many facets listed below:
P r o fo rma income statement
P r o fo rma balance sheet
Capital budget—Five year period
Cash budget
Source and use of funds forecas t
Manpower forecas t
Facil i ty Forecas t
Research and Development Forecas t
188
The ma jo r organization components of Continental-Emsco
Company (6) part icipate on a decentralized bas is in the formulation
of the f ive-year plan by prepar ing and communicating upward an organ-
izational component, long-range plan which is consolidated to form the
total company long-range plan.
Green (7) notes that the preparat ion of a company's long-range
plan, s imi la r to the case just descr ibed, involves many value judgment
compromises and " t r a d e - o f f s , " due to the limitation in corpora te r e -
sources . Some examples of the long-range planning " t rade-of fs" a re
1. Shor t - te rm profi t vs . long-term growth
2. Prof i t margin vs . competitive position
3. Direct sa les effort vs . marke t development
4. Growth opportuni t ies-- re la ted vs . growth opprotuni-
t ies—unrelated
5. Penetrat ion of existing marke t s vs . development of
new marke t s
P e r s o n s involved in preparat ion of the corporate long-range
plan must corisider such " t rade-of fs" when preparing the corpora te or
organization component plan within the f ramework of the fo rma l plan-
ning p roces s . When making " t rade-off" and other decisions pertaining
to the long-range plan, Green (7) fo resees that the fo rma l planning p r o -
ces s makes available the relevant inputs as generated through the v a r i -
ous other face ts to the planning p roces s , object ives, goals , c r i t e r i a , etc.
189
Techniques Involved in Preparing A Corporate Long-Range Plan
In evaluating planning practices, Warren (13, p. 71) observes
that the most typical approach to preparing the formal plan involves
essentially five steps
1. The lower levels of the f i rm prepare annual and five
year plans within the framework of the corporate formal plan-
ning process .
2. The short and long-range plans are summarized,
consolidated, and reviewed at the division level.
3. The corporate management staff consolidates the
division plans by corporate budget and also conducts a financial
review of the consolidated annual and long-range plan.
4. The review of divisional plans supporting data which
includes: objectives, goals, assumptions, s trategies, and
planned commitment of resources .
5. The final review of the consolidated corporate an-
nual budget (short-range plan) and the long-range plans by the
Chief Executive and the Board of Directors.
The information contained in Appendix H represents a format
of the type utilized by corporatings when consolidating the long-range
plan's quantitative data into a minimum number of comparative sched-
ules. Cohen and Robbins (4) note that when using this type format for
190
the long-range plan, a corporation needs to provide persons engaged
in the preparat ion of the annual and long-range plans with the following
ass is tance:
1. An external and internal environmental information
bank which provides data for short and long-range planning.
2. An "umbrel la" type f ramework which pe rmi t s estab-
lishing and communicating objectives, goals , c r i t e r i a , and cor -
porate strategy.
3. A corpora te planning staff or a divisional planning
staff comprised of economists, business r e s e a r c h e r s , and spe-
cia l is ts capable of providing information and consultant a s s i s -
tance in the preparat ion or implementation of short and long-
range plans.
4. A manual or mechanized system of information,
control data, policies, simulation, etc. , to ass is t in the p r e -
paration and implementation of a short and long-range plan.
Green (7) comments that such a climate will encourage individ-
ual and t eam-ef fo r t type of participation, inasmuch as a smal l or large
organization component helps the corporation formulate its short and
long-range plans, which basically represent the quantitative and quali-
tat ive commitments of the strategy to be followed in attainment of ob-
jectives and goals.
191
In noting the va r ious techniques ut i l ized in the p repa ra t ion of
the annual and long- range p lan , t h e r e appear s to be a t r end toward the
g r e a t e r employment of the computer in p repa r ing the f o r m a l c o r p o r a t e
p lan. The long- range plan f o r m a t , as shown in Appendix H, appea r s
to be amenable for input into the compute r ; thus providing management
with a long- range plan which is m o r e acces s ib l e , one which can be
read i ly r ev i sed on a continuous updating cycle or as the occasion de -
m a n d s , and a f o r m a l plan which is easi ly communicable to al l or a .
por t ion of the corpora t ion . Util ization of the computer in f o r m a l p lan-
ning h a s been descr ibed in Chap te r s IX and X.
Organizat ion Components Involved In P r e p a r a t i o n of the F o r m a l P lan
The extent to which a corpora t ion is cen t ra l i zed or decen t r a l -
ized wi l l , in g r ea t p a r t , tend to de te rmine whether the co rpo ra t i on ' s
f o r m a l plan wil l be p r e p a r e d by an el i te group such as a planning c o m -
mi t t e e or the co rpo ra t e staff planning depar tment . In th i s r e spec t the...
r e cen t National Indus t r ia l Conference Board survey noted:
A number of companies without long- range planning s t a f f s have organized planning commi t t ee s of key execut ives .
Some of the commi t t ees a r e charged with the p repa ra t i on of the c o r p o r a t e plan (12, p . 13).
The following p r a c t i c e is noted as occu r r ing in the p r epa ra t i on
of the co rpo ra t e plan within the decent ra l ized f i r m :
192
Among survey respondents with decentralized organi-zations, it is common pract ice to give the managers of the v a r i -ous operating units responsibili ty for formulating long-range plans for their respect ive units (12, p. 13).
During the past five y e a r s , according to Green (7), some of .
the l a rger corporat ions in the United States have implemented the f o r -
mal planning p rocess , and this has permitted the establishment of a
planning and decision-making f ramework which has led to a decentral -
ization of many planning functions. In addition to the installation of
a fo rmal planning p roces s , many of the l a rger corporat ions have en-
te red into an advanced, phase in the evolution of the planning organiza-
tion; consequently, the organization s t ructure includes a Vice
Pres ident of Planning who di rects a corporate planning staff . Green
(7) observes that at the division level there is a division planning staff
report ing to the division manager . Such a planning cl imate pe rmi t s
the formulation of re l iable and usable long-range and shor t - range plans.
Benefits Derived in Prepar ing Formal Plans
The decentralized participation in the preparat ion of fo rmal
plans, according to Branch (3, p. 225), tends to st imulate people to-
ward thinking ahead in a del iberate , organized, and purposeful fashion.
Involvement in planning helps promote a comprehensive view so that ,
f an individual can scan and fo resee the full range of relevant fac to rs
at the outside of an analysis.
In addition to advance thinking, the preparat ion of a unit plan requ i res that all significant elements of the unit be
193
considered; s imi lar ly , at the topmost level of management the corpora te plan calls for identification, integration, and p ro j ec -tion of all components and crucia l aspects of the business to -gether (3, pp. 225-226).
Recognizing that the fo rma l planning p roces s r ep resen t s a
r a the r complex program of management, the benefits to be derived
f rom a fully developed planning p rocess will not be real ized in a short
period of t ime . As the organization moves through the learning curve ,
with the implementation of the fo rma l planning p r o c e s s , a point will be
reached when the p roces s is fully developed, whereby
. . . the way of thinking and acting which it r ep resen t s has become par t and parce l of the general corporate attitude, and the procedures involved a re f ami l i a r , accepted, and not unduly difficult in themselves .
What is necessar i ly implied by corporate planning is a higher degree of purposeful integration, projection toward accepted objectives and institutional effor ts than is otherwise likely. This is certainly to the corporate good (3, p. 2 32).
Summary
In this chapter corporate strategy and the corporate long-range
plan were described in relation to the fo rmal planning p rocess . It was
recognized that s t ra tegic decisions a re concerned with the planning
gap caused by the variance between anticipated per formance based on
the commitment of existing r e sources and the forecas ted growth curve
of the corporat ion, which includes s t re tch or work-toward objectives
and goals. Based on a p remise that corporate r e sou rces a re l imi t -
ed, management can benefit by simulating the var ious " t rade-off"
194
combinations which are attendant to the var ious possibi l i t ies for com-
miting r e sources in the implementation of the grand and supporting
s t ra tegies .
Upon selecting the appropriate s t ra tegies and combinations of
r esource commitments , the organization becomes involved in the p r e -
paration of an annual and a long-range plan. These fo rma l plans p r o -
vide a vehicle,of communications between different levels of manage-
ment p r io r to and af ter the adoption of the corporate and organizational
component plans. The respect ive plans a re based on the previously
adopted objectives, goals , c r i t e r i a , s t ra teg ies , and such plans as r e -
late to the commitment of r e sou rces for a long-range planning period
of usually five yea r s . The dynamic fo rces of the external and internal
environment requi re the annual or semi-annual updating of the short
and long-range plan, and on occasion these fo rma l plans will also be
updated if the re is a significant change in the assumption base which,
in tu rn , causes a res t ruc tur ing of the corporate objectives and goals.
The next chapter provides an opportunity for the fu r the r anal-
ys i s of the annual plan, along with a depth study of the techniques to
be employed in the formulation of p rog rams and pro jec t s leading to
the attainment of organizational objectives and goals.
CHAPTER BIBLIOGRAPHY
1. Andrews, Kenneth R. , "A Concept of Corporate Strategy, " presented to the Eleventh Annual International Meeting of the Institute of Management Sciences, Pi t tsburgh, March 13, 1964.
2. Ansoff, H. Igor, Corporate Strategy, New York, McGraw-Hill Book Co. , Inc. , 1965.
3. Branch, Melville C. , Planning: Aspects and Applications, New York, John Wiley & Sons, Inc. , 1966.
4. Cohen, Je rome B. and Sidney M. Robbins, The Financial Manager, New York, Harper & Row, Publ i shers , Inc. , 1966.
5. Continental-Emsco Company, Company Development and Divers i -fication Report , Dallas, October, 1961.
6. Continental-Emsco Company, Long-Range Company Plan, Dallas, 1965.
7. Green, Edward J. , Pres ident , Planning Dynamics Incorporated, personal conversation, Pi t tsburgh, September, 1968.
8. Henry,Harold W. , Long-Range Planning P rac t i ce s in 45 Industrial Companies, Englewood Cliffs , New Je r sey , Prentice-Hall , Inc. , 1967.
9. National Association of Accountants, Long-Range Prof i t Planning, Research Report No. 42, New York, December 1, 1964.
10. Opinion Research Corporation, Long-Range Planning for Growth, Pr inceton, November, 1965.
i j
11. Planning Dynamics Incorporated, Planning and Control Manual, Pi t tsburgh, 1968.
195
196
12. "The Status of Long-Range Planning,1 1 The Conference Board Record , 3 (September , 1966), 7-17.
13. W a r r e n , E. Kirby, Long-Range Planning: The Execut ive View-point, Englewood Cl i f f s , New J e r s e y , P r e n t i c e - H a l l , Inc. , 1966.
CHAPTER VIII
IMPLEMENTATION OF FORMAL PLANS,
PROGRAMS AND PROJECTS
This chapter provides an opportunity to consider m a t t e r s
relating to the implementation of the fo rmal corporate plan, with em-
phasis upon the shor t - range or annual plan and those p rog rams or
pro jec t s which provide for the commitment of r e sources in the attain-
ment of corporate objectives and goals.
The fo rmal planning p rocess f ramework has permit ted manage-
ment to finalize the following facets : environmental analysis and the
assessment of corporate s t rengths and limitations; the formulation of
object ives, goals , assumptions, and c r i t e r ia ; and the determination
of corporate strategy and preparat ion of the long-range plan. Having
accomplished these noteworthy face ts of fo rma l planning, management
is ready to concern itself with the implementation phase of the process .
Concerning the various implementation considerat ions, this
chapter will convey information pertaining to the communication of
short and long-term plans, organizational and individual accountabili-
t i es of the implementation phase of the planning p r o c e s s , management
philosophies and techniques which tend to support in many instances
197 .
198
the decentral izat ion and delegation of implementation accountabilit ies,
and a discussion of corporate p rograms and pro jec ts which a re the
p r ima ry means for implementing the s trategic plans of management.
Guidance Provided by the Corporate Planning System
In following the discussion of guidance provided by the corpo-
ra te system of fo rmal planning, it will be beneficial to ref lect upon
Figure 1 and the information supporting this f igure , as contained in
Chapter II. This f igure , as presented by the Stanford Research Inst i-
tute (9), por t rays the basic system of formal plans and denotes that
the planned strategy establishes the long-term guidance for the corpo-
rat ion, taking into account the broad object ives, goals , and s t ra tegies
formulated by top management and the board of d i rec to rs . Figure 12
denotes that corporate s t ra tegies a re implemented through formulation
of a long-range or developmental plan and a shor t - range or operational
plan, with the la t ter being analogous to the corporat ion 's annual plan. ...
The Stanford Research Institute (9) ut i l izes the t e rm "Strategic
P lan" to denote the corporate s t ra tegies which resulted f rom the com-
pletion of each of the fo re runner facets contained in the fo rmal planning
p roces s . Through instituting a fo rma l planning p rocess and the fo rmu-
lation of the s t rategic plan, there is provided the f ramework and guid-
ance for prepar ing the long-range or development plan and the shor t -
range plan.
199
Strategic Plan
Operations Plan (short-range)
Development Plan (long-range)
Fig. 12—Interrelationship between fo rma l plans*
*Source: Stanford Research Institute, "A Framework for Business Planning., " Confidential Report by the Long-Range Planning Service, Menlo P a r k , California, February , 196 3.
In discussing the plans which a re formulated within the f r a m e -
work of the fo rmal planning p roces s , Ewing of fe rs the following thoughts
relat ive to implementational planning:
A second ma jo r set of motions that organizations go through when they plan has to do with the s teps , m e a s u r e s , and p rograms set up to achieve the broad goals. Authorities on planning have labeled this second set of motions in different ways. To contrast it with s t rategic planning (sometimes called comprehensive, over -a l l or objectives planning), the second set is called variously, tac t ical , derivat ive, functional, opera-t ional , o r implementational planning. Almost all the experts agree that in a given organization there a re m o r e possibi l i t ies for delegating and spreading around decisions concerning imple-mentational planning (5, p. 30).
Since the Stanford Research Institute (9) has functioned as one
of the leaders in foster ing the state of the art for fo rma l planning, the
overview of developmental and operational planning tends to depict the
var ious aspects of implementational planning as described by Ewing
in the quotation above.
200
Guidance Provided by Corporate Development Plan
A pic tor ia l overview of the corporate long-range or development
plan, as projected by the Stanford Research Institute (9), is contained
in Figure 13. The var ious aspects of the development plan denotes that
this plan establishes guidelines which re la te to the long-term commit -
ment of corporate r e sources .
Development Plan (Long-Range)
Divestm tent Plan
\ / Diversification
an
Research and Development Plan
Acquisition and Merger Plan,
R & D Finance Plan
R & D Administrative Plan .
£
Basic Research Plan
Product R & D Plan
Market R & D Plan
Fig. 13--Overview of corporate development plan*
*Source: Stanford Research Institute, "A Framework for Business P l a n n i n g / ' Confidential Report by Long Range Planning Service, Menlo P a r k , California, Februa ry , 1963.
Ewing says:
It [ long- term guidance] determines the activit ies by which a new generation of products and marke t s will join or
201
replace the current ones. At the same t ime it maps in g rea te r detail the route toward the fu ture position of the f i r m . * . .
The corporate development plan is concerned with: Assuring that favorable conditions exist for cre-
ating or discovering new product and market ideas to help keep the development pipeline full .
P r o c e s s e s which screen out poor prospects . Fo recas t s which identify those developments
with the highest potential. Project ing the r e source requi rements and the
timing needed to implement a program af ter it passes f rom development to operations (5, p. 8).
Based on the above thoughts it can be observed that the so-called
development plan provides implementing guidance for the diversif icat ion
p r o g r a m , r e sea r ch and development p rog ram, and in some instances
a divestment p rogram. These p rograms have a long-term impact upon
the corporation; consequently, these p rograms provide the means for
implementing corporate s t ra tegies which were designed by management
in the interest of attaining the targeted corporate objectives and goals.
Guidance Provided by Corporate Operational Plan
The Stanford Research Institute (9) notes that the operational
plan provides a guiding f ramework or blueprint fo r current business
actions; thus , it can be viewed as the shor t - t e rm or annual corporate
plan. As shown in Figure 14 the operational plan provides a guiding
f ramework for the functional, p rog ram, and project activities which
accompany the commitment of corporate r e sou rce s in the accomplish-
ment of immediate objectives and goals.
202
Operations Plan Short-Range
J p ] j Programs \
L ^ l a _ n i - -1
J
^Produc t ion Plan
Marketing Plan
^ Financial Plan
^ Administrative Plan
Fig. 14—Overview of corporate operational plan*
^Source: Stanford Research Institute, "A Framework for Business Planning, " Confidential Report by Long Range Planning Service, Menlo P a r k , California, February , 1963.
According to Stewart (10), in some corporat ions the operational
plan direct ly influences plans for such functional groups as: production,
market ing, f inance, and administration. Within decentralized f i r m s
which a re comprised of severa l divisional and subordinate organiza-
tional components, the various corporate p rog rams and pro jec t s p ro -
vide the means for committing corporate r e sou rces to the accomplish-
ment of decentralized objectives and goals.
Ewing comments on the operational or shor t - t e rm plan:
. . . important reasons that implementational planning is so often p re f e r r ed . It is more specif ic , more concrete , , more visible. When a manager works on the implementation :
of plans and p rog rams , he thinks in t e r m s of certain people, jobs, facil i t ies—things that he knows and can see (5, p. 31).
203
As to the concreteness and guidelines of the operational shor t -
t e rm plan, Stanford Research Institute s ta tes :
In combining a f i r m ' s various current p rog rams and p r o -jects into actionable plans for functional groups, the operations plan specif ies the total work to be accomplished in the plan 's span. It subdivides the work into logical work .units; assigns the work stations at which the work will be done; defines the flow of work among work stations; and establ ishes the lines of authority that build the work stations into an organization. And* of course., it se ts schedules and budgets (9, p. 10).
Respondents' Utilization of Fo rma l Planning Guidelines
To provide an insight into existing corpora te prac t ices relat ive
to the preparat ion and implementation of the long-range and shor t - range
plans , the Survey of F o r m a l Planning P r o c e s s P r a c t i c e s contained the
following question: "In what ways have long range plans been used to
provide guidance in the formulation and implementation of short range
p l a n s ? " (11).
The responses by many of the participating corporat ions tend to
underscore the views of var ious authorit ies that the corporat ion 's f o r -
ma l plans provide implementational guidance for the commitment of
corpora te r e sou rces . There is quoted below a representa t ive listing
of the var ious comments relating to planning guidance (11).
The long-term plans provide the boundaries within which the shor t - t e rm plans are formed and executed.
Establ ish broad f ramework of assumptions, objectives and goals and f ramework to develop shor t - range plans in detail.
The f i r s t year of our five yea r plan becomes next y e a r ' s operating plan.
204
Long-term plans and especially marketing plans, are the basic framework guiding the operations of the firm. Short-term plans fit the long-term plan, but may be modified as con-dition® warrant. Long-term plans are the long-run posture ©f corporation, while short-run plans a re the operating tools,
The long-range plan guides decisions on short-range product plans (next year's lines). Long-term- plans guide deci-sions on capital investment for the short-term and management development.
Long-term plan aids in identifying resources required for investment in growth programs to achieve objectives. Mak-ing long-term vs. short-term trade-offs. Identifying exposures.
These comments indicate that many of the responding corpora-
tions have prepared a formal long-term plan or development plan and
a short-term or operational plan in conjunction with the formal planning
process. Such formal plans provide the guiding framework for the de-
centralized recommendation and actual commitment of resources through
the implementation of corporate programs and projects.
Green (6) says that in many instances the commitment of corpo-
rate resources is accomplished through the implementation of programs
and projects which are proposed and adopted within the prevailing struc-
ture of policies and procedures and the formal planning process. A
corporation at a given point in time might be implementing from 75 to
400 different programs and projects contingent upon the size of the i
corporation.
205
Relation of Pol ic ies and Procedures To the Implementation of P lans
A brief comment about the corporate policy and procedure
f ramework is in order since the implementation of fo rmal plans is
also accomplished on the bas i s of adhering to the existing policies and
procedures of the corporation. In some instances the scope and com-
plexity of p rograms and project lead to the requirement for updating,
revis ing, or establishing new policies and procedures .
In their planning manual Planning Dynamics Incorporated con-
veys the following in regard to policies and procedures :
Two principal questions should be considered: 1. Are there any a reas where existing policies/
p rocedures prevent optimum per fo rmance? 2. Are there any a reas where pol icy/procedure
guidance is needed to pe r fo rm m o r e effectively? As a par t of the planning p roces s , it is a manage r ' s
responsibil i ty to recommend changes in or additions to exist-ing policies /procedures that effect his a rea of responsibil i ty.
An order ly p rocess of planning will usually fo rce c l a r i -fication of ma jo r policies (7, p. A6.1).
Implementation of the Corporate Forma l Plan Through P r o g r a m s and P r o j e c t s
As corporat ions institute the fo rmal planning p rocess there is
created a f ramework of management which is conducive to the imple-
mentation of the management by resu l t s concept of corporate direction.
Such a concept of management, according to Green (6), includes the
g rea te r decentralization of accountability and authority, plus the in-
creas ing opportunity for incumbents of most organizational levels to
206
part icipate in the planning and decision-making p rocess of the f i r m .
Under such a management s t ruc ture there is a requirement to provide
a f ramework of administrat ion, policies, and procedures which allows
for the design, development, and upward recommending of p rograms
and pro jec t s that a re designed to permi t a given organization compo-
nent or individual to attain the objectives and goals which were p rev i -
ously established within the f ramework of the fo rma l planning p rocess .
According to Green (6) a corporation is continually involved,
with numerous p rog rams and pro jec ts which a re being implemented
throughout the f i r m . The Planning Dynamics Incorporated Planning
and Control Manual reads :
There a re few a reas in the whole field of management where there is more wasted t ime and effor t , confusion and f rus t ra t ion than in the authorization of p rog rams and p ro jec t s .
Significant p rog res s can be made through the use of the Pro jec t Data form which provides an effective way to spell out the What, Why, Who, When, and How Much of a simple project or to t ransmi t attachments that bring forth the details of a more complex program (7, p. A7.1).
Drucker ' s Thoughts on P r o g r a m s and P ro j ec t s
Drucker notes that to turn an ent repreneur ia l program into p e r -
formance requ i res that:
All proposals for new ventures , capital investment, or new products and se rv ices , should be directed toward the com-pany's program for per formance . All such proposals should be presented together ra ther than piecemeal . This applies to capital investments for a given per iod, to new products , and to all new activities and effor ts . . . . Only in this way is it possible to find out whether these proposals seek the best
207
utilization of the company's r e sources and whether they a re focused on the right opportunities and on the needed resu l t s . Only in this way can it be seen whether the proposed investments, products, or activities aim at realizing the idea of the business and support its objectives. Each individual proposal should , c lear ly spell out the expectations that underl ie it (4, p. 220).
Responding F i r m s ' P rog ram and Pro jec t P rac t i ces
Some of the corporat ions, in answering the survey, revealed
that the planning process aided in the management of p rog rams and
projects . They were asked to "Describe the approach you employ
in the development of specific s t r a t eg ie s ; p rograms , and projec ts to
capitalize on s t rengths , cor rec t weaknesses , solve problems, seize
opportunities and accomplish objectives ( i .e . , p r io r i t i es , project
scheduling, formulation of a course of action)" (11).
Some of the more representat ive answers to this question a re
given below (11):
Decentralized divisions formulate s t ra tegies within cor -porate policy guidelines. From the s t ra teg ies , divisions f o r -mulate action p rograms and projects .
Annual planning cycle leads to review of all contemplated pro jec ts and programs. . . and to an assessment of their im-pact on object ives/goals , economic and human resources .
In severa l divisions, objectives sheets a re prepared. On these sheets a re listed action projec ts to achieve objectives, names of people with responsibil i ty, target dates.
Annual budgets are proposed by regions, consistent with previously submitted corporate outlook. Between budget sub-miss ions , specific pro jec ts a re proposed as indicated.
208
Implementation of Long-Range Plan Through P r o g r a m s and P r o j e c t s
Experience gained through consulting with corporat ions on the
installation of the fo rmal planning p rocess has helped Green (6) to r e -
cognize that corporat ions which are actively involved with the imple-
mentation of a complex and fa r - reach ing long-range or developmental
plan tend to rely more heavily on the program and project approach
for managing the commitment of r e sources . As port rayed in Figure
13 the development plan is the m a j o r means for implementing the long-
range type of corporate s t ra tegies . Green (6) notes that the develop-
mental plan is concerned with the long-term commitment of sizable
corpora te r e sou rce s , and this necess i ta tes divisional and corporate
management becoming directly involved in designing, recommending,
approving, and implementing such ma jo r p rog rams or p ro jec t s as might
be required in the attainment of corporate objectives and goals.
An example of the type p rograms and pro jec ts utilized by man-
agement when involved with developmental planning concerns the s t r a t -
egies attendant to the concept of corporate diversification through ac-
quisitions and m e r g e r s . Stewart (10) mentions that most corporate
acquisition and m e r g e r p rog rams and pro jec t s , which re la te to the
closing of the previously noted planning gap, a re proposed and imple-
mented by the Staff Planning Department, corpora te line and staff off i -
c e r s , and the Chief Executive. P r o g r a m s and pro jec ts which re la te
209
to the implementation of the long-range plan are managed on a central-
ized basis by corporate or divisional management. Green (6), on this
subject, revealed that in most corporations the Staff Planning Depart-
ment recommends acquisition and merger projects either to an acqui-
sition and merger committee or to the chief executive officer. Review
of a given acquisition project which normally involves the acquiring of
another company, a product line, or a patent shelter , is conducted by
the corporate executive committee, composed of officers over each
corporate functional division. Upon approval of the acquisition project ,
which often includes board of director sanction, the chief executive
and members of top management implement the project leading to the
acquisition as established through the project proposal.
The forementioned example as to the utilization of the program
and project concept in the implementation of the long-range plan helps
establish the organizational involvement in directing the f i rm toward
the attainment of corporate objectives and goals. In reflecting upon
the programs and projects attendant to the long-range plan, there is
a need for realizing that non-management personnel, operating at low-
er hierarchy levels of a corporation,often become involved in the many
aspects of programs and projects. An example would be the scientist
or inventor who is involved with the corporate research and develop-
ment programs,,
210
Implementation of Short-Range Plan Through P r o g r a m s and P ro jec t s
With the shor t - range plan being analogous to the annual plan,
which usually re la tes to an ensuing yea r , Stewart (10) and Green (6)
say there is considerable decentralized involvement with the implemen-
tation of numerous p rograms and projec ts . Likewise, the extent of
program and project involvement is g rea te r in a corporation which
employs a decentralized management and accountability s t ruc ture
since objectives and goals have been s t ructured on a h ierarchy bas is .
The fo rmal planning p roces s provides corpora te management
with the means for this decentralization and delegation of objectives
and goals , which includes organizational and individual accountability
points located throughout the corporate organization s t ruc ture .
The adopted objective, goal, s t ra tegy, and fo rmal plans f r a m e -
work helps to establish a management system which, Green (6) notes ,
re l ies heavily upon the upward recommendation and implementation of
p rog rams and pro jec t s that allow for the commitment of r e sou rces in
accordance with the desired attainment of the h ie ra rchy of objectives
and goals.
In a discussion of the program and projec t subject with Russel l
(8), it was revealed that the AMF Corporation had instituted a decen-
t ra l ized system which made provisions for recommending and imple-
menting of p rog rams and pro jec t s . An overview of the m o r e important
211
aspects of this decentralized operational planning concept is noted
below:
Action P r o g r a m s : The specific p rog rams and continu-ing procedures required to ca r ry out the strategy.
The plan is accomplished through action p rograms . In many cases severa l action p rograms may be necessary to im-plement any one phase of s trategy. In such a case , some p r o -g r a m s may not be obvious at the s ta r t and a project to select the necessa ry p rograms may be a par t of the initial plan.
As each program is p repared , it must be c lear ly defined in t e r m s of t a rge t , cos t s , and expected resu l t s . The man r e -sponsible for each program should be indicated and a report ing schedule should be prescr ibed to provide a means of measuring the p rog res s against the resu l t s desi red.
For the most pa r t , these procedures a re needed within the unit and between the unit and the group. Consequently, they should be laid out to meet the par t icular requi rements of the business unit manager and the group executive, and may well vary f rom group to group (1, p. 12).
The AMF Corporation uti l izes the following guide:
General Outline For Each Action P rog ram Objective Brief statement of p r o g r a m ' s purpose. The key Target ta rget toward which the program is directed.
The target is a measurable attainment to be reached within a specific t i m e - - f o r example, "attain a minimum annual sa les level of 1,000 units in 1965. 11 Subsidiary t a rge t s should also be stated if pertinent to the p r o g r a m ' s purpose.
Background a) Relation of program to established unit, group or corporate goals.
b) Relation of program to current operat ions. c) Relation of program to external condit ions--
marke t , competition, nature of industry, etc. d) Alternatives considered in selecting this j
p rogram. Description a) Outline of the program and how it will be c a r -
ried out. b) Timetable of actions and assignment of r e -
sponsibili t ies.
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c) Discussion of c r i t e r i a used in planning the p rog ram, ma jo r assumptions, a reas involv-ing judgment, and fac tors which could affect the p r o g r a m ' s success .
Financial a) P r o F o r m a P & L s ta tements . Schedule b) Investment schedule for capital requi rements ,
c) Cash Flow schedule. Control a) P r o g r e s s schedule.
b) P rocedures for interim measurement and r e -view of program (1, p. 13).
Responding Corporat ions ' Use of F o r m a l P lans
As a Guide in Allocating Resources
The corporat ions participating in the Survey of F o r m a l Planning
P r o c e s s P rac t i ce s were asked this question: "In what ways have either
or both the long range plans and short range plans been used to provide
guidance in the allocation of corporate r e s p u r c e s ? " (11).
Some of the more salient comments to this question a re quoted
below (11): We a re an extensive company. We use a project system
within a business plan system within the constraint of over -a l l corpora te capatibility—means forced choice at neares t objec-tive level.
Three annual planning cycles , and th ree are project plan-ning and reporting sys tems. A carefu l assessment is made of corporate r e source utilization.
Long-range plans are essent ial in allocation of corporate r e sources . Long-range plans are inseparable f rom the al loca-tion p rocess .
Strategy of long-range plans guides the allocation of r e -sources as between competing al ternatives in shor t - range plans.
P r o g r a m s must show opportunity for profi table invest-ment— establish pr ior i ty for capital.
213
Short and long-range plans and the evaluation of re turn f rom expected pro jec ts provide the means for allocating r e -sources ; especially where resources have definite l imitations.
Both short and long-range plans a re continuing control mechanisms , worked with almost on a daily bas i s by corporate managements.
These comments tend to indicate that many corporat ions are
utilizing the fo rmal planning process , and the resulting fo rma l plan as
an important manager ia l system in the day-to-day and long-range d i r ec -
tion of corporate operations. To be assured of the maximum benefits
which might be derived f rom the implementation phase of the fo rmal
planning p roces s , corporate management, according to Bower (2), is
faced with the requirement for designing and instituting var ious manage-
ment and organizational sys tems , pol ic ies , and p rog rams which will
compliment the fo rmal planning p rocess .
Management Systems, Pol ic ies and P r o g r a m s Which
Compliment the Fo rma l Planning P r o c e s s
After consulting to ma jo r corporations for severa l y e a r s , Bower
ar r ived at the following conclusions: To be effective, the will to manage must ultimately be
reflected in the purposeful and productive actions of people. There fore , an effective system for managing a company must activate the people in it to pe r fo rm the work required in a p u r -poseful and productive manner .
There are many ways to get people going: o rder them, impose penalt ies on them, advise them, encourage them, fr ighten them, drive them, lead them, inspire them, grant them rewards , motivate them in other ways, and, best of all,
214
let them govern themselves , i. e. use se l f -d i rec t ion and se l f -control.
I believe that the activating package will be most e f fec-tive when it is par t of a management. In fac t , the interdepen-dencies and interrelat ionships of the var ious means for activat-ing people underscore the value of the sys tems approach to managing. When individual activating methods a re integral p a r t s of a total sys tem, they support one another and draw strength f rom other system components. In short , the total interaction makes the activating task eas ie r and m o r e effective (2, pp. 223-224).
The above comments give fu r the r credence to top management ' s
accountability and obligation fo r supporting the fo rma l planning p rocess
with pol ic ies , p rocedures , and p rograms which will permit the g rea t -
est possible decentralization in the implementation of the fo rma l plans.
When the Continental-Emsco Company (3) instituted a fo rma l
planning p rocess the management, on a concurrent bas i s , implemented
the following changes in the over-all management system. These
changes, as listed below, were designed to fos te r a p rogram of decen-
t ra l iza t ion , delegation, diversif icat ion, and company growth.
A program for individual planning which allowed the
incumbent to p r epa re an annual operating plan in accordance
with delegated objectives and goals.
A comprehensive accountability type system of organi-
zation which included a new job evaluation p rogram, account-
ability style of position descr ipt ions, employee compensation
related to delegated accountabilities, and a human r e sou rce s
development system based upon the training gap.
215
.A program which permit ted the accountability type of
per formance appraisal with per formance measurement based
upon individual accountability fo r attainment of delegated cor -
porate objectives and goals.
.A revamping of the control and reporting system with
g rea te r utilization of the computer which provided the increased
opportunity to re la te organizational and individual r esu l t s with
the budgeted resu l t s based upon the long and shor t - range plans.
A complete revision in the chart of accounts and var ious
f inancial schedules to allow for an accountability type system
of report ing.
A complete revision in the fo rma l organization s t ruc-
tu r e with the m a j o r change relating to the establishment of over
100 separate profi t and loss centers .
A capital investment policy manual and procedura l guide-
line to permi t the decentralized implementation of program and
project recommendations involving the commitment of corporate
r e sou rces .
A management acquisition and m e r g e r policy manual
was developed to ass is t corpora te management in the implemen-
tation of the diversif icat ion program. This permit ted g rea te r
effect iveness in the implementation of diversif ication p rograms
and pro jec ts .
216
These m a j o r changes helped contr ibute to a m o r e effect ive
management sys tem which complimented the f o r m a l planning p r o c e s s
at Cont inen ta l -Emsco Company (3), and such changes pe rmi t t ed a
management by r e s u l t s p r o g r a m as descr ibed by Bower (2).
Corpora t ions ' Use of Simulation Techniques in Planning
Recognizing that t h e r e a r e manifold opportuni t ies f o r commi t -!
ting r e s o u r c e s through inst i tut ing va r ious co rpo ra t e p r o g r a m s and p r o -
j ec t s , the Survey of F o r m a l Planning P r o c e s s P r a c t i c e s (11) provided
the m e a n s f o r evaluating the s imulat ion techniques which a r e used in
making r e s o u r c e commitment dec is ions . The surveyed corpora t ions
provided answer s to the following question:
"In what manne r have you uti l ized the s imulat ion technique in
conjunction with the fo rma l i zed planning p r o c e s s ? " (11)
A m a j o r i t y of the r e p r e s e n t a t i v e a n s w e r s to th is question a rg
quoted below (11):
Probabi l i ty s imulat ion of capi ta l expendi tures ; l inear p r o g r a m m i n g mode l s in capi ta l expendi tures and machine t i m e allocation s imulat ion of f inancia l condit ions and f inanc ia l s t a t e -men t s .
We have a s imulat ion of prof i t and loss cash f low, p r o -duction, s a l e s vo lume, c o s t s , m a r g i n s . This model is used fo r examining quickly a s e r i e s of a l te rna t ive product s t r a t eg i e s .
A computer s imulat ion model i s used in p repa ra t ion of the long- range co rpo ra t e plan.
217
Models have been constructed to enable management to a s se s s the likely resu l t s of a number of alternative courses of action, principally in marketing and financial a reas .
Have detailed computerized simulation models of va r i -ous kinds at corporate and division level.
We are real ly just beginning to apply simulation and other management science techniques to fo rmal planning.
Determine al ternatives f rom available courses of action - equipment design, market demand, inventory, and production p rograms .
Limited. Recent accomplishment has been the use of fores t lands simulation, designed to optimize use of land r e -sources .
Computerized model of corporation. Statistical analy-s is of market d a t a b a s e .
Demand model - Financial models - Planning models to a s se s s effects of al ternat ives.
Simulation technique is in the p roces s of being developed. Has been used on a few specialized products .
Just beginning this year with a corpora te model - not yet creditable.
Product line distribution and location of production and " warehouse s i tes . Simulation techniques used for production control. Mathematical design of experiments , simulation to check out and prevent bottlenecks.
None so fa r but very interested in locating a prac t ica l approach to being able to simulate in conjunction with fo rmal planning.
Based on these findings, it is apparent that many of the respond-
ing corporat ions are utilizing the computer and data processing tech-
niques, along with management science, in an effort to c rea te a more
effective formal ized planning process . Since the computer hardware
218
appears to provide the capacity for greater mechanization of formal
planning, the challenge to management centers on the need for design-
ing more effective software. With the software experimentation, which
is being performed in many of the responding f i rms , there should be
continual improvement in the design and implementation of formal plan-
ning processes .
Summary
This chapter provided an opportunity to establish the relation-
ship between the formal plans and the program and project concept of
management. Likewise, important considerations were explored re la-
tive to the long-range or developmental plan and the short-range or
operational plan, with emphasis on the type of management system
which would best support the formal planning process concept of man-
agement.
In the next chapter the control or appraisal aspect of this dy-
namic planning process will be discussed with consideration given to
the periodic recycling of the total formal planning process as a corpora-
tion continues to survive and grow within a dynamic sphere of opportuni-
ties and constraints.
CHAPTER BIBLIOGRAPHY
1. AMF Corpora t ion , Bus iness Unit Planning Guide, New York, March , 1964.
2. Bower , Marvin , The Will To Manage, New York, McGraw-Hi l l Book Co. , Inc. , 1966.
3. Cont inenta l -Emsco Company, pe r sona l conversa t ions with management execut ives , Dal las , 1960-67.
4. Drucke r , P e t e r F . , Managing fo r Resu l t s , New York , H a r p e r & Row, P u b l i s h e r s , Inc. , 1964.
5. Ewing, David W. , The P r a c t i c e of Planning, New York, Ha rpe r & Row, P u b l i s h e r s , Inc. , 1968,
6. Green Edward J. , P r e s i d e n t , Planning Dynamics Incorpora ted , p e r s o n a l conversa t ion , P i t t sburgh , Sep tember , 1968.
7. Planning Dynamics Incorpora ted , Planning and Control Manual, P i t t sburgh , 1968.
8. Russe l l , J a m e s W. , Manager of Planning, AMF Corpora t ion , pe r sona l conversa t ion , New York, June 9, 1964.
9. Stanford R e s e a r c h Inst i tute , A F r a m e w o r k fo r Bus iness P l a n -ning, Confidential Report by Long Range Planning Service . Menlo P a r k , Cal i forn ia , October 21, 1968.
10. Stewart , Robert F . , Manager Planning R e s e a r c h , Stanford R e s e a r c h Inst i tute , pe r sona l conversa t ion , Menlo P a r k , Ca l i forn ia , October 21, 1968.
11. Survey of F o r m a l Planning P r o c e s s P r a c t i c e s , unpublished survey by R. C. Johanson, Denton, Texas , November , 1968. ;
219
CHAPTER IX
APPRAISAL OF PERFORMANCE WITH CORPORATE
PLANS AND RECYCLING OF PROCESS
By concentrating upon the appraisal or control facet of the
fo rmal planning p roces s , this chapter concludes the full cycle review
of the var ious components of the planning p r o c e s s , as described in
Figure 4. Also to be considered in this chapter is the required r ecy -
cling of the total fo rmal planning process due, in pa r t , t o the dynamic
external and internal environmental fo rces of the corporation.
Focus on this facet of the fo rma l planning p rocess br ings about
the recognition of the integral relationship between planning and control;
and, accordingly, "control" o r , as it is often called, "appraisa l" occu- -
pies an important position in the planning p rocess . Due to the analo-
gous relationship between the concept of appraisal and control, the
t e rm "appraisal" will be utilized throughout this chapter when descr ib-
ing the appraisal facet of the fo rmal planning p rocess .
Conceptually, it is possible to break the appraisal p ro -cess into its purely appraisal elements and its planning elements , but such a breakdown is not useful , since in prac t ice the ele-ments occur together.
' In short , planning and appraisal activities a re so closely intertwined in the budgeting p rocess that to descr ibe each of them separately is not only difficult but also pointless—pointless because those concerned with the p rocess usually a re involved
220
221
with and interested in both its planning aspect and in its apprais-al aspect (1, p. 11).
In recognizing the integral relationship between planning and
appraisa l , there is need for realizing that the appraisal function is
s t ructured on a multiple bas is to provide a companion relationship with
the long and shor t - range plans of the corporation.
Anthony (1) o f fe rs the conceptual f ramework of this relat ion-
ship between planning and appraisa l , as shown in Figure 15.
Strategic Planning
V/ Management
Appraisal vj/
Operational Appraisal
f
f
<r
Information Handling
Fig. 15— Planning and Control P r o c e s s e s in Organization-Internally Oriented P r o c e s s
In equating Anthony's (1) planning and appraisal concepts to the
fo rma l planning p roces s , the following relationship is noted:
Anthony1 s P r o c e s s
Strategic Planning
Management Appraisal
Operational Appraisal
Fo rma l Planning P r o c e s s
Face t s of P r o c e s s leading to development of s t ra tegies j
Long-Range Plan (Developmental Plan)
Short-Range Plan (Operational Plan)
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Based on the above noted considerations the fo rmal planning
p roces s , portrayed in Figure 4, is p r imar i ly concerned with th ree
levels of planning and appraisal ; and of necessi ty , there is an interl ink-
ing relationship among these levels;
Corporate Strategy Appraisal
Long-Range or Development Plan Appraisal
Short-Range or Operational Plan Appraisal
In some instances corporat ions will combine corpora te strategy
and the long-range plan into one appraisal sys tem, since in many r e -
spects the long-range plan is the p r imary means fo r implementing the
corpora te s t ra tegies which were formulated within the f ramework of
the fo rmal planning p rocess .
Ewing underscores the import of the appraisal facet of the p ro -
ces s by stating:
Clearly the modern corporation must meet a requirement : a system of effective control. There is probably no leading company in North America or western Europe today that could . be where it is without techniques of management and operations control. Sometimes these a re qualitative: simple repor t s and verif icat ions. More often they are quantitative: f igures on cos ts , sa les volume, p r ice , a s se t s , employee turnover , and so forth (4, p. 5).
Ewing also recognizes the need for a var iable appraisal sys tem:
P r o g r e s s measurements in shor t - t e rm planning are dif-ferent f rom measurements in long-term planning. In the f o r m e r , M. J. Kami (formerly with International Business Machines and Xerox) has noted, actual r esu l t s a re proper ly compared with planned resu l t s . The comparisons can be f i s c a l - - f o r example actual monthly revenues and expendi tures- -as well as phys ica l - -such as sa les productivity, manufacturing output, etc. But in
223
long-term planning such precision is self-defeat ing; there a re m o r e unknowns, more subjective es t imates (4, p. 13).
Corporate Appraisal System for Monitoring Attainment of Objectives and Goals
When designing the corporate appraisal system a m a j o r consid-
eration is the degree of self-direct ion and se l f -control which has been
delegated to incumbents within an environment of corporate decentra l i -
zation. The appraisal system is normally tai lored to a corporation
based upon whether the f i rm is highly central ized, decentralized or
has an approach to management which lies between these two ext remes .
The following proponents of the fo rmal planning p rocess con-
cept of corporate management visualize the p rocess as providing a
f ramework of management which permi t s a high degree of incumbent
sel f -direct ion and sel f -control .
Bower notes:
. . . the control component is s t r ic t ly an information component. True , the information provided is designed to in-duce action. But the action does not follow automatically f rom the information. If it did, the re would be no need for capable managers., The information simply influences manager ia l will, judgment, and init iative--and the managers take whatever action they deem appropriate in the c i rcumstances .
Actually, the t e rm "control" itself is somewhat mis lead-j since control involves changing people 's behavior by mot i - r
vating them in some way. Therefore , I think it may be more ! helpful to give up the concept of "control" as a component in favor of two separa te components: management information and activating people. (In any case the c lass ic notion of control is wholly contrary to the concept of self-control) .
Once we focus on the concept of management information, we can approach the.task simply and directly. What management
224
needs to act ivate and reac t iva te people is (1) informat ion on which to ba se planning, (2) m e a s u r e s of p e r f o r m a n c e of the people involved, and (3) feedback on what i s actually happening. Th is planning i n f o r m a t i o n / p e r f o r m a n c e m e a s u r e m e n t / i n f o r m a -tion feedback cycle i s an informat ion cycle . It p rov ides the b a s i s f o r ac t ion--not the action itself (2, p. 217).
Hughes also u n d e r s c o r e s the concept of s e l f -d i r ec t ion and s e l f -
cont ro l :
Actual p e r f o r m a n c e m e a s u r e m e n t and evaluation provide the cont ro l funct ion. Whether we a r e judging organiza t ional or individual p e r f o r m a n c e , evaluation mus t be unders tood in t e r m s of r e s u l t s achieved. During th is phase the supe rv i so r will have the impor tant t a sk of mediat ing between individual and o rgan i -zation to help each pe r son unders tand just how p e r f o r m a n c e has been s u c c e s s f u l o r unsucces s fu l in re la t ion to objec t ives (6, p. 105).
T h e r e is need fo r re la t ing t he se thoughts on se l f -d i r ec t ion and
s e l f - con t ro l to the r e q u i r e m e n t s f o r monitor ing at tainment of the long-
range and s h o r t - r a n g e p lans of the corpora t ion . A wel l -des igned and
implemented sys tem of f o r m a l planning is e s sen t i a l to a decen t ra l ized
concept of management which c r e a t e s the conditions f o r s e l f -d i r ec t ion
and se l f - con t ro l . Such a sys tem of app ra i sa l , according toKi t che l l (7),
i s imposs ib le u n l e s s the purpose of organized effor t is known and un-
ders tood; and th is is accomplished through the de te rmina t ion of ob jec -
t i ves and goa l s , p lus the designing of a des i r ed c o u r s e of action through
the f o r m a l planning e f fo r t s . These provide the underpinning to the j
m e a s u r e m e n t and audit of accompl i shments of both organiza t ional c o m -
ponents and individuals. •
225
A recent ar t ic le descr ibes the above concept of planning and
appraisal :
A company can implement an effective appraisal system within a Theory Y f ramework- - tha t i s , one in which manage-ment encourages the employees to accept responsibil i ty for planning and evaluating his contributions to the organizat ion 's goals. This approach emphasizes the integration of the employ-ee into the organization, and to a substantial degree it sa t i s f ies the employee's need for ego reinforcement and provides an op-portunity for self-fulf i l lment .
McGregor has recognized the need for an appraisal method that provides a basis for guiding the development of the employee within the corporate world, and he views Pe t e r Drucker ' s concept of "management by object ives" as a good start ing point. This management concept emphasizes employ-ee planning and appraisal (10, p. 16).
Since the fo rma l planning process concept of management r e -
p resen t s an effective means for implementing the management by ob-
jectives sys tem, which is also the bas is fo r self-direct ion and se l f -
control , it becomes logical to assume that the planning p roces s facet J
of appraisal would be compatible with such a system of management.
An Example of a Corporate Appraisal System
Having instituted the fo rma l planning p roces s of management,
thte Continental-Emsco Company (3) designed and implemented a man-
agement by objectives type of appraisal system. The appraisal system
was designed to be compatible with the long-range plan and shor t - range
plan of the company, along with a decentralized concept of management
which permit ted the m o r e effective direction of an international company
226
comprised of operational points located around the world. The sequence
of events relat ive to the design and implementation of the appraisal
system of the Continental-Emsco Company (3) a re summarized below: „
1. The recognition by the chief executive and other co r -
porate of f icers that the company's present system of management
was inadequate. Management also recognized the inadequacy of
company sa les , p rof i t s , re turn on investment, and long-term
survival and growth prospects .
2. The strengthening of general office line and staff off i-
cer and non-officer personnel was required in order to be a s -
sured of having human resource know-how capable of designing
and implementing new systems of management.
3. The consulting organization of Edward N. Hay and
Associates was retained to help introduce into the company the
accountability concept of management. In conjunction with the
consultant, corpora te management designed and implemented an
accountability or objective oriented fo rma l organization s t ruc -
t u r e which included a position description, a listing of account-
abili t ies, and the establishment of a sa lary compensation plan
-using the guide-profi le chart which places emphasis on individ-
ual contributions to corporate objectives and goals (the guide-
prof i le chart is shown in Appendix I). The accountability
concept related to each manager ia l , supervisory , technical ,
227
sales and administrat ive position throughout the company, and
it provided a vehicle for introducing the hierarchy of objectives
and goals on a decentralized bas is .
4. The chief executive appointed a task force of corpo-
ra te of f icers and designated this group the "Company Develop-
ment and Diversification Committee. " This task force group,
aided by the consulting f i rm of A. D. Litt le, Incorporated, de-
signed and implemented a fo rmal planning p rocess which led to
the preparat ion of the f i r s t f ive-year long-range company plan.
Over a two-year period the task force performed the following
functions of the planning p rocess :
a. Environmental analysis.
b. Assessment of company strengths and limitations.
c. Assisted chief executive in formulating broad
company objectives and goals.
d. Designed an assumption base and guiding c r i t e r ia .
e. Assisted chief executive in formulating company
strategy to help close the long-range planning gap.
f. P repa red the f ive-year long-range plan.
5. The comptrol ler , in conjunction with general office
line and staff personnel , revised the annual budgeting process
and instituted a system of shor t - range planning which was built
upon the concept of responsibili ty accounting. Also established
228
was a more integral relationship between the long-range plan
and the shor t - range plan.
6 . The Chief Executive issued a policy statement noting
that fo rmal planning would be per formed on a decentralized ba-
s is with concerned incumbents having the accountability for
prepar ing on a bottom-up basis plans based on incumbent objec-
t ives and goals. This decentralized planning endeavor would be
supported by a need-to-know information inflow f rom the P lan-
ning Department and other staff serv ices . Likewise, the
Planning Department was held accountable for coordinating the
preparat ion of the long-range plan, and the Comptroller coor-
dinated preparat ion of the shor t - range plan.
7. The company's management, in conjunction with
consultative ass is tance f rom Booz, Allen and Hamilton; P r i c e
Waterhouse; and the International Business Machines, Inc. ,
completely revamped the company appraisal system which had
prevailed on a highly centralized bas is fo r many y e a r s , since
top management had not been interested in sharing operational
r esu l t s with non-executive personnel .
The revised appraisal system was s t ructured on aj
decentralized bas is and provided g rea te r compatibility between
the functions of planning and appraisal . Included were over one
hundred profi t and loss or accountability centers . To implement
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this new appraisal system it was necessary to revamp the chart
of accounts and the numerous schedules and repor t s . This al-
lowed for g rea te r utilization of the computer and the decentral -
ized reporting of resu l t s to incumbents who required such
information for the purpose of self-direct ion and se l f -appra isa l
'within the f ramework of company policies and procedures .
8. The utilization of this newly implemented planning
and appraisal system placed Continental-Emsco Company man-
agement in a position of being able to install a management by
objectives program of administration. After a few y e a r s ex-
perience with this concept, incumbent personnel became pro-
ficient in the planning and appraisal e f for ts , and this permitted
the company to p repare a more rea l i s t ic and valid long-range
and shor t - range plan than existed before.
9. The continued refinement of the planning and appra is -
al endeavors was accomplished through the design and use of
capital budgeting and corporate investment planning concepts,
plus the reporting of sa les , prof i t s , and re turn on investment
contributions by product l ines, geographical a rea , and organi-
zational components.
Over a period of severa l yea r s the management of Continental-
Em sco Company (3) has been able to completely r e s t ruc tu re its
planning and appraisal sys tem, and th is new system has allowed
230
for g rea te r employee participation in the a f fa i r s of the company. Like-
wise, the creat ive know-how and drive of a large number of people have
focused upon the survival and growth of the company as it diversif ied
and grew in new a reas of opportunity.
Appraisal Techniques Utilized by Responding Corporations In Monitoring Attainment of Objectives
Several of the corporat ions participating in the fo rmal planning
p rocess survey described specific prac t ices which are utilized in ap-
prais ing the attainment of objectives and goals as p rescr ibed within
the f ramework of the planning p rocess (14):
Appraisal is based on exception reporting.
Fo rma l appraisal at corporate level - -we rely heavily on management by objectives.
Monthly repor t s by each division which compare divi-sional operating plans with actual per formance .
Management information system based on forecas t va r i ances - - a l l emphasis is on forecas t .
Correlat ion of division plans and operating resu l t s to the 5 year corpora te s t rategic plan—exposing resu l t s to oper -ating personnel .
Measurement of the degree of attainment of specific goals in long-range plan is reviewed. This, is used as a "feedback" to monitor actual per formance and to ass is t in the continuous review and reset t ing of objectives and goals. ;
The concept of management by objectives is being in-corporated into compensation and management development p r o -g r a m s .
Responsibility accounting and measurement by key func-tions with per formance to plan on goals.
231
These comments indicate that severa l of the reporting corpora-
tions have or a re implementing a program of management by objectives.
Also in evidence is a h ie ra rch ia l type of appraisal p rogram, as shown
in Figure 15.
Appraisal P rog ram Related to Long-Range and Short-Range Plans
Since corporat ions tend to formulate two basic types of fo rmal
plans; namely, the long-range plan and the shor t - range plan, the re is
a need for considering the types of appraisal sys tems which provide a
companion relationship with the two types of plans.
One important purpose of the long-range plan is to p ro -vide a means for establishing control over per formance in order to achieve desired objectives. Since planning alone does not bring realization of planned resu l t s , the major i ty of the compan-ies participating in this study use a two-stage procedure to make action and resu l t s conform to plans. The approach consis ts of long-range control applied through the long-range plan and shor t -range control and follow-up by means of annual budgets and a routine reporting system. In br ie f , the procedure is as follows:
1. The long-range plan is the guide for preparing the annual budget and defines actions that need to be taken
, now in order to move toward long-range objectives. 2. In preparing the budget, there is yea r -by -yea r
review of p rog res s made toward realization of the long-range plan. To the extent that the long-range plan is incorporated into the annual budget, the usual budgetary control p rocess acts as a control on actions needed to rea l ize long-range plans (9, p. 103).
In summarizing the above noted thoughts about the two general
types of appraisal sys tems , it seems evident that the following charac-
t e r i s t i c s exist:
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Appraisal Attendant to the Long-Range Plan
Since the long-range or development plan re la tes to thQse
objectives, goals , and s t ra tegies which are attained through p rograms
involving diversif icat ion, acquisitions, m e r g e r s , r e s ea r ch and devel-
opment, d ivesture , and other long- range 'programs, there is not a r e -
quirement fo r implementing an appraisal plan that provides the contin-
uous monitoring of resu l t s in comparison with company plans. Many-
companies will compare actual per formance to long-range plans on a
quarter ly or semi-annual basis with the emphasis centering on the c los-
ing of the planning gap. This appraisal system is m o r e centralized
due to the general centralization of the accountabilities for implemen-
tation and attainment of the objectives, goals, and s t ra tegies analogous
with the company long-range plan.
Appraisal Attendant to the Short-Range Plan
The annual budgeting p rocess provides the bas is for an appraisal
system which incumbents and management can util ize in relating actual
r esu l t s with the shor t - range or operational plan of the company.
The appraisal sys tem, which re la tes to the shor t - range plan,
has been described as follows:
Budget control r epor t s are another means of follow-up, especially useful for those objectives which have been quantified and expressed in units which correspond to accounting and bud-getary units. While the usual budget r epor t s will not provide all the necessa ry follow-up information in the most convenient manner , they will se rve as one of the severa l sources of control
233
which a company requi res . Moreover , in those companies which emphasize responsibil i ty accounting, much of the information needed for. control and follow-up of p rog re s s toward objectives will be available as a mat te r of course and special r epor t s will not be necessary . Responsibility accounting is designed to p ro -vide each manager with the data required for effective p e r f o r -mance in his job.
Thus the regular accounting and budget r epor t s will r e -flect p rog re s s made toward quantified objectives having to do with cos ts , income, production, sa les volumes, r a t e s of r e tu rn , and related indices (8, p." 79).
The appraisal system used in conjunction with the shor t - range
annual plan is largely quantitative in nature since the annual objectives
and goals a re usually s t ructured in this manner . Likewise, the com-
mitment of r e sou rces for attainment of the shor t - range plan requ i res
appraisal input on a continuous, weekly, or monthly bas is ; and to p r o -
vide such a sys tem, management has provided the means for a highly
flexible, decentral ized, and t imely approach to company and incumbent
appraisal .
Appraisal of Company Pe r fo rmance Through Utilization of the Computer
Stanford Research Institute says:
Two interesting t rends are occurr ing in the field of mea - -surement . One is the increasing use of a computer linked to special apparatus at work stations that enables an hour-by-hour measurement of schedule per formance or r e source utilization, or both. The second t rend—occurr ing in the p rocess industr ies such as basic chemicals and petroleum—is the tendency to move measurement as f a r ups t ream in the work p rocess as possible. Since the t rend toward computer-based, hour-by-hour m e a s u r e -ment is analogous to the p rocess industry 's monitoring, it appears that measurement of other aspects of business eventually may move fur ther upstream (11, p. 9).
234
Based upon the r e sea r ch findings of Henry (5) the applications
for computers in business planning have increased rapidly in recent
yea r s due to the third generation of computers and the improvements
in management science, plus the great amount of information avail-
able for use in business planning. Computers a re used to simulate al-
ternat ive commitment of r e sou rces or to make a financial analysis of .
profitabili ty using the ra te of re turn on investment concept. Some
f i r m s have used computers in the planning of corporate faci l i t ies to
help determine optimum levels of operation.
According to Steiner (13) some corporat ions have utilized the
computer as a means for storing the long-range and shor t - range plan,
and on a r ea l t ime or periodic bas is actual per formance is stored in
the computer. The capacity and flexibility of the computer pe rmi t s the
design of electronic data processing sys tems which will allow a com-
parison between corporate plans and actual r esu l t s . Such a system is
often s t ructured on a h ierarchy bas is , thus contributing to the es tab- __
lishment of multiple accountability centers throughout the corporation.
Utilization of Computers in Planning As Noted by Respondents
The corporat ions participating in the fo rmal planning process
survey provided the following comments relat ive to the role of comput-
e r s within the planning p rocess (17):
Computers a re used extensively in the development of environmental background data, industry fo recas t s , etc. Also
235
used in scheduling of product inventory control and distribution, plus simulation of opportunities.
Data bases for forecast ing. Monitoring per formance vs . plan.
Economic analysis of specific investment proposals . Demand/supply planning studies. Various specific studies.
Simulation of route and ra te s t ruc tu res . "Costing out" alternative activity assumpt ions-- these are sti l l under devel-opment including broader computer applications to include an industry "model. "
Probabili ty analysis. Simulation models. Data bank.
For allocation of r e sou rces , as well as for fa i r ly com-plex simulation models .
Only for h is tor ica l accumulation of data for the long-range plan. Developing a simulation model for long-range and shor t - range plan.
These responses indicate that marly corporat ions are at tempt-
ing to develop a more sophisticated fo rma l planning p roces s through
g rea te r deployment of the computer and management science techniques.
It is conceivable that with the passage of t ime many corporat ions will
uti l ize to a g rea te r extent the computer in conjunction with the fo rma l
planning p roces s , thus developing a more t imely planning and appraisal
effect iveness.
Considerations Leading to a Recycling i Of the Formal Planning P r o c e s s !
Based on the p remise that the re will be periodic changes in the
environmental influences upon the corporation along with changes in the
236
assumption base and in corporate r e sou rces , the re is need for design-
ing a fo rma l planning p rocess which can be recycled on a pat tern or
special bas is .
Although the period covered in the planning p rocess is typically five y e a r s , companies seldom follow the same plan for more than one yea r . Since they view long-range planning as a dynamic p roces s , most companies p r e f e r to keep their plans current r a the r than retain the same plan unchanged for the duration of the five year period. Nearly all the companies interviewed regular ly rev ise their long-range plans every 12 months. At that t ime they make any necessa ry changes in the planning., Significantly, the companies that rev ise plans an-nually a re largely the same ones where the re exists a high de-gree of integration between s h o r t - r a n g e planning and long-range planning.
The usual procedure for these companies is to put the long-range plan on a "rolling base , " and to maintain a current f ive-year projection by updating and extending it every 12 months.
A very few companies rev ise plans l ess frequently than once a yea r , or do so only "as needed" (9, p. 31).
The National Industrial Conference Board (12) survey on plan-
ning p rac t i ces noted that a major i ty of the respondents rev i se and up-
date the long-range plan once a y e a r , and in some companies there
will be an updating and review more frequently if conditions warrant .
The survey noted the comment of a company president who stated that
"plans can be al tered, changed, or entirely revised at any t ime during
the year in o rder to maintain flexibility and to encourage growth"
(12, p. 8).
An important fea ture of the fo rmal planning p rocess is i ts
ability to recycle and permit management to rev ise in an efficient man-
ner any or all facets of the p rocess . Since objectives and goals a re
237
formulated on a futuri ty bas i s , the re is considerable re l iance by man-
agement on the assumption base concerning future social, economic,
polit ical, and technological t rends and pat terns . With m a j o r change
in the assumption base; e. g. , the country 's involvement with a war ,
the recycling p rocess would probably lead to a revision in the corpo-
ra te objectives, goals , s t ra teg ies , long-range plan, shor t - range plan,
and eventual commitment of r e sources . A system for continuous moni-
toring and appraising of those considerations which could lead to a
recycling of the planning p rocess is vital to this concept of planning.
Summary
This chapter concludes the review and analysis of the fo rmal
planning p rocess as each facet has been discussed in detail within a
respect ive chapter of the disser tat ion. The complexity of the fo rmal
planning process necessi tated that the review be confined to the more
important considerations. In keeping with this approach the previous
chapters have provided an overview of the par t icular facets of the
planning p rocess , and the final chapter is addressed to the linkage
of pa r t s in the application of the fo rmal planning process .
CHAPTER BIBLIOGRAPHY
1. Anthony, Robert N. , Planning and Control Systems: A Framework for Analysis, Boston, Harvard University, 1965.
2. Bower, Marvin, The Will To Manage, New York, McGraw-Hill Book Co. , Inc. , 1966.
3. Continental-Emsco Company, personal conversations with manage-ment executives, Dallas, 1960-67.
4. Ewing, David W. , The Prac t i ce of Planning, New York, Harper & Row, Publ i shers , Inc. , 1968.
5. Henry, Harold W. , Long-Range Planning P rac t i ces in 45 Industrial Companies, Englewood Cliffs , New Je r sey , Prent ice-Hal l , Inc. , 1967.
6. Hughes, Charles L. , Goal Setting, New York, American Manage-ment Association, Inc. , 1965.
7. Kitchell, Raymond E. , "A Summary of Current Planning Concepts, " Dallas, Continental-Emsco Co. , June, 1963.
8. McConkey, Dale D. , How to Manage by Resul ts , New York, American Management Association, Inc . , 1965.
9. National Association of Accountants, Long Range Prof i t Planning, Research Report No. 42, New York, December , 1964.
10. Sloan, Stanley and Alton C. Johnson, "New Context of Personnel Appraisal , " Harvard Business Review, 46 (November-December, 1968), 14-20.
11. Stanford Research Institute, A Framework for Operational Planning, Report No. 357, Menlo P a r k , California, September, 1968.
12. "The Status of Long-Range Planning, " The Conference Board Record, 3 (September, 1966), 7-17.
238
239
13. Steiner, George, Managerial Long-Range Planning, New York, McGraw-Hill Book Co. , Inc. , 1963.
14. Survey of Formal Planning Process Practice®, unpublished survey by R. C. Johanson, Denton, Texas, November, 1968.
CHAPTER X
SUMMARY AND CONCLUSIONS
In th i s f inal chapter t h e r e is ref lec t ion upon many thoughts and
conclusions re la t ive to the s ta te of the ar t of f o r m a l planning. Init ial ly,
and overview or s u m m a r y of the va r ious f ace t s to the f o r m a l planning
p r o c e s s wil l provide background information which will be helpful in
de termining the p r o g r e s s made by the f o r m a l planning movement . Then ,
specif ic attention will be d i rec ted to the hypotheses which w e r e p r e -
sc r ibed in Chapter I. Salient informat ion gained f r o m p r i m a r y and
secondary r e s e a r c h techniques (e.g.-, f o r m a l planning p r o c e s s survey
ques t ionnai re and comprehens ive pe r sona l interviews) wil l be ut i l ized
in tes t ing the hypotheses regard ing the f o r m a l planning p r o c e s s concept
of c o r p o r a t e management . Final ly , the anticipated t r e n d s and m a t t e r s
of f u tu r e concern in f o r m a l planning will be p re sen ted along with poten-
t i a l a r e a s fo r f u r t h e r r e s e a r c h into th is complex subject .
Summary Highlights of Each Face t to the F o r m a l Planning P r o c e s s
Envi ronmenta l Analysis
1. The numerous ex te rna l envi ronmenta l conditions vital ly af-
fec t a c o r p o r a t i o n ' s surv iva l and growth; t h e r e f o r e , management needs
240
241
reliable information about future economic, social, political, techno-
logical, and other business conditions to help serve as a guide in fo r -
mulating assumptions, objectives, goals, c r i t e r ia , s trategy, plus the
long and short- range plans.
2. Corporations involved with formal planning have designed
monitoring systems to permit the continuous appraisal of salient en-
vironmental influences.
3. The assumption base in many respects re lates to environ-
mental considerations; consequently, a significant change in the cor -
porate environment will lead to the restructuring of assumptions.
4. A variety of corporate staff specialists ( e . g . , economists,
planners , market r e s e a r c h e r s , financial special is ts , engineers) are
actively involved in providing environmental information required for
the fo rmal planning process .
5. The corporate planning staff p repa res broad industry studies
(e.g. , plast ics , electronics, pollution control) which are utilized in
conjunction with the formal planning process and the diversification,
acquisition, and merge r endeavors.
6. The corporate planning staff also p repares special studies
which are utilized in the implementation of the long-range and short-;
range plans. These studies provide environmental input data with em-
phasis on product l ines, specific markets , acquisition of given corpo-
rat ions, plus research and development opportunities.
242
7. The environmental analysis data bank is based upon a
corporat ion 's existing and future product /marke t mix, diversification
s t ra teg ies , divestment considerat ions, and ma jo r commitments of c o r -
porate r e sources .
Assessment of Corporate Strengths and Limitations
1. The corporate management, when initially implementing a
fo rmal planning, process, will conduct a depth assessment that is likely
to include the following r e sources : human, f inancial , fac i l i t ies , p ro -
ducts, patent shel ters and uniqueness, equipment, and natural r e -
sources .
2. The management will pursue two basic approaches in a s s e s s -
ing corpora te s trengths and l imitations:
a. Examination of each functional activity.
b. Examination of the total corporate entity.
3. The corporate entity type of assessment helps provide an
insight into the synergistic capabilities of the f i rm .
4. The initial assessment in many corporat ions is conducted
by a management task fo rce , and subsequent assessments a re coordi-
nated by the staff planning department in conjunction with line and staff
personnel . /
5. The assessment of strengths and limitations is based upon
quantitative and qualitative considerat ions, and in some instances this
243
is accomplished on a continuous bas i s , wherein some re sources a re
periodically assessed .
6. The information gained f rom the environmental analysis
facet of a fo rmal planning p roces s is used as a par t of the comparison
base when conducting the corporate resource assessment .
7. The inputs generated f rom the environmental analysis and
assessment of s trengths and limitations provide an important under-
pinning for the formulation of the assumption base and objectives, goals ,
and c r i t e r ia .
Corporate Objectives, Goals, Assumptions And Cr i te r ia
1. The corporation operates, within an extremely dynamic and
ever-changing external and internal environment; consequently, the
formulation of an assumption base which requ i res continual moni tor-
ing and updating is important to the establishment of corporate objec-
t ives and goals.
2. The fo rmal planning p rocess provides management with the
means for formulation of quantitative and qualitative type objectives
and goals which are s t ructured on a h ierarchia l basis in accordance
with organization components and individual incumbents. ;
3. The establishment of objectives and goals in some corpo-
r a t i o n s is accomplished on a bottom up bas is wherein individual
incumbents target respect ive objectives and goals, which a r e
244
communicated upward in the organization s t ruc ture for eventual syn-
thes is and approval.
4. The corporation and its many facets usually comprise a
growth oriented philosophy; consequently, s t re tch or work-toward t a r -
gets a re designed into the objectives and goals.
5. The t e r m s "objectives" and "goals" have at t imes created,
semantical problems, but for this study the following distinctions have
been util ized:
Object ive--broad, quantitative and qualitative s tatements
which provide basic guidelines for corpora te or incumbent ac-
tivity. Objectives a re enduring and often never fully achieved
since over a period of t ime they are usually res t ruc tu red .
Goal—derived f rom an objective and helps pinpoint the
intermediate t a rge t s as r e sources a re committed for the attain-
ment of objectives. The targeting of specific end resu l t s as
related to the factor of t ime is required, with the targeting
usually stated f i r s t on a quantitative bas i s and then a qualita-
tive bas is .
6. The effective preparat ion of objectives and goals f ramework
pe rmi t s the corporation to implement a management by objectives or
management by resu l t s p rog ram, predicated on a high degree of incum-
bent participation in the commitment of r e sources to the attainment of
objectives and goals.
245
7. The corporation benefits f rom the development of c r i t e r i a
since these provide salient guidelines for use in a decentralized organi-
zational environment wherein incumbents a re involved with capital in-
ves tments , diversif icat ion, acquisition, m e r g e r s and r e sea r ch or
development pro jec ts .
8. The objectives and goals establish corpora te direction as
equated to t ime , and this accomplishment is formalized in writing and
communicated throughout the corporation on a need-to-know bas is .
Corporate Strategy
1. The corporation upon formulating its objective and goal
s t ruc ture must design and adopt s t ra tegies which, when implemented,
will provide the right direction fo r the commitment of r e sou rces ; thus,
s t ra tegies re la te to the broad courses of action which a management
must select f rom many different al ternatives.
2. The formulation of s t ra tegies helps provide for a g rea te r
decentralization in the implementation facet of the fo rma l planning p r o -
ces s as incumbents make decisions in the attainment of the long and
shor t - range plans.
3. The corporate s t ra tegies re la te to both the long-range or / i
developmental plans and shor t - range or operational plans, but the '
s t ra tegies in great par t a re implemental through the long-range plan.
4. The s t ra tegies a re changed o r recycled whenever there
is a ma jo r change in the corpora te objectives and goals since
246
s t ra tegies provide the basic thoughts or means for attaining objectives
and goals.
Long-Range or Developmental Plan
1. The corporate long-range plan or development plan, as it is
sometimes called, is a commitment in writing of the corporate objec-
t ives , goals , s t ra tegies , and commitment of r e sources . This commit-
ment culminates in such documents as pro f o r m a income statement,
pro fo rma balance sheet, pro fo rma source and use of funds statement,
pro fo rma cash budget, pro forma.expense statement. In addition to
the above quantitative s ta tements , the long-range plan also includes
non-financial quantitative plans. The non-financial, quantitative com-
mitments culminate in salary administration budget project ions,
magnitude of employee suggestions and ideas, employee turnover pro-
ject ionis, employee safety plans, marketing plans relating to market
penetration, new cus tomers , inventory turnover , and other key a reas
of the business which can be quantified. In most corporat ions the long-
range plan covers a period of five yea r s .
2. The general pract ice followed by many corporat ions is to
update the f ive-year plan on a sliding annual, semi-annual , or continu-
ous bas i s - - t he la t ter being related to an unusual change in the various
facets of the fo rmal planning process which might cause a recycling.
3. The importance and scope of corpora te long-range planning
leads to the requirement for considerable decentralized involvement
247
in the preparat ion of long-range plans for the organizational h ie rarchy ,
and this is usually handled on a bottom up basis with the eventual build-
ing toward a consolidated corpora te long-range plan.
4. The computer has been utilized in recent y e a r s as an aid in
the preparat ion of the long-range plan, and upon completion the f ive-
year plan is stored in the computer for retention and utilization on a
need-to-know bas is .
Short-Range or Operational Plan
1. The corporate shor t - range plan o r , as it is somet imes
called, the operational plan" usually re la tes to the ensuing one year
period; consequently, there is an interrelat ionship between the corpo-
ra te budgeting system and the shor t - range plan.
2. The basic guiding f ramework for the shor t - range plan is
provided by the f i r s t year of the f ive-year long-range plan, and of ne-
cessi ty there is a continual ongoing relationship between the long-
range plan and the shor t - range plan—the la t ter relating to objectives,
goals , s t ra teg ies , and commitment of r e sou rces for an immediate pe -
riod of one year or l ess .
3. The annual shor t - range planning and budgeting p rocess is
very amenable to decentralized involvement; consequently, incumbents
who use an individual planning system are involved in establishing r e -
spective goals and plans for such an immediate period.
248
4. The shor t - range plan ass i s t s in creating a functional or
divisional plan which provides a guiding f ramework for use by incum-
bents and management in making the many daily, weekly, or monthly
decisions attendant to the commitment of corporate r e sou rces .
Appraisal of Pe r fo rmance and Recycling of P r o c e s s
1. The appraisal facet of the fo rmal planning p rocess pe rmi t s
management to periodically or continually monitor attainment of objec-
t ives and goals through implementation of the long-range and shor t -
range plans.
2. The computer is being used by many corporat ions as a
means for the continual or periodic reporting of significant var iances
between corporate shor t - range and long-range plans and the actual
pe r fo rmance being generated by the numerous incumbents and organi-
zational components throughout the corporation.
3. The corporation will uti l ize its appraisal system to help
monitor external and internal environmental influences and especially
those which provide the bas i s for the corporat ion 's assumption base.
4. The appraisal system in many corporat ions pe rmi t s a man-
agement by exception approach to managing the f i rm due to the in ter -
relationship between objectives, goals, long and shor t - range plans ,
and the par t icular design of the appraisal system.
5. The fo rmal planning p rocess is a dynamic and not a static
concept of management; consequently, the re is a requirement for
249
designing the planning p rocess to permi t re lat ive ease for recycling.
In some instances management will recycle the p rocess on the basis
of a set t ime schedule, such as every six months. Additionally, un-
der some c i rcumstances the planning process will be recycled when-
ever there is a ma jo r change inside or outside the corporation which
may affect the attainment of objectives and goals.
State of the Art of P lanning- -Presen t and Future
The r e sea rch which related to the genera l concept of a fo rmal
planning process for the corporation produced the general observation
that various authorit ies (1, 2, 4, 8, 9, 15) are involved with helping
corporat ions introduce a fo rmal planning p roces s , s imi lar in design
to the planning p rocess depicted in Figure 4. Many of the consulting
authorit ies (1, 4, 8, 9, 15) in planning have spent the past severa l yea r s
helping to develop the state of the art of a fo rmal planning process .
Within the past five to seven y e a r s these individuals have been involved
in the application and experimentation with the planning p rocess as
corpora te management recognizes the requirement for thinking and act-
ing in s t rategic t e r m s .
The growing magnitude of available information tends to indicate
that many organizations are more aware of the need for formalized
planning, and this awareness has resulted in par t f rom a limited num-
ber of pioneers who have advocated the need for a more formalized
250
approach to planning. Some managers are participating in seminars
on planning and reading var ious publications on this subject. In addi-
tion the re is the exchange of planning information between management
personnel of various organizations.
As more individuals and organizations develop a g rea te r insight
into the fo rmal planning p roces s , it seems likely that the state of the
art of planning will continue to improve and become more effective.
Some of the planning authorit ies (1, 8, 9, 15) recognize that a gap exists
between the general planning prac t ices of management and the more
sophisticated fo rmal planning p rocess . This observation was also evi-
dent in evaluating the resu l t s of the Survey of Formal Planning P r o c e s s
P rac t i ce s (17) since some large corporat ions commented that top man-
agement is just beginning to recognize a need for instituting a fo rma l -
ized planning process .
During personal consultation with some of the authorit ies (1, 8,
9, 10, 15) it was indicated that the state of the art of planning is in the
embryonic stage, and it is foreseen that in the y e a r s ahead there will
be many evolutionary changes in the planning process of management.
In additional to corporat ions , var ious non-profit organizations and
governmental units a re becoming involved in instituting more fo rma l -
ized approaches to planning. These organizations will also be making
contributions to the s tate of the art of planning.
251
Based upon a growing commitment of r e sou rces to the improve-
ment of formalized planning, there is reason to believe that p rogress
will be forthcoming. The Survey of Formal Planning P r o c e s s P rac t i ces
(17) shows such a commitment t rend.
Conclusions
Conclusions in Relation to the Hypotheses
The p r imary purpose of this investigation was to determine
whether or not a fo rmal planning process exists within a r ep resen ta -
tive group of corporat ions throughout the United States. There is
summarized below relevant comments relating to each of the previous
noted hypotheses, and in the interest of brevity the comments and
thoughts will be s tructured to present the key considerations. In addi-
tion to the five hypotheses the conclusions include comments upon the
following subjects which were discussed in previous chapters : fo rma l -
ized planning p roces ses ' compatibility with management by objectives
and the fact that the planning process necess i ta tes a revision of poli-
c ies and procedures .
Hypothesis 1. - -A substantial and growing number of corpora-
tions within the United States are involved in implementation of more
formal ized and sophisticated planning concepts.
The investigation revealed that there is a growing awareness
of the need for more effective formalized corpora te planning, and
252
according to the r e sea rch the following information tends to support
this t rend toward a formalized approach to planning:
1. From 1965 to 1968, a total of 25 corporat ions have
participated in the Planning Program of the American Manage-
ment Association Learning Center (9) at Hamilton, New York.
One of the main objectives of this program is to help corpora-
tions design and implement the fo rmal planning process .
2. Under direction of Edward J. Green (8),Planning
Dynamics Incorporated has been retained as a consultant for
approximately 50 corporat ions during the past th ree yea r s ,
with the intent of assist ing these f i r m s in the design of a f o r -
malized planning process . Additionally, Green (8) noted that
other corporat ions are discussing with his company the design
and implementation of a fo rmal planning process .
3. The Stanford Research Institute has been conducting
planning seminars for corporate management in various loca-
tions throughout the world; and, according to Stewart (15), the re
is a very decided trend toward a more formalized approach to
corporate planning. The Stanford Research Institute personnel
have functioned as consultants for United States and foreign
corporat ions, with many of the consulting assignments cen te r -
ing on the design and introduction of a planning process .
253
4. The corporat ions participating in the Survey of
Fo rma l Planning P r o c e s s P rac t i ce s (17) conveyed comments
which tend to indicate that various responding f i r m s have or
a re planning to upgrade the planning function. Of par t icular
note a re the responses to the question: "Do you see a trend
toward the development of a formalized and dynamic (continu-
ously revised) approach for short and long run planning ? "(17).
The answers , as recorded in this chapter , tend to indicate that
the planning function is a subject of concern to corporate man-
agement, and action is being taken to improve the planning
p rocess .
5. A fu r the r indication of the g rea te r emphasis upon
planning is the growing participation of corpora te management
in the planning conferences, s emina r s , and workshops p resen t -
ed by the American Management Association (9). These edu-
cational type conferences are being presented throughout the
United States, and in the past few y e a r s the enrollment has
shown a remarkable increase .
6. A recent survey conducted by the National Industrial
Conference Board (16) points out that the respondents ' commit-
ment to long-term planning has been growing.
254
Hypothesis 2. - -The formalized planning concepts may vary
f rom one corporation to another, but there is a common sequential
pat tern prevalent in each concept.
The planning authorit ies have presented various flow dia-
g r ams which represent the sequential pattern of evolvement when
implementing the fo rmal planning process . An analysis of these
d iagrams, plus the written ma te r i a l presented on each facet of the
planning p rocess and the respondents ' comments to the Survey of F o r -
mal Planning P r o c e s s P rac t i ce s (17) reveals that the re is a common
sequential pat tern inherent in the fo rmal planning process . This pat-
te rn consis ts of the following general sequence in fo rmal planning:
1. Environmental analysis
2. Assessment of strengths and limitations
3. Prepara t ion of an assumption base
4„ Determination of objectives
5. Determination of goals
6. Establishment of c r i t e r i a
7. Formulation of s t ra tegies
8. Prepara t ion of the long-range plan
9. Prepara t ion of the shor t - range plan
10. Appraisal of r esu l t s and the recycling of the planning
p rocess
255
The following sources have helped in the delineation of the
common sequential pat tern which is attendant to the fo rmal planning
p rocess :
1. Stewart (15) of the Stanford Research Institute has
commented that the various r e sea rch investigations conducted
by this organization denote that the fo rmal planning prac t ices
of corporat ions tend to follow a basic sequential pat tern . The
noted pattern has been shown in Chapter II.
2. The respondents to the Survey of Fo rma l Planning
P r o c e s s P rac t i ce s (17) indicate that a sequential fo rmal plan-
ning p rocess exists . The various answers to this comprehen-
sive survey indicate that an .integrative relationship exists be-
tween the various face ts of the fo rma l planning p rocess ; l ike-
wise, the various face t s are implemented on a sequential bas is .
3. The planning authority Steiner (13) has observed a
sequential approach to planning based on the fo rma l planning
p rocess as shown in Figure 3. It is recognized that the appli-
cation of the fo rmal planning process may vary based upon such
c i rcumstances as the philosophy of management, international
vs . domestic oriented business , consumer vs . industrial or ien-
tation, etc. But, according to Steiner (13), a b r o a d sequential
pat tern is followed by most f i r m s when instituting a fo rma l
planning p rocess .
256
4. Planning Dynamics Incorporated has designed a
formalized pattern for planning which has been conveyed to in-
t e res ted organizations through their planning and control man-
ual. Green (8) recognizes that variat ions of this conceptual
design is required based on conditions contiguous to a given
organization, but it is also recognized that a bas ic sequential
pat tern is necessary in the interest of effective planning.
5„ The American Management Association (9), when
presenting the planning course to a group of corporate o f f i ce r s ,
ut i l izes an approach to formalized planning which includes a
flow chart that depicts the sequential relationship between m a -
jor facets of the fo rmal planning p rocess .
6„ In reviewing the works of planning authori t ies, of.
note a re these authors who suggest a sequential approach to
formalized planning:
H. Igor Ansoff, Corporate Strategy (1)
Melville C. Branch, The Corporate Planning
P r o c e s s (4)
David W. Ewing, The P rac t i ce of Planning (7)
Brian W. Scott, Long-Range Planning in Ameri -can Industry (12) ;
Charles E. St. Thomas, P rac t i ca l Business Planning (11)
The formalized planning p rocess as shown in Figure 4 conveys
the common or general pat tern of face ts of the fo rmal planning process
257
which appears to be evolving among various corporat ions within the
United States.
Hypothesis 3-. - -The corporat ion 's chief executive possesses
an accountability for providing a general f ramework of management,
and this can be greatly facili tated through the implementation of a f o r -
malized planning p rocess .
Most of the planning authorit ies recognized the vital ro le of
the chief executive when instituting a more fo rmal planning process .
Some experts felt that the p r ime accountability of the chief executive
re la tes to the establishment of a formal planning p rocess f ramework
of management which will allow for the decentralization and delegation
of var ious planning activities. Since the chief executive posses se s
considerable authority in determining how corporate human r e sou rces
will be committed, it is natural to p resume that a formalized planning
p rocess will be most effective in a corporation whose chief executive
helps design, adopt, and whole heartedly implements the planning p ro -
cess .
The role of the chief executive in relation to the fo rmal plan-
ning p rocess was discussed by the following planning authorities:
1. Stewart (15) has utilized the se rv ices of behavioral
scient is ts to help in identifying the ent repreneur ia l cha rac t e r -
is t ics which re la te to the successful introduction of formalized
258
corporate planning. Such a study recognizes the s t rategic role
of the corporate chief executive who occupies a key position
when designing and implementing a more formalized approach
to planning.
2. Green (8), when discussing planning with chief execu-
t ives , des i res to convey the important role of the top executive
in relation to the fo rma l planning process . He noted that the
chief executive should actively part icipate and endorse the ini-
t ia l and continuing planning effor ts of the corporation.
3. Steiner says , "The chief executive is responsible
for corporate planning. The most effective planning is done
when he strongly supports the planning program and exer ts his
influence at appropriate points in the p r o c e s s " (14, p. 313).
Hypothesis 4. - -The re a re indications that the evolving fo rma l -
ized planning p rocess permi t s management the opportunity to become
more oriented to the future survival and growth of the f i rm .
The design of the fo rmal planning p rocess causes management
to ask questions and seek information in regard to the external and in-
t e rna l environmental influences which tend to have a noteworthy impact
on the destiny of a corporation. Since the planning process is designed
to function as a dynamic sys tem, a means is developed for continually
and periodically sensing the important considerations which, in tu rn ,
259
may lead to a change in the assumption base. The integral re lat ion-
ship between the var ious facets of the fo rmal planning process leads
to a chain of events whenever there is a requirement to recycle any
or all facets of the planning process .
Such a dynamic planning system helps management to f i r s t
identify survival and growth considerations; and, secondly, it provides
the means for continually monitoring and acting or reacting to such sur -
vival or growth influences.
Several of the planning authorit ies (1, 2, 3, 4, 7, 8, 9, 13, 15)
have proposed a philosophy of management which centers on the consid-
erat ions relating to the survival and growth of a corporation. This
philosophy of management is inherent in the formal ized planning p ro -
ces s , as proposed by the above noted authorit ies. The focus on s u r -
vival and growth is accomplished, in pa r t , through effective environ-
mental analysis , assessment of strengths and l imitat ions, the delinea-
tion of forward looking objectives and goals, and most importantly, the
preparat ion of a long-range plan which outlines the means for accom-
plishing the corporate objectives and goals.
Hypothesis 5. - -The corporat ion 's long-range and shor t - range
plans a re being integrated on a more effective bas i s through utilization
of the formalized planning p rocess .
260
The fo rma l planning process permi t s the corporation to p repa re
a highly real is t ic long-range plan which usually spans a period of five
yea r s . The bas is for such a long-range plan is the effective implemen-
tation of each fo rma l planning p rocess facet which is to be accomplished
before the preparat ion of the long-range plan. This preparat ion com-
mences with the environmental analysis and is concluded with the de-
terminat ion of corporate strategy. Since the long-range plan is fo rmu-
lated on such a f i rm foundation as provided by the fo rma l planning
p roces s , it is logical to assume that the shor t - range or annual operat-
ing plan will be more completely integrated with the long-range plan.
In some corporat ions the f i r s t year of the f ive-year long-range plan
provides the f ramework which is used in formulating the shor t - range
plan, and it is logical that the re be an integral relationship between
the two types of plans with the shor t - range plan targeting specific ac-
complishments as related to t ime.
The strongest evidence of the integrated relationship between -
a formalized planning process and the long-range and shor t - range plan
was ref lected by the respondents to the Survey of Fo rma l Planning P r o -
cess P rac t i ce s (17). These f i r m s noted that there is a developing in-
terre la t ionship between the long-range and shor t - range annual budget-
ing functions of the f i rm with the long-range plan forming the pe r ime te r
for the shor t - range plans.
261
Compatibility with Management by Objectives
The formalized planning p rocess is compatible with and pe rmi t s
a more effective implementation of management by exception, manage-
ment by objectives, and part icipative management concepts.
The fo rmal planning process appears to offer an effective means
for bringing into the corporation a decentralized concept of management
which is also amenable to management by objectives. This philosophy
of management pe rmi t s incumbent involvement within the f ramework of
the fo rmal planning p rocess which provides a basis for the founding of
h ie ra rch ia l type objectives and goals. The information banks of the plan-
ning p rocess help to establish more valid and rel iable objectives and goals
for var ious incumbents and organizational components which a re extended
the authority to commit r e sources to the attainment of decentralized ob-
jectives and goals.
Additionally, the fo rmal planning p rocess , assisted by the e s -
tablishment of an appraisal system, is vital to a program of management
by objectives and allows for the decentralized part icipative involvement
of corporate personnel.
The following sources tend to substantiate the desired in t e r r e -
lationship between the fo rmal planning p rocess and a management by ; '
objectives p rogram:
1., Green (8), during a discussion with Pe t e r F. Drucker
regarding the fo rmal planning process movement in the United
262
Sta tes , developed the thought that the f o r m a l planning p r o c c s s
provides .an impor tant foundation fo r implementing a m a n a g e -
ment by object ives or management by r e s u l t s p r o g r a m . Accord-
ing to Green (8),various client co rpora t ions a r e in te res ted in
instituting both a f o r m a l planning p r o c e s s and a management by
objec t ives p r o g r a m .
2. The accountabili ty approach to management is another
designation which can be used when descr ib ing management by
ob jec t ives , and according to Rock (10),there is a growing kinship
between the concept of accountabili ty management and fo rma l i zed
planning. As Managing P a r t n e r of a consult ing f i r m which has
helped pioneer the management by objec t ives movement , Rock (10)
f o r e s e e s a r equ i r emen t f o r the Edward N. Hay and Assoc ia tes
consulting f i r m to d ivers i fy by providing consultat ion in the a r e a
of fo rma l i zed planning. Corpora te c l ients a r e in te res ted in
insti tuting accountabil i ty management or management by ob jec-
t ives and a m o r e fo rma l i zed approach to co rpo ra t e planning.
Planning P r o c e s s Necess i t a t e s Revision Of Po l i c i e s and P r o c e d u r e s
The va r ious management p r o g r a m s , po l ic ies , p r o c e d u r e s , and
p r a c t i c e s of a corpora t ion a r e being revamped to pe rmi t a m o r e in tegra l
re la t ionship with the f o r m a l planning p r o c e s s .
263
The corpora t ions responding to the survey and author i t ies in-
volved with f o r m a l planning have met a r equ i r emen t to r e s t r u c t u r e
many of the t rad i t iona l management aids. As previous ly noted, t h e r e
is a r equ i r emen t to develop a d i f ferent type of posit ion desc r ip t ion ,
identif ication and l is t ing of incumbent accountabi l i t ies , gu ide-prof i l e
job evaluation plan, an employee compensat ion plan t ied to object ives
and goa ls , a p r o g r a m fo r individual planning, the r e s t r u c t u r i n g of p e r -
f o r m a n c e app ra i sa l p lans , and also the revamping of the char t of ac -
count and the redes ign of accounting and f inancia l schedules or r e p o r t s .
The va r ious e lec t ronic data p rocess ing sy s t ems have been designed to
provide g r e a t e r compatibi l i ty with the f o r m a l planning p r o c e s s concept
of management .
Comments by many of the responding co rpora t ions to the survey
ques t ionnai re indicate continued exper imenta t ion with va r ious manage -
ment aids to pe rmi t the f u r t h e r support of a fo rma l i zed concept of
planning.
An example of the r equ i remen t fo r a r e s t r u c t u r i n g of the v a r i -
ous management po l ic ies , p r o g r a m s , and p r a c t i c e s was descr ibed in
Chapter VIII, especia l ly in re la t ion to the Cont inenta l -Emsco Company
(6). This f i r m , uti l izing va r ious management consul tants and the
t a len t s of company management , revamped ce r t a in management pol i -
c i e s , p r o c e d u r e s , and p r a c t i c e s to provide the n e c e s s a r y compatibi l i ty
with the f o r m a l planning p r o c e s s .
264
This investigation into co rpo ra t e f o r m a l planning p r a c t i c e s ,
in gene ra l , r e v e a l s that co rpora t ions a r e ut i l izing an in tegrated p lan-
ning p r o c e s s which usual ly includes the f a c e t s to planning shown in
F igure 4. T h e r e was no evidence that all co rpora t ions have become
involved with the implementat ion of a fo rma l i zed planning p r o c e s s ,
but t h e r e a r e a suff icient number of corpora t ions which have ins t i -
tuted a r a t h e r sophis t icated f o r m a l planning sys tem to a r r i v e at the
conclusion that planning is evolving into a m o r e fo rma l i zed sys t em.
Responding Corpora t ions Comment On Fo rma l i zed Planning P r o c e s s T r e n d s
Dealing with the hypotheses which r e l a t e to the f o r m a l planning
p r o c e s s concept of management , the Survey of F o r m a l Planning P r o -
c e s s P r a c t i c e s (17) p re sen ted an opportunity to s e c u r e comments on
the s ta te of the ar t f o r co rpo ra t e planning. The par t ic ipa t ing c o r p o r a -
t ions w e r e asked to answer th i s question: "Do you see a t r end toward
the development of a fo rma l i zed and dynamic (continuously revised)
approach fo r shor t and long run planning? "(17).
The responding corpora t ions expressed the following thoughts
in r e g a r d to th i s c r i t i c a l question (17):
Yes . £l6 co rpora t ions responded in th i s manner^) j
We a re t h e r e now.
Yes. M o r e important ly the s a m e manage r who works on s h o r t - r a n g e plan mus t be cognizant of long- range objec t ives
265
and s t ra tegies . Vice v e r s a t rue . Short-range keeps long-range f rom being "blue sky stuff" in many top manager ' s eyes.
Certainly p r io r to 1975 this will be on line.
We would like improved objectives and follow up (related more closely to per formance measurement and salary). At this stage we will not formally rev ise more often than annually.
We believe we a re using a dynamic short and long range planning system now. We have fo rmal planning, but any plan-ning must have a high degree of flexibility.
I think the p rocess is improving. Management in total is more involved and responsive. Management by objectives has rea l potential.
Yes, this is one of my depar tment ' s main miss ions .
Yes, but it is painful and not instantly imminent.
Formalized planning has been in effect since 1961 with emphasis on annual planning,cycle (pr imary benchmark is an-nual of f -s i te meeting where long-range plans a re presented to Board of Directors) . P ro jec t plans are developed and serve as the per formance standard for period.
Yes, well managed and successful companies a r e devel-oping more formalized and dynamic approaches to short and long-range planning. Each company requires a tai lored plan.
Yes, but 3 to 5 yea r s away.
Yes, revisions as necessary .
Yes, but grandiose or theoret ical planning not an inte-g ra l par t of every day opera t ion-- i s c lear ly of little interest or effect iveness.
t
No r ea l ground swell, but f i r m s using planning on a reasonably fo rmal bas is seem enthusiastic based on resu l t s both tangible and intangible.
Yes, the trend toward continuous planning is evident. The f i r s t emphasis , however, has to be the improvement of
266
planning content to focus m o r e exactly on decision demands and t imely action p r o g r a m s . Improvements in planning me thod-ology a r e impor tant and a r e being developed.
No m o r e than what we have been employing fo r the pas t 3 to 4 y e a r s .
A few y e a r s ago we saw a t r end toward developing broad c o r p o r a t e planning depar tmen t s . Now we see m o r e development of segmenting the va r ious f ace t s of planning into the funct ional a r e a s of the company where the planning can have the g r e a t e s t impact . At the top level only a ve ry s m a l l staff ass i s t ing the p res iden t .
We a r e not r eady fo r th is .
Yes , but th i s i s ex t remely slow fo r a company th i s l a rge and one being in the commodity type bus iness .
Yes , we a r e and have been developing and ref ining our planning in those a r e a s — f o r 10 or m o r e y e a r s .
Yes , we work continuously throughout the y e a r to keep planning assumpt ions up-dated and usab le f o r dec is ions on a l lo-cation of r e s o u r c e s . T h e r e is cons iderab le ski l l developing throughout the company in planning.
The availabil i ty of computer p r o g r a m s and build-up of co rpo ra t e data banks wil l definitely move planning toward a m o r e fo rma l i zed and dynamic condition. Storing up input data and assumpt ions and using dynamic mode l s , a fol low-up on p lans and t imely rev i s ions seem within g r a s p .
Yes , no doubt about i t - - any m a j o r company that doesn ' t do th i s will be left behind.
These r e s p o n s e s r e f l ec t the in te res t exist ing within many c o r -
pora t ions fo r the f u r t h e r improvement in fo rmal i zed planning, and some
of the commen t s indicate that some f i r m s have designed and implemen-
ted r a t h e r sophis t icated f o r m a l planning s y s t e m s . Based on such a
high in t e r e s t l eve l ,management , during the immedia te y e a r s ahead,
267
will possibly experience many break-throughs as there is the continued
attempt to ref ine the fo rma l planning p rocess concept of management.
Areas for Fur the r Research
During the course of this investigation the exposure to formalized
planning indicated that the re a re many a reas requiring r e s e a r c h and
depth analysis. Research in the following a reas should provide valuable
ass is tance to all facets of society which might benefit f rom more effec-
tive planning prac t ices . The a reas for fu r the r r e sea rch are
1. Centralized vs. the decentralized approach to f o r -
mal planning,
2. Utilization of the computer to fu r the r support a dy-
namic fo rma l planning process .
3. Techniques for developing and monitoring an assump-
tion base tai lored to a given corporation.
4. The establishment and implementation of a more ef-
fect ive objective and goal s t ruc ture as established for incum-
bents of varying organizational levels throughout the corporation.
5. Role of the central planning staff in relation to the
fo rmal planning process .
6. A depth analysis of the relationship between the f o r -
ma l planning p rocess concept and the management by objective
concept.
268
7. The behavioral science considerations attendant to
the formal planning process concept of management.
8. Interrelationship between management policies,
pract ices, programs, and the formal planning process.
CHAPTER BIBLIOGRAPHY
1. Ansoff, H. Igor , Corpora te Strategy, New York, McGraw-Hi l l Book Co. , Inc. , 1965.
2. Appley, Lawrence A. , "If I Were P r e s i d e n t , " Management News, 41 (October, 1968), 1.
3. Bower , Marvin , The Will To Manage, New York, McGraw-Hi l l Book Co. , Inc. , 1966.
4. Branch , Melvil le C. , The Corpora te Planning P r o c e s s , New York, Amer ican Management Associat ion, Inc. , 1962.
5 . , Planning: Aspects and Applicat ions, New York , John Wiley & Sons, Inc. , 1966.
6. Cont inen ta l -Emsco Company, pe r sona l conversa t ion with manage-ment execut ives , Dal las , 1960-67.
7. Ewing, David W. , The P r a c t i c e of Planning, New York, H a r p e r & Row, P u b l i s h e r s , Inc. , 1968.
8. Green , Edward J. , P r e s i d e n t , Planning Dynamics Incorpora ted , pe r sona l conversa t ion , P i t t sbu rgh , Sep tember , 1968.
9. Kasten , M e r r i t t L. , D i r e c t o r , Management Learning Cente r , Amer ican Management Associa t ion, pe r sona l conversa t ion , Hamil ton, New York , September 17, 1968.
10. Rock, Milton, Managing P a r t n e r , Edward N. Hay and Assoc ia t e s , pe r sona l conversa t ion , Phi ladelphia , Sep tember , 1968.
11. St. T h o m a s , Char le s E. , P r a c t i c a l Bus iness Planning, New York, Amer ican Management Associa t ion, Inc. , 1965.
12. Scott , Br ian W. , Long-Range Planning in Amer ican Indust ry , New York , Amer ican Management Associat ion, Inc. , 1965.
269
270
13. Steiner, George A. , "Long-Range Planning: Concept and Imple-mentation, " Financial Execirtive, 34 (July, 1966), 54-61.
14 . , editor, Managerial Long-Range Planning, New York, McGraw-Hill Book Co, , Inc. , 1963.
15. Stewart, Robert F. , Stanford Research Institute, personal conversation, Menlo P a r k , California, October 21, 1968.
16. "The Status of Long-Range Planning, " The Conference Board Record, 3 (September, 1966), 7-17.
17. Survey of Fo rma l Planning P r o c e s s P rac t i c e s , unpublished survey by R. C. Johanson, Denton, Texas, November, 1968.
APPENDIX A
272
SURVEY OF FORMAL PLANNING PROCESS PRACTICES
Summary of Responses
Total number of corporations receiving questionnaire 205 Total number of corporations answering questionnaire . . . . 52 Total number of corporations responding but not returning
questionnaire 14 Total number of responding corporations 66 P e r cent of total number of corporations responding to
survey 32
Title of Corporate Officers Completing Questionnaire
Title
President Executive Vice President Senior Vice President Vice P res iden t -Treasu re r -Di rec to r Vice Pres ident , Finance Vice Pres ident , Corporate Planning -Assistant to President Director of Corporate Planning . . Director , Economics Manager Management Controls . . . Assistant Director , Corporate Planning Corporate Planner
Number
2 3 1 1 3 8 2
23 1 1 4
•_3 52
Size of Corporations Completing Questionnaire (By Sales Volume)
Sales Number of Corporations
$3 billion and larger 7 1 - 3 billion H 800 - 1,000 million 5 600 - 800 million. . 8 400 - 600 milLon 200 - 400 million 9 100 - 200 million 6
273
Array by Industry of Corporations Completing Questionnaire
Industry Number of Corporations
Machinery 7 Elect ronics and Elec t r ica l 6 Foods 6 Transportat ion . . 5 Consumer - Non Food 5 Fo res t ry and Paper 4 Petroleum and Coal . . . . 3 Insurance 3 Recreation 2 Steel 2 Banking Packaging . . . . Material Handling Utilities Rubber Goods Drugs . . . . . . . . Paints and Glass . . . Chemicals Consumer - Appliances
52
274
Corporations Who Received the Forma l Planning P r o c e s s Questionnaire
Company
Addressograph Multigraph Corp. Aluminum Company of America American Airlines American Can Company American Machines & Foundary Co. American Standard Incorporated
#American Telephone & Telegraph Co. Armco Steel Corporation Armstrong Cork Company "Automatic" Sprinkler Corporation . Avon Products Incorporated Babcock & Wilcox Company Bangor Punta Corporation
*Bank of America Bell & Howell Company
*Bemis Company Black & Decker Company Blaw-Knox
*Boeing Company Boise Cascade Corporation Borden, Incorporated Borg-Warner Corporation
^Brunswick Corporation Budd Company Burroughs Corporation
* Cabot Corporation Calumet & Hecla Campbell Soup Company
#Carnation Company C a r r i e r Corporation Caterpi l lar Trac tor Company Central Soya Company Certa in- teed Products Corporation Chase Manhattan Bank Chicago Pneumatic Tool Company Chrys ler Corporation
*Cincinnati Milling Machine Company *Clark Equipment Company *Clevite Corporation
Headquar ters
Clevelandj Ohio Pi t tsburgh, Pennsylvania New York, New York New York, New York New York, New York New York, New York New York, New York Middleton, Ohio Lancas te r , Pennsylvania Cleveland, Ohio New York, New York New York, New York New York, New York San Franc isco , California Chicago, Illinois Minneapolis, Minnesota Tow son, Maryland Cleveland, Ohio Seattle, Washington Boise, Idaho New York, New York Chicago, Illinois Chicago, Illinois Philadelphia, Pennsylvania Detroit , Michigan Boston, Massachuset ts , Des P la ines , Illinois Camden, New Je r sey Los Angeles, California New York, New York Peo r i a , Illinois For t Wayne, Indiana Ardmore , Pennsylvania j New York, New York New York, New York Detroit , Michigan Cincinnati, Ohio Buchanan, Michigan Cleveland, Ohio
275
Coas ta l States Gas Producing Company Coca Cola Company-Colt Indus t r ies Incorpora ted
* Combustion Engineer ing Corpora t ion Commonwealth. Edison Company
* Consolidated Edison Company Container Corpora t ion of A m e r i c a Continental Banking Company Continental Can Company Continental Oil Company
* Control Data Corpora t ion * Cooper Indus t r i e s , Incorpora ted
Corn P r o d u c t s Company Corning Glass Works Crane Company Crown Cork & Seal, Incorpora ted
* Crown Ze l le rbach Corpora t ion * Cummins Engine Company
Cur t i s s -Wr igh t Corpora t ion C u t l e r - H a m m e r , Incorpora ted Deere & Company Dow Chemica l Company
* D r e s s e r Indus t r i e s , Incorpora ted , * DuPont de Nemours & Company
E a s t m a n Kodak Company E m e r s o n E l e c t r i c Company
* Equi table Life Assu rance Society of the United States
Evans P r o d u c t s Company FMC Corpora t ion Fa i rch i ld C a m e r a & Ins t rument Corp. F e d e r a l Pac i f i c E l e c t r i c Company F ib reboa rd Corpora t ion F ie lde r est Mi l l s , Incorpora ted F i r e s t o n e T i r e and Rubber Company F i r s t National City Bank
* Ford Motor Company Fruehauf Corpora t ion G a r d n e r - D e n v e r Company Gene ra l Aniline & Fi lm Corpora t ion Gene ra l E l e c t r i c Company
* Genera l Foods Corpora t ion Gene ra l Host Corpora t ion
* Gene ra l Mi l l s , Incorpora ted Gene ra l Moto r s Company
Corpus Chr i s t i , Texas New York , New York New York, New York Cleveland, Ohio Chicago, I l l inois New York , New York Chicago, I l l inois New York , New York New York, New York New York, New York Minneapol i s , Minnesota Houston, Texas Englewood Cl i f f s , N. J . New York , New York New York , New York Phi lade lphia , Pennsy lvan ia San F r a n c i s c o , Ca l i forn ia Columbus, Indiana Woodridge, New J e r s e y Milwaukee, Wisconsin Moline, Ill inois Midland, Michigan Da l l a s , Texas Wilmington, Delaware R o c h e s t e r , New York St. Louis , M i s s o u r i
New York , New York Po r t l and , Oregon San J o s e , Ca l i forn ia Lyosse t t , New York Newark , New J e r s e y San F r a n c i s c o , Ca l i fo rn ia Spray, N. Caro l ina Akron, Ohio New York, New York Dea rbo rn , Michigan De t ro i t , Michigan Quincy, I l l inois ; New York , New York New York , New York White P l a i n s , New York New York , New York Minneapol is , Minnesota De t ro i t , Michigan
276
Genera l Telephone & E l e c t r i c Corpora t ion Genesco Incorpora ted Geo rg i a -Pac i f i c Corpora t ion
* Gil let te Company *Goodyear T i r e & Rubber Company
G r a c e (W. R . ) & Company Grea t Atlantic & Pac i f i c T e a Company
*Green Giant Company G r o l i e r , Incorpora ted Gulf & Wes te rn Indus t r i e s , Inc.
*Gulf Oil Corpora t ion * H a m m e r m i l l P a p e r Company
H a r r i s - I n t e r t y p e Corpora t ion Ha r t , Schaffner & Marx Hewle t t -Packa rd Company Hoerner Waldorf Corpora t ion Honeywell , Incorpora ted Hoover Company
*Indian Head Corpora t ion Ingerso i l -Rand Company Inland Container Corpora t ion
^Internat ional Bus iness Machines Corp . In ternat ional Ha rves to r Company Internat ional Minera l s & Chemical
Corpora t ion *Internat ional P a p e r Company
Internat ional Silver Company Internat ional Telephone & Te legraph
Corpora t ion *1. T . E . Circui t B r e a k e r Co. *Itek Corpora t ion
J . C. Penney Company, Inc. *John Hancock Mutual Life Insurance Co. Johns Manvil le Corpora t ion Johnson & Johnson Joy Manufactur ing Company Ka i se r Indus t r ies Corpora t ion Kelsey-Hayes Company K e r r - M c G e e Corpora t ion
#Kimber ly-Clark Corpora t ion #Koehring Company *Koppers Company Kroger Company
#Lever B r o t h e r s Libby-McNei l l '& Libby
New York, New York • Nashvi l le , T e n n e s s e e New York, New York Boston, Massachuse t t s Akron, Ohio New York , New York New York , New York LeSueur , Minnesota New York, New York New York , New York P i t t sbu rgh , Pennsylvania E r i e , Pennsy lvan ia Cleveland, Ohio Chicago, I l l inois Pa lo Alto, Ca l i fo rn ia St. Pau l , Minnesota Minneapol is , Minnesota North Canton, Ohio New York, New York New York , New York Indianapol is , Indiana New York , New York Chicago, I l l inois
Skokie, I l l inois New York , New York Mer idan , Connecticut
New York , New York Cincinnat i , Ohio Lexington, Massachuse t t s -New York , New York Boston, M a s s a c h u s e t t s New York, New York . New Brunswick , N. J . P i t t sbu rgh , Pennsylvania Oakland, Ca l i fo rn ia Romulus , Michigan Oklahoma City, Oklahoma Neenah, Wisconsin Milwaukee, Wisconsin P i t t sbu rgh , Pennsylvania Cincinnat i , Ohio R o t t e r d a m , The Nether lands Chicago, I l l inois
277
*Ling-Temco-Vought , Incorpora ted •Lockheed A i r c r a f t Corporat ion
Manufac tu r e r s Hanover T r u s t Maytag Company McGraw-Edison Company McGraw-Hi l l , Incorpora ted
*Mead Corpora t ion *Merck & Company *Metropoli tan Life Insurance Co. *Minnesota Mining & Manufactur ing Co. #Mobil Oil Corpora t ion
Morgan Guaranty T r u s t of New York Motorola Incorpora ted
^National Biscui t Company ^National Cash Reg i s t e r Company #New York Life Insurance Company
Otis E leva to r Company * Owens-I l l inois , Incorpora ted
Pac i f i c Gas & E l e c t r i c Company Pan Amer ican World Ai rways , Inc. Penn Cen t ra l Company Pennsa l t Chemica ls Corpora t ion
*Peps iCo, Incorpora ted Pe t Incorpora ted Ph i l l ips -Van Heusen Corpora t ion P i l l sbu ry Company P i tney -Bowes , Incorpora ted P i t t sburgh P la t e Glass
' ' 'Polaroid Corpora t ion P r o c t o r & Gamble Company
#Pruden t i a l Insurance Company of A m e r i c a
Radio Corpora t ion of A m e r i c a *Ralston P u r i n a Company Raytheon Company Rex Chainber t , Incorpora ted Rexal l Drug & Chemica l Company
^Reynolds Meta ls Company Reynolds (R. J . ) Tobacco Company Rheem Manufactur ing Company Rockwell Manufactur ing Company Safeway S to res
#Scott P a p e r Company # S e a r s , Roebuck
Sherwin-Wil l iams Company
Dal las , Texas Burbank, Ca l i fo rn ia New York , New York Newton, Ohio Elgin , I l l inois New York , New York Dayton, Ohio Rahway, New J e r s e y New York , New York St. P a u l , Minnesota New York , New York New York , New York Frank l in P a r k , I l l inois New York , New York Dayton, Ohio New York, New York New York , New York Toledo, Ohio San F r a n c i s c o , Ca l i fo rn ia New York , New York Phi lade lphia , Pennsy lvan ia Phi lade lphia , Pennsylvania New York , New York St. Louis , M i s s o u r i New York , New York Minneapol is , Minnesota Stanford, Connecticut P i t t sbu rgh , Pennsylvania Cambr idge , Massachuse t t s Cincinnat i , Ohio
Newark , New J e r s e y New York , New York St. Louis , M i s s o u r i Lexington, Massachuse t t s West Milwaukee, Wise. Los Angeles , Ca l i forn ia Richmond, Virginia Wins ton-Sa lem, N. C. New York, New York P i t t sbu rgh , Pennsylvania Oakland, Cal i forn ia Phi lade lphia , Pennsylvania Chicago, I l l inois Cleveland, Ohio
278
Singer Company Smith, (A. O.) Corporation Southern California Edison Company Southern Pacif ic Company Sperry Rand Corporation Staley Manufacturing
* Standard Oil Company Stewart-Warner Corporation
*Studebaker-Worthington, Inc. Square D Company TRW, Incorporated
#Teledyne Incorporated Tenneco Incorporated
# Texaco, Incorporated *Texas Ins t ruments , Incorporated
Textron Incorporated Time Incorporated Timken Roller Bearing Company
* T r a n s World Airways, Inc. U. S. Industr ies , Incorporated U. S. Plywood-Champion P a p e r s , Inc. United Air Lines, Incorporated United States Steel Corporation
v Union Carbide Corporation Union Tank Car Company Victor Comptometer Corporation Warner & Swasey Company Western Elect r ic
*Westinghouse Air Brake Corporation *Westinghouse Elect r ic Corporation
Weyerhaeuser Company v Whirlpool Corporation
Wyandotte Chemicals Corporation Xerox Corporation
* Youngstown Sheet and Tube Company
New York, New York Milwaukee, Wisconsin Los Angeles, California San Franc isco , California New York, New York Decatur , Illinois New York, New York Chicago, Illinois New York, New York P a r k Ridge, Illinois Cleveland, Ohio Los Angeles, California Houston, Texas New York, New York Dallas, Texas Providence, R. I. New York, New York Canton, Ohio New York, New York New York, New York New York, New York Chicago, Illinois New York, New York New York, New York Chicago, Illinois Chicago, Illinois Cleveland, Ohio New York, New York New York, New York New York, New York Tacoma, Washington Benton Harbor , Michigan Wyandotte, Michigan Rochester , New York Youngstown, Ohio
^Corporations answering questionnaire
^Corporations responding but not retu'rning questionnaire
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When completed please return to: Formal Planning Process Project School of Business North Texas State University Denton, Texas 76203
FORMAL PLANNING PROCESS
Companies are moving beyond the preparation of the traditional 5-year type plan and are now engaged in the design and implementation of a dynamic formalized planning process. This research questionnaire should assist in determining the current state-of-the-art of the planning process. Preliminary research indicates a greater degree of integral relationship between such facets of management as environmental analysis, assessment of the firm's resources, formulation of objectives/goals, projection of assumptions, criteria, and strategies, the interlinking of long-range plan-ning with short-range planning, and the use of a control system which permits dynamic re-cycling.
Please answer the following questions by circling (yes) or (no) or writing in. Use additional sheets as required. Whenever it will be helpful, include company documents to supplement your response.
I. Environmental Analysis
1. Does your company prepare broad industry studies to determine economic, technological, social, and political trends and patterns (e.g. plastics, pollution equipment, recreation)? Yes No
If yes, what were some of the industries studied?
2. What organization component(s) prepares the industry studies?
3. Check below how the industry studies were utilized:
Formulation of Objectives/Goals Diversification
Product Planning-Lines, Mix, etc. J Reallocating Investment
Process Planning-Technology, Assessment of Company's
Methods, Facilities, etc. Performance
Acquisition/Merger . Research and Development
Divesture Other (Specify)
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- 2 -
4. Check below the sources of information utilized in preparing environmental studies:
SIC Data University Facilities
Company Directed Market Governmental Studies
Research Studies
Services of Consultants Other Firms
Trade Associations Professional Associations
Company's Data Bank Others (Specify)
5. To what degree has the program of environmental analysis helped in developing more reliable and valid objectives and goals? (Check one)
Extremely Beneficial Moderate Limited
6. What factors seem to be of key importance in determining when and how there should be an assessment of the environmental influences upon the firm?
7. (a) Have you formulated a monitoring system which permits the continuous appraisal of the economic, tech-nological, social, and political influence upon the firm? Yes No
If yes, please describe.
(b) If such a monitoring system exists, under what conditions will it contribute to the reformulation of your short or long range plans?
- 3 - 281
H. Assessment of Corporate Strengths and Limitations
L Attendant to your long range planning process, what approaches and techniques do you employ in evaluating the firm's relative strengths and limitations? Please consider the following areas:
Area Appraisal Techniques Frequency
(a) Human Resources
(b) Facilities
(c) Financial Resources
(d) Other
2. Check below if your assessment program encompasses the following:
Extent of annual dollar volume and growth rate
Degree of market saturation present
Market penetration and historical and anticipated trends
Dollar volume by product and major customers
Technological patterns
Quality and depth of company organization
Demonstrated company profit margins and rate of return on investment
Product design, quality, performance
Product cost, price, production
Marketing effectiveness
Patent shelters or identification of uniqueness
• 4 * 2 8 2
ill. Formulation of Objectives and Goals
L Has the company, to an increasing extent, derived objectives from a careful analysis of future developments and potentials based on environmental analysis data and company strengths/limitations? Yes No
2. What contributions are made to the formulation of objectives/goals by:
Corporate staff:
Division personnel:
Individual incumbents:
3. Check below if objectives and goal setting encompasses the following:
Hierarchy or descending scale of objectives/goals
Standards of performance
Quantitative and qualitative objectives/goals for individuals
Linking of performance appraisal and the individual's objectives/goals
Linking employee compensation plan to objectives/goals
Basing management by results or management by exception on objectives/goals
IV. Preparation of Assumptions and Strategies
1. Do you formulate specific assumptions (quantitative and qualitative estimates of future developments which will have a substantial impact on your business) to provide a frame of reference for planning? Yes No
2 8 3
2* Note below if there are areas where you quantify/qualify assumptions periodically or continuously:
Area By Whom How Often
Fiscal policy
Monetary conditions
General price patterns 1
Foreign trade
_ _ Consumer spending
Technological impact on product lines
Population trends
_ _ _ Human resources
Money and capital markets
Legislation
_ _ Sociological pressures and Changes
Market conditions (trends/patterns)
Securities markets
Transportation/material costs
Gross national product
Other (please note)
3. Describe the approach you employ in the development of specific strategies, programs, and projects to capita-lize on strengths, correct weaknesses, solve problems, seize opportunities and accomplish objectives (Le., priorities, project scheduling, formulation of a course of action).
V. Interrelationship with Short Range Plans
1. In what ways have long range plans been used to provide guidance in the formulation and implementation of short range plans?
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2. In what ways have either or both the long range plans and short range plans been used to provide guidance in the allocation of corporate resources?
VI. Control System for Monitoring Attainment of Plans
1. In addition to the usual facets of a control system (capital budgeting, expense budgeting, income statements, etc.), what additional techniques have been utilized in monitoring attainment of the firm's objectives?
Other Data
1. What role does the Chief Executive occupy in the company's planning program?
Coordinates and approves the design and institution of the planning process
Formulates mission and broad objectives for the firm
Provides guidance for the firm's Planning Division
Approves major commitments of the firm's resources
Monitors attainment of plans
Other (specify)
2. In what manner have you utilized the simulation technique in conjunction with the formalized planning process?
.7- 285
3. In what principal ways are computers used in the planning process?
4. Do you see a trend toward the development of a formalized and dynamic (continuously revised) approach for short and long run planning?
Thank you for completing this questionnaire.
Name and title of person completing the questionnaire:
Name: Title: _
Company:
Street: •
City & State Zip Code
APPENDIX B
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Glossa ry of T e r m s - F o r m a l Planning P r o c e s s
A s s e s s m e n t - - t h e ar t of appra is ing an o rgan iza t ion ' s r e s o u r c e s to del ineate s t r eng ths and l imi ta t ions . Appra isa l may be conduct-ed on a per iodic or continuous bas i s with r e s u l t s being r eco rded in a r e p o r t fo r u s e with the planning p r o c e s s (4,, 5).
Assumpt ion—a t e m p o r a r y hypothesis regard ing a ve ry impor tant p rob -able development that cannot be pred ic ted with accuracy and over which you have no significant control . Since planning r e -l a t e s to the f u t u r e , a plan r e q u i r e s some es t ima te of the fu tu re set t ing fo r which it is being designed. Object ives and goals e m e r g e in par t through ut i l izat ion of an assumpt ion base which includes quanti tat ive and quali tat ive f o r e c a s t s (4,, 5 ).
Budge t - - s ince planning alone does not br ing rea l iza t ion of p lans , con-t r o l over opera t ions is n e c e s s a r y to achieve planned objec t ives . A budget is a management tool f o r control l ing opera t ions with-in the scope of a plan. It is expres sed in f inanc ia l t e r m s and is based on the idea of p rede te rmin ing the r e s u l t s and using compar i son of actual p e r f o r m a n c e with budgeted p e r f o r m a n c e to m e a s u r e p r o g r e s s against, objec t ives . Budgets a r e a s s o -ciated with the s h o r t - r a n g e plan and usual ly r e l a t e to a one y e a r t i m e per iod (3, 4).
Con t ro l—process within f o r m a l planning sys tem of moni tor ing act iv i -t i e s (through feedback) to see that t h e r e is conformance to planned r e s u l t s . Is one of the act ivi t ies of management which includes: planning, organiz ing , d i rec t ing , coordinat ing, and control l ing. Planning p r e c e d e s control s ince planning p e r m i t s the fo rmula t ion of ob jec t ives , goals , s t r a t e g i e s , and long- range plus s h o r t - r a n g e p lans , with cont ro l being ut i l ized to m e a s u r e anticipated r e s u l t s as es tabl ished through th is f r a m e w o r k . Con-t r o l s y s t e m s p e r m i t m a n a g e r s to moni tor deviat ions which r e -quire c o r r e c t i v e action (3, 4).
C o n s t r a i n t s - - a n o rgan iza t ion ' s environment imposes l imi ta t ions in such broad ca tegor i e s as technological , economic, soc ia l , and pol i t i -ca l tha t , consequent ly , the organizat ion in in te res t of surv iva l and growth needs to del ineate these cons t r a in t s . The cons t r a in t s or l imi ta t ions a r e cons idered when formula t ing ob jec t ives , goa l s , and s t r a t e g i e s (2, 4).
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C r i t e r i a - - a standard on which many corporate judgments or decisions a re based. A corporation will formulate multiple c r i t e r i a which a re used in conjunction with the fo rmal planning p rocess with most c r i t e r i a pertaining to the commitment, of r e sou rces ; e .g . , not to dilute stock ownership, diversification through acquisi-tions (2, 4).
Data—facts and s ta t is t ics which, when effectively processed on a man-ual and mechanical bas i s , form basic "input" for planning and decision-making (3, 4).
Developmental P l a n - - a long-range type plan which pe rmi t s a corpora-tion to make ma jo r changes in existing business and develop new business over a period of severa l yea r s . Such a plan r e -lates to the order ly and purposeful application of a corporat ion 's creat ive r e sou rce s to cor rec t i ts faults as a business , to ad-just itself to the changing environment, to c rea te opportunities, and to close the planning gap (6).
Director of Corporate Planning--an individual occupying a key corpo-ra te position and possessing the ability to ass is t the chief executive and others by coordinating all salient aspects of the f o r m a l planning process . Helps design the "plan for planning, " provides input data for planning, a s s i s t s in coordinating the implementation of the various facets to the fo rmal planning p ro -ces s , provides counseling and ass i s t s chief executive in imple-menting the developmental plan (3, 4, 5, 7).
Dynamic Planning P r o c e s s — a continuous p rocess which helps to a s su re the survival and growth of a corporation through implementing the following facets of the process : environmental analysis; assessment of s trengths and l imitations; formulation of assump-tions, objectives, goals, and c r i t e r i a ; formulation of corpora te s t ra tegies ; preparat ion of the long-range and shor t - range plans; implementation of the plans through commitment of r e sou rces as specified by p rograms and pro jec ts ; and the utilization of an appra isa l /cont ro l System to help assure that the p rocess functions in a dynamic way (3, 4, 5 , 6 ) .
Envi ronment - -a corporation operates within an extremely dynamic en-vironment; consequently, the survival and growth of an en te r -p r i s e is contingent upon the effective identification of economic, technological, social , and political influences. Environmental analysis information provides one of the underpinnings for the
289
establishment of corporate objectives and goals. Many environ-mental considerations are monitored on a continuous bas is ; whereas , others a re assessed on a periodic bas i s . The assump-tion base is a key consideration in determining what environ-mental influences should be monitored (4, 5 , 7 ) .
Functional organizational components-- the ma jo r organizational facets of the corporation which are based upon the homogenous group-ing of s imi lar functions. Typically, a functionally oriented, corporate organization s t ructure includes market ing, f inance, manufacturing, engineering, and personnel (4).
Goals--used in dynamic planning to designate the intermediate " ta rge ts" enroute to achieving an objective. Specific quantitative and qualitative s tatements used to direct the pursuit of corpora te objectives. Pe r fo rmance goals provide means for measur ing corpora te and incumbent p rogres s . Included may be s tatements concerning sales and profit levels , marke t penetrat ion, etc. (3, 4, 5, 7).
Guidelines--background information or a guiding f ramework as provided by the fo rmal planning process which makes available a common f r a m e of re fe rence for corpora te personnel so that planning and
.decision-making can be coordinated and consolidated (4, 6).
Implementat ion--the action required through instituting p rograms and pro jec t s which provide for the commitment of r e s o u r c e s to at-tain corpora te objectives and goals (4, 5).
L imi ta t ions- -a corporation faces certain limitation or constraints which a re inherent in the corporate external or internal environment. -Such constraints should be identified and recognized when f o r -mulating object ives, goals , and s t ra tegies (3, 4, 5).
Long-Range P lan- -genera l ly includes the determination, for at least five y e a r s ahead, of long-term corporate objectives, goals, s t ra teg ies , and planned commitment of r e sou rces . The long-range plan is also called the "developmental plan" (3, 4, 5, 6, 7).
Management by objectives—a resul t oriented system of management based on a dynamic p rocess of planning and measurement which concentrates on the more effective use of r e sources to achieve a h ierarchy of objectives and goals (3, 4, 5).
290
Object ives- -a t e rm used to designate broad s t ra tegic objectives for the en terpr i se . Objectives are general and enduring s ta tements of purpose that express management ' s fundamental intentions . and provide guidelines for planning the future development of the corporation (3, 4, 5, 7).
Operational P l a n - - a shor t - range plan which re la tes to the annual co r -porate budget for guiding current business actions. This type plan centers on the activities by which the existing generation of goods and serv ices a re sold into existing marke t s . In com-bining a f i r m ' s var ious current p rograms and pro jec ts into actionable plans for functional components, the operational plan specified the total work to be accomplished during the planned period (6).
P lanning--a ma jo r aspect of the management p rocess ; planning being the f i r s t function per formed in the cycle of management. P lan-ning is the p rocess of determining in advance what actions must be taken to achieve resu l t s relating to the survival and growth of a f i rm . Planning is accomplished through established p r a c -t ices for collecting and presenting s ta t is t ical data and other necessary inputs. Such prac t ices provide for the review of plans , p rog rams , and pro jec t s ; and includes c r i t e r i a for mea -suring p rogres s . Planning is accomplished by instituting a corporate fo rmal planning p rocess (3, 4, 5, 7).
Standards of performance—specif icat ions of the conditions that will exist when a job is done acceptably. Normally the s tandards provide for p rog re s s stage of development as related to a specific t ime period. A standard of per formance is a goal fo r a specific task (3, 4, 5).
Strategy a broad course of action selected f rom among al ternat ives as the optimum way to attain ma jo r objectives, with due regard for the environment, c r i t e r i a , policies, and corporate r e -sources (1, 3, 4, 5).
Synergy when the end resul t of a combination of committed r e sou rces adds up to more than the sum of its pa r t s . This is often r e - i f e r r e d to as the "2+ 2 = 5" effect (1, 4). !
APPENDIX BIBLIOGRAPHY
1. Ansoff, H. Igor, Corporate Strategy, New York, McGraw-Hill Book Co. , Inc. , 1965.
2. Collegiate Dictionary, Webs te r ' s Seventh New Collegiate Dictionary, Springfield, Massachuset ts , G. & C. Merr iam Company, 1963.
3. National Association of Accountants, Long-Range Prof i t Planning, Research Report No. 42, New York, December 1, 1964.
4. Planning Dynamics Incorporated, Planning and Control Manual, Pi t tsburgh, 1968.
5. Scott, Brian W. , Long-Range Planning in American Industry , New York, American Management Association, Inc. , 1965.
6. Stanford Research Institute, A Framework for Business Planning, Confidential Report by Long Range Planning Service, Menlo P a r k , California, February , 1963.
7. Stanford Research Institute, The Planning Organization, Long Range Planning Service Report No. 133, Menlo P a r k , California, May, 1962.
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APPENDIX C
293
Position Description
Vice Pres ident Corporate Planning
Accountability Objective
With p r imary planning and decision-making accountabilities for corporate survival and growth centering in the chief executive of-f ice and the executive management group, the incumbent and planning staff in conjunction with the executive planning committee, p e r f o r m s functions relating to establishment of a formalized planning p roces s , formulation of corporate objectives and goals , analysis of environmen-tal opportunities and existing capabili t ies, formulation of s t rategic courses of action, also pe r fo rms functions relating to acquisitions, m e r g e r s , and diversif ication.
Basic Accountabilities
1. Coordinates in conjunction with executive management the development of a formalized planning process that is responsive to the manager ia l and control needs of the corporation.
' ^
2. Institutes a planning data bank with data being available on a manual or mechanical bas is to ass is t the corporation in per formance of the recur r ing and non-recurr ing planning functions.
3. Takes initiative to provide rel iable decision-making infor-mation at t ime and place of decision.
4. " P r o g r a m s " the planning p rocess to meet specific requ i re -ments of the corporation.
5. Organizes and schedules the semi-annual business and bud-get reviews.
6. Monitors external changes in var ious business marke t s to identify new opportunities for the corporation.
7. Studies and evaluates in depth specific industr ial or economic a reas in which the corporation can most effectively part icipate relat ive to its capabili t ies.
8. Coordinates* activities and p r e p a r e s special studies cen te r -ing on acquisit ions, joint endeavors, disposals , manufacturing r ights , and patents.
294
10. Analyzes the corporat ion 's r e sources to determine present and future per formance span.
11. Ass is ts chief executive and executive management in coor-dinating and establishing appropriate t ime re fe rences for certain types' of ma jo r commitments .
12. Serves as a r esource for determining the acquisition, dis-posal , and movement of corporate asse ts .
13. Encourages the stimulation of ideas f rom management toward broadening corporate operations; estracting these ideas and following up on possibi l i t ies .
14. Assis ts with the design and preparat ion of the corporate budgeting and control sys tems.
15. Develop, recommend, and obtain approval of plans, p roce-dures , and policies to be followed in implementing a diversification program.
16. Establ ishes adequate educational p rog rams to support the formal ized planning p rocess concept. .
17. Contributes to~the development of over -a l l corporate policy, s t ra tegy, diversification and growth in a capacity as a member of top management and president ial advisor.
APPENDIX D
296
BUSINESS STUDY QUI'LINE
THE INTERNATIONAL PETROLEUM INDUSTRY
CQNTINENTAL-EMSC0 COMPANY
I . PURPOSE AND SCOPE
A. Purpose: 1. To provide a long-range petroleum industry projection of
trends and patterns over the period 19&5-19&5. 2. To serve as a data base for decision making and planning
for the future. 3. To chart areas of concern and opportunity for the company. 4-. To delineate long-range implications for the equipment
expenditures and requirements.
B. Scope: A comprehensive review and analysis of the international and domestic industry, encompassing 1. Analysis of projected energy demand and resource allocations
1965-1985: ' a. Global b. Regional c. Categorical Resources
2. Analysis of projected petroleum hydrocarbon demand, 1965-1985: a. Global b. Regional c. Oil and Gas
3. Review and Analysis of petroleum hydro-carbon resources and availability: a. Petroleum reserves b. Geographical location c. Past development d. Future development e. Alternate sources f. Relationship to market
4. Analysis of the structure of the international oil industry: a. Exploration b. Production c. Refining d. Transportation and marketing
5. Review of the economics of the international oil industry: a. Companies involved b. Financial factors c. Influence on future trends
6. Analysis of the relationship of political influences, market trends and prices, import policies, and nationalistic aspects on the future of the international petroleum industry
297
7. Consideration of the role, current status, and future status of the domestic United States segment of the International oil industry: a. Resources and reserves b. Production c. Refining, marketing and transportation d. General outlook
b. Summarization and general outlook for the internation oil industry and the domestic United States segment.
9. Consideration of the implications for the equipment requirements and technology, 1965-1985*
II. GLOBAL ENERGY DEMAND:
A, General Energy Demand and Consumption Patterns 1. Global 2. Regional
a. Western Europe b. North American Continent c. Middle East . d. South America e. Africa f. Oceania
3. Resource Category Distribution a. Coal b. Petroleum hydrocarbon c. Hydro-electric d. Nuclear and other
4. Growth Rate a. Historical b. Current c. Projected
B. Projection of future energy demand patterns, 1965-19S5 1. Global 2. Regional 3. Resource derivative and proportion
III. PETROLEUM ENERGY DEMAND:
A. Historical and Current 1, General Consumption Trends
a. Global .b. Regional
(1) Western Europe (2) North American Continent (3) Middle East (4) South America (5) Africa (6) Oceania
298
B. Exploration Patterns and Trends; 1. Historical
a. Geophysical activity factors, global and regional b. Drilling activity factor, global and regional
2, Projected a. Geophysical activity factors, global and regional b. Drilling activity factors,,global and regional
C. Production Patterns and Trends 1. Historical
a. Production of crude oil, global and regional distribution
b. Capacity estimates, global and regional c. Production by petroleum hydrocarbon resources (gas/oil)
2. Projected a. Production of crude oil, global and regional
distribution b. Capacity vs. production, global and regional c. Production by petroleum hydrocarbon resources
D. Refining 1. Refined Product Demand and Yields, Global and Regional 2. Refinery Capacity vs. Demand, Global and Regional 3. Effects of increasing Yields on Crude Requirements 4-. Effects of Excess Refining Capacity 5. Anticipated Trends and Patterns in Refining
Transportation and Marketing • 1. Transportation
a. Inter-regional transfers of oil shipments b. Tankers, pipeline mileage, patterns and trends c. Future projections of shipments
2, Marketing Market prices, global and regional, potential effect on regional demand and usage
VI. INTERNATIONAL OIL ECONOMICS
A. Dominant Concerns Comprising Major Forces in International Oil 1. Specific companies 2. Proportionate relationship
B. Revenue Received and Distribution of Income
C. Return on Capital
D. Fixed Asset Expenditures
E. Capital Expenditures Trends and Patterns 1. Exploration 2. Production !
3. Refining 4. Transportation 5. M&rketing
F. Capital Expenditures Regional
299
G» Prices and Receipts
H, Geographical Distribution of Investment
I, Organization and Control of the World Petroleum Industry
J. Governmental, Political, and Nationalistic Factors Affecting International Oil, Global and Regional: 1. Concessions 2. Import Policies 3. Inter-regional Pacts
VII. THE ROLE OF TEE UNITED STATES IN INTERNATIONAL OIL:
A. Petroleum Hydrocarbon Demand, Historical and Projected: 1, Crude Oil 2. Gas
B. Resource Reserve Adequacy: 1, Crude Oil 2. Gas 3. Other
C. Exploration and Development Patterns: 1. Geophysical Activity 2. Exploratory and Development Drilling Levels 3. Reserve Additions k. Areas of activity 5. Outlook for Capital Expenditures
D. Production 1. Crude Oil Production 2. Growth Trends in Secondary, vs. Primary Production 3. Growth Trends in Imports vs. Domestic Production
Outlook for Capital Expenditures
E. Refining and Marketing 1. Demand for Refined Products 2. Capacity vs. Demand Levels 3. Refining Yields *•!-. Outlook for Capital Expenditures 5. Domestic Crude and Refined Price Structure and Economic
Implications
F. Governmental Influences 1. Import Policies 2. Political Influences 3. Depletion Allowance 4. Foreign Policy
VIII. SUMMARIZATION AND GENERAL OUTLOOK - 1965-19&5:
A. International 1. Demand/Supply Patterns 2. Exploration Trends 3. Production Outlook 4. Refining Projections 5. Transportation and Marketing Outlook 6. Governmental and Economic Factors
300
B. Domestic 1. Demand/Supply Patterns 2. Exploration Trends 3» Porudction Outlook 4, Refining Projections 5. Transportation and Marketing Outlook fc>. Governmental and Economic Factors
IX. IMPLICATIONS FOR THE OILFIELD EQUIPMENT AND SUPPLY INDUSTRY -1965-19»5:
A. Anticipated Changes in Industry Composition; 1. Size 2. Types of Operating Companies 3. Number of Competitors 4. Marketing Patterns and Channels of Distribution 5. Product Emphasis
B. Projected Technological and Equipment Changes in the Areas of: 1. Exploration 3. Refining 2. Production 4. Transportation
C. Anticipated Demand Levels for; 1. Oilfield Equipment and Services
a. Drilling equipment b. Production and Maintenance c. Service items
2. Refinery Equipment 3. Metals and Tubular Products
D. Geographical Distribution of Demand; 1. Drilling and Exploration Equipment 2. Production and Maintenance 3. Refinery and CPI items 4. Services and Related Equipment 5. Transportation and Marketing
E. Conclusions and Recommendations 1, Areas of Geographical Concentration 2-. Product Mix 3. Marketing Channels and Methods
APPENDIX E
302
FUNCTIONAL ASSESSMENT - MARKETING
Continental-Emsco Company
MATURE OF PRODUCT LINE
A. Fundamental type of product 1. Heavy capital equipment 2. Medium capital equipment 3. Light capital equipment 4. Consumer goods
B. Diversity of product lines 1. Wide range of lines (more than 10)
a. With many types, ratings & models per line b. Essentially few types or models per line
2. Middle range of lines (5 to 10) a. With many types, ratings & models per line b. With essentially few types or models per line
3. Few lines (5 or loss) a. With many types, ratings & models per line b. With essentially few types or models per line
C. Degree of standardization by lines 1. Completely special or custom design 2. Partly special
a. Where principal components are special with few standard parts employed
b. Where principal components are standard with few specials used
c. Where components are standard but assembled into a "custom job" .
3. Standard items added into production schedule as orders received Standard stock items carried in finished stock
D» Relative importance of 1. Completeness of line 2. Quality of product
a. Heavy duty under severe conditions b. Light limited duty
3. Style or appearance
II. NATURE OF MARKETS
A. Fundamental types of markets. 1. Heavy industry - i.e. utilities, transportation, chemicals,
rubber, steel, etc, ;
a. For installation ox' major units of equipment i b. For modernization of tools, handling equipment, etc. c. For maintenance
2. Manufacturing industry a. For installation xof major producing equipment b. For plant modernization
30 3
c. For maintenance d. For incorporation of product or component in end
product 3. Districutors, agents, and contractors
B. Range of markets 1. Extreme range of markets
a. Including many types of industries b. Including many types & sizes of customers within
industries 2. Middle range of markets
a. Several basic types of markets reached with numerous types & classes of customers in each
b. Several basic types of markets but relatively few types or classes of customers
3. Limited range of markets a. With wide range of customers b. With few types of customers Highly restricted market such as exposure meter
5. Principally an internal company market
C. Location of markets 1. National market
a. Plus wide export demand b. Little export demand
2. Principally concentrated in •§• or fewer selling districts 3. Essentially restricted
a. To regions or areas b. To specific cities or centers
(1) Of industry (2) Of population
D. Stability of Market 1. Subject to only broadest economic fluctuations 2. Has definite cyclical pattern
a. But no seasonal b. With seasonal influence, added
3. Is affected by advent of, or random actions of, competition, government, etc, a. To some degree b. To a high degree
4. What "natural" economic factors influence the market, i.e., floods, droughts, etc.
E. Trend of market 1. Is the market a new one with
a. Broad possibilities for growth ; b. Limited possibilities
2. Is the market well established a. With remaining growth possibilities b. With few remaining growth possibilities
3. Is the market well "worked over" & appearing saturated
304
III. NATURE OF PRINCIPAL SELLING- CHARACTERISTICS
A. Relationship to other products 1, Product sold by itself 2, Product sold in conjunction with others Dut not as part
of an integrated system ji. Product sold as part of integrated system out not as
"factory package" 4. Product sold as part or whole of a "factory package"
B. Quantity sold on one order 1. Usually only one item per order 2. Several items or models sold per order 3. Each order covering substantial production run or stock
delivery 4-. Contract order calling for phased deliveries
C. Frequency of sale to same customers 1. Basic installation involving only maintenance for many
years - very infrequent 2. Periodic modernization involving sale every few years 3. Sales of maintenance equipment or sales of products for
components in customers' products a. On regular basis
(1) Year (2) Month, etc.
b. On irregular basis (1) But predictable to gome extent (Z) Unpredictable
D. Nature of Product Specifications Employed 1. Customer furnishing full specifications
a. Without possible modification b. With possible modification
2. Pre-engineered factory specifications 3. Standard specifications
a. On order b. Stock
E. Character of Sales Support Required 1. Technical assistance needed
a. Product Specialist b. District Application Engineer c. Industry Application Engineer d. Product Division Sales Engineer e. Product Division Engineer
2. Types of quotation service needed a. Handbook b. District Sales Engineer c. Industry Sales Engineer d. Product Sales Engineer
305
3. Inside sales service needed a. Unnecessary D. Helpful but not essential c. Pace of activity makes essential
IV. MATURE OF COMPETITION
A. Fundamental types of competition 1. On similar basis* covering same ganeral line of products
and markets 2. Specialized competition
a. Specializing on certain products b. Specializing on certain markets
3. Competition from different types of products for similar application a, From outsiders b. From other products within the company .
B. Ease of identification & comparison 1. Competition broad & comparisons difficult 2. Some comparisons possible through Trade Asso. Data, etc.
but situation complex & never completely clear 3. Competition localized and easy to analyze
a. Few competitors b. In localized area
C. Significance of "trade patterns" or practices 1. Trade generally highly•regimented into .specific nomencla-
tures, ratings, discount policies, etc, 2. Some trade practices but not followed by a preponderant
majority 3. No specific patterns 4. Existence of licensing agreements as a factor
a. Substantial factor b. Minor factor c. Not a factor
V. INDUSTRY SALES POSITION
A. Actual standing 1. Strong position with majority of industry sales 2. Strong position & dominant but not over $0% 3. Strong but not leading k. Among top three or four contenders 5. Not an important position
B. Trend 1. Up - or gaining position 2. Holding position 3. Losing position
C. Significance of Industry Position 1. Sales volume only 2. Can bring weight to bear on industry practices in quality,
style, etc.
306
3. Can literally dominate industry practices Attitude of customer a. Favorable b. Indifferent c. Unfavorable
VI» CHANNELS OF DISTRIBUTION
A. Fundamental types of channels used 1. Direct selling
a. On a general basis through (1) Industry salesmen': (2) Territory salesmen
2. Indirect selling a. To full line distributors b. To specialty distribution
B. Trends in Importance of Channels 1., Direct sales advantages gaining owing to nature of market
concentration, etc. 2. Ho descendable trend in shifting of importance 3. Secondary distribution gaining in importance
VII. PRICES AND TERMS OF SALE
A. Principal factors determining prices and terms 1. Manufactured cost 2. General industry levels 3. Negotiation and competitive bidding
B. Nature of Price Situation 1. Trend of price per unit and per pound
a. Downward b. Holding about the same c. Upward
2, Condition of price structure a. Great stability of price
v b. Generally firm prices c. .Prices subject to fluctuation
(1) For certain items (2) For certain customers
C. Responsibility for pricing 1. Who has basic responsibility for setting prices 2. Who has responsibility for changing prices
a. Initially b. Final say
VIII. CHARACTER OF PLANNING FUNCTIONS
A, Forecasting and Market Research 1. Ease and practicality
a. Industry potential unknown & forecasting largely by "feel"
b. Forecasting & research helpful but only in specific areas
307
c. Market potential well known & forecasting relatively-simple
2. Importance of Type of Forecasting a, Market & industry maturity make fundamental forecasting
relatively unimportant & places emphasis on field research
b. Unknown factors in market & its future make fundamental forecasting of considerable importance as headquarters research activity
3. Significance of Long Range Forecasting a. Industry highly flexible, can meet changes without
difficulty - long range forecasting important but not critical
b, Industry not flexible, heavy investment - long range forecasting highly significant
B. Product Planning 1. Importance of Functions
a. Application engineering b. Design engineering and sales of equal significance c. Marketing & manufacturing consideration most important
2. Frequency & ease of line modification a. Frequent & without difficulty b. More difficult, changes limited to essentials c. Almost impossible
3. Trend of Items in Product Line a. Increasing b. Holding position c. Decreasing Relative Importance of Balanced Line (Including less profitable items) a. Of little significance to overall job b. Of some importance but not controlling c. Essential
C. Sales Planning 1. Character of Sales Planning
a. Reliance largely on repeat business. Planning principally a field function
b. Planning for new business important to get (1) Greater share of business from existing customers (2) New customers
c. Emphasis on new products most important d. Emphasis on new uses for old products most important
2, Primary objective of Sales Planning a. Increased sales volume :
(1) In long margin lines i.e. to get a more strategic mix
(2) In overall factory (3) In more strategic factory load (4-) For better balanced market competitive position
308
b. Better coordination between sales & production & control of production through (1) Stock sales off shell" (2) Backlogged orders (3) Current orders
c. Intensity of Planning (1) Periodic review for broad plans (2) Frequent analysis for changes in plans or opera-
tions (3) Continuous process
(a) Covering certain products & markets (b) Covering all products & markets
IX. ADVERTISING AMD SALES PROMOTION
A. Fundamental type of advertising & sales promotion needed 1. Broad industrial institutional type 2. Broad industry type 3. Broad product type 4. Specific product
a. Broad applications b. Specific applications
5. Specialty promotion
B. Relationship with other products 1. Tie-in with system 2. Tie-in with related products 3. No tie-in
C. Relationship between Advertising & Sales Promotion & Selling Activities 1. Close tie-in for direct selling & with distributor
campaigns 2. General acknowledgement of relationship but no close tie-in
on sales 3. No relation between advertising & direct selling activity
(Turbines)
D. Size of Expense in Relation to Sales 1. Above 5% 2. Between 2 and 5% 3. Below 2%
x» NATURE OF SERVICE FUNCTIONS
A. Nature of Order Service Requirements 1. Few, large orders easily followed 2. Varied range of orders on normal distribution basis 3. Preponderance of small orders requiring "man-production"
handling of paper 4. Closeness of relationship between order handling & produc-
tion control a. When factory load is of critical importance b. Where expediting & order following is essential
309
B, Nature of Warehousing Requirements 1. Heavy preponderance of production going into finished stock
a. At factory b. In field
2. Some part of production requiring warehousing, balance from factory to customer a. Because of backlog or orders b. Because of "custom build" nature of equipment
3. Production largely direct to customer a. With parts warehousing requirement b. Without parts warehousing requirement
b. Handling requirements a. Heavy equipment for bulky products b. Palletized flow of small products involving "car pooling"
etc. XI* PiTERML ORGANIZATION AND MANAGEMENT
A. Fundamental scope of marketing organization X. Marketing functions including product planning, market
research, advertising & sales premotion, etc. a. With field selling organization b. Without field selling organization
2. Limited marketing functions with balance a. The responsibility of another group b. Performed on "service"basis
B. Requirement for adaptability • 1. Stable market requiring little change in marketing organi-
zation form as functions from year to year Moditifications needed periodically
3. Volatile market requiring great degree of adaptability & frequent change
C. Requirement for internal controls 1. Broad budgeting & periodic checking of performance only Z. Budgets tighten & requiring frequent adjustment with close
following of performance & expenses 3. Need for rigid controls on
a. Establishing sales goods b. Checking performance c. Maintaining expense % d. Checking trends in expenses, coverage, etc.
APPENDIX F
311
PLANNING SYSTEM
P L A I N S
© OBJECTIVES • GOALS
Sum of Group Goals plus Corporate Programs • STRATEGY • PROGRAMS
Corporate Development Inter-Group Programs R a D - New Fields Acquisitions Corporate Operations
G R O U P P L A M 8
MISSION GOALS
Sum of Business Unit Goals plus Group Programs
STRATEGY
PROGRAMS Group Development Inter-Unit Programs Group Operations
B O S B ^ E S S U m i T P L . A M S
© PURPOSE
© GOALS
© STRATEGY
© ACTIONS
APPENDIX G
313
Policy Statement: Management by Object ives
West inghouse Air Brake Company
Concept of Management by Object ives
a. Bet te r management is e s sen t i a l to cope with the speed and com-plexity of our environment .
b. Management can be improved through wise decent ra l iza t ion of authori ty , respons ib i l i ty , and accountabil i ty.
c. This decent ra l iza t ion r e q u i r e s that object ive goals and s tandards of p e r f o r m a n c e be subst i tuted fo r subject ive app ra i sa l s and p e r -sonal supervis ion insofar as poss ib le .
d. Consis tent objec t ives mus t be fo rmula ted within a f r a m e w o r k which gives appropr ia te considera t ion to all the e lements v i ta l to prof i tabi l i ty .
e. Effec t ive application of adequate r e s o u r c e s to accomplish opt i- -mum object ives is the u l t imate c r i t e r ion of good management at every echelon.
f. The respons ib i l i ty for formula t ion of objec t ives l i es at the s a m e point as the respons ib i l i ty to achieve the objec t ives .
g. The sys tem of m e a s u r i n g p r o g r e s s toward achievement of ob jec-t ives mus t allow managers, to r e v i s e objec t ives continuously as conditions change.
2. Concept of Object ives
The paramount object ive is enduring Prof i t ab i l i ty , broadly defined as "gain f r o m the activity. " It can be achieved through equitable and adequate p e r f o r m a n c e in the following Prof i t ab i l i ty Result Areas :
Market Posi t ion Product iv i ty Innovation Resou rce s Manpower Development Employee Attitude
Publ ic Responsibi l i ty
Concept of Delegation
Management by objec t ives can be achieved through decen t ra l iza t ion , without abdication, by delegating authori ty , respons ib i l i ty , and accountabil i ty fo r the following funct ions: a. Formula t ion of plans and objec t ives . Reaching agreement on
where you a r e , where you want to go, how you want to t r a v e l , when you want to a r r i v e , and how much you a r e willing to pay fo r the t r ip .
b. Formula t ion of budgets. Securing allocation of n e c e s s a r y r e -s o u r c e s to c a r r y out authorized plans .
314
c- Execution. Seeing to it that effective action is taken to achieve approved objectives.
d- Evaluation. Measuring p rog res s against adequate s tandards of performance.
Concept of Methodology
Management by objectives can only become, a "way of l i fe" if it is based on such a simple, flexible method that: a. The average manager can use it effectively, in spite of daily
p r e s s u r e s and the absence of extensive training. b. Each manager needs to use only those portions that help him
per form his own job. c. It provides the right data at the t ime and place of decision and
faci l i ta tes joint planning between functions such as market ing, engineering, manufacturing, and finance.
d. It makes it eas ier to modify p rograms and requi rements brought about by changes in environment, assumptions, and objectives.
5. Concept of Part icipation
Managerial personnel at all levels of the organization must par t ic i -pate intelligently and enthusiastically. This requ i res a continuing program of education and motivation.
6* Concept of Pe r fo rmance and Reward
Management personnel must be rewarded in accordance with their contribution to the formulation of sound plans and the effectiveness with which they apply their r e sources toward the accomplishment of optimum objectives.
APPENDIX H
3 1 6
FINANCIAL FORECAST INCOME STATEMENT
CURRENCY UNITS NAME OF COMPANY
COLUMN COPE
• 1 LINE CODE | 1? ! 19
! CRUDE OIL AND CONDENSATE . 01199 j
MOTOR GASOLINES 01201 |
DISTILLATE OILS 1 r 01202
HEAVY FUELS ' 01203 ' i SALES; OTHER PETROLGMM PRODUCTS 01204 , - j -
OR&KANM* CHEMICAL PRODUCTS 01205 !
TOTAL PRODUCTS 0129?
ann i
MERCHANDISE. COMMISSIONS, ETC. j 01302 ! i
OTHER REVENUE ( 01303
TOTAL 01399 | CRUDE OIL AND CONDENSATE 02101 ( ) ( M )
PRODUCTS - FINISHEO AND UNFINISHED ! 02102 •( l U ) ( I (
OTHER MERCHANDISE j 02103 ( )! )«( ) {
TOTAL ' 02199 '( ) < . V • • • } (
INVENTORIES 1NCREASE/(DECREASE) 02201
COMSUMED W OPERATIONS, FiRE LOSSES, ETC. 02202 j ! j
OPERATING MARGIN • 02299 i
OPERATING COSTS 03199 ( ) ( >;( > <
INCOME FROM OPERATIONS 03299 1 !
NON-OPERATING (CHARGES)/CR EDITS 03399 • • , J , , ,,
PROFIT/(LOSS) BEFORE INCOME TAXES 1 03499 I ' '
INCOME TAXES 03599 ( 1 [ > < ,, >!<
NET PROF!T/(LOSS) i 03999 1 i
SALARIES, ] [TOTAL • 04199 : f WAGES AND BENEFITS CHARGED TO INCOME 1 0J299 !
| , .. CHARTER HIRE EXPENSE ! 04301 ! 1
MARINE FREIGHT AND DELIVERY EXPENSE j 04302 |
TOTAL 1 04999 1 — CONSUMER j 05101
I
PRODUCTION PAYMENTS i 05103 i
IMPORT DUTIES PAID OR ACCRUED : 0510J ! 1 TAJIK*
INCOME 1 05104 :
OTHER THAN INCOME j 05105 1 i
TOTAL | 05199 t 1 !
^ _ .. ! _ _
3E OEPR., DEPL., AMORT., RETIRE. 1 05299 ©
DIVIDENDS AND ROYALTIES ! 04101
INTEREST CREDITS j 06102 1 1 1 !" 1
o NON-OPERATINC INTEREST CHARGES j 04103 ( > ( ) < )! (
X (CHARGES) EXCH. FLUCTUATIONS - OPERATIONS » 06104 1
« i CREDITS UNREALIZED EXCH.LOSS-FIN.POSIT. ! 061 OS j '
5, [OTHER (NET) ! 06106 i
a ! TOTAL *PER LINE 0339V) ! 06999 m - J DRY HOLE j 07101
' 1 • - • — - f — |
a'. LEASING AND LEASING AND EXPLORATION 1 07102 8 EXPLORATION
EXPENDITURES ' CHARGED TO
RENTALS AND TAXES j 07103 EXPLORATION
EXPENDITURES ' CHARGED TO TEST WELL CONTRIBUTIONS 07104
INCOME OTHER ' 071OS
TOTAL 07999
PRODUCING ' 08101 , * ] - r~
REFINING ! 08102
FUNCTIONAL MARKETING : 08103 1
INCOME MARINE 08104 ' FROM PIPELINE 08105 !
OPERATION! ADMINISTRATIVE AND OTHER , 08106
ELIMINATIONS j W 0 7 |
TOTAL (PER LINK M a t t ! L s a a - L .
3 1 7
FINANCIAL FORECAST BALANCE SHEET
CURRENCY UNITS NAME OF COMPANY COMPTOMETER CHECKED
COMPANY CODE
COLUMN CODE 1 2 ; 3 !
LINE CODE 19 19 19 1
CURRENT ASSETS CASH AND MARKETABLE SECURITIES 01101
RECEtVAI&LES AND OTHER CURRENT ASSETS on 02
INVENTORIES CRUDE, PRODUCTS * OTHER MERCHANDISE 01103 INVENTORIES
MATERIALS AND SUPPLIES onw
INTER—CO. ACCOUNTS
RECEIVABLE
COMPANY 01105 i INTER—CO. ACCOUNTS
RECEIVABLE INTERNATIONAL AFFILIATE 01106
INTER—CO. ACCOUNTS
RECEIVABLE OTHER CONSOLIDATED AFFILIATES 01107
TOTAL CURRENT ASSETS o i m
CURRENT LIABILITIES
INCOME TAXES PAYABLE 01201
ACCEPTANCES, NOTES
AND LOANS PAYABLE TRADE 01202 ACCEPTANCES, NOTES
AND LOANS PAYABLE NON-TRAOE 01203
LONG TERM DEBT DUE WITHIN ONE YEAR 01204
OTHER CURRENT LIABILITIES 01205
INTER-CO. ACCOUNTS PAYABLE
COMPANY 01206 INTER-CO. ACCOUNTS PAYABLE
INTERNATIONAL AFFILIATE 01207 INTER-CO. ACCOUNTS PAYABLE OTHER CONSOLIDATED AFFILIATES 0120ft
TOTAL OJRRSHT LIABILITIES 01299
NET WORKING FUNDS AT YEAR END 013 W
J L O k U L . T j E I U U » m . PROPERTY, PLANT AND
J L O k U L . T j E I U U » m . PROPERTY, PLANT AND EQUIPMENT 01401
LESS RESERVES 01403 < ) ( ) ( ) (
OTHER LONG TERM ASSETS 01403
TOTAL LONG TERM ASSETS 0149?
LONG TERM LIABILITIES
LONG TERM DEBT
COMPANY 01501 LONG TERM
DEBT OTHER CONSOLIDATED AFFILIATES 01502 LONG TERM
DEBT NON-CONSOLIDATED SOURCES 01503
RESERVES 01504
OTHER LONG TERM LIABILITIES 01505 RESERVE FOR FOREIGN EXCHANGE FLUCTUATIONS - 01506
MINORITY INTERESTS 01507
TOTAL LONG TERM LIABILITIES 01599
TOTAL NET ASSETS 01699
NET WORTH
CAPITAL STOCK 01701
CAPITAL SURPLUS PI7W EARNED SURPLUS 01701
TOTAL MIT WORTH Q17W
318
FINANCIAL FORECAU
CAPITAL BUDGET AND EXPENDITURES
CUHREHCY UNIT* NAME OP COMPAHV
TolumWCOOS^
COMPTOMETER CHeCKKQ
COMPANY COOK
2
m
n
FUNCTION LINE CODE 19 W
BUDGETS
PRODUCING 01101
REFINING 01102
CHEMICALS 01103
MARKETING 01104
MARINE 01105
PIPELINE ^ 01106
ADMINISTRATIVE AND OTHER 01107
TOTAL 01199
BUDGET EXPENDITURES
CURRENT BUDGET
PRIOR BUDGETS
ANTICIPATED ADDITIONS
CAPITALIZED
02101
02103
02199
02203
02299
CURRENT BUDGET 03101
PRIOR BUDGETS
ANTICIPATED ADDITIONS 03103
03199
CURRENT BUDGET
PRIOR BUDGETS 04102
ANTICIPATED ADDITIONS
TOTAL
MARKETING
CURRENT BUDGET
PRIOR BUDGETS 05102
ANTICIPATED ADDITIONS
TOTAL 05199
MARINE
CURRENT BUDGET 06101
PRIOR BUDGETS 06102
ANTICIPATED ADDITIONS
TOTAL __06103_
06199
PIPELINE
CURRENT BUDGET 07101
PRIOR BUDGETS 07102
ANTICIPATED ADDITIONS 07103
TOTAL
CURRENT BUDGET ADMINISTRATIVE
AND
OTHER
08101
PRIOR BUDGETS
ANTICIPATED ADDITIONS
TOTAL
CURRENT BUDGET TOTAL
CAPITALIZED
PRIOR BUDGETS J 9 i ° L
09102
ANTICIPATED ADDITIONS 09103
TOTAL 09199
CARRY OVER TO FOLLOWING YEAR
319
F I N A N C I A L FORECAST
SOURCE AND DISPOSITION OF FUNDS
CURRENCY UNITS NAME OF COMPANY COMPTOMETER CHECKEO
COMPANY CODE
COLUMN CODE
HEX PROFIT OR {LOSS) D i m
DEPRECIATION, DEPLETION AND AMORTIZATION
RETIREMENTS CHARGED TO (PROFIT) AND LOSS
ACCELERATED
CONSOL. AFFILS.
JLU R?A?01R?D_LE A 5 E S
OTHER
02101
_02|03
02103
02104
02105
TOTAL PEPRE. DEPL. AMORT, AND RETIREMTS. 02IW
NEW CAPITAL
COMPANY
OTHER CONSOL. AFFILIATES
OTHER
COMPANY
03101
OTHER CONSOL. AFFILIATES
OTHER
03102
03103
03104
03105
03106
TOTAL NEW CAPITAL 0319?
INVEST. MENTS
OTHER SOURCES
OF FUNDS
MISCELL-ANEOUS
CONSOL. AFFILI ATES
OTHER PLANT REDUCTIONS
CONSOL. AFFILIATES
NON-AFFIL. COS.
CONSOL. AFFILIATES
NON-AFFIL, COS.
LONG TERM RECEIVABLES
LOANS TO OEALERS
NET CHANG P. IN RESERVES
SURPLUS ADJUST. (DESCRIBE)
DEFERRED CREDITS
PREPAID AND DEFERREP CHOS.
SPEC. DEPOSITS AND FUNDS
DIFF. ARISING IN TRANS, TO US OOL.
TOTAL OTHER SOURCES OF FUNDS
04302
04303
TOTAL WORKING FUNDS AVAILABLE
05101
05102 TOTAL DIVIDENDS
ADDITIONS TO PLANT 06199
NEW INVESTMENTS
CONSOL. AFFILIATES
NON-AFFIlllATED COMPANIES
CONSOL. AFFILIATES
0620?
06202
06203
NON-AFFILIATED COMPANIES
LONG TERM RECEtVABl.ES
06204
06205 LOANS TO OEALERS
TOTAL NEW INVESTMENTS
RETIREMENT OF
LONG TERM DEBT
OTHER CONSOL, AFFILIATES
OTHKR
TOTAL RETIREMENT
TOTAL WORKING FUNDS REQUIRED
IHCREASE/(DECREAS!) IN WORKING FUNDI DURING YEAR
07101
07102
APPENDIX I
321
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Repor t s
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Continental-Emsco Co. , "Auditing and Evaluating the Marketing Struc-t u r e , " Dallas, 1966.
Company Development and Diversification Committee Report , Dallas, October, 1961.
, Cr i te r ia for Classifying Functional Work for Organizing, Grouping and Operating Product Businesses , " Dallas, 1964.
, "General Format of a Product Line Study, " Dallas, 1964.
Guidelines for Evaluating and Managing % H Marketing Channels, " Dallas, 1966.
, "Importance of Planning and Diversif ication, " Dallas , 1964.
, "Long-Range Company Plan , " Dallas, 1965.
, Minutes of Diversification Committee Meet-ing, Dallas, July 5, 1962.
, Planning Policy Manual, Dallas, 1960.
• , Position descriptions of Executive Personnel , Dallas, 1964.
"Principles of Evaluating Business Enter-p r i s e s ; Dallas, 1965.
Franklin, H. F reder i ck , "Financing the Acquisition, " address before a seminar of the American Management Association, Los Angeles, December 15, 1964.
Gavin, James M. , "Technological and Market Research for Growth Under Antitrust , " address made before the National Industrial Conference Board, New York, March 4, 1965.
348
Genesco Corpora t ion , Coordinated Management Planning, New York , September 1, 1966.
Green , Edward J, , "The P r e s i d e n t ' s Role in Planning, " add re s s to. the P r e s i d e n t ' s F o r u m , Texas A & M, Dal las , March 18, 1967.
K r a u s s e , Dan M. , "Resul t s Management , " excerpt of a d d r e s s to Dal las Management Associat ion, Dal las , March 1, 1967.
LTV Corpora t ion , Integrated Defense Industry Planning, Dal las , 1966.
MacGowan, Thomas G. , "Marketing R e s e a r c h - - V i t a l Advance P l a n -ning Tool, " P roceed ings , Twentieth Annual Insti tute on Accounting, Columbus, May, 1958.
Motorola Incorpora ted , Planning Manual, Chicago, 1965.
Singer Corpora t ion , 1967-1971 Division Planning Guide.
Sma l t e r , D. J . , " P l a n n e r s : M o b i l i z e ! ! , " Corpora te Long-Range Planning Cour se , New York, Amer ican Management Assoc ia -t ion, Inc. , May, 1965.
Survey of F o r m a l Planning P r o c e s s P r a c t i c e s , unpublished survey by R. C. Johanson, Denton, T e x a s , November , 1968.
Texas In s t rumen t s , Inc. , TI Planning and Control P r o g r a m , Dal las , 1964. •
Newspaper Ar t ic les
The Denver P o s t , August 27, 1968
The Wall St reet Journa l , March 13, 1968.
P e r s o n a l Conversa t ions ;
Cont inen ta l -Emsco Company, pe r sona l conversa t ion with management execut ives , Dal las , 1960-67.
Green , Edward J. , P r e s i d e n t , Planning Dynamics Incorpora ted , pe rsona l , conversa t ion , P i t t sburgh , Sep tember , 1968.
349
Kasten, Merr i t t L. , Director , Management Learning Center , Ameri-can Management Association, personal conversation, Hamilton, New York, September, 17, 1968.
McKee, John, Ford Motor Company, personal conversation, Dallas, 1955.
Rock, Milton, Managing P a r t n e r , Edward N. Hay and Associates , personal conversation, Philadelphia, September, 1968.
Russel l , James W. , Manager of Planning, A. M. F. Corporation, personal conversation, New York, June 9, 1964.
Stewart, Robert F. , Stanford Research Institute, personal conversa-tion, Menlo P a r k , California, October 21, 1968.
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