Industrialization of Corporate Planning

Industrialization basically means automation of processes. In case of manufacturing, this means using power driven machines to manufacture products. Its due to industrialization, use of assembly line was possible. But, though there has been lump scale automation in manufacturing area, hardly any automation or so called "industrialization of corporate planning” has happened till date. Corporate plans can be thought of as the most important internal products meant for long term success of the firm. May different divisions and departments of firms generally have different plans to follow and integrating them to form a common corporate plan is difficult. Ideally, after industrialization of corporate planning, we should have one holistic corporate plan meant for strategy execution. Diagrammatically, this problem can be represented as in below: -

As noted before, every single type of plan – be it strategic plan or annual budgets – is considered to be altogether different entity. Though managers agree that these should be integrated into a single product for better applicability and impact, practically many different problems arise. Most notable issue is use of different tools in preparation of the individual plans. Different data sets used also add to the problem of getting the linkages.

Industrial revolution of manufacturing came about with the invention of steam engine. This engine showed a way to do complex repetitive work automatically, thus saving tedious manual labor. Corporate planning is also facing a similar pre-steam engine situation. Here there are actually different “engines" for different plans. For example one tool or engine is to prepare financial plan and an entirely different engine is used to prepare a annual sales forecast. If this was the case in any manufacturing unit, ultimate assembly would have been very costly and would require plenty of manual work. Same is the case here in corporate planning. Integration is so difficult that most often than not, the different plans are left alone or some loose integration is done using Excel functions.

Any organization can go about doing planning integration in the following three degrees.
Plan Data Integration: During planning two types of data are considered – past performances and past plans. Past performances are actual targets the firm has achieved till now. Planning becomes more realistic when past performance data is taken into consideration. Past plans are also important to compare plans with actual achievements. Plan data integration implies integrating the different past performance data and past plans for better results and consistent reports and dashboards.

Planning Platform integration: Before we integrate the planning process we need to synchronize the planning platform. This can be done by leveraging the different tools to access the same database and using similar assessment patterns and ways. Thus we can get a level playing field across unique tools as a step towards an integrated plan.

Planning Process Integration: After data and platforms are integrated, we can integrate the planning processes. By this we mean, that as and when any changes are done in any of the plans in any division or department of the firm, the other departments are informed. Thus changes in other plans are also correspondingly done to reflect the changes across all areas of the planning process.Following diagram represents a ideal integrated planning approach.

Thus, one major issue in corporate planning today is existence of many plans across different divisions in a firm. Integration of these plans is difficult because of multiple tools and data sources used. To make planning more effective we can integrate the data sources, use a common platform and then synchronize the planning processes. This would ultimately create more consistent and effective plan which would be applicable to the whole organization in a holistic way – be it for centralized or decentralized planning system.

Reference :

The Industrialization of Corporate Planning, Rise of the “Planning Factory”,
Dean Tarpley, Palladium Group, Inc, 2008

Growth, Development and Corporate Planning

There is a tendency to understand corporates by comparing them with organisms. This is because corporate changes its configuration with time. Moreover there is a need to form an abstract level entity of corporate organizations to understand them better. This comparison between organisms and organizations cause many times a blunder in corporate planning. Managers think that they are in for corporate development but what they actually mean is corporate growth. This is just the way organisms grow over time. It must be made clear that corporate growth and development are not the same thing and neither of these two concepts are dependent on others. That is, either of growth and development can happen without the other.

Growth is basically an increase in size or number. Hence an organization can increase in size and likewise, number of cities in a country can increase. Similarly Corporate Growth also refers to an increase in size or number of some key performance indicators like – revenue or profits. But this understanding again poses a different problem. Organisms grow compulsively without choice. And in many cases like obesity it is an unfavorable growth. Organizations in turn seem always ready to grow. This anomaly occurs because managers tend to think that organizational growth would imply in turn organizational development. But as stated earlier corporate growth and development do not always go together and more often than not a different approach is necessary for corporate growth and development. Although, when survival of firm is dependent on its growth, corporate growth becomes very important. So do we have limits in growth then?

To answer this question let us first understand development. Development is a process in which an individual increases his ability and desire to satisfy his own needs and legitimate desires. By legitimate desires we mean desires which do not hamper others' capability to fulfill their desires. It is more of having knowledge and motivation to achieve goals rather than having wealth. If we talk about a country, development actually is talked in relevance to quality of life rather than living standard. Increase in living standard does not necessarily increase quality of life. When a country is underdeveloped, the very first aim of government has always been to increase standard of living. And then by increasing standard of living, it is hoped that quality of life also increases. Now, this does not mean that resources are not important for quality of life or development. After all it’s with resources only that we have to finally work out something. But the whole contention is that, even with resources the end result is drastically different when they are handled by developed person or otherwise. Greater returns from limited resources are a sign of development. In fact, for development purposes, even resources are sought after and optimally utilized. Maximum utilization of resources is the target.

Development cannot be given or prescribed by any one. It has to be learnt. It is like teacher, who can teach but only give the information, not the understanding. Development is about potential and abilities and these can only be facilitated and encouraged. Learning and motivation can never be taught.

Corporate planners are many times concerned with resource availability and its effect on limitation of growth and development. While planning, it must be understood that improvement is itself not the development, but development is actually the potential to improve. Hence even though resource constraints can bring about decrease in improvement, the potential remains untouched. Resource constraint becomes inconsequential if desires are changed so as to decrease interdependence on the resources. Even technological development causes to find a roundabout method of dealing with physical unavailability of resources. Resources can only hamper development in the extreme case where no substitute of resource is possible. Thus, in corporate planning, it must be always remembered that though growth may be affected by external factors, developmental limits are only set by internal factors and are mostly self imposed.

Reference:

1)The Concept of Development, Creating the Corporate Future Russell Lincoln Ackoff,1981

2)Management in Small Doses,Russell Lincoln Ackoff,1986