Peter Lorange.

An analytical scheme for the assessment of a diversified company's corporate planning system : needs, capabilities, effectiveness online

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Context. Context



Four. The Monitoring Stage

10. Monitoring against Short-Term Performance .

The coir(pany will probably have em elaborate management accounting
system in place, vrtiich in all likelihood will monitor deviations from the
budget in terms of actual versus projected sales, costs, profits and so on.
To what extent, however, is there a short-term monitoring which more spe-
cifically might give an indication of whether the company's strategies are
being implemented as planned. For instance, are short-term changes in
market share being monitored relatively frequently (more often than the one
time a year nesded for developing next year's plan)? Similarly, are changes
in sales growth monitored frequently enough so that it, together with a
measiire of inventory levels, cam provide an "early warning system" that
business plans may have to be changed? In terms of monitoring relevant
factors for the corporate portfolio strategy in particular, are the short-
term financial performance monitoring figures being consolidated that se-
nior corporate executives can get a picture of the overall pattern of



39



portfolio effects, in turns of funds flow changes in particular.



Rating

To what extent is the short-term performance monitoring providing "early
warning" signals that the planned strategic direction of the firm might
have to be modified?



Short-term
monitoring
is highly
strategically
focus sed

1—



h



Short-term
monitoring
is not

strategically
focussed

-I



11. Monitoring Strategic Program Fulfillment Performance .

To what extent does the performance monitoring focus on the degree of
progress towards the attempt to fulfill the strategic programs that have been

decided on? In this respect are there a formalized set of measures of
progress towards certain milestones in completing a strategic program? Is
there a measurement of the degree of usage per strategic program during a
given period of time of strategic resources that have gone into the stra-
tegic program; over- or under-spending of investments, expenditures, man-
hours, etc.? Is there any formalized monitoring of any critical environ-
mental assumptions, which, if they have to be changed might jeopardize the
relevance of the strategic program (examples might be competitors' moves,
product innovations, technological breakthroughs, etc.)?



40



Rating

To v^Mit extent does a formal monitoring effort attempt to measure the

progress towards the fulfillemnt of strategic progrcuns, i.e. of the degree

of strategy implementation fulfillment?

There is a There is not
clear, explicit clear, eacplicit
monitoring of monitoring of
strategy im- strategy im-
plementation plementation
fulfillment fulfillment

I t 1 I I



12. Monitoring Fulfillment of Objectives .

Thi! objectives of the company as a whole as well as those of the com-
pany's divisions and businesses can typically not be easily measured as such,
in the sense that while one might progress toweurds a goal one typically
seldom reaches it. We shall, however, be interested in measuring the de-
gree of progress towards a particulau: goal. Above all, to what extent do
the various environmental assxomptions that underline 2m objective hold up?
For instance, is the company systematically monitoring selected environ-
mental factors, such as major competitive moves, major technological in-
novations, energy price and/or supply trends, raw material prices and/or
supply trends, demographics trends, laLbor relations trends, inflation, in-
terest rate and/or currency change trends, political stability trend, and
so on, and also, is the company attempting to specifically assess the ef-
fects on its own objectives from changes in such factors? Are specific
environmental sccinning and measurement procedures developed for monitoring
any of these factors, including uncunbiguous assignment of management re-
sponsibility for carrying out such tasks?



41



Rating

The monitoring of one's objectives' relevcince is explicitly carried out
in a way that emphasizes scanning of a selected set of environemntal phe-
nomenae judged to be particularly relevant as underlying assumptions for
the validity of the objectives.

There is an There is not an
explicit, in- explicit, in-
stitutional mon- stitutional mon-
itoring of se- toring of se-
lected environ- lected environ-
mental phenomenae mental phenomenae



I-



Five. The Incentives Stage

13. Ince ntivating with Respect to Budget Fulfillment Performance .

To what extent does the company incentivate a line manager, at an
organization level where at a minimum he is responsible for running a
Strategic Business Unit, in terms of a formal tie-in of part of his salary
(bonus) to achieving fulfillment of the budget? In this respect we want
to assess the extent to which such additional compensation, in case, is an
individual bonus, and also the degree to which it is being explicitly de-
termined as a variable function of budget fulfillment performance.



42



Rating

Individual mcmagement incentives eure explicitly tied in as a variaJsle



fxinction of budget fulfillment performance.

Incentives are
explicitly tied
in with budget
fulfillment
performance



Incentives are not
explicitly tied
in with budget
fulfillment
performance



H
1



14. Incentives with Respect to Strategic Program Fulfillment Perform£mce .

To what extent does the company incentivate a line manager, at an
organization level where as a minimum he is responsible for running a
Strategic Business Unit, in terms of formal tie-in of part of his salary
(bonus) to achieving specific "milestones" toweurds the fulfillment of
peirticular strategic programs? In this respect we want to assess the ex-
tent to which such additional compensation, in case, is an individual
bonus, and also the degree to which it is being explicitly determined as
a Veuriable function of strategic program milestone fulfillment perfor-
mcuice.



Rating

Individual managers' incentives are explicitly tied in as a variable func-
tion of strategic program milestone fulfillment performcmce.



Incentives are
ex[3licitly tied
in with strategic
program fulfill-
ment perfor-
mance



»-



-i-



Incentives are
not tied in
with strategic
progr2un fulfill-
ment perfor-
mance



43



15. Incentives with Respect to Objectives Fulfillment Performance .

To what extent does the company incentivate a line manager , at an
organization level where at a minimum he is responsible for running a
Strategic Business Unit, in terms of formal tie-in of parts of his salary
(bonus) to his degree of success in developing objectives that dynam-
ically are being revised and improved on in the phase of environmental
cheinges that create new opportunities and/or threats. In this respect we
want to assess the extent to which the executive is creative in developing
such continued strategizing reorientations and improvements as well as
being adequately alert to significant environmental changes. To what ex-
tent, in case, is the degree to which additional compensation is being
determined as a variable function of objectives-setting/improving per-
formance?

Rating

Individual managers' incentives are explicitly tied in as a variable func-
tion of objectives-setting/improvement performance.



Incentives are
explicitly tied
in with specific
objectives-setting/
improvement per-
formance

♦ i



Incentives are
not tied in
with specific
objectives-setting/
improvement per-
f ormcince .



-4

1



B. General Properties of the Corporate Planning System .

This second part of the general assessment of the design of the cor-
porate planning system attempts to judge whether the overall design of the
formal planning system is such that the task of developing plans can be
expected to be achieved. Thus, the following four assessments relate to



44



general properties of the design of a "three by five" strategic planning
system, complementing the considerations about specific aspects of the
design of the planning system in part A.

16. "Con^ressing" of Planning Cycles .

In the "three by five" conceptual scheme for corporate pleinning a
distinction was made between one planning cycle attempting to establish a
unified set of objectives for the compemy and its pcurts, i.e., a sense of
"where to go," to be followed by a subsec[uent plemning cycle to develop
strategic programs for how to achieve the objectives, i.e. for "how to
get there." In many, memy corporate planning systems there will not be
two such distinctive pleinning cycles but rather one cycle (often called
the 5-yeau: planning cycle) , a critical question then being whether the
system can provide direction on both "where to go" as well as "how to
get there." Please assess the extent to which the planning system is
able to provide an adequate dual focus on both the development of objec-
tives as well as on development of strategic programs for implementing
these objectives. (This question is probably particularly critical in
instances where cycles one and two have been "truncated" into one) .

Rating

To what extent does the corporate planning system provide for a dual



45



objectives-setting and strategic programming focus despite the fact that

the planning activities are truncated into one cycle.

Clear dual Entirely blurred
objectives-setting or one-sided
and strategic objectives-setting
programming vs. strategic pro-
focus gramming



17. Role of Functions during Objectives-Setting .

The functions within the divisions of the company will typically
play a crucial role in the strategic programming effort in that it will
be combinations of specialized functional competences that will be needed
in order to come up with most strategic program alternatives. At the
objectives-setting stage, however, the role of the functions will probably
be much less profound and more informal given that the major focus will be
primarily on the general management related issues of "where to go," for the
corporate portfolio as well as each business. By providing strong and ex-
plicit emphasis on developing objectives for each function, then, the
overall business and/or portfolio adaptation processes might be jeopardized.
The resulting effect, instead, is that fragmented, partial, and inconsis-
tent objectives might develop.

Rating

To what extent does an explicit emphasis on functional objectives setting



46



jeopcurdize the development of an overall general management focus on busi-



ness- and/or portfolio-objectives setting?

Functional involve-
ment in objectives-
setting is not
detrimental to
business and/or
portfolio
objectives-setting



■+-



Functional involve-
ment in objectives-
setting is
detrimental to
business and/or
portfolio
objectives-setting,

H



18. Decision-Making Focus of Corporate Planning System .

The corporate planning system is intended primarily as a tool for
facilitating strategic decision-making within the company and its parts,
in such ways that strategic resources (funds, management talent, etc.)
can be allocated to facilitate strategic change in accordance with paths
set out for desirable strategic direction. To achieve a necessary decision-
orientation and commitment to planning can be frustrated by factors such
as lack of specific resolution of alternatives in the form of deciding on
a particular alternative at the culmination of each planning cycle ("lack
of narrowing down"), an inappropriate sequence of the steps in the planning
process in that, all or some of the planning cycles for objectives-setting,
strategic programming or budgeting might be carried out in parallel or in
reverse sequence. A third symptom of lack of decision-making focus might
be that there is an excessive degree of major forms of revisions, modifi-
cations and iterations of the type that involve going back and revising the
planning cycles that have preceeded the planning cycle one is presently at.
(Say, when time comes for approving the budget senior management find that
they not only deem the budget to be inadequate but also that the proceeding
objectives eind/or strategic programs will have to be revised.)



47



Rating

To what extent does the corporate planning system which promotes a stra-
tegic decision-making focus, centered around the deployment of the company's
scarce resources?



The corporate planning
system is highly
decision-oriented
in its focus



5



The corporate planning
system is not
decision-oriented
in its focus



■i



19. Logic and Clarity of Overall Corporate Planning Approach .

To what extent are the various elements of the corporate planning
process, cycles and/or strategic levels, tied together within a logical,
explicit, simple and understandably conceptual framework? In this re-
spect, are the various "bits and pieces" of the planning system logically
cuid consistently tied together? Are there "discontinuities" in the flow-
diagram for the planning process?



Rating



This is an overall
planning framework
which is logical
and consistent



-I-



I-



This is not an overall
planning framework
which is logical
and consistent



-I
1



C. Linkages of the Elements of the Corporate Planning System .

This third part of the general assessment of the design of the cor-
porate planning system attempts to judge whether the linkages between the
various elements of the system are such that the task of developing a plan
can be achieved. Specifically we shall attempt to establish the roles of
three types of linkage design devices; timing linkage - the patterns of



48



time-spending on Vcirious aspects of planning; organizational linkage -
the pattern of division of l£Lbor in carrying out the various aspects of
planning among various executive offices; and, content linkage - the
pattern of transformation of focus on planning substance from one cycle of
planning to another. We shall address the various linkage issues in terms
of their intended impact for adaptation as well as for integration. The
linkage devices might be designed to impact the corporate portfolio level
or the divisional business level.

20. Timing Linkage; Corporate Portfolio Level and Adaptation-Related .
( Time spent on Cycle One )

When making an assessment of the planning-related time-spending pat-
torn that the C.E.O. and his senior line corporate management will be
following, as dictated by the way that the corporate planning system has
been designed, please indicate the relative amount of time that this senior
mcuiagement group spends on the development of objectives, deciding "where

to go" (cycle one) compared with the time spent on development of strategic
programs and budgets, deciding on "how to get thero" (cycles two emd three) .
Also, indicate the relative time that the C.E.O. cind his senior corporate
line management spend on being involved in aspects of monitoring progress
towards objectives versus towards strategic programs and budgets, these
aspects of monitoring being for instance, tracking of selected environmen'-al
factors, evaluating the potential significance of deviations of these,
and/or developing ways of modifying the compeiny's objectives.



49



Rating

What is the relative amount of time that the C.E.O. and his senior cor-
porate line executives spend on highly adaptation-related aspects of plan-
ning, namely on objectives setting and objectives-fulfillment monitoring-
versus on the other aspects of planning?

A much higher A even rel- A much lesser

A mucn nigner amount relative amount

relative amount ative amount - 4..„„ ^^^„4-

of time spent of time spent of txme spent

on adaptation/ on adaptation/ on adaptation/

objectives- objectives- ob^ectives-

reiat^ aspects related aspects related aspects

of planning of planning of planning



H



21. Timing Linkage; Corporate Portfolio Level and Integration-Rel ated.

( Time spent on Cycle Three )

When making an assessment of the planning-related time-spending pat-
tern that the C.E.O. and his senior line corporate management will be
following, as dictated by the way that the corporate planning system has
been designed, please indicate the relative amount of time that this senior
management group spends on the development of near-term budgets, (cycle three),
compared with the time spent on the development of objectives (cycle one)
and of strategic programs (cycle two). Also, indicate the relative time
that the C.E.O. and his senior corporate line managers spend on being in-
volved in aspects of monitoring progress towards budgets versus towards
objectives and strategic programs, these aspects of monitoring being for
instance, tracking of performance against budget, evaluating the potential
significance of selected budget deviations, and/or developing ways of mod-
ifying the company's budgets.



50



Rating

What is the relative eunount of time that the C.E.O. and his senior cor-
porate line executives spend on highly integration-related aspects of
planning, namely on the setting of budgets and on monitoring of progress
towards budget fulfillment - versus on the other aspects of planning?

A much higher An even rel- A much lesser
relative amount ative amount relative amount
of time spent of time spent of time spent
on integration/ on integration/ on integration/
budget-related budget-related budget-related
aspects of plan- aspects of plan- aspects of plan-
ning ning ning

I ( 1 1 1

5 4 3 2 1

22. Timing Linkage; Divisional Business Level and Adaptation-Related .
( Time Spent on Cycle One )

When making an assessment of the planning-related time-spending pat-
tern that division managers will be following as dictated by the way that

the corporate planning system has been designed, please indicate the rel-
ative amount of time that a division manager spends on the development of
objectives, cycle one, compared with the time spent on development of
strategic programs and budgets, cycles two and three. Also, indicate the
relative time that the division manager spends on being involved in as-
pects of monitoring progress towards objectives versus towards strategic
programs cuid budgets, these aspects of monitoring being for instance,
tracking of selected environmental factors, evaluating the potential sig-
nificance of deviations of these, and/or developing ways of modifying the
business' objectives.



5]



Rating

What is the relative amount of time that a division manager spends on

highly adaptation-related aspects of planning, namely on objectives setting

and objectives-fulfillment monitoring - versus on the other aspects of

planning?



A much higher
relative amount
of time spent
on adaptation/
objectives-
related aspects
of plcinning



An even rel-
ative amount
of time spent
on adaptation/
objectives-
related aspects
of planning



»-



A much lesser
relative amount
of time spent
on adaptation/
objectives-
related aspects
of planning

—I



23. Timing Linkage; Divisional Business Level and Integration-Related .

( Time Spent on Cycle Three)

When making as assessment of the planning-related time-spending pat-
tern that a division manager will be following, as dictated by the way that
the corporate planning system has been designed, please indicate the rel-
ative amount of time that the division manager spends on the development
of near-term budgets (cycle three) , compared with the time spent on the
development of objectives (cycle one) and on strategic programs (cycle two) .
Also, indicate the relative amount of time that the division manager spends
on being involved in aspects of monitoring progress towards budgets versus
towards objectives and strategic programs, these aspects of monitoring
being for instance, tracking of performance against budget, evaluating ,
the potential significance of selected budget deviations, and/or developing
ways of modifying the division's budget.



52



Rating

What is the relative amount of time that a division manager spends on
highly integration-related aspects of planning, namely on the setting of
budgets and on monitoring of progress towards budget fulfillment- versus
Oil -';« other aspects of planning?



A much higntr
relative amount
of time spent
on integration/
budget-related
aspects of
planning



An even rel-
ative sunount
of time spent
on integration/
budget-related
aspects of
planning

H h



A much lesser
relative amount
of time spent
on integration/
budget-rel ated
aspects of
plcuining

-I



24. Organizational Linkage. Corporate Plannner versus Corporate Con -
troller .

The corporate planner (the executive who is responsible for the de-
sign, maintenance and implementation of the corporate planning system)
might also be responsible for the budgeting and monitoring functions.
Please assess the extent to which he is at a much higher level of orga-
nizational prestige and influence than the corporate controller.



Rating

The corporate plnaner is ranked organizationally more/less influential

than the corporate controller.



The corporate
planner is
much more
influential



The corporate
plamner and
controller have
about equal influence



The corporate
controller is
much more
influential



4

-L.



2



1
-1



53



25. Organizational Linkage. Corporate Planner's Responsibility of In-
centive Schemes .

The corporate planner may or may not have direct responsibility for

managing all or part of the management incentive scheme. Please assess

the extent to which he is responsible for managing and administering all

or part of the management incentives.



Rating

The corporate planner is also responsible for managing all or part of the



management incentive system.

The corporate
planner is
heavily re-
sponsible
for the
management
incentive sys-
tem



The corporate
plcuiner is
somewhat re-
sponsible for
the management
incentive sys-
tem



The corporate
plcinner is
not responsible
for the man-
agement in-
centive sys-
tem



4



3



2



1

-I



26. Content Linkage - Past vs. Present Plans .

Last year's (and previous years') planning documents might to a larger
or lesser degree be referred back to when this year's plans are being de-
veloped and/or reviewed. Please assess the extent to which previous years'
plcuis are being of influence as vehicles for questioning changes in di-
rection, checking unrealistic assumptions, etc.



54



Rating

The previous years' planning documentation is being referred to exten-
sively when this year's plans are being developed/reviewed, and the present
plans are extensively being reconciled with the past ones.

Past plans Past plans Past plans

are extensively £u:e playing are not playing

influencing some influence much influence

present plans on present plans on present plans

5 4 3 2 1

I 1 1 ■

27. Content Linkage - Executives' Roles in Past Planning

There typically is a relatively small niamber of medium- to senior-
level line executives in a company that are de facto responsible for most
of the strategic decisions that are being taken as part of the planning
process. Many of these executives were also instumental in strategic de-
cisions associated with planning in the past. To what extent is an execu-
tive, formally or informally, being held responsible for his past "track
record" of strategic decisions, i.e. "have to live with" his past successes
and/or failures?

Rating

A manager's substantive involvement with planning decisions in past years'
plcuining efforts rate heavily as part of his image and esteem in the com-
pany.

The past years' The past years' The past years'
planning perfor- planning perfor- planning perfor-
mance by the mcmce by the mance by the
manager rate manager rate manager rate
heavily in his somewhat in his little in his
career career career

5 4 3 2 1



L.



_» L



55



Section IV



Line Managers' Perceptions about the Corporate Planning System.

The following questions should be asked by line managers, either at
corporate level (ideally the C.E.O.) or/and at the division level (ideally
the division vice president) . You may also want to ask this set of ques-
tions to general managers at the group level (ideally the group vice
president) and at the Strategic Business Level (ideally the SBU manager) .
For comparison reasons the questions asked from all the line managers,
the "users" of the corporate planning system, will be the same; please
stress that each manager should answer from the perspective of his own


1 3 5

Online LibraryPeter LorangeAn analytical scheme for the assessment of a diversified company's corporate planning system : needs, capabilities, effectiveness → online text (page 3 of 5)