Closing the gap between planning and control

16

Long Range Planning

April 1979

Vol. 12

Closing the Gap between Planning and Control ]ohn L. J. Machin and Lyn S. Wilson-t

Top management responsible for setting objectives, determining organizational purpose and developing appropriate structures are almost always far removed from the harsh realities of implementing plans and subsequent operational control. This paper explores two traditional responses to the problems of planning and control before explaining ways and means for integrating the functions through using the Expectations Approach which appears to offer a bright futi re for a career in planning and control, and also a constructive aid to the Board wishing to translate strategy into detailed operational programmes. Furthermore. it must be emphasized that in a rapidly changing social, political and industrial relations environment, the integration of planning and control becomes more critical unless planning is to become merely an expression of pious hope rather than a means of achieving the desired future.

Introduction The authors take as their text a challenge in Professor Taylor’s 1976 article in Long Range Planning, New Dimensions in Corporate Planning, which reads : Planning

theory

is eloquent

about

formulating

long

range

plans

but somewhat less forthcoming on how plans should be carried out.. . As one executive remarked, it seems that ‘NO plan srrrviuer contact with reality’.’

This view is mirrored through the pages of thisjournal in which the task of planning and the roil of the planners are frequently explored. The subject of implementation of plans is almost wholly ignored, yet clearly there is little point in preparing a plan which does not carry organizational credibility. This point is strongly emphasized by Professor AnsofF:

‘0 John L. J. Machin and Lyn S. Wilson, Durham University Business School and Harbridge House Europe. tDurham Universitv Business School, Mill Hill Lane, Durham DHl 3LB. U.K.

. strategic ages under

planning

focuses

only on problems

the basic assumption

that internal

of external

configuration

linkof the

organization will remain essentially unchanged, mentation will follow as a secondary activity.

assuming impleIc ignores social

and political

the organization

and assumes

dynamics them

both

within

to be irrelevant

and outside and unaffected.*

and more recently in the Harvard Btrsiness Revieru: ‘It appears to be much easier to conceive a new strategy than to carry it out’.3 This paper raises some of the issues concerned with the translation of ideas into reality through the assistance of people. Considered first are the two traditional models of planning: top dotvn and bottowl up and the associated subject of control; subsequently an approach to Megrated Planning and Control is explained, based on research at Durham University Business School with some 30 organizations ranging from large multi-national corporations to small charities where, in the experience of the more than 1000 managers involved, the issue of ‘planning and reality’ (Taylor), ‘social and political dynamics Ivithin and outside the organization’ (Ansof) and the ‘carryir~g out’ of-strategy (Hobbs and Heany), is managed to their satisfjction. This will introduce the subject of the E?cpcctatiom Approach to Management Planning and Control. The authors do not claim that they have discovered a definitive answer to a major problem with which planners are wrestling, but they offer an approach, and a powerful tested system, that has been found increasingly useful by managers to reduce the conflict and improve the contacts between planning and control and the planners vs the controllers. The authors know that the words planning and control are used to mean different things in different places, but they believe that one of the factors hindering integrated planning and control in the past is the fact that one of the two processes has been seen as more complicated and more challenging and more top-management orientated than the other. These differences can be highlighted by reference to Tables 1 and 2 which present some of the more commonly practised attributes of the two processes of planning and control.

Closing

Planning Thv more obvious and critical listed in the following Table. Table

1. Attributes

attrihtes

of’planrzing

are

of plamling

(1) Planning is primarily a cerebral process (2) Planning activity is highly specialized (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13)

(14)

(15)

(16) (17) (18)

Planning activity is highly technical Planning activity uses analytical techniques and statistical methods that are complex and interrelated Planning activity is concerned with a long time-span Planning activity is concerned with things that are remote both physically and conceptually from the present time Planning activity is concerned with global considerations Planning activity is removed from day-to-day management Planning activity is devoid of intense spontaneous pressure Planning activity is located normally in a central position Planning activity is normally seen to be carried out towards the top of a hierarchy Planning activity is normally carried out at some distance geographically from subsequent managerial activity The variables involved in the planning process are quite different from those involved in the control process both by type and by separation The variables involved in the planning process are generalized models of sectors of employees (directors, managers, shop floor workers, salesmen, etc.) ; generalized models of plans, generalized statements concerning customers and suppliers, generalized views of financial suppliers, shareholders, banks, etc. The planning process is concerned with a highly simplified view of the totality of the organization for which the planning is being carried out Planners are rarely held accountable when performance does not meet plan Planning is seen to be a top management activity as is the subsequent assessment of performance The variables that are dealt with in planning are inevitably limited and therefore can be treated as individual variables albeit linked into a plan

These 18 items add up to an ‘unnatural process’ sufflciently removed both geographically and hierarchically from the work place which will ultimately generate the planned output as to have an aura of depersonalized unreality far from the day-to-day process of operational management. Statements concerning each of the variables in the plan may be consistent for the planners but may end in conflict at the management level (one obvious example being the need to reduce production costs whilst at the same time maintaining flexibility of customer service). On the shop floor, that means fights between quality controllers, production schedulers and salesmen. No amount of broad statements on a top management corporate plan about what is expected can actually provide detailed guidance in respect of the interaction that happens between different functions at the bottom of the organization.

Control The varia-bles in a control situation are seen by most managers to bc manifestly different from those in a planning situation, and many of those striving hard to contribute towards the achievement of organizational purpose find it almost impossible to obtain guidance on their day-to-day activity from the simplified postulates

the Gap between

Planning

and Control

17

of the management plan. This is because management control is an activity undertaken in a particular and, in some respects, unique situation. The conceptual theory that we have available to help us is very much more limited than that in respect of planning: the number of variables that have to be dealt with is very much larger, and the bulk of the information that a manager uses is in fact sittlatjonaf, i.e. acquired informally by the manager in respect of the particular situation he is managing. The most critical variables in rrspcct ofcontrol appear in Table 2. Table 2. Attributes

of control

(1) Control is primarily an interactive process (2) The time horizon for decision making is usually small (3) (4) (5)

(6) (7) (8) (9) (10)

The number of variables that have to be dealt with is very large and is not under the control of the manager The variables that interact on managerial control come from very varied disciplines The output that has to be controlled ranges from the concrete which can be measured clearly to the satisfaction of superior and subordinate, to the abstract which cannot be measured objectively Control is concerned with specific individuals and specific situations The need for control is frequently generated by random and unplannable circumstances Whereas planning is concerned with stating purpose, control is concerned with the process of achieving purpose Given the interaction essential for control, control is a behavioural process Because of the nature of the process, it follows that it is impossible to forecast accurately in a given situation either what information a manager will need, or what he will do with the information when he receives it

On the one hand plannirlg is concerned with choosing which variables will be included within the plan and then looking at such difficulties as exist within the substantive environment in moving towards the achievement of a desired position; on the other hand control is concerned with reacting to difficulties that are created as a result of past patterns of behaviour proving to be unsuitable for coping with the present situation. Many of the things that give rise to control problems are the normal day-to-day difficulties of co-ordinating a large number of variables. Some of the problems that are created in the control field, however, devolve directly from the plan and this has done much to undermine the operating manager’s view of the reasonableness of the planning function.

Models of a Planning: and Control Relationship ”

The authors perceive the relationship between planning and control to be fundamental to the achievement of purpose of the organization, one of the elements of which is to provide a working environment that is challenging and enjoyable whilst at the same time contributing towards a progressively more effective achievement of planned purpose by the organization. The authors also believe that the difficulties faced in linking planning and control satisfactorily range across the fuil

18

Long Range Planning

April 1979

Vol. 12

spectrum ofsocio-economic and technological problems, but are particularly manifest in attitudes to the two processes which were listed in Tables 1 and 2. The authors, therefore, see the problem to be a highly complex one, and one which is going to be settled situationally in each organization in different ways because of the simple fact that any reduction in the gap between planning and control can only be achieved through managerial action and is therefore contingent upon the motivation, the desires, the abilities and experience of the managers within a working group. In such a situation of complexity, however, it is the authors’ contention that many organizations would be assisted in narrowing the gap between planning and control if-they analyst4 wirh some care the purpose oj‘both activities and then came face-to-face with the reality of the need to define the purpose of the relationship bctwcrn the two. The responsibility for defining the purpose of that relationship clearly lies with the Board.

The Role of the Board A key clement in affecting the relationship between planning and contiol at the operational, managerial and strategic levels is the role undertaken by the Board of Directors and the Chief Executive. Ptjrspectives on Coryorare Strategy highlights the issues : There

are three fundamentally

first is preservation organization is planning

response future

different

executive

of the organization. to deviations

functions.

The second

from

expectations.

The

is control

of

The third

.4

expectations.

It is particularly interesting to note that the above author puts ‘control’ before ‘planning’ in his list of priorities, whilst recognizing that both processes can be linked through the concept of expectations. The critical decisions then become, firstly, whose cxpcctations and, secondly, what is their relative importance? In the same book there is a discussion about the role of the Chief Executive in Strategic Planning and the following points arc made: Most ofthe conventional ideas that we have about the contribution of the chief executive to corporate management su&r from historical obsolescence. They are of little help in coming to grips with questions +

such as these:

How can the chief executive division managers operating some overall

& How operate

corporate

gain the consensus of a group of in widely difkrent fields about

Research of this kind again indicates that althotlgh planning should in theory come before control, in practice short-term management control decisions often generate or change the parameters so much that only after these have settled into something resembling stability does planning for the longer term seem justifiable. But while such forces trigger strategic thinking, the consequent development and implementation ofstrategy could result in an enormous change in style, operations, tasks, roles, organization; for example, Kitching in 197312 quoted a study by McKinsey 8( Company showing that even a modest acquisition can involve some 10,000 major non-routine decisions.* Clearly it must be the Board which decides on the desirability of a major strategic move-such as an acquisition-but, equally clearly, there is no way in which a Board can either anticipate or control such a volume of consequential decisions throughout the enterprise. In these situations it is inevitable that such decisions are taken by managers at all levels who may have little, if any, understanding of how their decision fits in with the purpose of the original, ‘simple’, planning decision taken by the Board. It is obvious, however, that the volume of control decisions is consequent upon the initial planning decision at Board level, and it is therefore not surprising that the traditional pattern of the planning and control relationship has been ‘top down’.

purpose?

can the chief executive in fields they know

@ How can the chief executive in a diversified company?

evaluate better guide

division

managers

who

than he? the allocation

of resources

r> In what terms can the future of a diversified company meaningfully expressed? Is it all encompassed in the concept return

implernentatiorz qf’ strmgy6 i.e. determining WHO will be responsible for ‘making things happen’. There is evidence of substantial weaknesses in both activities: Clendenin, surveying Boards in the U.S.A. for McKinsey & Company, discovered that ‘In general, board involvement in policy and strategy tends to be superficial’,7 and one cannot therefore be too surprised at the horror stories of corporate collapse in ‘Corporations in Crisis’.8 The situation in Europe and U.K. can give no cause for complacency. Charmon discovered that strategic changes in British companies were frequently not the result of structured planning but were a response to external forces, especially competition and market pressures, analysis by management consultants, or internal forces arising from leadership changes. Denning and Lehr’O observed a strong positive correlation between a high rate of technological change and the introduction of planning; while Irving” reported that a third of companies in his survey began planning as a direct result of major changes in the Board.

be of

on investment?5

The task of the development of‘strutrgy-the conceptual struggles and the ideas phase which result in plans-is followed by ‘turning ideas into reality’ through the

Top Down-Planning

vs Control

Let us consider the model of the relationship between planning and control that is demonstrated in Figure 1. Figure 1 shows the position common in many organizations. The purpose of the planning process is to produce

‘Publicly available examples of such decisions are in the Stockton Et Darlington Railway Sesquicentenary 1975 files, 1971-1976, at Durham University Business School Library.

Closing Activity

the Gap between

and Control

19

Planners and Board Expecting Managerial Co-operation for Achieving Plans but

Purfiose Define Desired Purpose in Terms of Desired Performance Levels in Respect of a Limited Number of Variables

~ Planning

Planning

Profit Productivity Sales Volume Output

\

Measured Variables

Hard to Measure \ Controlling

Figure

1. Exercising

authority

To Achieve Planned Levels in Respect of Planning Variables (if Necessary at the Expense of Nonplanning Variables)

downwards

Rent Equipment Reduce Quality Reduce Customer Service Extend Credit - Even to Poor Risk Customers Cut Advertising Cut Management Education Cut R&D Develop ‘Resistance to Change’ Mentality and Institutions

a coherent plan covering a number of limited and chosen planning variables. In respect of each of the planning variables there is a stated level of performance that is seen to be desirable for the working group as a whole. The control purpose is quite clear. It is to ensure the achievement of the desired plan; and the control systems that are developed contain within them feedback on performance in respect of the planning variables. Thus, the manager treats variables that were not incorporated at the planning stage as of secondary importance and therefore low priority. He will concentrate his best endeavours on achieving the objectives set in respect of the planning variables, if necessary sacrificing the seconunplanned-variables. All too often when dary -the actual performance varies marginally from planned levels the reaction is to cut expenditure on those activities where results are not monitored, either because they are not planning variables, or they are seen to be impossible to measure. . Many such outcomes involve behavioural attributes which are not aggregable in the same way as incurred costs, and research has shown that a highly sophisticated budgetary control system is often taken by managers as a form of game which they play once a year with the accountants and which fortunately normally ends in a draw so that neither side need be too concerned !I3 The pressure to perform in respect of the planning variables inevitably gives these a progressively greater weighting in the manager’s mind, and when he handles the situational complexity ofhisjob he obviously ascribes a higher priority to those variables because they are seen to be the ones in which top management is most interested. This will be a common experience for most readers. Nowhere can that distinction be more readily observed than in the work which was done in the U.S.A. in General Electric in the 1950s and 1960s to define its key results areas. Readers will remember the following eight key results areas :

Operational Managers Response to Planners

Figure 2. Change vs control model

in emphasis

r

and action in the planning

(1)Profitability (2)Market position (3)Productivity (4)Product leadership (5)Personnel development (6)Employee attitudes (‘1 Public responsibility

(8)Balance

between

short range and long range goals.

The company spent a considerable amount of time and money to develop ways of setting objectives and measuring performance within these key results areas. And then, we quote (1965), The company’s business programme incorporated

planning, budgeting and forecasting the use of selected key results areas in:

(1) reviewing

history

standards

the recent

for each department;

and

current

(3) planning

status; to achieve

dards; and (4) periodic reporting and measurement plishment. Since the first four key results areas lend

(2) setting the stanof accomthemselves

readily to numerical evaluation, they were a part of the planning, budgeting, forecasting, reporting and measuring system. T/W other &w were not irxhrded because they were not amenable to rwnwical evaluatiorr.14

Whilst General Electric has come a long way since then, and has realized the simple folly of seeking to plan activities which are not subsequently controlled, many organizations have not yet included those key results areas into

20

Long Range Planning

Vol. 12

April 1979

their plans which are paramount for effective control.15 There are clear reasons why this is so. Many of them have been outlined above. Control is primarily situational. The planners know that managers’ motivation varies enormously yet they have to make assumptions about average levels of performance. However, at the control level it is the specific manager with the specific motivation pattern who is actually going to set to and try to achieve elements of the plan. Individual input variesand inevitably performance levels in different parts of the organization vary accordingly. These are the problems which have not been adequately addressed by those concerned with planning or control. Succinctly, how should individual managers’ responsibilities for planning for the future and controlling their endeavour be incorporated in an aggregated, meaningful, corporate plan aimed at achieving the objectives of the Board? Let us explore an example. The relationship between planning and control which is shown in Figure 1 is the situation where, in an attempt to meet targets for both profit and output, progressively lower quality material is produced on progressively worse maintained plant and machinery until the crisis of sudden failure in profitability, morale, market share and customer service. The acrimony is all too frequently shown in public journals. The planners maintain they have been illinformed. The operational managers claim that they. knew all along that this crisis was bound to happen and that they had to cut quality, cut customer service and extend credit terms in order to achieve short-term controllable variables. The disjunction is when the purpose of the plan is seen to be desirable and enforceable in respect of only a limited number of short-term variables.

Leadership One way out of this dilemma in the top-down situation has proved to be strong or charismatic leadership resulting in a single point of corporate association or identification. One of the roles of a leader, whether chief executive or middle manager, is to define reality for his team: ‘This is the problem, we’ll tackle it this way’. In essence, the leader seeks to reduce the complexity of the situation into a test of loyalty and trust on the part of subordinates who if they trust the leader will accept the latter’s chosen path personalized support for a and follow it. Willing, successful leader is a powerful motivational iniluence in any situation but is particularly useful when ‘control’ activities are at some distance geographically or hierarchically from the central planning function. As organizations become progressively larger and more complex the role of the leader has changed, as has the ‘leadership’ for thorough credibility of substituting organization planning. In contrast to traditional tiilitary leadership there is no sense in which modern managerial leadership implies autocracy. President Kennedy’s clarion call in 1961 to start the U.S. moon landing programmes

was a clearly stated objective with equally clear output* and which, if successful, was perceived to be of immense prestige and with possible ‘spin otf’ which might be exploited. The U.S. response was an immense industrial and managerial effort, a truly collective commitment to achieving the objective regardless of process. Where an organization has a well-established pattern of behaviour almost certainly a highly successful leader is needed to change that established thinking about managerial style, or to develop a genuine commitment to examining or seeking to remove barriers which exist between groups or individuals. Some managers are vigorously doing all in their power to move barriers and to demonstrate that their businesses can only operate electively and efficiently through the co-operative endeavours ofall employees. each ofwhom has special skills to contribute. An example is H. P. Bulmer where, under Peter Prior’s leadership, initiative and inventiveness are fostered among all employees in part through the company’s Outward Bound style course for all ranks, from chargehands to directors. giving opportunities for developing leadership and understanding teamwork.16 This activity and experience is concerned with changing the process of management rather than concentrating merely on specifying output from an unchanged process, and is a realistic response to the false assumption identified by Professor Ansoff. If organizations are to change realistically then leadership in planning those changes is essential. In his Introduction to Barnard’s classic book, Tlrc FIWCProfessor K. R. Andrews wrote, tion of‘ tlrc E.~~w~ti~~e, ‘Lead&ship in organizations means taking the initiative in the adaptation of organization resources and processes to clearly understood and attractive objectives’.‘7 While this is clearly true, the ways in which ‘objectives’ arc viewed as ‘attractive’ by people within the organization and the practical means for achieving such objectives through adapting (changing) rcsourcps & procrssc’s is less clear, and frequently cloudy ifnot downright muddy. ‘Clearly understood’ implies vision and perspective ; Thus the ‘attractive objectives ’ implies involvement. ‘processes’ have to facilitate involvement in the determination of objectives by those who will subsequently be concerned with achieving them, but this end can only be achieved if there is adequate vision and perspective for each individual or group to see their needs in the context of the total organization. However, the easiest way to plan a large organization is to seek conformitv to a stcrcotyped planning unit of resource, namely, ‘organization man’ in his or her job description box. In the 196Os, many organizations sought to reduce complexity that way. That attempt often

‘25 May 1961, ‘This nation should commit itself to achieving the goal, before this decade is out, of landing a man on the Moon and returning him safely to the Earth’. President J. F. Kennedy. (Objective achieved 20 July 1969.)

Closing failed because real-life was not like that-management was not a ‘rote’ exercise. Complex managerial problems can only be resolved by complex and adaptive people. The search to harness complex individualism within an effective, co-operating and co-ordinated whole led to a different philosophy of the relationship which should exist between planning and control.

Bottom

up-Control

vs Planning

A response to the problems raised by the earlier approach was to recognize that most people within the enterprise could contribute to the planning for future endeavours. Salesmen were involved in setting targets, rather than responding to dictates from top management who were generally remote from the market territory: and this approach was used elsewhcrc, in an attempt at realism and involvement and commitment. This alternative relationship between planning and control can be seen in Figure 3.

Activity

Purpose Planning Aggregate Forecasts from Individuals and Departments about what they Consider Achievable, and the Use of the Total Plan to Provide Perspective to Individuals when Determining what may be Achievable

To Achieve the Best that Each Person Can in the Light of his/her Interpretation of the Relative Importance of Different Situational Variables

/ Controlling

Figure 3. According

authority

that an individual situation is born

Planning

and Control

gives of the

21

information he possesses. If each member of a working group has clear and open access to the current updated plan then he is in a position to judge the implications for the working group as a whole when he ascribes one level of priority or another to the variables with which he deals. The result of ‘bottom-up’ planning is to focus on individual pcrspcctives. This will lead to individual managers ascribing higher priorities to things which matter to them and lower priorities to things which affect others. When trying to resolve this understandable conflict many organizations have indulged in T-group and sensitivity training with the purpose of improving intcrorganizational norms, and cogroup relationships, operative problem solving. Whilst this has produced clearly understood personal objectives and individually accepted corporate objectives the difficulty has lain in co-ordinating and integrating different individual points of view. Radical change in the relationship bctwcen planning and control produces sub-optimization when there is no group pcrspcctivc. As Audrcws made clear such a change calls for massive adaptation of the human resource. The bchavioural scicncc experts summoned to help in the management of change recognized the limitations of their work when dealing with decisionmakers responsible for corporate destinies; at the conclusion of a report on the use of T-groups for training Beckhard wrote, ‘It is not the only nor board rnembersl’ the most appropriate learning mechanism for improving team effectiveness, &errtan&i1~~ fm7r~~7pinl rtmtyy. . . .‘I ’ The early experiments wcrc mainly- conducted outside companies with the aim of improving individuals and were. indeed, situations almost whollv unrclatcd to individual and group relationships in the ‘real company environment’. Table 3 high!ights the difference in emphasis between the behavioural school and the strategists and planners who were planning changes and keeping their fingers crossed in respect to implcmcntation of the plans.

Table 3. Contrast between priorities scientists and corporate planners

upwards

In this model the task of the planner is to assess whether the balance between achievable results in respect of various planning variables is seen to be appropriate. This viewpoint would be very different for the manager controlling output and achievement. The logic of Figure 3 is that each individual is working as best hc can-given his level of experience, knowledge and motivation-to optimize within his own situation, and he will ascribe different priorities to the variables he controls depending upon his appreciation of their relative importance. This is fundamentally different from Figure 1 where he ascribes priorities in response to the planner’s plans-and the planner may be foreign in location and status and beyond the range of many managers’ communication networks. Obviously the relative priority to the variables in the control

the Gap between

Priorities of behavioural scientists The relationships among people The way that groups work together The work The goals and prtorities

of behavioural

Priorities of the strategists and planners Establishing goals or priorities Analysing and distributing work Examining how the group works Examining the relationship among the members of the group

The results of T-groups and sensitivity training were improved awareness by individuals, but such work had little effect on the development and subsequent implementation of strategies. 2o The contrast in Table 3 is clearly a case of extremes, and there are managers wrestling with approaches to bridge the gap and to develop an

22

Long Range Planning

April 1979

Vol. 12

acceptable ‘middle ground’. Denning, in an unpublished paper, offers a conceptual model capable of being adjusted to the planning needs of individuals and groups which can be developed as a unique service for a particular enterprise in response co its organizational needs.21 The significant ingredient which appears to be lacking is the concept of a common data base from which the two very different approaches, illustrated in Table 3, could both be used. The authors will outline an approach which meets this need later in the paper. Before doing so, however, they wish to explore briefly some of the reasons why planning and control have for so long been separated.

Planning Divorced from Control Since the butcher, the baker and the candlestick maker managed their own one-man businesses where their jobs ranged from technologist through inventory controller, purchasing agent, production management to costing, pricing, marketing and cash control, organizations have grown in size and tasks and jobs require more and more specialists. Penetratingly and with wit Galbraith outlined the rise of the technocrat and the power of the specialist.22 Specialism and the specialist are part of the answer for the divorce of control from planning, but there appear to be four main reasons for this separatism:

ing gap which exists in organizations: those who form the statements of desired purpose all too often lack any up-to-date understanding of the detailed interaction between different people within the organization which constitutes the process whereby that purpose is going to be achieved. Increased knowledge in technology and the behavioural sciences has meant that the most recently educatedwhether an owl or grasshopper-have power whilst still lacking virtually any experience of the reality of applying their new knowledge. This can cause disillusion among age groups. . the young feel frustrated, while the oldey fear their positions being undermined. Since the planning function is an important area needing cerebral activity the planners themselves are often young and frequently operational management controlling the achievement of organizational purpose is the responsibility of older, more experienced, people who do not have the planners’ advantage of new knowledge and yet who can see ‘management experience’ to be something that the planners conspicuously lack. LI

I

In these circumstances the channels ofcommunication are clogged or rusty if not actually blocked; small wonder that new data, let alone information, often fails to flow to and fro between the corporate planners and operating management.

(1) Information (2) Problems tions

of understanding

the totality

of organiza-

(3) Authority (4) Survival.

Information Separation has produced cntrenchcd opposition born as much as anything else of poor communication resulting in intcrpcrsonal misunderstanding and hostility. It is surprising that at a time when our methods of communication are getting progressively better our ability to communicate effectively seems to be getting worse. The current cry at all levels of managerial activity is for better communication to achieve understanding. In far too many organizations communication between planning and control is most easily delineated by the advice given at the planning stage to the grasshopper by the owl. The grasshopper wished to learn how it should operate so that it could live through the winter and still be alive the next summer. The owl gave it the following plan : ‘Change into an ant’. The grasshopper went away and passed this highly sensible plan down to those concerned with controlling activity. It was not long before the grasshopper came back to the owl and said, “How do I turn into an ant?’ to which the owl’s response, as most readers will know, was ‘Don’t bother me with detail, I’ve given you the plan’. That simple fable resembles

far too frequently

a shatter-

Totality

of the Organization

The ability to pcrccive the totality of the different yet complementary parts which are combined in the jigsaw of modern organizations is a skill which can only be exercised at a high level in the hierarchy from which it is difficult, if not impossible, to communicate about the subject to others lower down and who probably have less experience than senior executives. Consequently, the ‘top management viewpoint’ is rationalized, from which something critical may be omitted, when wanting others ‘to see the corporation as a whole’. This dilemma, and its partial resolution, has been a fertile ground for the rational analyst jumping from Business School with a pouch full of amlyticd techniqtws at his or her command. These analysts-yet another group of specialistswho deal with hard data have gained power and, at the request of senior managers and directors, present reasoned arguments and logical choices to the problems they have been asked to solve. But these solutions have frequently suffered because the fu-st task of a&ytical t1linkir?p has not been applied by the directors to clearly define the problem. Without analytic thinking by top management the trick analysts, full of ‘The Method’, cannot perceive the complexity and the intimate interrelationships of the organization, while most senior staffare not trained in thinking analytically b&r the analysts weave their spells. The analysts are often dealing with problems of planning or control: but the dichotomy between the older top

Closing management and the up and coming problem-solver, coupled with poor communication, leads to failures because of the problem most analysts and middle level decision-makers have in understanding the totality of the organization and this is the second of four reasons leading to a break between planning and contro1.23*24 Whilst this fear is real we must recognize that it is not true in all casts. Young and Hussey, for example, report the work at Rolls Royce Motors Ltd. on the Strategic Review as the first stage in a new planning process when ‘the review meetings . . . were structured in such a way as to encourage and support strategic analytical thinking’,25 and an encouraging development to help ovcrcome the problem is in a draft monograph for this journal by Hussey on ‘Portfolio Analysis : Practical Experience with the Directional Policy Matrix’.

Authority Figures 1 and 3 represent two very different views of the way authority is handled. On the one hand authority in the top-down model is excrcisd dolw~lmds, while on the other (Figure 3) is it nccordd tymrds. This marked distinction has to be seen in the context of massive changes in society, much more formal and informal education, and one consequence is radically changed expectations of employers held by employees. As an example, consider a social and governmental system in Europe and North America for which much blood has been shed: we prize highly the separation which exists between thejudiciary, the legislature and the executive; but take time to compare that prize with employing organizations where it is apparent that for most employees the role oflegislator, executive andjudgc gcncrally rests in a single person, namely their boss ! For most employees their boss sets the boundaries of operation, authority, responsibility, accountability and resource availability; and it is then the boss who agrees objectives with subordinates (or tells them what to do) and then, incredibly, it is the boss who judges performance and decides on rewards or punishments. The traditional hierarchical structure is easily caricatured. But, given that most employees spend 9 hours per day at their work, 8 hours asleep and 7 hours in society it is more than curious that we strive to safeguard things in society that we discard and dismiss in the workplace where, apparently, mediaeval barons reign supreme. It is inevitable that people enjoying modern educationthe new knowledge workers-should query the societal and organizational expectations of the individual. This will affect planning and plans, controlling and controls: and it is a reason for trying to marry the two subjects and recognize and accommodate the expectations of employees. This will be a prime task for those responsible for developing and implementing strategy. It is a critical element in the adaptation process and involves Board membersjust as much as middle management and the shop floor staff.

the Gap between

Planning

and Control

23

Survival Many of the things that a working group has to achieve arc essential for organizational survival and within this article they will be subsequently termed ‘nrrvid out,mt’. Most working groups, however, have the capacity to produce a great deal more than the minimum required for survival. It is a noticeable thing, and a major area of research over the last 20 years, that individual people within working groups apply varying amounts of their total capability into their work depending upon the opportunities available. Some devote virtually all their capability and appear to be highly committed and highly motivated towards contributing their energy to the working group; others contribute only a fraction of their potential. We still have only the haziest understanding of why this is so at the conceptual level, yet at the practical level everybody reading this journal is only too well aware that on some days they arc extremely effective and on others they return home wondering why they even bothered. Some days they take into their work place initiative and innovation and drive and on many other days they have only an average level of commitment to work probably born of dissatisfaction with a decision by another, lack of a decision by another. or changes in their authority or responsibility either actual or perceived which in some sense lead them to reduce their commitment. Thus the reality for any organization is that the amount of energy available to it is a significantly variable element in the achievement of organizational purpose. When a working group achieves a level that is above or greater than that necessary for minimum survival the wealth thus created will subsequently in this article be termed ‘symzswvival wealth.’ The distinction between survival output and suprasurviva1 wealth has considerable relevance for a consideration of Figures 1 and 3. Those elements of purpose which have to be achieved to enable the working group to survive seem certainly to be the variables that ought to be included within a plan, since they are essential and not merely desirable for the continuing survival of the working group. If those variables can be sufficiently clearly identified, and if the reason why those variables must be achieved can be sufficiently clearly identified, then it is reasonable to suppose that the logic of Figure 1 is appropriate because, to use Andrews’ phrase, the objectives will be both ‘clearly understood and attractive’. If, on the other hand, we are looking at the distribution of suprasurvival wealth then the logic of Figure 3 becomes unavoidable. The amount of energy that an individual brings into his working group is a function of a wide range of things but it is certainly variable. and it is largely under his own control. Recent managerial research in the behavioural sciences has given us greater (though still far from complete) understanding of what are the more important situational variables which lead individuals to bring more rather than less of their available energy, enthusiasm, and initiative, into the.work situation. It becomes inevitable that working groups should consider seriously whether

Long Range Planning

24

Vol. 12

April 1979

the variables that are contingently important to individuals within the working group should not in fact. as in Figure 3, be perceived as factors that should be drawn into a plan of what is currently achievable and desirable in the area of suprasurvival activity. This seems very important for planners to understand. It seems likely that a confusion between survival and suprasurvival wealth, and the use of a single system or approach to deal with both, has been at the bottom of much interpersonal and intergroup distrust and lack of effort over the past two decades, and has been a fourth reason for maintaining a gulf between planning and control.

The authors’ main contention, however, is that the delay in introdlrcing the necessary degree oj’jexibility into the relationship Getwren planniq and control based on an trnderstanding of the reality of‘ the behaviowal clnd situational variables associated with that relationship, has been due, not so much to the practical jiatlrres outlined above, but because oj. the lack of‘ a concepttral basis fbr integrating planning and control in ways that wollld make sense both to those employed within the working grozlp and those who have responsibilityfbr assisting the planning oj‘tlze activity within the workinggronp.

Summary

Table 4. Barriers against integrated

The logic of the discussion of the rationale underlying Figures 1 and 3 is that managers should seek to employ a combination of both approaches to the relationship between planning, and control.

The conceptual barriers seem to be fairly fundamental and need to be faced and are shown below.

(1)

(2)

F;,gllrtl 1 oJ,ff;arsNI acceptable swvival

approach ruhm dealing with or ‘essential’ output. A clear and accurate statement

of what needs to be achieved must be stated by those with the necessary authority, and the process whereby chat purpose is to be achieved needs to be discussed downwards and outwards in a progressively more detailed manner. Figrrre 3 o&s a behaviorrrally acceptable approach when dealing Iuith rrcprastrrvival or ‘optional’ wealth. Clearly the

way in which suprasurvival wealth will be distributed affects the motivation of organizational members to generate it. Participation in the decisions on how suprasurvival wealth will be used should bring a much higher commitment to its generation. The distinction between the two rationales and their obvious links with the two types of organization output leads so clsarlv to the above conclusions that there must bc reasons otlier than inertia to account for their lack of practical application, of which the following appear to be amongst the more important:

(1)The (2)The

increasing

size of organizations.

difficulty of handling the necessary information of a non-quantitative kind which should bc included within the planning function.

(3)The

changes that are involved between accountability upwards as in Figure 1 and accountability downwards as in Figure 3.

(4

The educational process necessary to enable all people within a working group to differentiate between survival and suprasurvival output.

(5)The

educational processes needed to enable employees to recognize and understand that items included for ‘suprasurvival output’ one year may well appear as ‘survival’ the next.

(6)The

change in status and relationships that would almost inevitably occur within and berween working groups.

(3)

(4)

planning

and control

The number of management control systems currently available to employing organizations is limited. Each system carries underlying and implicit assumptions about the people who will be using the control system. The majority of management control systems currently available to employing organizations are capable of dealing with only a limited number of variables. They are basically planning systems which have been brought into the control area and are therefore consistent with the ‘top down’ philosophy of the planning-control relationship (Figure 1). Management control systems currently available to an organization almost invariably carry the connotation of control of one person by another. Most management control systems currently available to working organizattons carry the underlying assumption that the ultimate planning decisions will be taken in only one place within a working group.

The time has come_& euch ofthese barriers to be chalkqed in the light qf‘ow cwwnt understandir;q qf‘individw~ls, society and the technology rue have availabl’ e_f or infbrmation handling.

The implicit assumptions in Table -i underlying the design of management control systems when made explicit appear unreasonable not least because they are unrealistic as well as stereotyped and restrictive. The authors contend that each should be rejcctcd-and needs to be-if we are to move into the last two decades of the 30th century with a practical and viable way of integrating planning and control activities in such a way that individuals and working groups can become more effective in, and gain more satisfaction from, their jobs.

First Conclusion Reality is changing. Systems have to keep pace reality and planning must anticipate reality. Let us tion two recent studies which, ifrepresentative, will profound effects upon organizations employing readers of this journal. One is from Britain, the from the United States.

with menhave most other

First, NW Society in April 1977 reported the results of an Opinion Research Centre survey into the attitudes of the British to money and work, ‘Do the British sincerely want to be rich?’ . . . it does seem from our survey that the British are a peculiar lot. They

are remarkably

sincerely

unambitious

in a material

want to be rich. Most people

in Britain

sense. Very neither

few

want nor

Closing expect

a great

majority

deal more

money

do not seem prepared

respondents

thought

live a pleasant

even if they could to work

we should

harder

only work

get it, the vast

for it:

lllosf of our

as hard as we ueed to

lift.

. . . Many now say that they are not entitled asked for 4 years ago. There revolution

of_filli,lg

appears

to as much as they to be a new phenomenon: a

expectations.26

Second, SRI International in 1977 reported recent surveys of Americans indicating a major change from ‘predictable economic growth and competition to a more uncertain, socially directed and qualitative economy. This transition is not happening because of any inherent limit to resources but because of a revolution in perception, ethics and values’.27,28 . If these reports represent some real truth, and we see no reason for fundamental disagreement, then thcrc are major implications for planning and control. Clearly the link that becomes apparent is that planning and control arc both concerned with expectations. Planning is COHccrnc~d lrlith f;rarrc cxpcctations and control is cnsnring organizational rrsponsc to changes that occur when what wtw jrrrrrc expectations bccorm~present expectations. This leads to the concept aud practicalities planning and control.

A Framework and Control

of inkyatrd

for Integrated Planning

The second part of this article outlines both a conceptual jamwork for, and a practical system which can facilitate, integrated planning and control. The thrust of the arguments put forward so far leads to the conclusion that the requirements for integrated planning and control are such that a useful framework must provide for activity which will be : (1) multi-centred (2) multi-time

horizon

(3) multi-style (4) multi-variable (5) both organizationally

and managerially

relevant.

(1) Multi-centred Each manager is at the centre of his own planning and control activity, yet he is also part of progressively larger groups such as sections, departments, or divisions. Each of those groups form a centre of planning and control activity. Clearly, different size groups work with di&ent levels of abstraction in their planning language. The operational manager is concerned with detail, and with level planning is ‘how to do it’, whilst at divisional concerned with policy and generalized statements of the overall achievement required. Multi-centred if the overall

planning and control activity is essential total plan is to be a linked chain of detailed

the Gap between

Planning

and Control

25

implementation plans in the short-term, through medium-term middle management plans to the appropriately, broad, general. statements included in the overall plan for the organization. The links in the chain vary in size and importance yet each link must represent a full circle of planning and control if the total organizational plan is to bc linked, reformulated, and disaggrcgated in a co-ordinated manner with the appropriate details necessary to manage effectively, for example, on the shop floor or in a Personnel Department. Multi-centred planning and control means that the degree of detail which would be included within planning or control in any of the interacting links would be appropriate to the situational needs of the particular centre concerned and to the systematically specified needs of survival orientated systems. Bridging the gap between interpreting at situational level what is needed for survival, and linking that with the multi-varied situation within which managers manage, is something that can only be done where the focus of planning is at the same point as the focus of control. Each centre must plan its activities as they affect other centres within the organization. Multi-centred planning and control therefore involves planning interaction and co-operation with other ccntres (which includes not only superior and subordinate individuals and groups but also colleagues of the same or different levels in the hierarchy?n other parts of the organization) in the level of detail that is relevant for a given interaction. Equally, apart from different levels of detail to be found at different levels of management, there is a need for dt~&ent fkqucncies of’the planning and control cycle. Multicentred planning therefore represents a move away from both single-centred planning and from single time-point planning. (2) Multi-time Horizon The planning horizon that makes sense for different activities varies. The concept of the single annual budget, whilst making sense from a financial point of view with the somewhat limited horizons of accountants, makes no sense in the multi-variable situation of the manager. New ideas, and changes in performance, pattern of sales, or competitive challenges do not nicely happen at a budget time. The concept of multi-time-horizon planning and control is an essential requirement if organizations are not to atrophy because of delay in decision-making. Response to changed circumstances either envisaged or actual does not always require a complete turn of the total organizational planning cycle. Authority to respond should be distributed to points in the working group where situational data can be balanced against organizational perspective. This means that the frequency of the planning and control cycle for any particular centre will be determined by the time-horizon of its decisions and outputs, and by unanticipated changes in the present or future environment

26

Long Range Planning

Vol. 12

of the centre which call for a re-evaluation strategy.

April 1979 of its current

Almost certainly the frequency of the strategic planning and strategic control cycle will be appreciably less than the frequency of the operational planning and control cycle yet they must be linked through the planning and control cycles at intervening levels of the hierarchy.

Management control systems have historically carried the connotation that managers must be prevented from wasting resources that ostensibiy belong to others. The implication clear within such an approach is that the concept of what constitutes waste is in the minds of those involved in planning whilst the desire to waste lies only with those who manage, and therefore managers have to be ‘controlled’ by those who plan. It is contended that there is no pre-emptive right held by those who plan to determine unilaterally what shall be called ‘waste’. (Many managers currently perceive most centralized planning activity to be a waste, actually !) It is just as important for control to be brought into the planning activity as it is for planning to be linked to control activity. Control must be concerned with more tha9 stewardship, i.e. with monitoring performance to discover fraud, inhibit defalcation, or to cajole when a person’s actual performance falls short of some imposed planned level. Control must be aimed at helping a manager to achieve a balance between his own inputs and outputs and which he can understand is necessary for organizational survival, and is attractive to him in terms of his own needs. Indeed if we were to substitute the phrase ‘management motivation systems in place of ‘management control systems’, much of what appears in books with the latter phrase in their titles would look singularly oat of place. Management planning and control systems must help a manager to be more effective by providing him with the necessary information to operate in a manner which is consistent with rhe complex links between the purpose of the organization and his own current managerial activity and satisfaction. Management styles vary within any organization and efIecrive linkage between strategic planning and operational control must accept the reality that different individual link: will be managed in different ways ranging from autocratic to participative.

(4)

Mdti-uariablr

If strategic planning and operational plannir,g are to be linked satisfactorily widin an integrated framework, that framework must permi t each planning and control ci-ntre to include those variables which are ofimportance to the management of that centre. A t strategic level that means including nor only numerically expressible variables such as saies or profits or costs

or market share but also variables such as management tional climate and the quality ment.

non-numerical development, of the working

planning organizaenviron-

At operational level that entails including variables that relate to the achievement of output objectives as well as variables that relate to the process whereby objectives may be achieved such as the content and style of interpersonal interaction, the development of more effective group co-operation and co-ordination, the search for more effective forms of authority distribution and work structuring. Many planning centre variables will be a function of the role which the planning centre performs but an integrated system must accept that in the control phase of any cycle the majority of variables are in fact dependent on the personality (or personalities) which form the centre. It is common managerial experience, proven by research, that managers holding ostensibly identical jobs perform them in different ways. A truly integrated planning and control system must accept common expectations of identical roles at the planning stage and a diversity of personality dependent variables for identical roles at the control stage. (5) Rrlrvancr Organizationally and Managrrially There are two acid tests of any new managerial system : (a) Do managers service?

use it, or do they merely

idea or

pay it lip-

(b) If managers do use it-does that use give improved organizational achievement?

rise to

Many theoretically beautiful systems have not been used because managers find (them too cotnplicated, too simple, too time-consuming, too dangerous of too much like the last one and that did not work either ! Aiiy integrated framework trying to link strategic planning with operational control must be capable of helping a manager to be more effective in the context of improving organizational effectiveness-and it must be one that is rrsd, not merely theoretically usable. Almost certainly the key to the use of a system by a manager is the ‘ownership’ by the manager of the design, the development, or the way in which he can control the use, of the system. In this context managerial relevance lies in recognizing that each planning and control centre will have control over the frequency of the cycle, the choice of relevant variables and the style or climate in which the p!anning and control processes take place.

Management It isworth pausing

by D bj ectives

to compare MB0 with the requirements posed by the framework, because MB0 represented a major step forward in trying to link planning and

Closing control. As a system it had certain very obvious advantages. It was Larzgtdog+bascd. It required the clear articulation of the key results areas of each individual within the working group. This was a major breakthrough in actually moving away from accounting based systems (the majority of managers do not speak accounting particularly well), into the language that managers do actually speak, namely English. This transition was fundamental and the use of language is a basic requirement of the framework which has been outlined. In this OIIC respect MB0 meets the framework’s needs. Ir c&d /Or .fau-to-/& cortrrtrrrnicatiori ~~etirwrr srry~rior and strbordillntc. discussions advocated by The superior-subordinate supporters of MB0 inevitably meant that a transmission of objectives goes along or down lines of organizational structure. It was early perceived that lateral or diagonal communication across structure, and larcral and diagonal formulation of objectives amongst and between working groups, was not facilitated by MBO, but, initially, it was not rcalizcd how important these lateral and diagonal communication channels would become in modern, complex, organizations.

the Gap between

Planning

and Control

there is a progressively widening ‘umbrella within which objectives are not transmitted.

27

of darkness’

MB0 by its very philosophy was designed in such a way that it does not tttret the need for a multi-style systcnr. Management by Objcctivcs also suffers from the fact that it makes no USC whatsoever of existing modern technology for handling communication in English. The immense amount of paper work involved in MB0 and gradual disillusionment with a ‘closed’ system based on a uniform acceptance of an implicit philosophy, has meant its inevitable fall from grace as its usefulness diminishes over ensuing years. Any system of integrated planning and control designed to help managers to bz more effective must clearly be cost beneficial in the use it makes of their time as compared with the relevance of ihe information it supplies to them. In this vital respect it is clear” that managers have found that MB0 is insufficiently relevant organizationally and managerially to compensate for the excessive time and paper work involved at the planning stage and the abscvlcc~of‘systetlr-prod~rcrd cotztroi infortnation.

Although notionally multi-centred, therefore, MB0 supported communication in comlcction with only a very limited set of communication channels, namely those between superior and subordinate, and dealt with a limited set of areas of output which were negotiated with the superior and not the many individuals due to receive the output.

Whilst MB0 made a major contribution in the restricted field of planning objectives it is clear from the preceding analysis that it was not conceptually strong enough to meet the needs outlined in the framework for an integrated planning and control system.

MB0 does not thrrc$rc _f&iliratc rut&-cerltwd control. MB0 is a sequential process. Only

The ‘Expectations Approach’ to Integrated Planning and Control

ylamzit~,g

after the superior lias determined his own objectives can he reasonably discuss those of his subordinates with the latter. In most organizations the process of one full cycle of discussion in connection with Management by Objcctivcs lasts many many months. As a result it is virtual!); impossible to link MB0 with the process of budget agreement which normally happens on a particular day as a result of months of preparation for that day. and it completely fails to meet the need for each ccntre to choose that frequency of planning and control cycle which meets its own needs. In respect of planning and controlling the achievement of outputs, therefore, MB0 does loot wet the nred_for a trrrrlti-iittlr-hori=orl systm. MB0

dcwattds

trttiwrsal

cotntt~i~tnant to a single

sty/c

of

t~lutin~~cnlenr. MB0 is entirely dependent for its success&l use on everyone using the system sharing a common and specific style of management based on a phiiosophy of discussion about objectives open and participative between suDerior and subordinate. In realitv managerial styles withtn a given group usually vary ‘widely:The basic philosophv of interpersonal interaction on which MBdrests \;ill’probab!).‘be shared by some. but not by all of the people within a given group. Since the use of MB0 tends to be vertical following structure it follows that under any manager who does not believe in, or actually operate, an MB0 philosophy

The integrated approach to planning and control which the authors advocate is based on one fundamental premise from which a!1 subsequent activities follow. Whereas MB0 was based on the concept of an ‘objective’, this new approach is based on the concept of an ‘expectation’ -namely a rc+rc~tncnt tvhich one prrsott (or group) holds qf‘ atzothcr ytlrsott (or group) II: cotztwctiotz with their jobs. From that basic concept, first an integrated approach for planning and control was developed and then systems to facilitate the use of the Expectarions Approach were designed and tested. The systems have proved sufficiently flexible and robust to meet the needs of managers from Board Room to first line supervision and they meet every criterion laid down in the framework described earlier. Let us first consider how the Expectations looks at the organizational !evel, shown Figure 4.

Approach simpiy in

Planning Let us look in more detail at the process which an organization must go through when it is planning what output (in the fuilest sense of the term) it will generate. The decision-makers within the organization must undertake the tasks in Table 5.

Long Range Planning

28

Vol. 12

April 1979 Table 6. Planning

responsibilities

Expectations

(1) Clearly defined and accepted responsibility for ascertaining the

Expectations Which the

Organisation Actually

Holds

of: Banks Customers Union Representative: Government

Government

all of Whom

Expect to

to Supply Inputs to the Organisation

Inputs

outputs

Producing Output which Meets Expectations

Input Needs Actions: Deciding What is Needed ;Communicating What is Needed Negotiating a “Price” for What is Needed

Figure 4. Organizational Table 5. Planning

contents of each of the sets of expectations that are held of the organization. (2) Clearly defined and accepted responsibility for ensuring decisions are made about which of these expectations should appropriately be met by the organization. (3) Clearly defined and accepted responsibility for ensuring that those who have the responsibility for making decisions in the planning process carry with them the support of those who have the responsibility for implementing those decisions. (4) Clearly defined and accepted responsibility for ensuring that the transmission of the decided purpose of the organization to those who interact with the decision makers is clear, accurate, sufficiently detailed and accurate/y perceived by those to whom it is transmitted.

Actions: Perceiving Accurately Whaj is Expected Deciding which Expectations the Organisation will try to Meet

Multi-centred Application of the Expectations Approach Planning The process described above in respect of organizational planning and control would be virtually identical whether one substituted the words division, department, section, committee or individual manager for the word ‘organization’.

input and output

tasks

(1) Identify which individuals or groups of individuals hold expectation of the organization.

(2) Work out which individuals or groups of individuals will hold expectations of the organization in the future. (3) Identify clearly what these expectations are in terms of a content, quality, quantity and timing. (4) Identify the relative importance of those expectations in terms of the holder’s ability to affect the survival of the organization. (5) Ascribe priorities to each of those expectations in terms of either the necessity (survival expectations) or in terms of desirability (suprasurvival expectations) of meeting each of the expectations. Identify the costs associated with meeting each expectation. I;; Determine which expectations can be met by the organization. (8) Determine the order in which they will be met by the organization. (9) Transmit this information to those within the organization who interact with the decision makers.

Certainly the same process needs to be implemented by each individual manager if he or she is to be justifiably confident that he or she is working effectively. Thus the Expectations Approach provides a means of‘integrating planning and control throughout an organization in a manner that is corrsistent both_/& the whole andfor its parts.

As a result it becomes possible both to specify the activities which must be carried out by each centre in respect of its own operation and to deveiop an operational system whereby the required activities can be facilitated. Each planning carry out the earlier in Table the following

and control centre must be required to same nine planning activities described 5 and as a result one can specify in Table 7 requirements for effective output planning.

Table 7. Requirements For those planning steps to be carried out effectively there must be specific individuals or groups who hold, and are known to hold, clearly defined and accepted responsibilities as outlined in Table 6.

At the level of organizational planning and control it is usually the control activity which tends to be ill-defined or neglected whilst the reverse tends to be the case at operational level. Control at the organizational level must be concerned with checking and testing to ensure that each step in the planning process has been carried out efficiently and that each of the four types of responsibility outlined above are defined, are understood and accepted and are being efficiently implemented.

planning

(1) Each part of the organization must determine what actual (2) (3)

Control

for effective output

(4) (5)

(6)

expectations are held of it by other parts of the organization and by its environment. Each part of the organization must decide which actual expectations it will try to meet. All actual expectations which are to be met must be congruent with some aspect of the purpose of the organization. All actual expectations must be accurately perceived within the organization. Each expectation must have a priority rating ascribed to it relative to its ultimate organizational importance and whether it represents survival or supfasurvival output. The priority given to any expectation must be congruent with the purpose and logic of the organization.

Obviously each part of an organization requires resource inputs of many kinds-information, support, money, physical resources, experience etc. As a result each part needs to plan its own inputs-expressed in terms of the actual expectations which that centre holds of other

Closing Table 8. Requirements

for multi-centred

planning

(1)

Each part of the organization must determine what resources it needs to achieve planned output. (2) Each part of the organization must state the actual expectations which it holds of other parts of the organization or its environment, clearly and accurately. (3) Each part of the organization must check to see that its actual expectations have been accurately perceived. (4) Each part of the organization must negotiate agreement for its actual expectations to be met.

individuals and groups within and without the organization. Again the requirements for multi-centred it2p14t ylanniq can be expressed as in Table 8.

Control Using theExpectations Approach in multi-centred planning and control, control activities are again common to all planning and control centres whether one is dealing with the entire organization or with an individual within that organization. The control process must beconcerned with ascertaining the answers to the questions in Table 9. Table 9. Requirements

for effective control

the Gap between

Planning

and Control

29

systems and the range ofapplications for which they have been found useful by managers can be found elsewliere.)30- 32 The systems have been developed using an ‘expectation’ as the basic unit of planning and control information. To ensure that planning and control are effectively integrated and to enable that integration to be monitored the system recognizes two types of unit: Actual expectations

Perceived

--Requirements

which an individual (or a

group)

hold

group)

in connection

expectations-Kequlrenlents

of another

which

individual

(or

with their job. individuals

or

groups perceive others to expect from them in connection with their jobs.

Each expectation (whether actual or perceived) needs three identifiers as shown in Table 10. These three identiflers enable the planning links within an organization to be analysed and controlled.

Table (1) (2) (3)

10. Expectation

identifiers

A subject-the individual or group who hold the expectation An object-the individual or group of whom the expectation is held A unique number-this enables each expectation to be discussed, altered or deleted as the situation warrants

(1) Are the actual expectations which are being held of the ‘centre’ being accurately perceived ?

(2) Are the actual expectations held of the ‘centre’ currently being met-and at what performance level ? (3) Are the contents or importance of actual expectations held of the centre likely to change ? (4) Have the input-output relationships calculated for present planned performance levels changed ? (5) Do others perceive accurately the actual expectations which the planning centre has of them and have they agreed to try to meet them? (6) Are the actual expectations held by the centre of others currently being met and at what performance level ? (7) Does the structure of the total organization or its parts transmit clearly defined authority to make the following decisions : (a) That any given actual expectation is appropriate. (b) That any given actual expectation should be met. (c) That the priority level ascribed to any actual expectation is organizationally appropriate. (d) That the resources specified as necessary to enable actual expectations to be met are appropriate. (e) That the resources specified as necessary will be provided. (8) Are formal systems available whereby holders of actual expectations can inform the person who has to meet the expectation of the extent to which they feel the actual expectation is being met ? (9) Are formal systems available whereby the causes of changes in expectations can be rapidly traced, their effects assessed, and necessary consequential changes in other expectations indicated ?

The Expectations Approach Integrated Planning and Control System Thr.ft.wmvork and methodology dt~srribcd above call be trscd as the basis for t&signing intqrattd planning arzd control systems. Praciical, operational systems have been designed

which a range of organizations have helped to test and develop. (Descriptions of detailed mechanics of the

If there is any contention about any link in the chain from organizational purpose to operational activity it is possible to ascertain the precise planning and control centres between which links arc broken or the contents of an expectation arc inadequately perceived or inadequately expressed. Expectations vary considerably in terms of content, openness of expression, style and fullness of expression. If a planned expectation is to bc met in the manner anticipated it must carry within it clear expression of the rontrnt of what is required, the q~rality of what is required, the qrrarztity required and the tirrrc by which it is required. Experimental use of the system shows that such clarity is not the norm in the complex, multiple-channel communications which exist within a working group such as a Board of Directors or a multi-disciplinary project team. Working with managers in a variety of organizations it has become clear that planning and control can be integrated more effectively when expectations are classified in ways which permit aggregation, as this enables senior management to identify more readily the key factors supporting or hindering organizational success. Since the system is manager-controlled and does not presuppose any particular management style, it necessarily follows that different managers in different organizations have developed classification systems to suit their own needs. Some examples are given in Table 11.

30

Long Range Planning

Table

11. Expectations

Vol. 12

April 1979 Let us take as an example a member of a Board of Directors using this system-say the Finance Director.

classifiers

importance One board of directors chose to classify the relative importance of expectations in the following way : H. High priority M. Medium priority L. Low priority Level of Achievement Accurate, relevant, performance reporting is essential for ‘effective’ planning and control. One group of managers chose a simple reporting format on expectation of achievement. A. Above expected level E. At expected level i3. Below expected level

The Expectations Approach meets the requirements outlined in the framework for an Integrated Planning and Control System and thereby overcomes many of the problems facing those who tried to link planning and control in the past. In so doing, this new Approach opens up a changed prospect for a satisfying career in the currently muchmaligned planning function. The planner will become more involved with managerial activity at all levels as a staff specialist able to help managers with planning and co-ordination, similar in many respects to the role of ‘the Integrator’ put forward by Lawrence and Lorsch.33 The Expectations Approach Integrated Control System supports multi-centred outlined in the framework.

Planning and plamiing as

Firstly, he will set down what he actuaily expects from others within the organization-his colleagues on the Board certainly, a number of staff within the finance function almost certainly and very probably a few senior members of staff from other functions. Secondly, he will set down expect from him.

(b) Input To enable each ccntrc to generate the output planned above, each centre must determine what it needs from others. Again the process is similar. The centre determines the individuals or groups from whom it needs things and then sets down clearly what it actually expects from those individuals or groups. that if rvrryonr within a l~~orki~zg a first planning report can be produced which shows where if at all there are breaks in the chain which links purpose with detailed activity.

others

to

There are three stages in the use of this material, in respect of the Finance Director, which is held within the Expectations Approach Planning and Control System database, which together ensure linked integrated planning and control.

The Finance Director will receive a report (Figure 5) which enables him to assess the accuracy of his planning communication. The Finance

Director

can immediately

ascertain :

(1)The

accuracy with which he has communicated his planned needs-by comparing ‘A’ aud ‘B’ in Figure 5.

(2)The

accuracy with which others have communicated their planned needs to him-by comparing ‘C’ and ‘D’ in Figure 5.

(3)What

needs to bc done to rectify any broken communication links or any inappropriate expectation contents or direction (i.e. a reasonable expectation but expressed towards an inappropriate object manager).

(a) Otrtput Each ‘centre’ identifies first those individuals or groups whom it perceives to expect things from the centre in connection with their jobs. Then the ‘centre’ sets down the things which it thinks those individuals or groups expect from it. As in any planning process the ‘centre’ tries to bc as clear as it can be in expressing what it thinks others want. In this manner the centre plans its own output. The ‘centre’ in multi-centred planning and control may be an individual manager, a department, or a total organization. A manager will bc concerned with the detail of his job. At departmental level concern will be with planning high priority expectations or groups of individual expectations of a given type.

what he perceives

What Others Within the Organisation Actually Expect from the Finance Director D

Figure 5. Subject Stqr

manager.

Finance

director

2. T/IL’ Group Input-Output

The Board (the next larger planning and control centre) will receive a report which presents in similar layout the planned inputs and outputs for the Board as a whole. The Board can then deal with the report as if it was a single entity in exactly the same way as the Finance Director dealt with his individual report.

It will be readily apparent

group plans in thir rlwrzrwr

Stage 3. The Group Proms A Board of Directors, like any other working group, processes its input to generate its output. The members

Closing

(a) What members each other.

in our

example

will

receive

of the Board

actually

expect

from

(b) What members of the Board bers to expect of them.

perceive

other

mem-

Planning

and Control

31

To produce consolidated year-end accounts one day earlier than last year.

of the Board must, as must members of any other working group, analyse, plan, and then control that process. The Board, therefore, report which shows :

the Gap between

a

The Board as a group can then review the quality, efficiency and effectiveness of its own process as a group of individuals. It was earlier stated that any successful framework for intcgratcd planning and control must provide a means whereby ‘process’ planning and control can be integrated urith output planning and control. It will be apparent from the above example that that has been achieved in the Expectations Approach based system. M%af is ‘ONyrrr’_f& n @IU~I cmtrc is ‘process for the text largrr centrc. (It is worth pointing out that tile data-handling within the system is both flexible and robust enough to allow each individual’s expectation data to be associated with more than one group. The Finance Director could, for example, choose to include himself and his data in Stage 2 and Stage 3 discussions in respect of the Finance Department.) Planning involves deciding which expectations should be met as well as ascertaining what expectations are held. This process not only means adding and deleting output expectations but it almost certainly means differentiating between the relative importance of different expectations using a classification system for priority which makes most sense in the light of the needs of the organization concerned. One such sysrem was shown in Table 11,

Control The time horizon incorporated within output expectations varies widely. The output expectations with medium-long time horizon outcomes are usually associated with process expectations dealing with the intermediate activities necessary for the planned long term output. It is important that the frequency of evaluation of performance is related to the nature of the output concerned. The Expectations Approach based systems support this concept of different time reporting as well as incorporating the possibility for both feed-back and feed-forward reporting. Let us take a hypothetical example. Suppose the Finance Director holds the following actual expectation of his Senior Financial Accountant which is accurately perceived :

Clearly the Senior Financial Accountant will have to plan carefully and well in advance of year-end if his staff are to achieve this output target. His espectations of his staff wil! bc involved with the process of enabling that output target to be achieved. He will report to the Finance Director in respect of the quoted expectation on the extent to which the process qf planr~irzg is in line with what is necessary to achieve the target. His feed-forward reporting to the Finance Director will be on his intention of meeting the target-a kind of progress reporting-achieved within the Expectations Approach system by the object manager (in this case the Senior Financial Accountant) classifying his esdmation of whether he will meet the expectation. He may well report monthly on the expectation on the extent to which he is confident the expectation will be met. This is feedforward reporting of the best kind because follow up action will only be triggered by either an A or B rating (see Table 11). The Finance Director can only assess the achievement of the output expectation ex post, which is feed-back reporting on process. The Expectations Approach systerrrs. thmfore, enable multitirw horirorl f&dTforward andjvd-back wportiyfor process corztrol and p&fomancc appraisal rcsyectit+ using only one basic data-base.

the Expectations Approach Planning and Control System Managerially Relevant? Is

Comments on research so far are favourable. The system is basically simple, easy to use and cheap. In particular, comments have drawn attention to the extent to which the system can include any variable. A manager can plan and control the real complexity of his job and include the variables that matter in his situation. Equally the system can aid any style and has done so. Some managers have used it to instruct their subordinates precisely what they will expect of each other. Some managers have told their subordinates to work out mutually satisfactory plans for interaction between themselves-referring to higher authority only those matters which cannot be mutually resolved. The work carried out in developing the Expectations Approach system indicates already a considerable potential but much the most important result is that it has demonstrated that the framework for integrated planning and control is not only theoretically justifiable but that it is practically applicable.

32

Long Range Planning

Whither

April 1979

Vol. 12

Planners?

Top management agree the budget, managers prepare budgets but neither process is conceivable without accountants helping at all levels in the organization to facilitate the budgetary process. The assistance is provided at all levels by people with the relevant accounting skill-a production supervisor gets help from a cost clerk not a corporate controller. Planning in organizations has suffered in its public image because most planners call themselves ‘corporate’ planners and precious few were ‘planning clerks’ at any stage of their career. Multi-centred integrated planning and control opens up the potential for a staff career in planning, because it takes planning back into the management of the organization as a necessary and therefore welcomed staff function advising management and facilitating xhe planning process.

Conclusions At the start of this paper the authors accepted the challenge of Professor Taylor, and we hope that a practical response has been made which will make it more likely that plans will be realistic and control will be acceptable as a result of recognizing the ‘social and political dynamics both within and outside the organization’ identified by Ansoff. It is hoped, too, that this workproven in organizations by practising managers-is an encouraging contribution to the issues raised by Owen Nutt in this journal.34

(11)

P. Irving, Corporate planning in practice: a study of the development of organised planning in major U.K. companies. M.Sc. dissertation, University of Bradford (1970).

(12)

J. Kitching, Acquisitions in Europe failures, See Vision, pp. 66-70, booby-trapped takeover trail.

(13)

G. H. Hofstede, (1968).

(14)

R. N. Anthony (1965).

(15)

W. F. Christopher, Achievement reporting-controlling formance against objectives, Long Range Planning, 14-24, October (1977).

The

Game

of

: causes

of successes September (1973).

Budget

et a/., Management

Control,

Control

Tavlstock

Sysrems,

10

per(5),

Management on the Move, October (1973).

(17)

C. I. Barnard, The Function of the Executive, Harvard (1954). See Introduction and see also pp. 258-281 on the concept of leadership.

(18)

R. Beckhard. T-Group training, group dynamics in management education, ATM Occasional Papers 2. pp. 51-55. The appropriate use of T-groups in organisations (1965).

(19)

K. Barmforth. ‘T-Group methods within a company’, Tgroup training; group dynamics in management education, ATM Occasional Papers 2, pp. 69-77 (1964).

(20)

C. L. Cooper (ed.), Developing Social (1976).

(21)

B. W. Denning, Unpublished Harbridge House manuscript. See R. Young and 0. E. Hussey, Corporate Planning at Rolls Royce Motors Limited, Long Range Planning, 10 (2), 2-l 5, April (1977).

(22)

J. K. Galbraith, (1967).

(23)

H. J. Leavitt. Beyond the analytic manager. Graduate School of Business, Stanford University, Alumni Bulletin, pp. 18-21, Fall (1975) and pp. 33-35, 45-48, Winter (1975).

Groups: Skills in

The New

Today,

Irwin

(16)

(24)

Management

and The

pp. 12-14,

joy on Monday morning in: Managers, p. 9, Macmillan

industrial

Stare.

Houghton

Mifflin

H. Mintzberg, The manager’s job : folklore and fact, Harvard Business Review, pp. 49-61, esp. p. 60, para. 2. July-August (1975).

(25)

R. Young

and D. E. Hussey

(see ref. 21).

(26)

T. Forrester, Do the British sincerely want to be rich ? New Society, 40 (760). 158-l 61, 28 April (1977).

(27)

Changing Values Tomorrow, 1 (2). 94025 (1977).

(1)

B. Taylor, New dimensions in corporate planning, Planning, 9 (6). 80-l 06, December (1976).

(2)

H. I. Ansoff, from ment, John Wiley,

(3)

J. M. Hobbs and D. F. Heany, Coupling strategy to operating plans, Harvard Business Review, pp. 119-l 26, June (1977).

(28)

W. Croft, Values and future’s research, 10 (6). 51-56, December (1977).

(4)

Boston Consulting Group, Perspectives egy, p. 19, Leadership, Boston (1968).

(29)

H. L. Tosi. Effective and ineffective Objectives, 4 (3). 7-14.

(5)

Boston Consulting Group, Ibid, executive in strategic planning.

(30)

J. L. J. Machin, Using the expectations approach, ment Decision, 15 (2). 259-277 (1977).

(6)

E. P. Learned, Guth, Business

(31)

(7)

W. D. Clendenin. A New look at Board performance, McKinsey Quarterly, 9 (2). 56, (Fall 1972) [reprinted from California Management Review, 14 (3), Spring (1972)].

J. L. J. Machin, tations Approach, Centre (1975).

(32)

(8)

R. A. Smith,

A. R. Woolley, The expectations approach-system documentation, Expectations Approach Working Paper No. 22. Durham University Business School, September (1977).

(9)

D. F. Channon, prise, Macmillan

(33)

P. Lawrence and J. Lorsch, integrator. Harvard Business November/December (1967).

(34)

Owen Nutt. A future for the corporate planner 7 Long Planning, 10 (2). 90-93, April (1977).

(10)

Strategic Planning New York (1976).

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to Strategic

Manage-

on Corporate

p. 23, The role of the chief

in a Crisis,

The Strategy (1973).

Anchor

and Structure

(1966). of British

Long

Range

Planning.

Strar-

C. Ft. Christensen, K. R. Andrews and W. D. Policy: Text and Cases, Irwin (1965).

Corporations

Create New Markets. investments in SRI International. Menlo Park, Calif.

Management DP. l-30.

M.B.O.,

Management

by

Manage-

Applications of the ExpecIBM U.K. Ltd., U.K. Scientific

Enter-

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New management job: the Review, Vol. 45, No. 6,

Range