Air University Review, May-June 1985

Corporate Planning:
Pulling It Together for Results

Daniel W. McGinty

COMMUNICATION, integration, change, organization, implementation, participation, commitment, accountability, goals, strategy, objectives, control, feedback, resources, results, and coordination––is there a manager in either the private or public sector who has not heard these terms and reflected on what they mean in regard to his or her organization? Are they just abstract concepts that are discussed in the literature and taught in schools of management? Or are they important factors in moving an organization from where it is to where it should be in the future?

In today's workplace, the answers to these questions are quite clear.

In this article, I shall explore the recent emphasis on the need for a close connection between long-range and operational planning in organizations. Without this connection, the literature suggests, strategic thinking will never be translated into the intermediate and short-term steps needed to obtain meaningful results. On the other hand, as Heinz Weihrich has pointed out, strategic planning is the missing link in traditional operational planning systems; and in the absence of a comprehensive long-range view, short-range objective setting is needlessly handicapped.1 Also, I shall describe how one organization has successfully integrated a formal strategic planning process with a flexible management by objectives system in order to ensure that its long-range aims are translated into achievable objectives which are communicated throughout the organization. Hence, with a conceptual framework and a practical description, the reader should gain an understanding of how the concepts listed earlier can be pulled together for improved organizational results.

Conceptual Framework

One of the fundamental characteristics of today's organizational environment is change. Much has been written on this fact. Today's change has been called discontinuous, rapidly accelerating, and pervasive. The "futurists" describe what changes the future will bring, while some other thinkers tell us how change is affecting us physically, psychologically, socially, and organizationally. It is undeniable that the fact and necessity of change should be a major consideration in the management of virtually any organization or project. Furthermore, it is absolutely critical for managers to be competent in introducing, responding to, or coping with fluctuations in the environment.2 The concept of integrated corporate planning aids the manager or management team in defining what the environment holds and how to navigate through that environment in order to achieve the changes that are desirable for long-term success of the organization. In the parlance of this article, these desirable changes are the goals (long-term) and objectives (intermediate to short-term) that are used to guide operations.

A corporate planning model

There are a great many descriptions of corporate planning methodology, and each is suited to the professional and academic preferences of its author. Regardless of the model selected, the corporate planning process can be employed successfully if it is applied in full awareness of the situations in which the organization exists. Regardless of how successfully it was applied elsewhere, the implementation of a patent model without careful consideration of the environment and the management systems, command practices, and culture of the unit will lead to a marginal process (at best) or an outright square-filling exercise (at worst). Hence, the model to be described here cannot be taken part-and-parcel and put into practice without tailoring it to the idiosyncrasies of the organization wishing to improve results.

The essence of the corporate planning process consists of the elements shown in Figure 1. Most of these elements are developed sequentially, but some of the early steps are accomplished concurrently. Most organizations will find that the flow of events shown should be used only as guidance and that continual iteration and skipping forward or back is the best way to develop a workable, effective plan.3 For the purpose here, it is assumed that planners have a clear understanding of the unit's mission; if not, this process is unlikely to produce meaningful results. Step by step, the planning process includes:

Figure 1. Corporate planning process

––The top manager's assessment of the unit and his/her enunciation of the very broad direction in which the unit should move.

––Analysis of the environment.

––Discussion of the unit's S.W.O.T. factors.

––Listing of the key goals. A discussion of each of these goals should be included to provide guidance as to the nature of desired short-range accomplishments to support the long-range aims. The plan's value as a communication vehicle is substantial, but the real value to the organization comes from going through the process which resulted in selecting and then documenting the goals.

The importance of communication, flexibility, and control

The entire process just described is based on communication. In fact, the process could not work at all without open communication up, down, and across the organization. The key to getting the information flowing is the participation of the people who will be responsible for executing the plan. Normally, the extent of participation in deciding on the unit's overall directions and corporate goals will not be great. That is the province of the top management team. However, once operational objectives are established and action plans developed, participation should be as wide as organizationally possible. Without participation in implementing the long-range aims that top management sets, the vital ingredient of corporate planning––commitment––is missing.

Two other vital ingredients of a successful corporate planning system are flexibility and control. Russell Ackoff has discussed the great turbulence that all organizations now face. He points out the substantial effects that shifts in economic, cultural, or technological factors have on us all. In addition to stating the need for management to anticipate change and thus avoid related pitfalls, he recognizes a fact familiar to most practicing managers: you cannot forecast all the time. Not only is it cost-prohibitive to try, but the uncertain nature of most organizational environments is such that it is practically impossible to foresee all contingencies. Hence, Ackoff subscribes to the notion that in creating a corporate future, a management team must be flexible in both organization structure and the plans which pull that structure along. If flexibility is not built into the system, if the firm or agency cannot (or will not) adapt to changing situations, if the unit is not willing to listen periodically to input from its environment and make course corrections based on those reassessments, then it will go the way of the dinosaurs. Organizations and the corporate planning architecture that they design must resemble earthquake-proof buildings. That is, they must be able to stand the shock of sometimes radical changes in the bedrock on which they are built.4

Whether one talks of strategic plans or the operational plans developed to implement strategies, without control of the organization's progress toward its aims, planning is a waste of time. In far too many cases, organizations make elaborate plans; have them printed, bound, and distributed; and then sit back and wait for the magic to happen. When the people of the organization then do not get moving in response to the plan and bring about superior results by the end of the planning year, top management complains that the system just doesn't work. If the management team is persistent, they might try corporate planning again. But unless the important ingredient called "control" is involved this time around, the results are likely to be the same, and planning will simply get another black eye.

In its simplest form, controlling means making sure that what you have planned is carried out. It involves: (1) spelling out your aims in sufficient detail to allow tracking of progress; (2) ensuring that work assignments are made for the major portions of the plan; (3) clarifying the relationships between the various people responsible for the major steps; (4) establishing time limits for the intermediate steps of the plan and, if possible, the overall target; (5) reviewing progress toward the intermediate steps regularly, while maintaining a clear view of the overall aim; (6) making adjustments to the plan to accommodate changed circumstances; (7) periodically assessing whether or not the aim is still valid and should be pursued; and (8) making a final assessment of progress toward the aim to determine whether the desired result was achieved, the benefits received were worth the cost incurred, and follow-on aims/actions are needed.

Unless this sort of scheme is followed after the planning is done, the chances of the organization moving ahead in the desired directions are reduced substantially. Furthermore, those who participated in the planning process will see that their efforts were a waste of time. Their reaction to any subsequent corporate planning activities will be to contribute only half-hearted efforts, at best. In short, the process will become a square-filling exercise that will not evoke the best and most creative ideas from people who could offer them.5

A few words of caution are in order regarding the key aspect of controlling, i.e., the actual review of progress with the people responsible for the major steps of the plans. Managers must make a careful assessment of the amount of oversight to exercise with each subordinate. If too little control is exercised, there is a possibility that problems could arise and grow unsolvable before any management action can be taken. Further, if the boss expresses infrequent interest in progress, subordinates will likely develop the notion that the aim is not particularly important and thus can be given the backburner treatment. If, on the other hand, the boss is a "checker-upper," at least three things are likely to happen: motivation vanishes, workers begin to resent the boss's meddling, and personal responsibility is turned off, i.e., the workers will tend to let the boss find the problems and schedule slippages instead of staying on top of the plan themselves. There is a fine balance between what is laxity and what is excessive control. In translating plans to actions, that balance must be found.

Another problem regarding control is the tendency during progress reviews to focus exclusively on what has happened regarding the steps of the plan to date. It is altogether too easy to look back and see what has been done. Comparatively little value can be added by a control system that is always concerned with the past. Although the past can and does hold many valuable lessons for all of us, unless management teams examine what has happened in terms of its effect on the future, they can easily get caught up in finger pointing and blame fixing. Reviews of progress must instead be focused on the consequences of progress to date, how past actions have changed the situation, whether plans need to be altered, and how to get on with the action in the most effective way.

Using the Concepts

The Air Force Contract Management Division (AFCMD) is the primary organization performing contract administration on the major aerospace products being purchased by the U.S. Air Force. With its Headquarters at Kirtland AFB, Albuquerque, New Mexico, the division has more than 4200 people assigned to offices that are located in the industrial facilities of many of this country's largest aerospace firms. In essence, AFCMD's mission is to ensure that the airplanes, missiles, electronics, and spacecraft which the government is buying meet the agreed-to technical specifications, are delivered on time, and are within the contractual cost limits. This job is accomplished by a highly skilled group of professionals in areas as diverse as engineering, quality assurance, and flight operations.

The nature of the division's mission has resulted in a very decentralized and functionally aligned organization. AFCMD's Air Force Plant Representative Offices are located at twenty-six major locations throughout the United States and northern Europe. Each one of these offices is composed of specialists in eight separate areas involved with the business and technical aspects of managing large, complex industrial operations. These factors––decentralization and specialization––have made AFCMD a natural for the integration, communication, commitment, and follow-through that accompanies the successful implementation of a corporate planning system.

Developing the AFCMD Corporate Plan

AFCMD began its experience with integrated planning in late 1973, when work was begun to design and implement a management-by-objectives/results (MBO/R) program. That initial effort has evolved over the years to the point where an integrated "Corporate Planning System" now enables the division to put the planning concepts mentioned earlier into practice.

The cornerstone of the division's planning and implementation system is a detailed strategic plan developed to provide both a long-range assessment of the internal and external environments and a description of the directions in which the organization will be moving during the next three to five years. The assessment and the delineation of goals comprise volume one of the AFCMD Corporate Plan. The document is a "rollover" plan. That is, it is redrafted annually by the division's planning staff, based on detailed reviews of a number of critical information elements, such as the Commanding General's views; higher headquarters' planning and guidance; progress on last year's plan; workload; human resource and budget data; production schedules; and organizational strengths, weaknesses, opportunities, and threats as seen by the division's top management team. The draft plan is then analyzed by a Corporate Planning Board consisting of eight top-level managers from both the field and headquarters. This board discusses and modifies the plan, puts it in final form, and presents it to the commander for approval and release. With publication of volume one, the entire population of AFCMD has access to the current strategic thinking of the top-management team and can begin the process of defining how each office or individual fits into the "big picture." This task is accomplished in large measure through the management-by-objectives/results system, thereby providing the clear linkage between strategic and operational planning that is essential for the long-term success of any large organization. The MBO/R system used is based on the generally accepted model of negotiation and self-control. Thus, it provides for the one-on-one communication between boss and subordinate that is so vital to this process.

When volume one is published, the headquarters staff and field are asked to examine the goals and to propose objectives that the division should accomplish this year in order to move closer to the goals. When those suggestions are received by the planning staff, they are boiled down into a set of draft objectives and action plans, which is presented to the Corporate Planning Board for further screening and elaboration. When the board's work is done, they present the proposed objectives to the commander for discussion, approval, and release to the workforce. From that point, a cascading process begins in which the successively lower levels of management develop objectives to support their boss's objectives. Of course, the managers also develop objectives on items of local significance, i.e., on items that may not have a direct relationship to their boss's objectives but which are important to the management of the particular subunit in question. As the cascade continues, the objectives become more specific, detailed, and oriented to the operations of the subordinate unit. At each level, the objectives are negotiated between boss and subordinate, and agreement is reached that the objectives represent important accomplishments which support, in their own way, the organizational goals and objectives. When the process is complete, the division, headquarters staff, and detachment-level objectives are compiled and published as volume two of the AFCMD Corporate Plan.

The division is not infatuated with publishing planning documents. In fact, the top management team feels that the cognitive and communicative processes used to develop the plans are much more important than the plans themselves. But the two volumes of the Corporate Plan are important in that they foster a sense of teamwork throughout the organization. The volumes provide a complete picture of where AFCMD is headed, how the organization will get there, and what each subordinate unit will contribute. Thus, each member can see what his or her role is compared to other parts of the organization and can get on with the job of achieving results.

Once the operational plans are formulated and put on paper, they enter into a continuous loop of performance, control, and evaluation of results. Bosses and subordinates come together at least quarterly to discuss progress, solve problems, make any needed changes to the plans, and discuss new objectives. These sessions are the primary vehicles for controlling progress toward the goals. Even though the emphasis is on self-control, knowledge that one's boss will want to discuss progress against an agreed-to plan tends to make one more serious about meeting commitments. When this review/control process is applied throughout the organization, the likelihood of making real progress toward the goals is increased.

Keys to success in AFCMD planning

Experienced planning executives will tell you that one of the surest ways to kill a planning system is to lock both the process and the resultant plans in concrete. This advice was taken to heart in designing the AFCMD system. Although the division has a clear idea of the format for the planning documents (volumes one and two), the process of gathering, analyzing, and reviewing the information that shows up in the plans is flexible. This flexibility is displayed best in the situational approach taken in implementing the management-by-objectives/results portion of the system. The top managers of the twenty-five detachments are required to establish objectives throughout their organizations, but they are given great latitude in the methods they use. Conceivably, each detachment could have a different scheme for determining and reviewing objectives. Experience has shown that this latitude enables the managers to tailor the MBO/R technique to fit the environments, personalities, and cultures of the individual detachments. Such flexibility is allowed within the context of a well-documented corporate plan. The unique approaches that result for the various subunits promote both important field-level support of the overall goals and effective planning and control of significant local-interest initiatives.

Another aspect of AFCMD's pragmatic approach to planning is the flexibility of the plans themselves. Recognizing that change is a way of life, managers do not attempt to lock past or current goals/objectives/action steps into concrete. If situations surrounding a plan change significantly and it makes sense to alter the steps or schedule in response, then the change is implemented. These midcourse adjustments are always made with an eye toward the long-range goals and how they will be affected.

AFCMD chose to use a protracted implementation approach rather than an "instant" introduction. Because the structured planning and control approach was itself a major change, the division took several rather small, yet significant steps spread out over three to five years. During the entire implementation period, the system has continued to evolve to the point where management has confidence that the approach fits the requirements of the organization. This deliberate, patient approach has given the management team the opportunity to get comfortable with the technique as it develops. Hence, there have been none of the traumatic upheavals that other organizations have experienced as a result of rapidly introducing prepackaged "programs."

It has been (and will probably continue to be) difficult to ascertain whether AFCMD's Corporate Planning System is fully implemented. This uncertainty is primarily due to the evolutionary nature of plan implementation and the flexibility built into the system. When significant changes occur, both the plans and the system are looked at for possible modifications. The focus is always on the future and what the division must do to accomplish important results when it gets there.

The process of corporate planning has become essential for the organization interested in obtaining significant results. It matters little whether the organization is large or small or whether it is in the private sector or government service. When an organization has the need to move into the future with a high degree of confidence in what that future holds, it needs corporate planning. The integrated approach of deciding on a set of long-range goals and then developing the objectives and plans to reach them is the most reliable tool that the organization can use to define its own future and ensure success. In other words, it is the surest way that the management team can become what George Odiorne called "system makers"––people who are willing to take the time to make things happen instead of responding only when their buttons are pushed.6

Andrews AFB, Maryland

Notes

1. Heinz Weihrich, presentation to the Tenth Annual Management by Objectives State of the Air Conference, Long Beach, California, 19 November 1982.

2. Russell L. Ackoff, Creating the Corporate Future (New York: John Wiley and Sons, 1981), pp. 1-24.

3. Adapted from J. C. Higgins, Strategic and Operational Planning Systems Principles and Practice (London: Prentice Hall, International, 1980), pp. 14-28.

4. Ackoff, pp. 25-50.

5. George L. Morrisey, Management by Objectives in the Public Sector (Reading, Massachusetts: Addison-Wesley, 1976), pp. 145-69.

6. George S. Odiorne, MBO II (Belmont, California: Fearon-Pitman, 1980), pp. 41-76.


Contributor

Daniel W. McGinty (B.S., Eastern New Mexico University; M.P.A., University of New Mexico) is Plans/Project Officer, Commander's Action Group, Hq Air Force Systsems Command, Andrews AFB, Maryland. During McGinty's thirteen years with the federal government, his work has centered on planning, project management, and the development and implementation of management systems. Before assuming his current position, he was Chief, Corporate Plans Division, Directorate of Plans, Air Force Contract Management Division, Kirtland AFB, New Mexico.

Disclaimer

The conclusions and opinions expressed in this document are those of the author cultivated in the freedom of expression, academic environment of Air University. They do not reflect the official position of the U.S. Government, Department of Defense, the United States Air Force or the Air University.


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