Business Planning involves a ‘strategy formulation’ phase – addressing the mission, objectives, strategy and policies of the organization, and the ‘strategy implementation’ phase – creating the specific programs, budgets and procedures that the company will follow to achieve the objectives and mission of the organization.
Likewise, the ‘Evaluation and Control’ phase reviews the company’s performance to see whether or not the company is meeting its objectives. Jerome Grossman, a past Executive Vice President and Chief Operating Officer for H&R Block once said, “You can’t stand still. You are either moving forward or going backward.” And measuring actual company performance is the best way to review an organization’s progress or lack thereof.
The diagram below puts the overall planning process into perspective. 1
Manufacturing and Supply Chain Services
There are numerous ways to examine a company’s performance. Certainly, financial results play a key role providing management with information about the fiscal health of the company. But these results alone do not tell the whole story. For example, working capital costs may have increased by 10% in the last quarter but it may have been due to an inordinate amount of new customer orders, needed raw materials, etc.
In a like manner, the sales history can describe the results of the company’s sales and marketing plan. But this too paints only a partial picture in that it does not tell management how well the company is meeting the end customer’s qualitative or quantitative needs. So, another method may be needed.
To determine the actual tactical performance of a company, it is important to conduct operational audits periodically. An audit of this kind, done quarterly or semiannually, reveals ‘how well’ the company is performing when measured against the company’s objectives and goals. More importantly, it measures how well the company is meeting its customer’s expectations.
The bottom line is that operational reviews provide the necessary information on ‘how to proceed.’ If the reviews are positive, perhaps the operation is operating as required. However, if the reviews are not as good as they should or can be, then the organization can take appropriate action to put the company on a better course after identifying any deficiencies.
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1 Strategic Management and Business Policy, second edition, Thomas L Wheelen, J David Hunger, 1986, Addison-Wesley Publishing Company, Inc.