An integrated and holistic approach to organizational planning

An integrated and holistic approach to organizational planningBob Mindrum2004-01-0138The Centrefalse

Seemingly innocent questions can provide insight on how we organize our professional activities. Questions like: "How will we ever be able to afford to renovate this place?" "Is there any relationship between our mission statement and our capital expenditures?" "Why do we set our goals and objectives after the annual budget process is already completed?" "Does my performance evaluation really have anything to do with my salary increase?" and "I know I'm behind budget, but what am I supposed to do about it?" Behind these questions lie four fundamental issues:

•   What do we do?
•   Why do we do it?
•   When do we do it?
•   Who does it?

The "correct" answers to these questions will vary depending on the nature of our organization, our relationship to the larger institution, the services that we are responsible for providing, the seasonal demands on our time, and the size of our staff, among other factors. However, in a healthy organization there is general agreement about what needs to be done, a level of trust that it is being done for good reasons, an understanding of when is the best time to do things, and an appropriate division of labor to get those things done. One approach to organizing professional activities is used at Purdue University's Purdue Memorial Union (PMU) with the following desired outcomes:

1. Consensus on organizational direction

2. A concrete plan for achieving goals

3. A direct correlation between pay and performance

4. A process for evaluating new business proposals

5. Strategic and defensible policies, rates, and prices

6. A process for evaluating and prioritizing capital requests

7. Individual and collective ownership of the budget process

8. A comprehensive plan for renovations and other capital expenditures

9. Accountability at the unit level for financial performance, and a structured method for adjusting plans based on actual information.

10. An annual opportunity to assess and measure organizational progress

The following activities are offered neither as an exhaustive list nor as a prescribed model for success, but rather as an example of how planning functions may be ordered and timed so that they become an organizational routine. In addition to the predictability that such a calendar year schedule offers to staff members, it also allows staff members to understand the connectivity and interdependencies that exist between these functions.

Strategic plan

WHAT: A dynamic (i.e., changing) five-year plan
WHY: To align with the larger institution and to pursue the organizational vision
WHEN: Every other January, after staff has had time off and before classes begin
WHO: All unit managers (about 24 in PMU's case)

Strategic planning may be considered as "… a disciplined effort to produce fundamental decisions and actions that shape and guide what an organization is, what it does, and why it does it" (Bryson, 1995, p. 5). Although Purdue is on a July-to-June fiscal year, its planning cycle is on a calendar year and begins in January with strategic planning. Staff members are generally well rested after the holidays and tend to be more reflective than normal. The process generally takes a full day (longer if there is no existing plan in place), and includes review/revision of the values and culture, mission, vision, strategic goals, goal characteristics, strategies, metrics (i.e., measurements of progress toward goals), and funding. Certainly there are many different models, but the important thing is to have a strategic plan around which all other activities revolve.

Annual goals

WHAT: A short list of organizational goals based on the strategic plan
WHY: To provide a tangible "roadmap" toward the organizational vision, and to help understand the resources required
WHEN: Late January
WHO: Management staff as a group achieves consensus on organizational goals, and cross-functional work teams are established based on interest/experience. Each team takes ownership of one organizational goal, seeks feedback, and provides updates to the management staff throughout the year.

At PMU, initially the staff was unable to identify specific, concrete annual goals that would move it forward in the strategic plan. According to Bryson (1995), "if any particular approach to strategic planning gets in the way of strategic thought and action, that planning approach should be scrapped" (p. 2). For PMU, the breakthrough was to achieve agreement on the goals, ownership in terms of who would do the work, and a commitment on the part of team members to accomplish their goal within a year. Selection of team members is critical—they should each have a vested interest in the outcome, should be genuinely motivated to succeed, and should have the ability and the time to participate. Indeed, although there does not seem to be a documented relationship between group cohesiveness and productivity, when cohesiveness and acceptance of organizational goals are high, performance is usually high as well (Daft & Steers, 1986). At PMU, once a work group is established, it must identify resources needed to accomplish its goal. These expenses are then built into the operating budget for the upcoming fiscal year. Thus, while work groups are identified early in the calendar year, their work is funded on a fiscal-year basis.

The Peaks and valleys of organizational activity

Timing can be critical to organizational planning. Surprise tasks or processes that seem to appear out of nowhere can become an unanticipated burden for staff members and a clear disconnect in the normal flow of the organization. They may also promote cynicism that can hamper efforts to create organizational change. Consultants Carol Sanford and Pamela Mang (1992) convey that "it takes equal effort on the part of operators to overcome patterns, one of the most common being the fear and/or cynicism that this is just another 'program of the month' " (p. 157). Thus, it is helpful to understand the peaks and valleys of organizational activity and to consider those when you structure your planning processes.

While the diagram to the left is clearly an oversimplification of organizational activity at a college union or student activities department, it nevertheless illustrates the potential for interruption caused by unanticipated tasks or processes. If the solid line represents your normal business/organizational activity, then the dotted lines represent timeframes when other organizational planning activities may best be accommodated. Certainly every institution will have a slightly different demand curve, but it may be worthwhile to plot this curve so that you may better understand the demands on your staff and the optimal times for planning activities.


Performance evaluation

WHAT: Annual evaluation of staff member performance
WHY: Feedback, development, justification for remuneration
WHEN: February (prior to the start of the annual budget cycle)
WHO: Direct supervisors, with input from other staff members

Performance appraisals provide feedback to employees about the quality and quantity of job performance, help them identify areas for development, and may form the basis for organizational reward systems—particularly merit-based compensation plans (Daft & Steers, 1986). Giving 360-degree feedback is a process whereby the work performance of an individual is evaluated by the employee's supervisors, peers, subordinates, customers, and others who have familiarity with the quality of the employee's work (Fox Lawson & Associates LLC, 2002). While challenging to implement, it does provide a more comprehensive assessment of individual performance and goes beyond the relationship of an employee and his or her supervisor. At PMU, the evaluation process also includes a development plan, where supervisors and employees agree on areas that need improvement and discuss professional development opportunities that will facilitate such improvement.

Business plan

WHAT: A detailed proposal for establishing a new business
WHY: To justify the use of organizational capital
WHEN: Whenever a new business is proposed, but prior to the annual budget cycle for the fiscal year in which the business is to begin
WHO: Generally, the staff member who has conceived the business and who has a vested interest in its future

According to the U.S. Small Business Administration (2003),

A business plan precisely defines your business, identifies your goals, and serves as your firm's resume. It helps you allocate resources properly, handle unforeseen complications, and make good business decisions. The basic components include a current and pro forma balance sheet, an income statement, and a cash flow analysis. (¶ 1)

At PMU, business plans also include detailed descriptions of the business identity, products and services, markets, operations, financial performance, sensitivity analysis, company structure and principals, and funding requirements. Inherent in the process is the understanding that organizational resources are scarce, so a good business plan will identify both the costs and benefits of a given business, calculating the "payback period" after which the organization will recoup its capital investment.

Marketing plan

WHAT: A document defining business identity, positioning, and promotional activities
WHY: To support budgeted revenue and to schedule advertising/promotions
WHEN: March
WHO: Managers of business units with input from the marketing coordinator

Marketing encompasses everything you have to do in coming up with a needed product or service, making potential customers aware of it, making them want it, and then selling it to them (Obringer, 2003). In the same way that a business plan forces a manager to consider all aspects of a new venture, PMU's use of a marketing plan forces managers to annually reassess the positioning of ongoing business operations. In this process, unit managers must list their business identity, positioning, customers, competition, marketing goals, measurement of goal achievement, channels to be used to reach target markets, and a schedule of advertising and promotional activities (used by the marketing office to gauge annual workloads and generate assignments). The marketing coordinator reviews the plan and gives feedback, with final authority given to the unit manager responsible for financial results.

Capital requests

WHAT: Annual requests for funding of capital equipment/projects
WHY: To justify expenditures and to prioritize needs
WHEN: February through March, in conjunction with the budget process
WHO: Unit managers

For many organizations, capital expenses are a significant and highly debated portion of the financial plan, and typically there are more capital requests than available funds, so projects must be evaluated and planned carefully (SRC Capital Planning, 2003). At PMU, the capital planning process requires that all staff members review their operations and define the need for new capital equipment, the replacement of existing capital equipment, and the creation/renovation of an area that represents a capital project. These requests are evaluated prior to budget preparation for the fiscal year in which the capital expense would be incurred. This is especially critical for capital requests that imply the generation of new revenue, so decisions on all capital requests are finalized in time for managers to adjust their annual budgets accordingly. Standard components of the capital request document are a description of the item/project in question, its location, whether it is a new or replacement item, its estimated cost including infrastructure support, start-up expense, training of staff, and any annual maintenance expense. If the capital request involves either revenue generation or reduction of existing expense, a simple payback calculation is also required.

Benchmarking policies, rates, and prices

WHAT: Comparing policies, rates, and prices with those of competitors
WHY: To support business and marketing plans, project revenue, and address inquiries/concerns
WHEN: March, prior to budgeting
WHO: Unit managers with budgetaryresponsibilities

Benchmarking is a highly respected practice in the business world, looking outward to find best practices and high performance, and then measuring actual business operations against those goals (The Benchmarking Exchange, 2003). Once you have established your business position, via a business plan or a marketing plan, you have already identified competitors. From there, it is a relatively straightforward process to gather information on competitors' policies, rates, and prices and to use those in establishing your own. A critical issue at PMU has been to get managers to move beyond the inclination to use this process as a way of justifying higher prices, and instead to use it, for instance, to consider lowering prices to increase volume in a competitive area. Ultimately, decisions made about policies, rates, and prices are combined with historical data and recent trend analysis to form the basis of revenue projections in the annual operating budget.

Operating budgets

WHAT: Monthly projections of income and/or expense
WHY: To set financial goals, provide a basis for measurement, and assist with resource allocation
WHEN: April
WHO: Managers with budgetary responsibilities

"If the budgeting process at your institution is working well, you are fortunate. Budgeting at too many colleges and universities amounts to muddling through from one year to the next. This is a poor way to function in good economic times, and it can be fatal to an institution in bad ones" (Facione, 2002, p. 45). At PMU, this is perhaps the most critical organizational planning activity because it embodies all of the activities already discussed and serves as the vehicle for moving the organization forward. In PMU's process, unit managers use an Excel-based program to review third quarter results from the current year and to re-project year-end results based on all available information. Then, using that analysis as a frame of reference, the managers input monthly income and expense projections for the upcoming fiscal year. Once completed, their budgets are reviewed by their department head and approved as "first-run" budgets. The director reviews the roll-up of all first-run budgets and meets with department heads to discuss any issues. Department heads in turn meet with unit managers to discuss needed revisions, after which a "second-run" budget is generated. Generally this budget will be approved with only minor adjustments.

Capital plan and capital budgets

WHAT: A five-year plan for allocating capital reserves, including annual capital budgets and projections of longer-term income and expenses
WHY: To provide a roadmap for accomplishing the organizational vision and goals through use of capital reserves, and to monitor capital expenditures such that they are in balance with operating results and projections
WHEN: April, in conjunction with operating budgets
WHO: Director and department heads

"Capital planning and budgeting for facilities improvements is based on an organization's strategic facilities plan and provides descriptions, budgets, timetables for implementation, and funding sources" (HHK Capital Planning and Budgeting, 2003, ¶ 1). At PMU, the capital plan/capital budget is a dynamic document revised quarterly to reflect re-projections of current-year financial operating results, revised estimates of major construction projects, and long-term (20-year) income and expense projections including the ability to support debt service. Beyond its obvious financial function, it serves as a philosophical reminder to "put your money where your mission is," and at the highest levels of university administration, this is the key document that determines whether a capital project will be approved.

Financial analysis and re-projection

WHAT: A quarterly review of actual operating results followed by a re-projection of year-end projected results
WHY: To reinforce budgetary accountability, stimulate awareness of other units and their performance, encourage midyear operational adjustments, and update the capital plan
WHEN: Quarterly, approximately two weeks after receipt of operating statements
WHO: All managers with budgetary responsibility

In this two-hour session, each manager at PMU stands before his or her peers and explains any significant variances from budget (positive or negative), as well as plans for remedying any issues. In doing so, managers not only develop financial analysis skills, but also presentation skills and the ability to respond to difficult questions from colleagues. An Excel-based program is used and projected on a screen, focusing on actual-to-budget variances in the major categories of income, labor, and other expense. This activity is all about ownership, and at PMU it has been a key strategy in motivating managers to improve financial performance.

Annual management report

WHAT: An annual accounting of performance by units and by the organization at large
WHY: To document progress toward the organizational vision and goals, and to provide an historical context for posterity
WHEN: August, after receipt of year-end statements
WHO: Managers of each functional unit

Annual reports can communicate activities and accomplishments, help you raise money by attracting new donors, educate decision-makers about your work, recognize special people, and serve as an historical record of your progress (EcoScribe Communications, 2003). Managers at PMU use this report to look retrospectively at the past year and to make both quantitative and qualitative observations. Commentary is sought on financial performance, personnel, facilities, and programs/services, and a key component is the listing of metrics that document progress on strategic goals.

Summary observations

These organizational processes most likely are not foreign to the reader, nor are they particularly difficult to understand. What has been important to PMU's success has been to ensure all members of the management team agree on the importance of these activities, understand their relationship to each other, accept that there is a chronology and timeframe in which each activity must be accomplished, and commit to managing their time such that these activities may be completed in addition to their daily workloads. In the eight years since its implementation at PMU, this process has provided a cycle of activity that has been recognizable and repeatable, a sense of connectivity between activities that may previously have seemed unrelated, and a level of trust and acceptance of these tasks that has minimized "flavor of the month" cynicism and enhanced staff morale.

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Updated Nov. 9, 2012