Long-Range Planning in the Present World Environment - Term Paper Example

This paper discusses long-range organizational planning given the circumstances facing the world today. In the World Economic Forum 2006 it was mentioned that the times our turbulent and uncertain. This paper describes the state of the world and goes on to a new definition of organizational planning needed to deal with the current changes. Long-Range Planning In The Present World Environment Introduction The World Economic Forum usually held in Davos, Switzerland, is an annual meeting of top business and political leaders to discuss the major social and economic concerns around the globe ("World Economic Forum" 2006). The most recent meeting was held in January 2006 when the issue of global warming came to the fore. Terror attacks, war, and nuclear dilemmas facing the world were additional topics requiring brainstorming at the event. Former U.S. President Clinton maintained that climate change is the only crisis "that has the power to end the march of civilization as we know it." Otherwise, "There is no reason for pessimism," declared Jeroen van der Veer, chief executive of Royal Dutch Shell (Environment News Service 2006). A Dutch managing director claimed that 'long-range planning is nowadays seen as an academic exercise' given that the times are uncertain and the environment turbulent. We have heard that the polar ice cap was depleted by a staggering fourteen percent between the years 2004 and 2005. Now if another Ice Age was to commence in six to seven years and we were sure that this would happen, companies could do away with long-range planning. Since there is no definite date for the end of the world, however, companies must do what they have always done - plan and forecast. Yes, there are forces beyond the control of people of the world. Besides, threats of violence around the globe have not been put to an end. We have already witnessed the effects of war and terror on the economic state of the world. Still, uncertainty has always been the present state of the world. There was no time in human history when a powerful cosmic force, such as an asteroid, could not have finished life on earth as we know it. As far as violence is concerned, the world seems to have become used to it since the great world wars in the last century. Companies of all sizes continue to operate everywhere on earth. Life is going on without any surety as to what would happen in five to ten years' time. Natural disasters do occur and both small and large companies do lose a lot of money. Firms die and new ones are born. CEO's retire and younger ones take their place. Nevertheless, companies must continue to make long term plans about running their businesses as productively as possible, taking into account the external factors that could disturb the process in between. No company can survive with its focus on a big scale disaster. Therefore, businessmen would go on making budgets and deciding how to increase their sales over the coming years. Short and long term planning combined is the lifeblood of all firms and would be carried on for as long as the earth endures. Furthermore, today's business environment is fast changing because of innovations in technology. Companies must be taking into account all factors that spell change whilst planning; these factors not only include technology but also forces that the world does not fully understand at this point in time. As Gordon C. Robbins (1995) puts it, "A good deal of organizational planning . . . is like a ritual rain dance. It has no effect on the weather that follows. . . . Much of the advice related to planning is directed at improving the dancing, not the weather." Long-Range Planning Business planning has two aspects: quantitative and qualitative. Quantitative planning is number crunching based on market reports, for example. Qualitative plans, on the other hand, consist of descriptions and explanations. A long-range business plan includes both qualitative and quantitative aspects. It is the qualitative aspect that we are concerned with in this discussion. A long-range business plan, also called a strategic plan, helps to establish new goals and objectives or revise the existing ones for the long haul. Goals are benchmarks, and regardless of what happens in the days to come, a company must work towards its goals and revise them if necessary given that goals are contingent on the business environment. Goals must be quantified in order for a company to size up its potential market and what it aims to achieve. A company must take into consideration the external factors, such as shifts in industry trends and inflation, before it writes up an analysis using market research as a crucial part of its report for the long haul (Beech 1998). It appears that the Dutch managing director at the World Economic Forum did not suggest that long-range planning is of absolutely no use in real terms. Rather, planning techniques are evolving in a changing world, and old-fashioned strategic planning methods must be supplemented with new techniques in order for long-range planning to be of effective organizational use. The Dutch managing director must be referring to something else that is needed as a complement to long-range plans that appear simply academic in times of true uncertainty, violence or turbulence. To put it another way, organizations must have plans that work when the state of affairs is pretty dreary or very rapidly altering. The good old long-range planning that most organizations know about may not always be sufficient except in the organizations' annual reports. Robbins explains this with a strategic alternative in mind: Managers like to think that they know what they are doing. Certainly, communities expect their professional managers to be prepared as the future arrives in a swirl of political, economic, and social issues. For years, many administrators have relied on strategic planning to prepare their organizations for what lies ahead. But some managers, both public and private, now realize that standard forecasting techniques alone cannot prepare them fully in a world in which little seems certain. Many have turned to a newer discipline, called scenario planning, to help bring the future into focus. Properly constructed scenarios go beyond forecasts to communicate vividly the meaning and impact of events in a way that clarifies the message and captures the attention of decision makers. In form, scenarios are not unlike organized daydreams, structured to achieve specific purposes. Often, however, educated professionals find it easy to dismiss this method of thinking and any conclusions drawn from it; they have been trained to recognize good information as coming only from charts, tables, and graphs. This belief is one reason why managers find it easy to feel comfortable with certain strategic planning techniques. Typically, they analyze sound historical data and make projections based on whether current trends are likely to continue. In this way, strategic planners ask, What is likely to happen based on the data. Because reliance on historical data alone can prove to be a weakness in a rapidly evolving present, scenario planners respond, What if the data are made obsolete by changing conditions This is precisely what the Dutch managing director must have been talking about when he mentioned that long-range plans are just for academic use. Given the present fast changing state of the world, scenario planning is essential. 'Long-range planning' has a new meaning at present. The Dutch managing director must have had in view only the standard meaning of strategic planning that Robbins has now updated for us. Scenario Planning To answer the questions, "What might give our company continued competitive advantage" and "What new markets should our company enter" senior executives may use the following scenario planning framework proposed by Paul J. H. Schoemaker (1997) comprising a four step method: (1) Using scenarios to examine the external environment, especially the trends and key uncertainties affecting all players in the industry; (2) Industry analysis and strategic segmentation to help define the competition arena in terms of the players, the barriers, and the profit potential; (3) Core capabilities analysis to provide the basis for developing a strategic vision for the future; and (4) Strategic options to help make the vision into reality. No company can predict circumstances related to an Ice Age, even so senior executives can and do investigate energy price hikes! Scenario planning is disciplined long-range planning for imagining possible futures, and has been applied to a great range of issues, but not all. Royal Dutch Shell, for example, has been using scenarios since 1969 in the process of generating and evaluating strategic options. As a result, Shell is consistently better in its oil forecasts than other major oil companies. It foresaw early on the overcapacity in the tanker business and Europe's petrochemicals (Schoemaker and van der Heijden 1992). The head of scenario planning at Royal Dutch Shell, Pierre Wack (1985) describes this form of long-range planning as "the gentle art of reperceiving." He adds that scenario planning must lead to more creative options and companies must have the courage and vision to carry them into effect. The Anglo-American Corporation of South Africa used scenarios in the 1980s to explore South Africa's future. These scenarios provided a catalyst for profound political reform (Sunter 1987). The Dutch Central Planning Bureau has issued wide-ranging twenty five year global scenarios (De Jong and Zalm, 1992). What if these global expectations include a global natural disaster Writes Melville C. Branch (1998), the author of Simulation, Planning and Society, on issues similar to the ones raised at the World Economic Forum 2006: If we allow ourselves to contaminate our planetary home, we will produce the conditions required for our disintegration or extermination. This could occur if the atmosphere carried radioactive contamination from a war or nuclear accident around the world. But the possibility of a deadly pandemic from an unknown organism is much greater - particularly if it is airborne or cannot be successfully quarantined - because of the continuous transportation of more and more people, goods, and services far and wide throughout the world. We would certainly need experimental simulations to identify, isolate, and neutralize the deadly organism. What could be done to avoid or reduce the destructive effects of an asteroid or comet striking the earth We could simulate the current and projected path of the threatening celestial body, using astronomical observation and mathematical calculation. One proposal suggests that a guided missile with a nuclear warhead and proximity fuse could be dispatched to destroy the approaching celestial body or deflect it into a path no longer threatening the earth. This too would require simulation. People may conclude they cannot avoid the oncoming crash and can only act to prevent the possible annihilation of the human species. This would require simulating the possible destructive effects of the collision. The only recourse would be to protect as much human life as possible, perhaps with hundreds of thousands of "air-raid shelters" around the earth, other protective measures, or concentrating on preserving enough people to save the human species from extinction. Perhaps enough genetic material could be protected for preprogrammed and undamaged robots to start up our species again for us - a desperate scenario that would require many kinds of preparatory simulations while we wait and plan for the fateful event. In Davos, 2006, Bill Clinton stated that there must be a "serious global effort" to promote clean energy (Environment News Service). Should companies plan to reserve more funds based on current global scenarios, just as many sizeable companies help to fight hunger and AIDS across the world, and reserve funds also for rescue operations in case of natural disasters in their regions of operation Ideally all companies, large and small, must have a contingency plan in place looking ahead at possible scenarios in and around their areas of operations. Reserving funds as contributions to improving the state of a 'turbulent' world or to meet a global emergency is always in the best interests of a company, especially one with operations in many parts of the world. Contingency Planning Contingency planning is another type of long-range planning and closely linked to scenario planning. In the year 2000, there was a terrorism response drill in the state of Virginia, United States. The exercise was a contingency plan involving several local and federal agencies, including the city police and fire departments, the Virginia Department of Emergency Services, the FBI, and the National Park Service (Drake 2000). Whereas scenarios are meant to inform us about possible occurrences in the future, contingency plans answer the question, 'What if it really happens' Recently there was a massive explosion and fire at the Buncefield oil refinery in the United Kingdom. In the wake of this fire, businesses were advised to review their contingency plans. Paul Bennett, corporate partner at a Black Country law firm, said that the fire at Buncefield "showed just how vulnerable all types of businesses are to sudden and devastating external disruption." Companies must therefore have a continuity plan in place. Mr. Bennett added: The threat to business not only comes from deliberate acts of sabotage such as arson or terrorism, but may arise from human error or equipment failure, civil disturbance or industrial unrest or natural disaster. Many foolishly dismiss the need for a contingency plan, regarding their own businesses as low risk. Not only should businesses consider their own activities, they should also be mindful of their neighbors and threats to distribution channels. Consider the impact that a major incident leading to the closure of the M5 or M6 could have. Who would have thought that we would have an earthquake with an epicentre in Dudley or a tornado in Birmingham ("Contingency Planning" 2006) Organizations with international operations must also be thinking up contingency plans to evacuate expatriate employees and dependents when the world environment is turbulent and uncertain. Moray J. Taylor-Smith (2002) reports that an international company was preparing to evacuate fifteen such employees and dependents from an earthquake afflicted country. But at the departure point twenty five individuals showed up to be transported out of the earthquake zone. Those arranging for the evacuation had failed to count the other teams of people visiting the country to assist clients. Thus, the company's plan was disrupted. There were not enough vehicles to take everyone to the airport in one trip, neither were there enough seats reserved on the airplane. A delay could have been disastrous. Fortunately, though, all of the expatriates did leave the country within a few days' time, and safely so. Companies must ensure that pitfalls are taken into account in their contingency plans. In other words, a contingency plan should also include scenario planning. What if an international company is not aware of the exact number of foreign workers visiting a nation afflicted by a natural disaster Natural disasters do happen to be on the increase in recent years, and Taylor-Smith is reminding companies to try and avoid all unforeseen difficulties in their contingency plans. She points out too that most international companies do not typically keep a record of all of its business visitors from around the world. Contingency plans must be made for every aspect of the business environment which is liable to disruption or discontinuity for any number of reasons. Gregory A. Gilbert and Michael A. Gips (2000) write about supply-side contingency planning: "A breakdown at any one business can affect every organization with which it does business. Even a small, momentary disruption involving critical suppliers or service providers can mean disaster for a business. This interconnectedness makes it incumbent on each organization to plan for business continuity all along its supply chain." Scenario planning includes contingency planning and vice versa. 'What if' leads to 'What if it really happens' and 'What if it really happens' includes scenarios that may have been dismissed to begin with. Both forms of long-range plans are very useful for a business that wishes to function for a long time to come. Conclusion The Dutch managing director in Davos, 2006, while stating that long-range planning is merely of academic use, may also have been aware of the several studies that have found no differences in the performance of planning and non-planning firms. According to Christopher Orpen (1985) there were only two early studies revealing that firms which engaged in formal planning performed better than firms within the same industries which did not. These mixed results call for further research in the area of long-range planning, this time including scenario planning and contingency planning in the definition of long-range planning. Because times are uncertain and turbulent it is vital for companies to plan for scenarios such as natural disasters and increasing violence and to prepare layouts for actions to be taken in these circumstances. A new, comprehensive definition of long-range planning is in order. It is not advisable to pass up long-range planning. Rather, it has become necessary to explain its lucid meaning to the corporate world. Bibliography 1. Beech, Wendy M. March 1998. "In It for the Long Haul: Establish New Business Goals and Objectives in Your Long-Range Plan." Black Enterprise, Vol. 28. 2. Branch, Melville C. April 1998. "Why We Simulate Long-Range Futures." The Futurist, Vol. 32. 3. "Contingency Planning Is About Much More Than Survival." 24 February 2006. Legal & Finance. The Birmingham Post. 4. De Jong, A., and Zalm, G. 1992. Scanning the Future. The Hague, Netherlands: Central Planning Bureau, Sdu Publishers. 5. Drake, John. 11 May 2000. "Contingency Planning." The Washington Times. 6. Environment News Service. 29 January 2006. "World Economic Forum: No Looming Energy Crisis." 7. Gilbert, Gregory A., and Gips, Michael A. March 2000. "Supply-Side Contingency Planning." Security Management, Vol. 44. 8. Orpen, Christopher. 1985. "The Effects of Long-Range Planning on Small Business Performance: A Further Examination." Journal of Small Business Management, Vol. 23. 9. Robbins, Gordon C. March 1995. "Scenario Planning: A Strategic Alternative." Public Management, Vol. 77. 10. Schoemaker, Paul J. H. 1997. "Disciplined Imagination: From Scenarios to Strategic Options." International Studies of Management & Organization, Vol. 27. 11. --------, and van der Heijden, C. A. J. M. 1992. "Integrating Scenarios into Strategic Planning at Royal Dutch/Shell." Planning Review 20, 41-46. 12. Sunter, C. 1987. The World and South Africa in the 1990's. Cape Town, South Africa: Human and Rousseau Tafelberg. 13. Taylor-Smith, Moray J. July 2002. "Do you know where: Companies with International Operations must have Contingency Plans in place for Employees Traveling to a Foreign Country on Business." Security Management, Vol. 46. 14. Wack, Pierre. September 1985. "Scenarios: Uncharted Waters Ahead." Harvard Business Review, 72-89. 15. "World Economic Forum." 2006. Wikipedia. Read More