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The Master Plan for Integrated Planning and Control is the IMS

The Integrated Management System (IMS) represents the various elements and subsystems of comprehensive planning and control with their interdependencies. Fredmund Malik developed it based on the St. Gallen Management Model (SGMM). The IMS shows which subsystems and elements are necessary and sufficient for correct and good management. The IMS presentation presented here is slightly adapted to facilitate access to the design of the integrated information system. However, the original content was not changed.

The management topics and the necessary tools are presented in four quadrants.

The Master Plan for Integrated Planning and Control

In quadrant 1, top left, the planning or management levels can be seen, which range from the purpose of the company to annual planning (see “The Main Questions of Each Planning Stage“).
Projects are listed on the demarcation line between company-related and employee-related. This is because real projects usually develop from strategic and medium-term planning. For their realization, the partial results to be achieved in a planned year must be reflected in the personal annual objectives of the assigned project managers and (employees). For space reasons, the box “Projects” is placed in the area above the year. Long- as well as short-range projects should also be included in the personal annual objectives with their milestones (partial results to be achieved).
Organizational structures and processes are derived from the strategic intentions and plans as well as from the functional concepts, which has an impact on operational planning and on the assignment of tasks (functions) and responsibilities. These tasks and responsibilities can be documented with the functional diagram (see glossary).
The realization of strategies and functional concepts requires management capacity. Therefore, both the need for managers and the development of junior managers must be qualified and quantified in the information system (quadrant 3).
Quadrant 4, bottom right, shows how the annual objectives of individuals are translated into results. With management by objectives, personal goals and orders are derived from higher-level objectives or projects. The principles of delegation and self-organization are also included in the implementation path. This results in responsibility for achieving objectives and enabling self-control (see page “Management by Objectives”). Management Control depends on the documentation of objectives in the information system and on the ability to track results achieved according to quantities, qualities, deadlines and results QQDR.
Performance appraisal provides feedback of the results achieved to the person or management function in quadrant 3. Questions regarding the need for technical and managerial competencies must also be addressed there and considered in the multi-year planning. The additional managemers to be recruited and trained are in turn a prerequisite for achieving the strategic and operational objectives defined in quadrant 1.
In quadrant 2, bottom left, the tactical control of the achievement of objectives takes place during the year. For this purpose it is necessary to map all processes and structures of the company in databases. On the one hand, the data must be contained in the information system as planned values so that the plan-calculation can be created. On the other hand, the real events must be mapped in terms of quantity, time and value down to all details that determine results and are relevant to decision-making. At this lowest level (customers, products, individual processes, purchased materials, operating materials and services, and existing plants), the database for integrated planning and control is created. Planning and recording at the lowest level is also indispensable because the data must be able to be evaluated multidimensionally and condensed into higher generic terms.
This information system is usually implemented with the help of an ERP (Enterprise Resource Planning) system. Fully developed ERP systems range from customer acquisition to research and development, from merchandise management and production to wage administration, asset management, internal accounting and bookkeeping. This enables them to cover the requirements of annual planning and tactical control for plan, target and actual.
Finally, controlling is the entire process of defining objectives, planning and control in the financial and performance area (see “Management, Controlling, Controller“). With the help of feedforward (corporate policy and strategy) and feedback (comparison of what was achieved with what was planned), managers try to prepare corrective actions that determine the future, decide on their realization, and subsequently assess the extent to which they have already been successfully implemented. Findings from the controlling process can have an impact at all planning levels. The controlling process is thus placed overlapping both left quadrants.

The personal annual objectives are exactly in the middle of the integrated management system because they describe the results to be achieved by the individual (manager) in the planned year in a measurable or verifiable form. To enable these persons to assess the progress they have made towards achieving their objectives (self-control), the ERP system should provide the database to generate regular plan-to-actual comparisons.

In this blog, the IMS forms the blueprint for the design of the integral management control system.

The Main Questions of each Planning Stage

Before implementation of its operational plan, each company needs to distinguish between four planning levels (or management levels), as in each of these levels a different question needs to be addressed.

Corporate policy (or mission statement) defines what the organization plans to become in the future and how it will distinguish itself from others. A company must consider the requirements of the various environments in which it operates and, if necessary, react to changes in these requirements. These adjustments should be reflected in the core values of the owners and senior management to determine whether the whole business can become what it wants to be.

As noted in our book (Management Control with Integrated Planning), the basic corporate policy statements are documented in three corporate concepts: the performance-based concept, the financial concept, and the social concept. The performance-based concept should be in line with the technological and market environments. Elements of the financial concept are profitability to be achieved, financing structure, use of results, maintenance of liquidity. The social concept sets out the guidelines on topics such as management methods, employee development, and conduct towards government, associations and competitors.

Strategic planning defines which markets are to be served, with which products and services, which technologies appear to be decisive for implementation, and in which price segments one wants to offer. Additionally it is necessary to identify which existing internal potentials for success must be enhanced and which new ones must be built up in order to reach the wanted market positions.

In operational planning the results to be achieved are recorded in terms of content and deadlines. The question is therefore how and by when the targeted market positions are to be achieved. In operational medium-term planning (usually 2 – 5 years), the focus is on building up and expanding the success potentials required for strategy implementation. The planning contents are often structured according to functional areas, because the potentials have to be built up there (personnel, market development, suppliers, plants, IT, financing). To document these plans, it is advisable to define functional concepts. In this way, it can be tracked whether the development of potentials is progressing properly and on schedule.

In (operational) annual planning, the results (objectives) to be achieved in the planned year are derived from the strategies and the functional concepts and transferred to the sub-budgets. This makes it clear to everyone involved what contributions they should make to ensure that the organization as a whole achieves its goals. Finally, the content-related plans and objectives must also be represented in terms of value, so that it is clear whether the plans are financially feasible. This is done in the cost, activity, revenue and profit and loss account (via management accounting).

Because customers order products in different quantities and at different times than planned, because unexpected plant downtimes occur, and because employees can be absent or projects delayed, tactical planning and control during the year is necessary. The majority of the data required for planning is managed in the ERP (Enterprise Resource Planning) systems. The comparison of actual data with planning supports employees and managers in meeting their annual targets.