APPENDIX D: MANAGEMENT INFORMATION AND PLANNING CONTROL

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• Document Creation Date: January 4, 2017
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• Content Type: REPORT

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Appendix D: Management Information and. APPEP~DIX D
Planning a.nd Control
To address the NPIC management information problem in detail, it is
essential to provide a practical framewor}: comprising definitions of
certain terms and pertinent concepts concerning the management process,
management. information systems, and planning and control ox command and
control. This appendix, which deals with these topics, is divided into
four sections. T11e first, Definition of Planning, Control, and Manage-
ment Information, i.s essential to the hTain Report since the .terms defined
are used throughout. Ttie second, third, and fourth sections, Strategic
Planning versus Management Control, hlanageme.nt Control versus Operational
Control, and Systems Design Implications, respectively, are presented,
fixstly, in amplification of. the definitions and to show their inter-
relationships and, secondly, to present pertinent generalizations about
a management information system based upon the discussions in the first
three sections.
Definition of Planning, Control,
and Aanagement Information
The central function of management, i.ts raison d'etre, is decision-
making. Except for a relatively straightforwa.xd class of. decisions
readily amenable to operations research (OR) or purely mathematical
solution, where enough of the decision variables can be rather explicitly
quantified (c.g.; inventory control, resource all.~ocation of the assign-
ment and distribution type, replacement, maintenance, and reliability
problems, seduencing and coordination problems--PERT and CPi`!, xouting
problems, etc.), decision-making not only involves but depends upon
human judgment. Judgment can be enhanced by good inform~.tion; t}iis is
the sole purpose of a management information system--to inform management
of the facts available relevant to the decision at hand. Therefore, a
management information system is not a substitute for, but only an aid
to, management, as the name implies. As a corollary, t}ie "perfect"
information system would be of little overall value to the organization,
if management were not competent.
These siml.~le and what might appear to he quite obvious facts are
often overlooked, consciously or unconsciously, by those involved with
automated information systems, -vhet}ier it be in their design, implemen-
tation, operation, or evaluation. That i.s, no matter how effective, an
information system does not automatically produce good decisions.
�� Unfortunately, automated information systems along with OR and systems
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Appendix D: Tanagement Information and
Planning and Control
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analysis techniques, are often "sold," either openly or implicitly, as
universal remedies for any acid all manager.~ent problems. Nothing could
be further from the truth.
These facts are pointed out not in denigration of OR, systems
analysis, or information specialists, or the usefulness of their s}:ills
and products. These disciplines are not only worthwhile, but are even
essential, in today's environment; the intent is to put them in proper
perspective, which often is not done. For example, an OR specialist
worth his salt will openly state that OR techniques are applicable only
to a certain class of problems and not necessarily to management problems
in general; the good ones will not attempt to apply techniques where they
do not belong--the "solution looking 'for a problem" approach with which
many of us are all too familiar. (OR techniques are most applicable to
that class of decisions w}iich falls under the management function of
operational control, as is discussed below.) Likewise, a competent
systems analyst will stress emphatically that systems analysis is an aid
to decision-making (generally at the other end of the management spectrum
from OR-type problems); systems analysis does not make decisions. An
analogous statement could be made concerning automated information systems
and those specialists dealing with them.
Coupled with the pervasive lack of attention to the principal
purpose of a management information system--an aid to management--often
is the failure to provide a meaningful, practical framework for con-
sideration of the information problem, both of w}rich auger against worth-
while automated systems and often insure their failure. That is, not
only is the basic purpose of the system not made explicit, but the very
process which the system is intended to facilitate, the management
process, is also neglected.
It is fine to talk of planning and control or command and control
systems because conceptually these classifications have validity; however,
under careful consideration and particularly when applied to real-world
problems, such broad classifications of management activity are of little
value. In fact, they often cloud rather than aid the issue. This is
because planning or command (roughly, determining what is to be done) and
control (roughly insuring that to be done is done) do not correspond to
distinct, separable management activities either with respect to time,
organizational. position or authority, or various discrete issues or
problems.
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Appendix D: Management Information and
Planning and Control
For example, many persons in an organization engage in planning;
but its basic purposes and nature vary so significantly that any
generalizations valid to encompass all types of planning within an
_organization are so vague and broad that they are of little help in
solutions of practical. problems. A similar statement can be made for
the control activity which involves, among other things, decision-
' making. The basic steps in the annual Congressional Budget, simplified
for this example, illustrate these facts. The cycle starts with prepara-
tion and approval at t}le appropriate time of the Congressional Budget,
which is clearly a planning activity. Iloivever, the budget is also used
as a basis for control (many say budget preparation is the principal
means of achieving control), and during t}ie budget year, many activities
occur that clearly pertain to control while, simultaneously and as part
of the same process, t}sere may be budget revision, which is a planning
activity. In short, planning and control activities are so closely
interwoven in the budgeting process that to describe each separately is
not only difficult but also pointless, because t}iose involved with the
process are interested in both its planning aspect and its control
aspect.
As with the budgetary example, planning or command and control in
general. are, in fact, so closely interwoven, especially outside the
military, and so often occur simultaneously that there is nothing to be
gained from such distinctions. Amore realistic and useful framework
for considering the NPIC management information problem, along with the
necessary definitions, is given below:
Strategic Planning: the process of deciding on objectives of the
organization, on changes in t}iese objectives, on the gross
resources used to attain these objectives, and on the policies
that are to govern the acquisition and use of these resources.
(Systems analysis is most applicable here.)
Management Control: the process by whic}i managers assure that
resources are obtained and used effectively and efficiently
in the accomplishment of the organization's objectives. It
combines both planning and control wit}li.n t}~e context of
objectives and policies determined in the strategic planning
process; effectiveness and efficiency are the criteria
relevant for judging actions. Decisions in t}iis process can
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Appendix D: t,~lanagement Information and
Planning and Control
be categorized as non-programmed; management decides what: is
to be done within the general constraints of the strategic
plans. (Long-range planning, conceptually suite distinct
from strategic planning, is applicable to this process.)
Operational Control: the process of assuring that specific tasks
ar.e carried out efficiently and effectively. Decisions in
this process often can be categorized as programmed or
structured, as opposed to management control decisions;
emphasis is upon execution of tasks. (Operations research
has its greatest utility in this process.)
Strategic Planning versus P~Sanagement Control
Strategic planning highlights objectives, ~vhich are what the
organization wis}ies to accomplish or its mission, and policies, which are
guidelines to be used in the choice of the most appropriate courses of
action to achieve the objectives. This type of planning is concerned
with plans and policies which determine or change the character ox
direction of the organization; such decisions affect the physical, financial,
and organizational framework within which operations are conducted.
Management control incorporates the concepts of effectiveness anc}
efficiency, effectiveness referring to the accomplishment of the
organization's objectives and efficiency referring to an optimum rela-
tionship between input a.nd output. It should be noted that management
control embraces both planning and control, and the usual connotation
given control; that is, conformance to plan, is missing. This is
intentional, because to the extent that middle management can make deci-
sions better than those implied in a plan, it should do so. Therefore,
top management should not necessarily grant operations to conform to plans,
and rigid conformance to plans is not the standard against which perform-
ance should be measured. However, plans should be followed in the absence
of evidence to the contrary.
The management control process .is carried on tivithin the guidelines
established by strategic planning; its intent is to make possible the
attainment of planned objectives as effectively and efficiently as possible
within given constraints. This process involves making decisions about
~'~ what to do in the future (the usual interpretation of planning), but the
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Appendix P: 6~fanagement Information aiul
Planning and Control
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planning decisions made in the management control process are of a some-
, what different character from those made in the strategic planning proc-
ess, although. the dividing line may at times be fuzzy and certainly there
ar.e interactions between the two processes. ',
A main distinction lies in the fact that management control relates
to current operations while strategic planning relates to objectives,
policies, organizational structure, etc. Also, strategic planning
involves a preponderance of value judgments while management control
decisions involve a preponderance of facts. i~Tanagement control is less
complex than strategic planning, since it does not set but only works
within precedents; that is, policies and plans already decided upon.
In adc}ition, it tends to be rhythmic; e.g., the budgeting process, while
strategic planning is essentially irregular because problems, opportuni-
ties, good ideas, and technological breakthroug}is do not occur according
to a timetable and there is no essential condition to cumulate strategic
' plans and present them in a nice, neat package on a specific date.
}Management control systems, wit}i rare exceptions, have an underlying
financial structure; that is, plans and results expressed in monetary
units; for example, as in the PPB system. This does not mean that money
is the only basis for measurement, however, or even that it is the most
important measure; it does mean that money is a com,-non denominator to
relate various pieces to one another, although other measurements such
as manpocver, product output, timeliness, etc., may be essential, as well
' as certain non-qualitative attributes such as quality, ability, coopera-
tion, etc. _ `
b}anagement control systems should be integrated, coordinated systems
which means that, although data collected for one purpose may differ from
that collected for other purposes, these data should all be reconcilable
with one another, or equivalently that non-monetary information should be
reconcilable with monetary information. For example, information or the
number of personnel must be relatable to information or the cost of
personnel. While strategic planning data often is "one-shot" and can
rely heavily on external information, a good deal of which may be relatively
inprecise, management control data have the same definitions and are put
together in the same way time after time. These data a.re intended to
influence line managers to take actions that will lead to desired results;
manager.~ent control decisions are made by the line, not t}ie staff.
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Appendix D: Aianager!ment Information and
' Planning and Control
In contrast, the data relevant for strategic planning purposes are
put together specifically for decision concerning a particular plan. The
estimates used in strategic planning are intended to show the expected
results of the plan. This usually predominately staff function, carried
ori.in consort with line management, can best be characterized as creative
as opposed to management control which is exercising leadership, even
though the organizational distinction may not be clear-cut. The only
control aspects of strategic planning, if they may be called that, have
to do with the top management need to check on the progress being made by
the staff toward arriving at a decision on a problem being analyzed, to
appraise the ability of those involved in the process, and to determine
whether general policies axe being follotived in the implementation of
procedures. And it should be pointed out that the PPB five-year plan,
the PFP, is actually an exercise in management control because the plan
itself is a projection of costs anticipated under policies and programs
already approved, rather than a device for consideration of and decision
on ne~v policies and programs; this function is accomplished through the
Program Memoranda. The PFP reflects strategic decisions already taken;
it is not the essence of. the process of making new decisions.
It is because of the varied and unpredictable nature of data
' required for strategic planning that an attempt to design an all -
purpose, internal information system is probably hopeless. For the same
reason, the dream of some computer specialists of a gigantic data balk,
from which planners can obtain all the information they wish by flicking
{ ~ a switch, is probably no more than a dream. However, conceptually at
1 least, a management control system .should be a single system, or an
integrated set o.f subsystems. In practice, attainment of this goal of
~ "integrated data processing" is so fantastically complicated even for a
moderate size organization that feiv, if any, organizations would even
claim its achievement. Nevertheless, this is the goal, and those
interested i.n improving management control systems will work toward it.
Tl~e error arises in attempts to meet the needs for strategic planning
j data from the same system; the data needed to plan and control ongoing
activities are quite different from those needed to analyze proposed
major changes in operations. To ask that data be collected routinely
in elemental building blocks that ,can be combined in various ways to
answer all conceivable questions is a completely unrealistic request
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Appendix I): Danagement Information and
Planning and Control
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since no one can foresee the possible ways in which data might be used,
and even if foreseen, some of the uses occur so infrequently t}iat the
rotitii~e collection of data for them is not economically justified.
Aanagement Control versus Operational Control
As wi.t}1 strategic planning and management control, the distinction
between management control and operational control is not always precise.
Operational control takes place within the context of decisions made and
rules formulated in the management control process and to some extent in
t}ie strategic planning process, and overall performance in activities
where operational control is applicable is reviewed as part of the manage-
ment control process. As indicated, the focus of operational control is
upon specific tasks or transactions: scheduling and monitoring and not
measuring overall performance; obtaining certain equipment and not manag-
ing inventory; personnel actions and not determining personnel policy,
etc.
Outputs are the products, services, or other effects created by an
organization; inputs are the resources the organization consumes. Out-
puts, in every case, many not being clearly definable or readily meas-
urable. In addition to the overall organization's outputs, every unit
within an organization }las outputs, either products or services or
combinations thereof, whic}i again may be difficult to measure.
One of the important management tasks in aii organization is to seek
I the optimum relationship between inputs and outputs; that is, either the
best combination of outputs when inputs can }~e varied or the combination
of resources t}iat will produce t}ie desired outputs at the lowest costs
~ in an enviro~ur.ent where the desired outputs are taken as given. Of
f course, t}iere may be gradations of the above, wherein there are varying
degrees of latitude between given outputs and variation of inputs; that
is, each may be varied to a certain extent, brit there are real constraints.
~ tV}ien there is the option of varying inputs, it is rarely, if ever., possible
to determine the optimum relationship between outputs and inputs objec-
' tively, in spite of many opinions to the contrary. This c}ioice of a
relationship is a matter of subjective judgment, and this is true because,
generally, there is no scientific ~or objective way of determining how
final output will be affected by changes in inputs or necessarily what
~; is t}ie "best" output mix, especially where it comprises services. However,
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Appendix D: Management Information a.nd
Planning and Control
if output is taken as given, then there is at least the possibility that
an optimum relationship between outputs and inputs can be found, but
perhaps not absolutely since new ways of doing things are contirnially
being developed. Therefore, optimum in this case must mean that combi-
nation of resources, out of all lcnowrr combinations, that will produce
the desired output at the lowest cost. For some activities, t}re
optimum relationship may be rather easy to determine; for others, there
exists no way of establishing the relationship, and again, decisions as
to what costs to incur depend upon human judgment. In the latter case,
the term overhead roughly corresponds to this class of inputs or costs.
It should be noted that the importance of the input-output relation-
ship can be overemphasized. decisions in this area should be weighed
very carefully. For example, conflicts between input-output objectives
' and organizational goals can arise; that is, large increases in economy,
efficiency, or productivity may be possible only at the costs of dis-
satisfactions to some employees and even external groups, curtailments
in output quality which may be very difficult to measure, dissipation of
organizational assets, etc. However, with this caveat in mind, if the
optimum input-output relationship can be cieterminecl for a given activity,
the inputs that should he employed in a given set of circumstances can be
described and reduced to rules; that is, they can }~e programmed. These
are the activities for which programmed operational control is applicable,
and as new techniques are developed, there is a tendency for more and more
activities to be susceptible to programmed control. But operational
control and programmed control are not synonomous, for there are many, in
~ fact a preponderance of, specific tasks that cannot be explicitly pro-
grammed; for example, certain research tasks as might be undertaken by the
! - PSG/P.i^,I2D, special studies performed by staff officers, analysis of new
~ types of targets or very significant "finds" or changes in known targets,
the entire class of activities often referred to as overhead, etc.
'I'o make the distinction between management control and operational
control clear, management control focuses upon the whole stream of on-
going activities while operational control focuses upon individual tasks
or transactions. Just as management coirtrol occurs within a set of
_ policies derived from strategic planning, operational control occurs within
a set of well-defined proeecli.zres and rules that are derived from both
strategic-planning and management control.
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