The Financial Executive's Role in Long-Range Planning
by GORDON L. MURRAY Partner, Executive Office
Presented before the Financial Executives Institute, Chicago—November 1964
ASSESSMENT of "The Financial Executive's Role in Long-Range
Planning" depends on a definition or description of the nature of long-range planning. Inspection of the function leads to an assessment
of the respective roles of the participants. As a point of departure,
then, let us first consider the essential nature of all planning.
NATURE OF PLANNING General Observation on Planning
Planning is nothing more than determining a future course of action. The purpose of planning at all is to select from among alternatives
the course of action that will produce the best result. What constitutes the best result depends on your objective. The constraints in a planning problem are the limitations in resources at hand or that realistically can be acquired—which are relatively ascertainable; and the uncertainties of the future economic environment—which require recourse to assumptions. The planning process itself calls for making decisions in step-by-step fashion and concludes with a statement of results in terms of volume of sales, dollars of profit, return on assets employed, and earnings per share. When the results of this process fail to meet objectives, decision-making can be re-cycled to see if an improvement can be achieved. In effect the planning process permits simulation of operations in advance.
Success of any course of action selected through the planning process is rarely assured. What is assured is a narrowing of the areas of uncertainty, a greater probability that a proper course of action will be selected, and an ability to detect conditions that were not anticipated in time to modify effectively an original course of action.
This then is the essence of planning:
• Assessment of present position, strengths and weaknesses, and resources
• Statement of objectives
• Forecast of economic environment with accompanying assumptions