The tightest linkage would be to include statements with the same level of detail as in the monthly reporting package which compares budgeted with actual results. One important feature of content linkage is the amount of detail in the financial statements included in the plan document. Let us take a closer look at each of these linkage devices. Within each of these categories, there are several specific features of the planning system that can be manipulated to influence the extent of plan-budget linkage. Timing linkage concerns the sequencing of the annual planning and budgeting cycles. Organizational linkage focuses on the relationship between the units responsible for planning and budgeting.ģ. Content linkage relates to the correspondence between the data presented in the plan document and that presented in the budget.Ģ. On close examination, it quickly becomes apparent that the different aspects of plans and budgets can be linked in three distinct ways:ġ. It may not always be possible to achieve a totally satisfactory trade-off, but we shall describe the mechanisms being used by a sample of successful companies to achieve what for each of them is a satisfactory compromise. In short, we believe that management can control the focus a planning system will exhibit with respect to the realism versus reach problem. These reflect the experiences of six companies which we selected because they (a), are successful in terms of compound earnings growth and (b) have long-range planning systems with both action-oriented and mind-stretching characteristics. Then, in the second step, we shall illustrate some of the most interesting devices actually being used. In this regard, we shall summarize the general features of the planning system which relate to plan-budget linkage, illustrating both the “tight” and “loose” form of each “linkage device.” That “something” involves varying those aspects of the long-range planning system which relate to its interface with the short-range budgeting process. In the first stage, it is important for long-range planners to begin thinking about the realism-reach trade-off as a problem they can do something about. Our discussion will proceed in two steps. In fact, our purpose is to illustrate that the long-range planning system can be structured to achieve both an action orientation and a focus on mind stretching. In this article, we shall argue that these dual objectives need not be mutually exclusive. We are making the assumption, of course, that for the formal planning system to operate effectively it must achieve a balanced compromise between realism and reach. While close linkage between planning and budgeting puts the stress on the desired action, it also promotes a focus that can be disastrous to mind-stretching “reach.”

Generally, this is done by relating long-range planning closely with short-term budgetary control. The primary way of enhancing “realism” is to give the planning function a clear action orientation. On the other hand, it wants planning to reflect forward-looking, assertive, and creative thinking. On the one hand, management wants the planning function to reflect pragmatic judgments based on what is possible. After specifying the set of design features, they go on to show how six companies have used various combinations of them to achieve an appropriate degree of creativity that is consistent with practicality.Įvery company engaged in long-range planning would like its efforts to attain two fundamental but often conflicting goals. The authors also argue that the problem of maintaining a satisfactory balance can be directly addressed by varying the design features of the planning/budgeting interface. This article contends that to be effective every formal long-range planning system must achieve a compromise between “creativity” and “practicality”-goals for planning that are often in conflict.

Satisfactory planner