AMOHELANG LIMITED

At the end of the recent five$-$year plan, it was estimated that there would be a considerable

demand in the manufacturing capacity of power transformers in South Africa in order to deal

with current energy supply crisis. It was further projected that the gap between demand and the

manufacturing capacity would be even larger in the subsequent plans. Thus, anticipating the

country$$s demand in future, Amohelang Limited decided to set up a new unit for manufacturing

transformers. This was in addition to the manufacturing capacity already built up at one of the

existing factories.

Formal Planning Process

Formal planning was introduced in the very first year of the commencement of activities at the

new unit. The planning process at Amohelang Limited included the setting up of broad

objectives and the preparation of the three years forecast. In a letter addressed to departmental

heads, the General Manager, Ms Ayanda said, $$The time has come to put down on paper, the

objectives and goals of our organization and to develop a proper framework whereby we can

take a more systematic look at the future we are heading for. This, I believe, can be achieved

by involvement and cooperation of all the departmental heads in putting into practice a culture

of planning.$$

The responsibility for developing a three$-$year plan was entrusted to the planning cell, which

reported directly to the General Manager. There was a separate controller$$s office which looked

after budget preparation and the subsequent monitoring of actual performance.

Goal Setting Process

Planning began each year in the month of April with the establishment of goals by the top

management. The top management group consisted of the General Manager and her various

functional heads. The goals were set both in qualitative as well as quantitative terms. The

quantitative goals were in terms of growth in sales and profits. Commenting on the quantitative

goals, Ms Ayanda observed that: $$Profit is the primary goal$.$

ADVANCED PROJECT MANAGEMENT $($APR$8$X$01)$

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The planning cell, after collecting all the information, consolidated and integrated the data and

prepared operating results and cash flow projections for the three years period.

Exhibit$-$I

AMOHELANG LIMITED

$($a$)$ A Temporal Overview of the Planning Process

Date Steps in planning

$1$st week of April Planning call sends relevant formats to

departmental heads, with detailed

explanations.

$4$th week of April By the fourth week, the various departments

send the formats back to the planning cell,

duly filled.

$1$st week of May Planning officer compiles all the data and

puts it in an integrated form.

$2$nd week of May The first draft of the plan is discussed in a

management group meeting, wherein several

suggestions emerge and the draft is

thoroughly revised by resolving the

conflicting objectives of various

departments.

$1$st week of June The final draft of the plan is ready and is sent

to corporate headquarters.

$($b$)$ Responsibility for Plan Preparation

Segment of the plan Responsibility

Sale Plan $($Order Book Position$)$ Manager $($Marketing$)$

Production Plan Manager $($Production$)$

Materials Plan Materials Manager

Manpower Plan Personnel Manager

ADVANCED PROJECT MANAGEMENT $($APR$8$X$01)$

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Township Development Plan Manager $($Projects$)$

Integration of Various Segments of Plan and

Final Plan Document

Planning Officer

Before finalizing the plans as prepared by the various functional$/$department heads, a detailed

discussion was held. During these discussions, various departmental heads explained the basis

of their respective plans. The final plan was arrived at after resolving the conflicting objectives

of various departments.

The Planning$-$Budgeting Linkage

Immediately after the plan was approved by the Management Group, the process of preparing

a detailed budget for the next year was initiated. The three years plan set out the broad

objectives for the first year and projections for the next two years. A detailed exercise had

already been conducted in preparing the broad objectives, which served as a basis for the

preparation of a detailed budget for the ensuing year. Thus the first year of the plan document,

with necessary modifications, became the budget for the next year. The three years plan

document and the budget were, therefore, closely inter$-$ related. It was said that the preparation

of a three$-$year plan was, in a way, a process of creating an organizational climate for a rigorous

and time$-$consuming process of budgeting.

Reactions of Executives

A few executives from the production department had the following comments to make with

regard to the format plan: $$The forms are time$-$consuming and tiresome. Here, when we are

already overburdened with our daily routine, which has got time to fill in figures in these

lengthy forms. We are more worried about day$-$to$-$day problems, rather t