Towards a better understanding of dynamic forms of planning

Traditional planning instruments, such as annual budgets, work well under conditions of relative certainty. In rather predictable and slow-changing contexts, coordination of a firms activities may reasonably be based on plans that are established up to one year in advance. As uncertainty about the future increases, however, operational coordination becomes increasingly difficult if it has to rely on such pre-planning of activities. In such cases, a more dynamic approach to planning is likely to be needed. Indeed, many firms have instituted rolling forecasts or similar planning practices, through which upcoming financial and operational challenges can be discussed on an almost real-time basis. These dynamic forms of planning are characterised by short planning intervals and oftentimes also by some form of direct exchange between managers from different departments who come together to discuss their planned courses of action. Despite their practical importance, however, they have barely been examined in extant accounting research. On the contrary, the dominant research focus on the annual budget has led to the manifestation of a rather static view of plans as ex ante devices for motivation and ex post tools for evaluation, as opposed to a more dynamic perspective of planning as an on-going effort of coordination. As a consequence, we know rather little about the opportunities and challenges involved in dynamic forms of planning. The proposed research project seeks to address this gap in the accounting literature. The main objectives of the research project are: to inquire into the challenges that firms might face when moving to dynamic forms of planning; to examine how uncertainty is managed in such forms of planning; and to shed light on how concerns with accountability can influence dynamic planning practices. To this end, we plan to conduct comparative empirical research in three case firms that have recently introduced dynamic forms of planning. In each firm, an in-depth case study will be conducted, involving interviews with different managers, observation of planning meetings, and investigation of documents. By looking at three firms rather than just one, we seek to generate not only an in-depth understanding of what is happening within each firm, but also to identify commonalities and differences that can provide scope for refined theorizing. To guide the interpretation of our observations, we will draw upon practice theory and sensemaking theory as theoretical frameworks. We expect that our findings will significantly enrich our understanding of how planning is performed in organizations and of the challenges as well as opportunities that dynamic forms of planning bring about.

Budgets are a central mechanism for management control. In a traditional sense, budgets are prepared for one business year and support companies in planning, coordination, and performance evaluation. However, such traditional forms of budgeting have been heavily criticized in the (recent) past critics claim that such forms of budgeting do not meet the requirements of modern organizations (e.g., fast-moving and ever-changing markets) and that they cause various dysfunctionalities (e.g., inefficient use of organizational resources, manipulation by managers). Propelled by such criticism a trend towards more dynamic forms of planning could be observed: companies do no longer rely on performing planning activities once a year but update their plans more frequently; and they increase the interaction and communication of the involved actors from different organizational functions during the preparation of plans. The research project Dynamic Forms of Planning took this observation as a starting point, investigating how companies use such forms of planning to address existing challenges, how such practices support companies in dealing with uncertainties about the future, and how such forms of planning relate to questions of accountability within companies. Building on various qualitative case studies, the research project was able to generate new insights about dynamic forms of planning. The insights illustrate how managers develop a shared understanding about the future by means of interaction during the planning process and how they can reduce uncertainties. Moreover, the studies show that targets and indicators can, on the one hand, improve the quality of plans; on the other hand, they can also cause conflicts between managers and departments, respectively. Especially forecast accuracy indicators turn out to be difficult to put into practice. Moreover, the research project outlines how dynamic forms of planning are experienced by those persons who coordinate and manage planning processes: dynamic planning can be experienced as highly burdensome as it intensifies the planning process over the course of the year.