Enterprise planning source flaws (14)

The enterprise plan contains the highest level pricing guidelines.

For this reason, its development must come surrounded by precautions, especially regarding its source flaws such as the following:

1 The plan is a straitjacket

If the enterprise plan is detailed and rigid, it restricts the operational activities, does not allow actions beyond those foreseen, and limits its executors’ creativity and improvisation capacity.

2 The plan is too flexible

In this case, the deficiency is the possibility of adapting the goals to the conditions faced.

If its performance is poor, the company reduces its goals; if it is good, it increases them. This stance turns the plan into a formal document, useless for the performance improvement and evaluation.

3 The plan is built top-bottom

A top-bottom plan is one in which the top management decides its content without negotiating it with its operational bases (commercial, manufacturing, purchasing, finance, technology, and human resources).

As a result, in addition to causing the operational team to be less involved in its execution, when the company fails to achieve its goals its members argue they should have participated in its formulation.

4 The plan is constructed bottom-up

A plan constructed from bottom to up is based on information from operational staff.

This hypothesis usually originates underestimated goals that are easy to exceed, and do not represent the enterprise capacity and market potential in which it operates.

5 The enterprise performance is overrated

Plans containing overrated performance are sources of stress, conflict, and misconduct, such as result misrepresentation, anticipating revenues, and deferring expenses, which distort business performance and sabotage the fundamental purpose of planning.

6 The plan has no challenges

This type of plan is assembled based on historical data rather than contemplating challenges and stimuli for better performance.

By doing so, the company fails to take advantage of all its potential and many market opportunities, leaving room for its competitors.

7 The qualitative targets are inadequate

A good plan contains qualitative goals. However, even having them, sometimes they may need to be more numerous and measurable.

Statements such as “the sales team will act aggressively,” “the customer’s service will be improved,” and “the product quality will be optimized” that do not clarify how these purposes will be performed and measured tend to make them ineffective.

C. L. Eckhard, author of Pricing in Agribusiness: setting and managing prices for better sales margins.