Evaluating action plans

G obbelaa , J. W.; Mu phy, J. J.; Van De Wal , S. R. A icle E alua ing ac ion plans Sou h A ican Jou nal o Business Managemen P o ided in Coope a ion wi h: Uni e si y o S ellenbosch Business School (USB), Bell ille, Sou h A ica Sugges ed Ci a ion: G obbelaa , J. W.; Mu phy, J. J.; Van De Wal , S. R. (1986) : E alua ing ac ion plans, Sou h A ican Jou nal o Business Managemen , ISSN 2078-5976, A ican Online Scien i ic In o ma ion Sys ems (AOSIS), Cape Town, Vol. 17, Iss. 4, pp. 210-214, h ps://doi.o g/10.4102/sajbm. 17i4.1059 This Ve sion is a ailable a : h ps://hdl.handle.ne /10419/217945 S anda d-Nu zungsbedingungen: Die Dokumen e au EconS o dü en zu eigenen wissenscha lichen Zwecken und zum P i a geb auch gespeiche und kopie we den. Sie dü en die Dokumen e nich ü ö en liche ode komme zielle Zwecke e iel äl igen, ö en lich auss ellen, ö en lich zugänglich machen, e eiben ode ande wei ig nu zen. 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Mu phy and S.R. an de Wal School o Business Leade ship, Uni e si y o Sou h A ica, P e o ia In 1976 Louis Ge s ne w o e, 'one o he mos in igueing managemen phenomena o he la e 1960's has been he apid sp ead o he co po a e planning concep . Excep o he so-called compu e e olu ion, ew managemen echniques ha e swep h ough co po a e and go e nmen en e p ise mo e apidly o comple ely'. Ye in spi e o his explosion o companies doing co po a e planning he e a e s ill a eas wi hin he p ocess ha need o be esea ched. One such a ea is he 'e alua ion o he ac ion plan'. How do manage s decide which po olio o ac ion plans o selec and implemen ? I has been he au ho s' expe ience ha hese decisions a e mos ly made on 'gu ' eel wi h a g ea deal o poli icking aking place. In his a icle a me hodology is de eloped o assis manage s in he compa a i e e alua ion o ac ion plans, he inal decisions being based on he use o a mul i a ia e model which ela es achie emen and isk. S. A . J. Bus. Mgm . 1986, 17: 210 -214 Louis Ge s ne he in 1976 gesk y da een an die mees p ikkelende bes uu s e skynsels an die laa 1960s seke lik die snelle e sp eiding an die ko po a iewe beplannings- konsep was. Bui en die sogenaamde ekenaa e olusie he min ande bes uu s egnieke so innig en olledig deu ko po a iewe- en s aa sondememings geswiep. Ten spy e an die on plo ing an ko po a iewe beplanning onde maa skappye is daa s eeds gedeel es binne die p oses wa nage o s moe wo d. Een hie an is die 'e aluasie an die aksieplan'. Hoe kies bes uu de s ui die po olio an aksieplanne wa e om e implemen ee ? Die sk ywe s he onde ind da hie die beslui e mees al op aan oeling be us en da heelwa poli ieke y in die p oses plaas ind. In hie die a ikel wo d 'n me odologie on wikkel wa bes uu de s kan help in die e gelykende e aluasie an aksieplanne. Die inale beslui e wo d gebasee op die geb uik an 'n mul i a ian model wa p es asie en isiko me mekaa in e band b ing. S.-A . Tydsk . B«J y sl. 1986, 17: 210- 214 J.W. G obbelaa *, J.J. Mu phy and S.R. an de Wal School o Business le'c1de ship, Uni e si y o Sou h A ica, P.O. Box 392, P e o ia, 0001 Republic o Sou h A ica •To whom co espondence should be add essed Accep ed Augus 1986 In oduc ion In o de o su i e, o ganiza ions mus ela e o hei en i on- men . As he en i onmen is changing a an e e inc easing pace o ganiza ions sol e he p oblem o de e mining hei ela- ionship wi h he en i onmen h ough he p ocess o planning. Planning econciles objec i es, oppo uni ies and capabili ies; i in ol es selec ing ends and means -deciding whe e you wan o be in he u u e and he bes way o ge ing he e. An in insic elemen o componen o his (planning) p ocess is he ac ion plan o p og amme; i.e. he plan o ac ion o be ollowed in o de o achie e a s a ed objec i e. Pe usal o he w i ings o such au ho s as De me (1977), An hony & Dea den (1976), A gen i (1979), and Wilson & Tomb (1968) highligh s he ac ha al hough much is said abou he de elopmen and s uc u e o an ac ion plan, e y li le, i any, is men ioned abou he e alua ion o an ac ion plan. This has p omp ed he p esen a icle. De ini ion o an ac ion plan Al hough used by many au ho s, he e m ac ion plan is pe haps bes desc ibed by Wilson & Tomb (1968). 'Al hough no p ecise o ma is necessa y o exp esgng and communica ig an ac ion p og amme each p o- g amme should do h ee hings, wha e e he o ma . I should s a e he objec i e o he ac ion, de ail he s eps o be aken and desc ibe he inancial impac he ac ion should ha e'. Figu e I illus a es he way an ac ion p og amme may be exp essed. I is ob ious om Figu e 1 ha as pe de ini ion each manage shoud s a e exac ly wha he expec s o do and he mus be p epa ed o demons a e ha he ac ions he p oposes will be adequa e o achie e he planned esul s. O pa icula impo ance in he u he de elopmen o ou cen al heme a e he ollowing componen s o an ac ion plan: (i) Ac ion s eps. This en ails he di e en s eps equi ed o accomplish he objec i e. I mus be s a ed in a way ha clea ly exp esses wha mus be done, who is o do i , and he da e by which i is o be comple ed. This pa o he ac ion plan can be conside ed o be he echnical easibili y o he pa icula p og amme and will be e e ed o as such in u he delibe a ions. (ii) Financial impac . P og ammes designed o achie e he p o i imp o emen goal se by he CEO ha e a plus impac ; p og ammes aimed a imp o ing some manage- men p ocess (e.g. managemen de elopmen ) in ol e a cos which p oduces an immedia e minus p o i impac , Vi ually all ac ion s eps in ol e some cos implica ions. S. A . J. Bus. Mgm . 1986, 17(4) Objec i e Reduce by a leas 40% he equency and cos o aul y cas ings ecei ed om he XYZ Company. S ep Ac ion 1 ep1 Pa icipa ion Pu chasing manage Ensu e ecogni ion by supplie o p oblem wi h 'ha d spo s' In cas ings Timing Comple ed Nego ia e p ice concession on Pu chasing Janua y 31, 1968 all cas ings ecei ed du ing manage weeks when we e u n mo e han en bad cas ings Se up s o age a ea o accumu- Facili ies manage Janua y 31, 1968 la e uined cas ings Es ablish p ocedu es o eco d P oduc ion con ol Feb ua y 15, 1968 machine down ime and cu e b eakage wi h Indi idual cas - ings Submi in o ma ion weekly o Pu chasing Begin Ma ch 1, XVZ Company manage 1968 P o i lmpec P ice concessions E ec o imp o ed quali y -Sc ap -O e ime -Expense ools -Los p oduc ion Modi ica ions o s o age a ea Reco ding p ocedu es O he cos s To al inancial impac 1968 P o i lnc ease/(Oec ease) $ 7,000 8,500 3,500 9,000 20,000 (2,000) (1,000) (3,000) $42,000 Figu e 1 Illus a ion o ac ion plan (Wilson & Tomb, 1968). The inancial impac is he ne e ec o he cos s o he ac ion s eps and he inancial bene i o be de i ed om he changed condi ions. Delinea ion o he p oblem I should be no ed ha majo capi al expendi u e ype ac ion p og ammes (s a egic h us s) a e excluded om ou dis- cussion. This ype o ac ion p og amme is no mally e alua ed by he use o such echniques as payback pe iod, discoun ed cash low (DCF), cos -bene i o cos -e ec i eness analysis and compu e simula ion models. The le el o sophis ica ion is o en dic a ed by he magni ude o he in es men in ol ed. In his pape we a e conce ned wi h he 'no mal' eplanning (Ko ze, 1983) o managemen con ol (An hony, 1965) ype ac ion plan as well as hose ac ion plans ha a e de eloped as pa o he annual business plan. Gene a ing ac ion plans Ac ion plans a e gene a ed o igge ed du ing he de elop- men o he annual co po a e plan as well as pa o he managemen planning and con ol p ocess du ing he cou se o he inancial yea . Schu e (1981) s a ed ha ac ion plans a e igge ed by ou speci ic sou ces, i.e.: (a) 'by speci ic s a egic guidelines p o ided by op manage- men as a esul o he s a egic planning exe cise (b) by he a ge s se in he s a egic plan (c) SWOT analysis (d) by he managemen con ol p ocess'. I should howe e also be no ed ha he e a e many o he igge s o ac ion plans. I o ins ance he o ganiza ion is using quali y ci cles, hese will also igge ac ion plans. Fu he mo e, some ac ion plans a e de eloped simply as a esul o he c ea i i y o he manage s o en ep eneu s wi hin he o ganiza ion. 211 E alua ing ac ion plans - a li e a u e su ey Thus a we ha e been concen a ing on he de elopmen and he o ma o ac ion plans. O en he mo e c i ical ques ion is how do manage s e alua e he di e en ac ion plans? How do manage s selec hose ac ion plans ha no only ha e he highes p obabili y o comple ion bu also how do hey es ima e o e alua e he ac ual p o i impac o he ac ion plan? A ela ed ques ion is how do manage s p io i ize he a ious ac ion plans? Inspec ion o he li e a u e indica e ha : (i) Wilson & Tomb (1968) in hei classic publica ion In eg a ed P o i Planning and con ol glossed o e he e alua ion p ocess by making b oad mo he hood s a emen s. (ii) A gen i (1979) also did no o e any conc e e me hodo- logy by which ac ion plans can be e alua ed. (iii) De me (1977) looked a he p oblem om a p ocess pe spec i e ( iming and o ganiza ion). He did no add ess he inancial aspec o he ac ion plan. (i ) An hony & Dea den (1976) in hei discussion on p o- g amming in gene al, and new e enue p og ammes, manu ac u ing p og ammes and suppo p og ammes speci ically, o e ed e y li le by way o a me hodology o e alua ing hese a ious plans. ( ) Schu e (1981) o e ed he managemen e iew p ocess a a ious hie a chical le els and imes as he ehicle by which o e alua e ac ion plans. I is howe e clea ha he e iew p ocess as en isaged by Schu e is suscep ible o poli icking, halo e ec , dominee ing, and bu eauc acy and does no o e a solu ion o he basic p oblem o e alua ion. ( i) Ko ze & du P eez (1984) analysed he a ious cons i uen o ecas ing elemen s o he business planning and manage- men con ol p ocesses and came o he conclusion ha he mechanis ic o ecas is an accep able ins umen o os e c ea i e en ep eneu ial planning, i.e. ac ion plans. Howe e , hey also did no add ess he p oblem o e alua ion. E alua ing ac ion plans - a Mon e Ca lo simula ion app oach I is seldom possible o a manage o pinpoin exac ly he u u e inancial ou come o a p oposed ac ion plan. The e a e many chance unce ain ies wo king in on he plan owing o he unp edic abili y o en i onmen al ac o s and e en unknown a ia ions in in e nal ac o s. Hence i is main ained ha any e alua ion o ac ion plans in a business en i onmen mus be done in a leas wo dimensions: inancial gain (loss) and inancial isk. To ob ain ep esen a i e igu es o ne p o i and isk he i s equi emen is o de e mine he p obabili y dis ibu ion o possible p o i igu es which may ma e ialize i he ac ion plan unde conside a ion is implemen ed. I we e e o he ac ion plan in Figu e 1 we see ha such a p o i igu e can be made up o a ious posi i e and nega i e con ibu ions o p o i . Each one has po en ially inhe en unce ain ies. Hence he p oblem o he e alua ion and compa ison o ac ion plans educes o he ollowing s eps: es ima e he a ious cos and p o i con ibu ions, allowing explici ly o unce ain ies; combine hese es ima es in o a p obabili y dis ibu ion o ne p o i o he ac ion plan; de i e ep esen a i e igu es o p o i con ibu ion and isk; and epea o o he ac ion plans and compa e hem, along hese wo dimensions. 212 P o i /cos con ibu ion o an ac ion s ep Whe e he e is unce ain y in he p o i o cos which will be ealized by an ac ion s ep, he app op ia e way o ep esen his unce ain y quan i a i ely is by means o a p obabili y dis ibu ion. The p oblem is o ob ain a ep esen a i e o m o his dis ibu ion and o es ima e he equi ed pa ame e s o he dis ibu ion. This is no an unknown p oblem o he ne wo k analys who has o ob ain es ima es o he du a ion o indi idual ac i i ies which make up a PERT ne wo k. Expe ience has augh ha knowledgeable people eel mo e com o able and a e mo e eliable when asked o gi e h ee es ima es o he du a ion o such an ac i i y namely a pessimis ic, an op i- mis ic, and a mos likely es ima e. A be a-dis ibu ion is hen i ed o hese es ima es. The example o PERT analys s is ollowed he e and i is sugges ed ha he inancial ou come o each ac ion s ep be es ima ed in e ms o a = pessimis ic es ima e, i.e. he wo s alue ha can ealize -ba ing 'ac s o God' no allowed o m = mos likely es ima e b = op imis ic es ima e, he coun e pa o a. In con as o ne wo k analys s i is sugges ed ha he simple iangula dis ibu ion is i ed h ough he abo e es ima es, and no he be a-dis ibu ion. I displays su icien lexibili y whils accommoda ing he in o ma ion con ained in he poin es ima es (see Figu e 2) and is easie o wo k wi h. Dis ibu ion o ne p o i The ne p o i o an ac ion plan may be w i en as n Z= I:.X; i=I whe e Z = ne p o i ; X; = e enue (posi i e) o cos (nega i e) om ac ion s ep i; i = 1, 2, ... , n; and n = numbe o ac ion s eps. The chance unce ain y in e enue and cos componen s is now con ained in di e en iangula dis ibu ions. Thus he ne p o i is gi en by a linea combina ion o a numbe o andom a iables wi h di e en iangula dis ibu ions. This dis ibu ion o Z can be complica ed e en mo e i i is aken in o accoun ha o en he e is a small bu no negligible chance ha an ac ion plan will ail and hough cos s a e incu ed o all in en s and pu poses, ze o e enue will ealize. Thus i can be seen ha he dis ibu ion o Z is a di icul one o handle analy ically. Howe e , by means o Mon e Ca lo simula ion, i is ~ible o ob ain an adequa e ep esen- a ion o i s o m. Fo each ac ion s ep a alue is d awn andomly om he co esponding iangula dis ibu ion. These a e hen added o gi e a ep esen a i e igu e o ne p o i . This p ocess can now be epea ed o build up an empi ical dis ibu ion o ne p o i . Use ul displays o such a dis ibu ion a e he isk unc ion a m b a Skew o he gh m Symme ic b a m b Skew o he le Flp e 2 Examples o iangula dis ibu ion wi h di e ence in skewness. (a) S.-A . Tydsk . Bcd y sl. 1986, 17(4) (b) Cumula i e I Achie emen I P obabili y P obabili y P o i le el P o i le el Fagu e 3 (a) Cumula i e dis ibu ion unc ion and (b) Achie emen p obabili y unc ion. o cumula i e dis ibu ion unc ion (Figu e 3a) and i s com- plemen , he achie emen p obabili y unc ion (Figu e 3b). F om he isk unc ion one can ead o o any le el o p o i on he ho izon al axis he isk (p obabili y o achie ing ha o less). The achie emen p obabili y unc ion gi es he p obabili y o achie ing a pa icula le el o p o i o mo e. The illus a i e ac ion p og amme in Figu e 1 can be used o illus a e he p ocess and es ima es can be made o he a ious ac ion s eps (Table 1). The achie emen p obabili y unc ion is displayed in Figu e 4. Table 1 Es ima es made o he a ious ac ion s eps Pessimis ic Mos likely Op imis ic Ac ion s ep es ima e es ima e es ima e Re enue gene a o s P ice concessions 2 000 7 000 13 000 O e ime 0 8 500 8 SOO Expense ools 3 500 3 500 3 500 Los p oduc ion 0 9000 26000 Cos gene a o s S o age a ea 8 000 2 000 soo P ocedu es 2 000 I 000 0 O he s 6000 3 000 I 300 Rep esen a i e igu es o p o i and isk In o de o compa e a ious ac ion plans acco ding o he wo dimensions o ne p o i and isk i is necessa y o ob ain o each ac ion plan a single ep esen a i e igu e o ne p o i and a single igu e o isk. Compa able single alues o ne p o i a e expec ed p o i (mean), mos likely p o i (mode), o median p o i . Because an ac ion plan will be employed only once, i is sugges ed ha he mos likely p o i be used. Howe e , in p ac ice his will o en no be an app op ia e indica o o achie emen , because e.g. o mul imodal dis ibu ions (i.e. dis ibu ions which display mo e han one peak) he ques ion a ises heo e ically o which mode o use. In p ac ice i may also be ound ha he dis ibu ions do no display e y p ominen modes. The expec ed alue has mo e in ui i e appeal whe eas he median is mo e app op ia e when ou lie s can 'dis o ' he expec ed alue. The median is used in he example below as being mo e disc imina o y. Wha is eally impo an hough is ha whiche e igu e is used, he same measu e o locali y mus be used o all ac ion plans e alua ed. Risk can also be exp essed in mo e han one way. The p obabili y o make a loss, o he p obabili y o make less S. A . J. Bus. Mgm . 1986, 17(4) Achie emen p obabili y 2 I 20 I 40 I 50 60 I I 80 I 100 I - 9009 ... , .... a : ............ : ... , •• * ......... ,., ......... , ...... * .................. , ... , .................... ,*. -7517 ..... : ... , ................. ** .. '***'••••=•-=***i :*****•=-=•*•••••••* -6025 *•••****•****•=••••**••****•'••*i a •-• .. *****i :l .****•'•••• -4533 ..... ., ....... .., .... , ... * ................... , ............ , .... ,.,.,.., .............. ****•*•••11•=•• - 3041 ******•'**'**•••*•••·*1 '""•=••••=•1 :•·*••=•.o :•·•• .. ,...,**•=•* ... *••=•*• -1549 *-••••i =••i =••' <i ,•••i •i :•·•i =l :, :*•=•i i•••*****•11 :• :1 a :, , ., ... ,, .i+:i :•• _ 57 1 :, , •i c•:1 1 1-:••••·**•i :1 :*, .'*•*** .. '**•=*i+:***=**1 :1 ., ,:, , +:, 11 :, .o+, .. , i :•1 :, :1 : 1435 .. , .. •, :W., : ............. ..,.., ....... ~ .... , •• , .......... ,., .. ,,.., .... .,, ......... ,.,,.,,., .. ,,.. ... ,.., .......... , .... ** 2927 * ............. , ..... ..,_ ............... ,.., ...... ***•=i : ......................... , ..... , .. ,.., ...... , ... ., ............ , .. 4419 ... **"""'' .. '**** 11 '*•i ·, :i :, ·i :•i, ·, ., ..... ,,., ...... ,.:, :, :.i, :, :11 :i :i :o+., ;i, ,:, :i ,""·~:,-:11 , :, :, ,*""' 5911 .............. :,.,, :-., ..... ,.,..,.,.* ... *' .. * ......... ..., ........ ,., • ., •.• *,.·•*••"·"'"'*• 7403 i :•*****'*'** ...... .., .. , .... ***••••******•'**** ... *"' .............. ***•••·""· 8895 1 11 :•**'*•*** .. ,,. ...... , .. , .... ..,11·111-·J , :, :i , ... ,,., ..... ,., •. ,.. .. ,., ....... ~w. ..... , .. ,..,, ;, : ... , -., :i . 10387 l :14:, ,i c, ,i:l ll :i :i *•'"''****••=i ii :l o:i :i , :, ; .. *'*"':"''*•" -i :i ,,..,. , " *• "'·"'·•" 11879 "· .... ,*** , :, :i ·i': .,... ...... .., **· .. , .. , , :, : ... , , :i " *"' ... .., ................ *."'"* i .,, .. , ... 13371 l J c***•*•••***":"" o <, :•:i -:l "*"''"'"'**o :i :i a :"'u c• ,, :i ;l ,li :l ci 14863 .. , .................. ..,**""* ................... , ... **••***l 'i : .. ,o , .. :i :, 16355 ............... , : ... i ·i :o ·> "o <l ******•'**•:a :l ci :i <i :, ;+i :o :i e .... 17847 *""*******•**.,****** ... "' ........ :W., :, , .............. i : ... : 19339 , : o-:4'1, <•:••'****·'llo:*""**•*"' ............ , : •• ,.i :1 :i :1 · 20831 .., ... * ......... , .............................. , .. ,, .... i :i <• 22323 .... *"''**"l l***•·•=i :, :, :* .. :*l ' 23815 .,,., .. ,..,,..*****·*'*"'"****•· 25307 , :, .*', ,, - .. ,,.,..,, .. , .. , ... ,..~.,. 26799 .. , ...... *,."''"'**'"' 28291 ... ,.. .... ., ... , .. ,,. >--* 29783 *'**'• o •** 31275 ...... 32767 •.• 34259 ,. 35751 37243 38735 40227 41719 43211 44703 46195 47687 49179 Figu e 4 Achie emen p obabili y unc ion: Example. han some accep able amoun o ne p o i , is an in ui i ely appealing no m o use and hence is p opaga ed he e. I can be ead o di ec ly om he isk unc ion. Fo he example abo e, he simula ion p og amme ga e he ollowing alues: Median p o i : 20831 P obabili y o making less han 20 000: 640Jo Compa ison o ac ion plans Fo he pu pose o p io i izing di e en ac ion plans i is sugges ed ha all ac ion plans o be conside ed be displayed on he same g aph wi h p o i on he ho izon al axis and isk on he e ical axis. The example in he nex sec ion will illus a e he p ocess. Example The example conside ed he e is a heo e ical one and should no be linked o he p e ious discussion. The pu pose is o demons a e he me hod as well as o in es iga e whe he some gene al conclusions may be d awn as o he endencies ha will eme ge om di e en o ms o cos gene a o s and e enue gene a o s. Fou di e en dis ibu ions we e used o e enue gene- a o s showing ma kedly di e en o ms hough ha ing he same mode. Simila ly ou di e en cos dis ibu ions wi h he same mode we e conside ed. These we e combined o c ea e 16 di e en combina ions ('ac ion plans') each con- sis ing o a di e en (single) e enue gene a o and a single cos gene a o . The e enue dis ibu ions used a e gi en in Table 2. No e ha he mode was always he same and he di e ence be ween ex emi y and mode was ei he IO 000 o 40 000. This was also ue o cos dis ibu ions used ( able 3). Each combina ion was simula ed 500 imes. As a measu e o achie emen median p o i was used. The esul s a e gi en in Table 4. As measu e o isk he p obabili y o ob aining Table 2 Re enue dis ibu ions Code Type• Lowe limi Mode Uppe limi A HC 350 000 360 000 370 000 8 SR 350 000 360 000 400 000 C SL 320 000 360 000 370 000 D LC 320 000 360 000 400 000 ·He: High deg ee o ce ain y, i.e. a small ange be ween lowes and highes alue. SR: Skew o he igh . SL: Skew o he le . LC: Low deg ee o cenain y, i.e. long ange be ween lowes and highes alue. Table 3 Cos dis ibu ions Code Type• Lowe limi Mode I HC 270 000 280 000 2 SR 270 000 280 000 3 SL 240 000 280 000 4 LC 240 000 280 000 "See Table 2 o explana ion o symbols. Table 4 Median p o i Cos HC:A SR:B SL:C LC:D Risk 80% 70% 60% 50% "40% 30% 20% 10'/o Re enue HC:I SR:2 SL:3 80 000 88 500 74 000 70 000 78 500 57 500 86 500 101 000 76 000 83 500 87 000 68 500 Table 5 Risk (P (p o i < 70 000)) Cos HC:A SR:B SL:C LC:D xB3 Re enue HC:I SR:2 SL:3 60Jo 4% 38'lo 44'lo 28% 70% 2'lo O'lo 30'7o 30% 20'lo 72'7o x03 x84 x81 xA3 x04 xA4 xC3xe2 x01 x04 x02 xA1 xA2 xC1 Uppe limi 290 000 320 000 290 000 320 000 LC:4 78 000 72 500 89 000 80 000 LC:4 32'lo 42'lo 30'lo 38'lo 213 70 000 80 000 90 000 iau e 5 Compa ison o ac ion plans. 100 000 11 000 P o i L 214 less han 70 000 p o i was used. The esul s a e shown in Table 5 and Figu e 5. Discussion o esul s F om Figu e 5 i is ob ious ha combina ion C2 (i.e. cos en y C and e enue en y 2) is he mos luc a i e p oposi ion ha ing he highes ep esen a i e p o i ma gin (IOI 000) and lowes isk (0% p obabili y o ob aining less han 70 000). Simila ly A2 and Cl a e also a ac i e. The choice be ween Al and D2 will depend on he p e e ence o managemen conce ned. Gene al commen Al hough he example is oo limi ed o d aw de ailed con- clusions, wo ema ks a e in o de . Fi s ly, i he e enue dis ibu ion is skew o he igh o he cos dis ibu ion is skew o he le , i has a ma ked imp o emen in isk as well as on median p o i and ice e sa. This is due o he ela i ely be e chance o ob aining a eally high e enue and/ o low cos . Secondly, he e is no de ini e pic u e eme ging ega ding he compa ison o high ce ain y e sus low ce ain y in e ms o he c i e ia used. P ac ical applica ion In p ac ice he ac ual cos / e enue dis ibu ions will be used in he simula ion p og amme o ob ain an achie emen p obabili y/ isk cu e o each ac ion plan. This will aid S.-A . Tydsk . Bed y sl. 1986, 17( 4) managemen o selec a po olio o ac ion plans o close o exceed he planning gap (gap be ween ac ual yea end p o n o ecas and p o i objec ion) aking in o accoun manage- men 's isk p opensi y. Fu he esea ch is being conduc ed o de elop an oJ) imii.a- ion model o his pu pose. Re e ences An hony, R.N. 1965. Planning and Con ol Sys ems. A F amewo k o Analysis. Di ision o Resea ch, G adua e School o Business Adminis a ion Bos on. 185 p. An hony, R.N. & Dea den, J. 1976. Managemen Con ol Sys ems. Tex and cases. Homewood, Illinois: Richa d D I win. 769 p. A gen i, J. 1979. Sys ema ic Co po a e Planning. Thomas Nelson and Sons L d. 316 p. Denne , J. 1977. Managemen planning and con ol sys ems. Ad anced concep s and cases. Homewood, Illinois: Richa d D I win Inc. 388 p. Ko ze, J. Meaning ul Manage ial Ac ion Planning: The inancial componen . S. A . J. Bus. Mgm ., ol. 14, 156-160. Ko ze, J. & Du P eez, N. Dynamic Replanning: Some commen s on he P ac ical Applica ion o he Analy ical Fo ecas . S. A . J. Bus. Mgm ., ol. 15, 119-172. Schu e, F.G. 1981. In eg a ed Managemen Sys ems. P e o ia: Bu e wo hs. Wilson, S.R. & Tomb, J.O. 1968. Imp o ing P o i s h ough In eg a ed Planning and Con ol. Inglewood Cli s W J: P en ice-Hall Inc. 162 p.