Failures of Central Planning

Inayet Hadi
Professor Gage
PAD 5002, Section 001
December 12, 2006
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Table of Contents

Abstract
3
Strategic and Central Planning

Difference between Central Planning

I. 4
and Strategic Planning
II. Assumptions and Refutations of Central Planning 5
III. Central Planning: Failing the Community (Case) 6

Management's Role

IV. Drucker on Function of Management 8

V. Management and Its Benefits 9
The Need for Performance and Political Appointees
VI. 11
Failures of Central Planning

VII. Formal Specifications 12

VIII. Approaches to Program Management 15
Decision Making Models
IX. 21
Conclusion

X. Organizations of the Future 22

XI. Works Cited 23

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Abstract

The principles of central planning and strategic planning are discussed in its variant

forms and applied throughout the profession of management. With the withering away of the

USSR, and its economic systems, without a doubt address the uselessness of central planning

methods. Central planning assumes that all knowledge and information would be available for

the use of a central planning board, and that the subordinate units will perform as is expected.

This assumption of central planning method has been refuted in the proceeding paper.

Management role and its effect towards enhancing performance are addressed through

the functions of management, its benefits, and the role of political appointees in the process of

strategic planning method. Managements role are drastically different in the central planning

method and the strategic planning method. In the former scenario, management continuously

waits for instructions from the central planning board, while in the lateral scenario; management

takes proactive and responsible actions in order to achieve its objectives or goals without having

to wait for approval to act.

The failures of central planning are discussed against the formal specifications principals

developed by Peter F. Drucker. The differences are discussed and evaluated between the

approaches to program management from central planning and strategic planning perspectives,

As well as the approaches taken towards the utilization of decision making models.

Finally, organizations of the future are discussed in light of the failures of central

planning methodology, and the need for incorporation of autonomous strategic planning

perspectives to ensure that organizations of the future maximizes the needed and positive

benefits that they confer upon society.

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Strategic and Central Planning

Strategic and Central planning have important differences which have been compared.

The purpose of this paper is to compare central planning with important elements of

management in order to demonstrate the failures of central planning. To accomplish this goal,

the paper will first discuss differences between central and strategic planning, management's

role, and why central planning methods will most likely fail.

Differences between Central Planning and Strategic Planning

The notion that human response and activities can be micromanaged through the use of

central planning to achieve an outcome in a five-year plan will not succeed. The demise of

central planning in the public sector was supported with the withering away of the Union of

Soviet Socialist Republics (USSR). According to Levine (1995) the “Soviet central planning,

with its routinized (sic) behavior, served a useful purpose for Soviet political leaders” without

providing benefit to the people as a whole (para. 7). State sponsored central planning requires

the state to have direct control over the assets and human resources necessary to achieve a

desired goal of the community, as defined through its political process.

Strategic planning can easily be associated with central planning, in that a small select

group of staff aims to direct and manage the organization’s assets and human resources to

achieve a desired goal within a specified time period. There is no doubt that as a tool, strategic

planning can result in failure if applied with too much rigidity and micromanaging of day-to-

day operations (Starling, 2005, p. 430). The principal of rigidity in ensuring that the goal(s) of

the organization are achieved will be counter-productive and harmful to the end results (Franks,

1947, p. 27). In addition, micromanaging will result in destroying of trust within the

organization that is valued in human relations to build a foundation for future interaction

(Guarrero, 1998, para. 13). The practice of micromanaging strategic planning is referred to, as
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central planning, where the action of reporting and filling out of correct forms is valued more

then the initial goals and objectives of the organization. Central planning and strategic planning

can be compared, with productive results, utilizing the principals of rigidity and

micromanagement.

Assumptions and Refutations of Central Planning

Central planning assumes the “…Central Planning Board would have perfect knowledge

of all resource availabilities, all technical capabilities of all production units, and society's social

welfare function, and that all the Central Planning Board's instructions would be carried out,”

(Albert & Hahnel, n.d., para. 1) is practical in theory and on paper. Currently there is no method

that a central planning board can share complete information in a coherent manner with other

units to allow them the flexibility and reliability of performance in relationship to other units of

the same organization. Perfect information as described above can only be made a reality if we

were all connected to each other through a live-network, as were the Borgs in Star Trek. Borgs

were creatures that were connected to each other through a live-network, where each Borg was

understood instantaneously and completely.

The most advanced network organizations of today will fair badly in planning if a

central board controlled the activities and personnel of its various units. There are several

reasons that this author believes classic central planning methods cannot be effective. To begin

with we have assumed that perfect information cannot be transmitted to others without

transmitting total information, in which case the information would be too much and without

any form. Second, once total information was transmitted to the central board by the unit, who

will decide which of the total information to send out to other units? It could be possible that the

information transmitted by the central planning board is not the information requested or used

in a timely manner to affect the work of the organization in a positive manner (Steele, 1981, p.
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108). The answers to these questions are too complex to be useful to management if central

planning board controls the process of planning, and implementation.

The principal of time is strategic in explaining why central planning is not the most

effective method of running an organization (Drucker, 1954, p. 14-15). First, the managers of

the units will have to wait for answers from the central board to their questions or queries.

Second, opportunities as envisioned by a unit manager or a worker will be lost if it has to go

through the central planning board for approval for action. Third, the human and material

resources will not be used most effectively, if the unit manager is not giving the authority and

responsibility to act independently in certain circumstance that could have potential long term

benefit for the entire organization and the unit.

The three limitations imposed by classic central planning methods in relationship to time

can be enough justification as to why organizations of the twentieth first century must be made

autonomous entities with clear understanding of responsibility, and outcomes. The units of

major organizations must be set up where the managers and the workers are giving broad

priorities, responsibilities, and authority to act. The actions taken by the manager must be

justified according to the primary priorities of the organization. With the advent of network-

technology, central boards can still maintain strategic control over the organization, but it must

not allow it self to be involved in operational responsibilities that rightly belongs to managers,

and staff at the frontline.

Central Planning: Failing the Community (Case)

The Washington Policy center, a non-partisan think tank, published a case study

regarding Certificate of Need (CON) program, which requires health facilities to obtain

permission from the State health agency to build and expand their health care facilities. The

report unveiled the lack of response from state employees to meet the needs of a community
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and the free market. For instance, the study concluded that in order to receive approval to

expand a health care facility takes longer then to actually build and operate the needed facilities.

Another ill of central planning was the process itself became a power sources amongst the

functionaries of the to obtain CON. The state health agency refused to allow the hospital to

renovate, unless they eliminated ten beds. This clearly is a perfect example where a state

functionary is out of touch with reality. The process was used to limit “where patients will be

treated than the decisions made by doctors and hospital administrators” (Barnes, 2006, sec. IX).

A locally funded community hospital wanted to renovate after the residents had increased a

one-cent sales tax for this purpose. The hospital was not giving permission to renovate by the

state health-planning agency unless the hospital eliminated ten beds. The research conducted by

the hospital projected that all ten beds would be needed with the rise of new population and

aging population

This case study illustrates the failure of central planning to meet the needs of society. If

a private or state funded entity, as agreed to by the consent of the residents, decide to renovate

or expand a service they are providing to willing purchaser, then the State has no right to

interfere in the implementation phase of the approved action. The state does have a proper rule

to play in regulating organizations both under its direct authority and those governed by statutes

to safe guard the population from free market monopolies, harm to public welfare, and

enforcing contracts made in open agreement between two consenting parties (Tanzi, 1999, para.

2). These rights are conferred upon the state to ensure that individuals and organizations have a

level playing field against each other.

States allowing central planning creates monopolies as to whom and how a certain

product or service is delivered. The original intent of the CON process was to limit the number

of beds in hospitals in the hopes of reducing cost of health. The healthcare facilities that are
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accredited by the CON process enable them to be become monopolies, thus limiting other

health care facilities from becoming accredited. Over two decades of research reveled the CON

process has been a source of cost increase, because new and expanding hospitals are not

allowed to meet consumer and market demands (Barnes, 2006, para. 10). The weakness of

central planning is especially strong when the objectives of regulations are not in agreement

with consumer and free market oriented policies.

Management's Role

Drucker on Functions of Management

The most fundamental question asked by Drucker (1954) in his work was, “what is

management and what does it do?” The analogy used by Drucker (1954) to form a bond

between management and business was that of an organ to the body, which is defined only

through its function (p. 7). The functions of management include the day-to-day decisions

made, actions carried out, and behavior recorded by the organization within the confinements of

social and ethical realities of the society (Drucker, 1954, p. 7). That without the functions of

management being implemented on a daily basis the organization will soon wither away or

seize to function. Drucker also suggests that management must not only implement the

functions of the organization, but give great care as to how well the functions are executed.

To answer the basic question of what is management and what does it do, Drucker

offered us the following analysis in terms of functions of management. The first function of

management is to ensure economic benefit to the organization, that without a profit for a private

organization or a defined benefit to a public organization, then management has not managed

well the resources allocated for that specific purpose. A manager’s primary focus is to utilize all

the parts of an organization to achieve what is desirable then making it possible, and finally to

initiate a course of action to implement it, resulting in greater benefits then the parts used at the
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beginning of the process (Drucker, 1954, p. 12). The second function of a management is to

manage the workers of an organization. The workers should not be viewed in the same light that

inanimate object are viewed, but must be understood “… as human beings having, unlike any

other resource, personality, citizenship, control over whether they work, how much and how

well” (Drucker, 1954, p. 14). The view of workers as identified by Drucker is a humane method

of managing other people. That without a humane perspective the whole business of managing

an organization would crumble before it can be sustained. Organizations are nothing without

humans being running them. This function requires management to realize that some work done

by workers would be more effective if managers did them. One method explored by Drucker

(1954) was to allow workers to become managers by consulting or sharing “in the decisions

concerning his work or that of others” (p. 13). Viewing workers as potential managers

constitute good management.

The third function of management “is managing the social impacts and the social

responsibilities of the enterprise” (Drucker, 1974, p. 41). Organizations either public or private

do not serve themselves, but that it provides a product or service to the society. The example

used by Drucker (1974) is the hospital is not built or maintained for doctors or nurses but it is

there for patients to get cured and never have to return again (p. 42). In order to have effective

management technique there has to be a realization of the importance of the three functions

being integrated in the day-to-day activities of an organization. Without each function

integrated within the entire organization, management will have lost an opportunity to utilize

the full power of human resource to achieve its own objectives weather in private or public

organizations.

Management and Its Benefits

According to Peter F. Drucker (1954), the well renowned Western management scholar
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asserts that “[p]rior to, and outside of, the modern West, resources have always been considered

a limit to man’s activities, a restriction on his control over his environment – rather then an

opportunity and a tool…” (p. 4). The assertion implies the benefits of studying management as a

science, rather then allowing a few individuals with gut feelings to define “good management.”

With the “free world” political structure dominated by the U.S.A. during the 1950’s the aim of

management was to utilize the limited resources, both material and human, to methodically plan

a course of action that could result in the best execution possible, then if no systemic thought

was giving to it initially. This Drucker (1954) argued, would allow nation-states with the most

capable managers from “becoming smug, self-satisfied and lazy” (p. 5) to lead the second half

of the twentieth century to world dominance. Inherent in Drucker’s writing is that management

principals and Western basic beliefs are one and the same, that resources can be managed for

the purpose of mankind to achieve a better livelihood.

The brazen analysis of Drucker (1954) was that management could be categorized into

its many sub-systems and analyzed for performance enhancement, and build upon that

knowledge (p. 9). However, this knowledge should not be characterized to enable managers to

“[…] be the leading group…or it will help into power a dictatorship that will deprive

management as well as all other groups in a free society of their authority and standing”

(Drucker, 1954, p. 10-11). Furthermore, Drucker was against the idea that managers be licensed

as doctors, lawyers, and other groups are, because managers are in charge of both human and

material resources which can fluctuate on a daily basis. To attempt to eliminate such fluctuation

can bring about a dictatorship of control of all human choices and material needs in order to

achieve some desired goal. Keeping constant or managing human behavior and needs is

impossible if not unethical. The two examples where the political leadership used the science of

management to control human behavior was Adolph Hitler in Germany, by applying the
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principals of scientific management techniques to the armed forces (Drucker, 1999, para. 13),

and by Benito Mussolini who admired scientific management (Mintz, 2003, para. 2). Both

dictators used management principals to have controlling influence over the entire populations.

The Need for Performance and Political Appointees

“… [I]t is managers and management that make institutions perform. Performing,

responsible management is the alternative to tyranny and our only protection against it”

(Drucker, 1974, p. X). Drucker wrote the above in response to young educated persons of the

late sixties and early seventies that wanted the institutions of government to be dismantled

because of the war in Vietnam and the oppressive atmosphere that was characterized by the

actions of police forces.

Drucker saw the need to transform government institutions to better perform and keep

the society’s living standards from digressing downward. In order to save public institutions

from being controlled by a tyrannical leadership, central planning methods had to be replaced

because of the limitations of central planning. For managers and management to enhance

performance and reform their institutions they must be allowed the autonomy and responsibility

to manage through the use of mission statements that are then transformed into objectives, then

to design a plane of action to achieve them. To make the objectives into reality the manager

must have control over the resources and personnel as to how they are to be used.

The question that arises is where does that leave the political appointee that represents

the will of the people in theory? The political appointee does have a rightful place in directing

management towards a common goal through the use of mission statements and statements of

intentions. The political appointees should have the tools at his disposal to ensure that the

manager achieves the desired result. In practice, the political appointee directing the

manager towards a common goal does not mean then that every other day he is breathing down
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the neck of manager to show results, but that a clear outline should be established of what is

expected of the manager and management team. On the other hand, central planning is the

concept that once clear goals have been identified the manager in order to implement them must

get permission along every other step from higher-ups. This scenario should only be used to

approve the objectives and course of action plane developed by the manager, and approved by

the political appointee. Once this initial plane has been approved then the management should

be allowed minimal supervision by the political appointee unless the manager asks for

clarification on a certain issue or the management has violated law, society, and ethics that

would require the intervention of the political appointee in the work of management.

Failures of Central Planning

Formal Specifications

According to Drucker (1974), formal specifications of an organization require five

principals in order to satisfy organizational performance. The first principal is that of economy,

which is defined as “[t]he minimum effort should be needed to control, to supervise, and coax

people to perform” (p. 554). The requirement of economy is not compatible with central

planning for the simple reason of the need for control by the central planning board to direct and

redirect the different units under its command. Once the data has reached the central planning

board then it must relay the information back to other units, then those units must comply with

the new information. With the reporting requirements the sense of economy is lost. For central

planning requires total control over the operations of its units in order to fit them with other

unit’s work. Second, this excessive control will not allow people to perform at their peak

performance. If people know their initiatives will be back-rolled by a central planning board,

then they just wait for instructions in order to accomplish their tasks. The concept of the first

principal is then lost, because now maximum forces must be exerted in order to influence the
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operations of a unit within the organization.

The second principal of formal specification for an organization is “understandings

one’s own tasks and the common task,” which implies that individual member of the workforce

understand what is required of him. This is done through reviewing performance of tasks

associated with his work. Drucker (1974) asserts, “[c]ommunications therefore need to be

helped rather then hampered by organizational structures” (p. 554-5). The principal of central

planning in its ideal form is communications is performed on way, from the top to the bottom.

An ideal central planning environment would not encourage the free flow of information

feedback into the central planning board to formulate alternative policies. The reason for this is

because those at the top of decision making believe they have considered all relevant

information to formulate policies system wide on the assumption that all the variables have

been accounted for. Drucker emphasizes individual members of the organization to understand

one own tasks, and the common task. This emphasis is not consistent with the traditional central

planning methodology where the worker is to only implement the decision already made

without the ability to communicate its effectiveness to the central planning board.

The third principal that is of value to performance is decision-making. . Decision

making model have made considerable progress since Drucker first published The Practice of

Management in 1954 from the classical models to the naturalistic models of decision making

(Cannon-Bowers, Salas & Pruitt, 1996, para. 1). For a centrally controlled organization to

decide to procure products or services, it must often go through elaborate process where a

request for procurement notice must be sent, and advertised in designated publications and

areas. Then a review and hearing process must be held to ascertain the alignment with

procurement laws or similar guidelines. After the review a contract is entered to, and the last

stage is contract execution and evaluations (Starling, 2005, p. 413). On the other hand, the
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autonomous organization will be allowed to use the naturalistic decision making model because

each organization will be empowered to freely make procurement decisions as long it will

enhance the performance of the organization.

Starling (2005) writes how taxpayer’s funds are being wasted by using centralized

procurement procedures to maintain the front lawn of a seized house by the Drug Enforcement

Agency (DEA), and the Air Force used the same central procurement procedures to purchase

airline tickets (p. 348). The use of centrally procurement procedures resulted in wasting

taxpayer’s funds. Compared to if the same services were procured using common sense by

using the naturalistic decision making model. According to Starling (2005), the common

solutions would have been to hire a local teenager to cut the lawn of the seized house, and

calling up a travel agent to purchase the tickets at a reduced price (as cited in Al Gore, 1999, p.

4). The common sense approach would be discouraged by the central planning board because to

define common sense for every possible situation would be extremely difficult.

The fourth and final principal that is instrumental in discussing formal specifications of

an organization is the perpetuation and self-renewal of an organization. Drucker (1974) writes

that “[f]or perpetuation and self-renewal it is further necessary for an organization structures to

be accessible to new ideas and to be willing and able to do new things” (p. 556). Without this

ability, the organization will vanish and could be taken over by another organization. Drucker

suggests that managers within the organization be provided with experiences, meaningful work

to eventually reach within the top leadership at an age when he is still effective. This includes

providing individuals within the organization the necessary experiences, training, and education

so that he is prepared to take on the responsibility for the next level of management. The last

principals encourages the manager to take on responsibility for the success of the organization,

which is anti-thesis to the concept of central planning by a group of board members that are far
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removed from the actions of day-to-day activities of the organization. Central planning board

will only advances those officials it considers is following its directives without consideration to

the future role of the entire organization.

The four selected principals discussed in relationship to central planning give rise to

several inconsistencies that will conclude our discussion of formal specifications of an

organization. First, it can be deducted that central planning does not effectively advocate

economies of scale thus giving a facade of efficiency on paper. Second, employing central

planning from the top to the bottom hinders the concept of two-way communications in

organizational structure. Third, central planning, in order to be successful, must have its units

act according to the instructions sent out by the central board. If the units individually decide to

interpret the instructions on their own, it could have negative consequences for the actions on

other units, because each unit will be perceived to be acting on the instructions received from

the central planning board (Starling, 2005, 442). The overall conclusion regarding these four

selected principals in relationship to central planning is that they are not compatible with central

planning methods to achieve its mission statement or objectives.

Approaches to Program Management

The first phase of program management is planning. At this stage creative options must

be considered to which planning models and type should be used in order to achieve the goals.

There are many models and types of planning that can be employed to manage a program, but

only the vision-planning model will be discussed to mitigating the ills of central planning.

Vision planning requires the governing board to decides on the vision of what they would like

to see happen or accomplished in the short and long term. The vision is then transformed into

goals and objectives that would fulfill the vision agreed to by the governing board and executive

director. Once the goals have been identified through analyzing the vision statement, the
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manager must then translate the broad goals into concrete and measurable objectives, which can

be tested and analyzed for future performance enhancements (Starling, 2005, p. 227). This type

of model is best suited for autonomous units responsible for making the vision and goals reality.

For vision planning to be successful, one has to ponder upon the future, and then attempt

is made in the present to ensure that the future envisioned is made a reality. One method of

predicting the future is to use expert forecasting. This methodology of predicting the future has

many flaws, but strengths are inherent in the process. Knowledgeable individuals are used to

predict the future on a particular subject matter; they will have peculiar interests, and be more

informed of those subject then individuals who are not informed on a daily basis regarding the

subject. With this intense area of interest, these experts can provide insights from history,

present, and project a most likely scenario for the future from which a vision can be developed

and goals extracted from the vision (Starling, 2005, p. 237-8). Even with the likelihood that

experts cannot comprehend the future that is outlined by the governing board, an attempt must

be made to discuss objectives in the short term that would allow the goals in the long term to be

made a reality.

Central planning boards on the other hand would not only decide on the goals,but would

also dictate to the units the objectives and the specific forms that must be adhered to with

minimum flexibility or with very stern rigidity imposed by the central planning board. Under

the central planning method the vision planning would not only have a difficult time to reassess

and modify the vision, but also the strategies for accomplishing the desired goals and objectives

would be laborious and time consuming to alter them.

Starling (2005) notes in order to achieve the objectives in the planning phase, the

organization must use strategic planning that requires five steps. The first step is to define the

mission and desired outcomes, which is characterized by the bones in the human body. The
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second step is then to align activities, core processes, and resources in order to ensure that the

bones have meat attached to it. The third step is then to implement the program, which can be

thought of as the blood flowing through the body to make it alive. The final step is performance

assessment, determining the successes of the program, and how the program can be improved to

achieve the desired outcomes (p. ix). The five steps to lead to successful strategic planning

requires the organization to clearly delineate the responsibilities identified in the five steps to

the governing board, chief executive, and staff with collaboration as necessary.

I would like to reiterate that central planning and strategic planning might indicate the

same process with a different name, this is not the case. Central planning might involve the

steps discussed in strategic planning, but the important difference in those two processes is that

strategic planning does not micromanage the implementation of the program, but allows the

manager to perform within broad framework in order to achieve the desired outcomes to meet

the goals and objectives agreed to earlier.

The next critical step after the planning phase is the decision making phase. This phase

requires “selecting one course of action from various alternatives” (Starling, 2005, p. 274).

Useful questions at this stage can avoid costly mistakes later on the implementation phases.

Starling developed a series of three questions that can identify the problems or opportunities to

be realized when making a decision. The first question

Is the problem a pressing one or a dispensable one?” [The second question,] [i]s the

‘problem’ really a symptom masking as the underlying problem or a root cause that

contributes to actual problems? [The third question] [i]s the problem sui generis (one of

a kind) or generic (one of a family of quite similar problems)? (Starling, 2005, p. 274)

Once the questions have been answered, the second step within decision-making phase is

gathering the facts to help with framing a decision. The next step for a manager of an
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autonomous unit is to consult people both within the unit, those who will be responsible for

later implementing the decision and outside of the unit, and those who could potentially serve as

supporter to the unit in accomplishing its objectives.

In the decision making phase, the autonomous manager can use many analytical

techniques to ensure that the decision being made is the best possible choice. Only two

techniques will be discussed, the first is the cost-benefit analysis (CBA) and the second is the

group decision-making technique. These two methods best work when the autonomous

manager, is most close to the operations. The manager must have the flexibility and authority to

reassign and allocate resources to promote the objectives of the organization.

CBA analysis conducted by a central planning board would have disastrous effect on the

performance of the unit or the organization as a whole. For it is impossible to plan an economy,

the board charged with directing the work and resources of a unit to produce the desired

outcome would result in failure and famine as was the case with the Chinese cultural revolution

(Gabriel, 1998, para. 13). The only individual that can effectively and economically decide

where to allocate the necessary resources is the frontline manager who is intimately involved

with the unit on a daily basis and understands the requirements of the unit in order for it to

perform at an optimal level. CBA therefore can be a useful technique for the manager in

deciding the best alternative to choose from, not by the central planning board.

Another technique best suited for autonomous units is the group decision-making

technique, which consists of five to seven individuals from different areas of the unit that will

be responsible for the implementation of the decision. Groups “can stimulate each other to try

new ways of approaching the problem and compensate for the weakness in one another’s

thinking style” (Starling, 2005, p. 297). The benefits of using this type of decision-making is

that if individuals who will be tasked with implementing the decision later on, are brought early
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in the process will ensure that the potential concern and issues are brought out for discussions,

and resolved. Then effort can be made to try to mitigate the concerns so that once a decision has

been made the other phases of program management are effectively carried out in meeting the

objectives of the organization. Drucker described the Japanese who are slow at making a

decision, but once a decision has been made, the next three phases of program management are

ready at lightening speeds because of their willingness to employ autonomous principals.

Once the manager has made a decision by using the two techniques discussed above, the

manager is now responsible for organizing the resources and personnel to implement the

decision successfully. Starling identifies four fundamentals of organizing, which are division of

labor, hierarchy, span of control, line and staff. These four fundamentals have to be addressed

by the organization to achieve the desired goals to meet the objectives assigned to each unit.

We will now turn to discussing the four fundamentals in terms of failure of using central

planning. Division of labor has to be addressed at the central planning level, but with enough

flexibility to allow the manager at the front line to decide how and when to deploy and employ

the resources under the direct control of the front-line manager, who then is responsible for

attaining the objectives to meet the goals of the organization. In a classical central planning

model the front-line manager would not be authorized to quickly and productively utilize the

resources to achieve the goals of the organization, without first receiving authorization from the

central planning board or their functionaries.

Hierarchy, the principal that orders are received from the top of the organizations are

obeyed to the letter by those responsible for implementing them, without ever having the ability

to participate in the process of decision-making phase. In the new organizational model of self-

autonomous and sustaining units working together to achieve the common goals of the over all

organization will become the norm. The concept of hierarchy as described above would be
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detrimental rather then helpful over the long term of the organization. The new model will

require that individuals and groups of individuals who will be primarily responsible for

implementing the policies will have to be involved in the process in each phase of program

management. This will be necessary in order to avoid sabotage, and other form of employees

resistant to the successful implementation of a program.

Span of control, under the central planning model where a group of individuals

controlled all the necessary resources both material and human to achieve a certain goal(s) for

which they were formed. The span of control theory holds that anyone individual can only

manages so many people successfully, that if the number of subordinates increases beyond

twenty, the control over their work and quality suffers. Different scholars have giving different

numbers, any where from five to twenty. This number can change with the type of function,

nature, or requirement of work to be performed (Donnelly, Gibon, & Ivancevich, 1978, p. 167).

Just by the description of central planning addressed so far, span of control theory illuminates

another reason why central-planning boards cannot effectively manage large organizations. This

responsibility then has to be transferred to an autonomous manager, who must also be giving

the necessary authority over the entire or parts of an organization to achieve the desired goals

and objectives.

For an organization like the Department of Homeland Security with over one hundred

thousand employees, cannot be directly managed by the Secretary of DHS, but must be

administered directly by managers at the front line to quickly and effectively control the

resources to meet the objectives, without having to wait for a signature approval from the

Secretary. Instances where central planning methods can be detrimental to the performance of

an organization is where autonomous managers see an imminent opportunity to respond in a

manner that would serve the interests of the organization, but could be prohibited by strict
 21

controls imposed by the organization. These strict guidelines only control and direct, without

realizing the benefits of autonomous actions by the manager that could contribute to the

organization’s mission and goals.

Decision Making Models

Drucker notes the differences between arriving at a decision between the Japanese and

US executives. The major differences between the two decision models is that it takes a while

for the Japanese to arrive at a decision, but once a decision has been made it is carried out with

great success and speed. The US model of arriving at a decision is quick, in that only a select

group of people in top management has to agree on a decision, but then it must sell that decision

within its organization and outside of the organization. The two decision models bear striking

similarities between central planning and strategic (i.e. autonomous) planning within an

organization.

The Japanese model resembles the autonomous model of decision-making. The

organization sends one delegations from different areas of the organization to meet with a

potential new partner, and “[o]nly when all of the people who will have to carry out the

agreement have come together on the need to make a decision will the decision be made to go

ahead” (Drucker, 1974, p. 467). During the decision making process, the opposition is

comforted with concessions only to strengthen the decision of the organization. Whereas, in the

central planning model, the decision is usually made by top executives who then have to

persuade the different units in the organization to accept it and act upon, which can lead to

sabotage “… by the organization or, what may be worse, it takes so long to make the decision

truly effective that it becomes obsolete, if not outright wrong, by the time the people in the

organization actually make it operational” (Drucker, 1974, p. 468). In central planning a

decision is easily made by a group of people who are required usually by some law, directive,
 22

constitution or an order to make long term plans in order to achieve some desired goal as

determined by the issuing authority.

Once that decision has been reached then the difficult part of the decision is making it a

reality during a time period that results will be achieved without becoming obsolete. The great

danger of central planning is that decisions can become obsolete if the managers in charge of

implementing those five-year plans interpret the plans differently then the intent of the central

planning board.

The legislative process is another example of central planning gone awry. Colorado

legislator passed a law limiting public services to illegal immigrants. The managers, the people

responsible for implementing the law declared that an elderly woman had to submit proof of

citizenship in order for the city's Water Conservation Department to give her a rebate of $100

on her purchase of low-flow toilet. The Colorado Senate President who co-sponsored the Bill

said in an interview that the law’s intention was not to limit services for elderly Americans, “’I

never expected this to affect rebates for low-flow toilets,’ Fitz-Gerald said” (Quintero, 2006,

para. 7). This is a classic example of not intending for something to happen usually does happen

through the use of central planning.

Conclusion

Organizations of the Future

Organizations of the future must be constantly aware of their surroundings and

understand the reasons for their creations. Organizations should be created and dismantled

according to the principal “of doing more good, then if the organization did not exist at all.” If

there is a need or a potential need for it in the future, an organization must be established that

would allow the fulfillment of people’s requirement for a livable environment and to earn a

livelihood. Individuals could easily castrate the above principal, in order to fulfill their own
 23

selfish needs with the use of public resources. This is where the three perspectives of political

representation, legal, and managerial approaches is required to stop the creation of or an

expansion of an organization that will be detrimental to the public good. The principal of public

good is to be determined through synthesizing the evaluations performed using the three

different perspectives. The three perspectives must be equally employed in its variant forms to

make the above principal sound and beneficial for the public to have trust, belief in ethical

morals, and competency in the organization.

 24

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