Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 74

Research Assignment, Strategy, Resource Capacity Planning Obtain from your library a copy of following article: Robert S. Kaplan and David P. Norton, “Mastering the Management System,” Harvard Business Review (January 2008), pp. 63-77. The authors of this article propose a five-stage management system designed to balance strategy and operations, that is, short-term operational concerns with long-term (strategic) priorities. In general, stage three of the process deals with what the authors call dynamic budgeting to include resource and capacity planning. It is this issue that is the subject of the present research assignment. (Note: the following additional source, available for download from the Harvard Business Publishing Web site, may also be helpful: Robert S. Kaplan, “Resource Capacity Planning in the Strategy Execution System,” Balanced Scorecard Report, Reprint No. B0809A [2008].)

Required After reading the above-referenced article(s), please respond to the following questions:

1. Provide an overview of the five-step cycle that comprises the management system proposed by the authors of this article.

---

2. Stage 3 of the proposed system focuses on “Planning Operations,” a significant component of which deals with planning resource capacity. Describe the process of resource-capacity planning within the context of the five-stage management cycle proposed by the authors. For example, discuss the linkage of Stage 3 to both Stage 2 and Stage 4 of the management cycle.

---

3. The authors indicate that their preferred tool for resource-capacity planning is time-driven activity- based costing (TDABC). Provide a brief overview of TDABC including how this implementation differs from traditional ABC models. (Hint: in addition to the article, refer to Chapter 5 of the text.)

---

4. Refer to the Towerton Financial example presented on pages 70-71 of the article. How did this organization use TDABC results to determine the level of resource capacity (people and computing) needed to implement its strategy?

Step 1 of 4

Research Assignment, Strategy, Resource Capacity Planning(50-60 Minutes)

1. A summary, diagrammatic representation of the “closed-loop” management system proposed by Kaplan and Norton (2008) is provided on page 65 of the article. The five components of this system are as follows:

1) Stage 1: Developing Strategy—Set Clear Strategic Goals (e.g., “what business are we in, and why?”, “what are the key issues we face in our business?”, and “How can we best compete?”

2) Stage 2: Strategy Translation—Development of Specific Objectives and Initiatives That Will Be Communicated to All Employees (via use of Strategy Maps, Balanced Scorecards, Strategic Themes, and Development of Strategic Expenditures Budget—see text Chapter 12)

3) Stage 3: Operational Planning (i.e., how the organization intends to accomplish its strategic objectives specified in Stage 2; available tools include: process-improvement plans; resource capacity planning; and budgeting—both operating budgets and capital budgets)

4)?Stage 4: Monitoring and Learning (i.e., both operational-review meetings and strategy-review meetings are conducted to review results and performance metrics)

5)?Stage 5: Testing and Adapting the Strategy (i.e., assessment of the strategy itself and, if necessary, revision of the strategy)

In terms of text Chapter 15, we note the relevance of “resource capacity planning,” a component of Stage 3 of the management system proposed by Kaplan and Norton (2008).