The business planning process in Cuba

It is a reality that the conditions on which the planning process developed in the national economy changed: material assurances guaranteed on the basis of material balances (fundamental planning method) and great security and stability in supplying companies, but the uncertainty and the range of possible scenarios that arose demanded more than ever the use of planning with a new conception.

In the new conditions in which the economy develops, where new conceptions, demands and challenges are imposed on business economic planning (current improvement of the planning system in Cuba), it is of particular importance, among other issues, regarding the methods of planning, where future studies are promoted (prospective), scenario construction and the application of optimization methods, which respond to the levels of foundation of the plan, in light of the risks of uncertainty and the need to increase business economic efficiency.

the-business-planning-process-in-cuba

Introduction

Until the end of the 1980s, the planning of the national and company economy was developed from the experiences of socialist planning in Eastern Europe and within the planned relations of cooperation with the member countries of the Council for Mutual Economic Assistance (CAME).

In Cuba, from the beginning of the 90's and as a consequence of the disintegration of the USSR, the collapse of the socialist camp and the dissolution of CAME, economic planning loses space (it is important to point out that we mainly refer to materialization in the system of economic plans), because really as a system of organization and direction of the economic and social development of the country it was always present.

When it was really necessary to maintain planning and its studies, because in the new conditions (insertion of the Cuban economy in the world economic scenario), planning is even more important. Thus, starting in 1990, the annual plan for the national economy was no longer brought to the National Assembly of People's Power (ANPP) for approval, until 1995 when the economy began to stabilize and the guidelines of the plan were submitted to the ANPP for consideration. economic and social, the approved figures are issued by the Ministry of Economy and Planning (MEP) and work begins to reestablish control of the plan.

From 1996 onwards, the indications for the preparation of the plan were elaborated, evaluated and conformed, and by the year 2000 the planning specified in the system of plans is gaining strength, all with a fundamental distinctive feature, which is the approach with planning is practiced: strategic approach, priority to the financial aspect and business economic efficiency, given the situation in which the activity of the Cuban economy develops, which translates into the business scenario: effects and impact of changes, phenomena and processes of the world economy, uncertainty and risk in material insurance, changes in the levels of financial insurance and the introduction of market elements in the planned socialist economy (market plan), among other particularities.

General foundations of the Business Planning process

In general, the planning process at the business level constitutes a complex process, characterized by a set of interconnected works that start from directives to be considered and conclude with the formation of the organization's financial plan (the company's annual economic plan).

According to the different planning experiences, this process has its peculiarities, especially with regard to business planning experiences in capitalist countries and market economies. But in general this process of economic planning on a business scale, follows a logic and work that could be structured as follows:

It starts from some guidelines, directives and indications to "consider and complete" in the business plan. Analysis or diagnosis of the present and future situation of the company. Selection of medium-term objectives. Definition of company strategies and actions. base on those directives, objectives, strategies and actions in the medium term; the company's annual economic plan is drawn up.

The works framed in steps two to four, make up what is conceived today in Cuba as the strategic projection or strategic planning and the works related to the fifth step, which is called the company's annual economic plan.

Source: Arràez, Freddy. Problem Analysis in planning, Operational Planning.

The guidelines constitute a group of regulations established by the higher levels, which companies must take into account when preparing the plan. These guidelines may be related to the levels of sales, costs, income, profits and their distribution.

It is important to highlight that the treatment of the guidelines, as a starting point for business planning, has its peculiarities depending on the type of economy, since the differences between capitalism and socialism and consequently between both types of planning (mainly given by its scope, as long as property relations allow), determine its nature, scope and forms of consideration in the elaboration of plans.

Objectives, tasks and importance of Business Planning

Business planning concept

Planning is a word that gives an idea of how to organize any activity and after the analysis of various approaches that the literature includes, it can be considered, in its most general sense it is a process, it is the preparation of a set of decisions, it is an action with Regarding future activity, based on research, reflection and systematic thoughts.

And that therefore represents a phase of the general management process, since this is a process in which four elements are always present regardless of the activity in question, namely: organization, planning, direction and control.

The organization is the way that the different elements that make up a certain activity are grouped and ordered, let's say its basic units, functions and hierarchical relationships. The planning that consists of the establishment of the objectives to which it aspires and the determination and allocation of the resources and the actions required to reach them, the direction of the decision-making process itself, that is, the direction and finally, control o Comparison of the results achieved with the initially proposed objectives in order to rectify if necessary.

This means that planning, as a phase of management, is inherent to all organized social activity, directed to an end. Planning may vary in terms of scope or instruments, but as a component of the management process it cannot be dispensed with; hence its universal character.

Thus the planning of the national economy and in particular that developed in centrally planned economy models, which has its differences with planning in market economies, especially due to its scope, can be defined as follows:

Socialist planning of the national economy is the process by which the economic and social activity of the nation is projected, organized, directed and controlled from a single center, through a plan, to fulfill the economic and social objectives demanded by the integral development of society.

Now the concept that interests us in this case is much more specific, it is the concept of business planning, which is part of the planning of the national economy and this can be defined as follows:

Business socialist planning is a technical, economic and organizational process in which the organization's objectives and strategies are established in the short and medium term, and the actions and resources for its fulfillment are defined in a rational way, constituting at the same time and over a whole political-ideological process that expresses the will to prioritize the contribution of state companies to society over any collective or individual interest and thus ensure the development of companies in accordance with the requirements of the national economy.

Business planning goals

The general fundamental objective of business planning can be expressed in the following way: the elaboration of the company's economic plan system, guaranteeing the highest levels of activity, with the efficient use of productive capacity and material, labor and financial resources available that respond to the strategies, policies and programs of economic and social development of the nation and the company.

Business planning tasks

The improvement of business planning. This constitutes at all times a task of the first order, and refers to the improvement, adaptation of the theoretical, methodological and organizational foundations and bases of planning to the realities of the moment, which today takes on special meaning in Cuba when we are immersed in the improvement, definition, if you want to create the Cuban business planning system. The preparation of the plan, which includes a series of tasks: evaluations, calculations and analyzes that define the plan's objectives, quantify the levels of activity and necessary resources, with maximum efficiency. The preparation of the company's plan proposal in its different categories, in correspondence with the organization's strategic planning and according to the directives,indications received and established execution schedule The presentation and defense of the company's plan proposals before the corresponding superior bodies (mainly the Governing Board, Ministry and CAP) The disaggregation of the company plan once approved, disaggregation by areas responsibility and time periods (operational planning). Control of plan execution, definition of measures for its correction and analysis of final compliance with the plan.disaggregation by areas of responsibility and time periods (operational planning). Control of the execution of the plan, definition of measures for its correction and analysis of final compliance with the plan.disaggregation by areas of responsibility and time periods (operational planning). Control of the execution of the plan, definition of measures for its correction and analysis of final compliance with the plan.

Importance of business planning

Business planning as part of the planning of the national economy and the economic plan of the company as part of the system of plans of the national economy are of great importance, since it is at this level that the objectives, strategies are specified and fulfilled. and programs of the economic and social development of the nation.

Several aspects allow us to explain the importance of business planning, among them the following could be exposed:

If we understand the planning of the economy as a function and phase of the general management process, which represents a set of decisions, a preparation to act in the future, where, in this case, the business economic objectives to be achieved in a period are established, resources are quantified and forms and actions are defined to fulfill these goals, business planning is particularly important, because:
- By establishing the objectives and goals for the period, it contributes to the efficiency of business management. By making the needs compatible with the availability of material, labor, financial and productive capacities, it allows achieving the highest levels of activity with rational allocation and employment. of production factors, thus contributing to the economic efficiency of the company, one of the current directions for business improvement and economic management in general.

Note then that these two important criteria of business management, effectiveness (doing the right things, determining the appropriate goals) and efficiency (do things right, rational use of resources to achieve goals), identify directly with the two aspects of economic planning: setting the right goals and then choosing the right means to achieve those goals

In this way, economic planning becomes an invaluable instrument to guarantee the effectiveness and efficiency of business management and to respond to the basic principles of business operation: productivity of resources (of production factors), economy of activity or selection and profitability of economic capital.

In addition, as a function of the management process, it represents an invaluable instrument for the direction of the company's economic activity in the period, the control of its development and the fulfillment of the objectives and goals.

But in the case of the Cuban economy, where planning is the form and distinctive feature of the direction and administration of the economy, business planning acquires a special connotation and in particular the works of the annual economic plan, which constitute the guide, the document for action and direction, where they are materialized, where they are concretized, where the strategic planning of the company "lands" (values, mission, vision, objectives and strategies of the company based on the current situation and future scenarios (SWOT))); thus contributing to the fulfillment of the objectives, goals and strategic approach of the development of the company, which in turn is based on the interests of the development of the national economy and society as a whole.

And in this sense, it is mandatory to highlight the current significance of business planning in the socialist state company, given the current challenges facing the Cuban economy and the responsibilities, powers and role given to the socialist state business sector, including:

To be the basic link in the economy, established to satisfy the needs of the State and the population, where business planning (production plan) must project the highest levels of production based on the availability of resources that respond to the demands and objectives of the economic and social development of the nation, with high levels of competitiveness and economic efficiency, which also guarantees its self-financing and development. With the process of decentralization of powers towards the management groups of companies, with the purpose of bringing the decision-making at the level in which the production processes take place and thus promote the development of the initiative and greater flexibility in the management and participation of workers, business planning acquires a great commitment,that could be summarized in the responsibility with the foundation of the planning work and the projection of the planned indicators on the basis of the highest level of activity with the minimum of expenses, incorporating all the existing reserves. Commitment that is increased and complex in an economy, where the State puts in the hands of the business management groups the resources of the people and the responsibility of managing them in the interest of society. Issue that determines that the interests of the company and its groups of workers are subordinated to the interests of society as a whole, which cannot be the cause for the best preparation of the company's plan, seek all the existing reserves and incorporate them, in search of the greatest effectiveness and economic efficiency.

It should be noted as stated in the Economic Resolution of the V Congress of the PCC, that "… the interests of the nation, expressed in the laws and in the decisions of the superior organs of the Party and the Government, must always be above any interest business, sectoral or territorial ”.

But even in capitalist companies, where business planning is not understood in this way, there are several reasons for resorting to a certain type of planning, in order to achieve proper management and control of business economic processes, which the play of the forces of market is not able to provide a satisfactory answer.

The rapid increase in the complexity of the international economy and national economic systems, derived from its increasing productive diversification and evolution of its structures, which has generated increasing difficulties in understanding the dynamics of these systems, poses new challenges for business management., forcing suitable procedures to guide and coordinate the actions of the company and give them coherence to maximize efficiency and profit levels.

In this regard, the prominent Latin American economist Bernardo Kliksberg stated: … The efficient management of this extensive set of heterogeneous operations, with the aim of maximizing objectives that in turn require a constant effort of compatibility, constitutes an extremely complex organizational problem… ».

And he has considered that planning as a forecasting process, with its instruments and arsenal of methods and techniques, seems to be the only suitable tool available to undertake the task of efficient management of the vast set of heterogeneous operations indicated by it.

With the processes of globalization and internationalization of business activity, strategic planning in the company, with future studies, forecasting methods, prospective, construction of scenarios on the future behavior of the main social actors (new conception of planning), They are presented as an excellent option for companies, allowing them to anticipate economic and social processes and phenomena, with a significant impact on the organization's management and results.

Under these conditions, planning can help a lot in the coordination and effectiveness of business decisions (setting its objectives, shaping its strategies, quantifying and using resources and ways of acting), especially since practice has already demonstrated and prestigious specialists have also indicated that the so-called second industrial revolution, which is producing revolutionary transformations in the field of science, technology especially in information and communications, microelectronics, microbiology and nuclear energy; it has significant impacts for nations and companies in particular and can be beneficial or terribly adverse, and this will depend on the way they act; and business economic planning is a means of action.

2.-The business planning process in Cuba. Characterization and types of planning, logic and methods.

Characterization and types of business planning.

Business economic planning in Cuba, which is part of the planning of the national economy, constitutes the basic management instrument, which coordinates and integrates the productive, economic, social and financial aspects, enhancing the initiative and efforts of the company in the fulfillment of its functions and economic objectives, with maximum efficiency and the active participation of workers.

And it represents a unique and continuous process of interaction between the different actors of the national economy, to achieve the objectives and priorities of the economic and social development of the national economy and society as a whole.

This determines its own particularities, with respect to business-level economic planning processes in other countries, fundamentally market economies, and even within the current Cuban business system itself; for example in the treatment of the guidelines, as a starting point for the elaboration of the plans, where these constitute requirements to be fulfilled in the plan of the state and national companies, since in the conditions of planning in Cuba, with the introduction of elements of the market economy, especially with the approval of foreign investment and the appearance within the business sector of mixed companies with participation of foreign capital and foreign private companies, the planning process has its differences.

In line with the above, in Cuba, a country with a centrally planned economy, the MEP, the governing body of economic activity (the minister is the vice president of the council of ministers), establishes these directives for the central state administration agencies and bodies. of territorial government (CAP), these to their dependencies and companies to their base business units (strategic business units), who will comply with them in the preparation of their proposals and plans. For example, the MEP establishes the MES the directives to take into account for its activity in general and planning in particular, this to the universities and finally these to its different faculties and study centers and other dependencies in general.

A very important directive is the corporate purpose (activity to be carried out), which the MEP approves for each company, constituting a violation of the execution of productions or services not included in it, thus the corporate purpose of the company constitutes a directive of obligatory consultation and dominance by the economists who work there.

Structured in a series of stages in time, this process results in a system of plans, which:

Depending on the level for which they are made, it includes:
- Plans of the Higher Organization for business management (union, business group). Business plans Plans of the base economic units (result of the disaggregation of the business plan).
According to the period level for which they are made, it includes:
- Strategic plans, strategic planning or strategic projection (3 - 5 years, there may be longer-term projections). Annual economic plans and their breakdown into shorter periods of time (quarter, month, etc.).

It is important to identify that this is the system of plans resulting from the planning process at the business level, which is part of the planning of the national economy, which results in the following system of plans: Plan of the national economy, plans of the territories and agencies, plans of the unions, groups and companies, and long-term or prospective plans, medium-term plans (between 3 and 5 years) and short-term plans, current or annual; attending to the two criteria previously handled: scope of planning and planning horizons:

Taking as a principle the necessary correspondence between the plan system, both for its scope and planning horizons (unity of the plan system and correspondence between perspective and current planning), objective necessity that derives from the fact that the objectives and economic tasks of The annual business plans are subject to the objectives of the business group, the corresponding ministries, territories and, ultimately, the national economy, as well as the longer-term goals and aspirations, that is, planning must guarantee the correspondence between the interests of the future development with the specificities and characteristics of the present.

The current business planning system in Cuba, which is governed by resolution No. 276/03 of the MEP, which establishes the general indications and guidelines for planning work in the state-owned company (includes one hundred percent Cuban-based mercantile companies based in Cuba); It distinguishes two types of processes, two fundamental types of planning:

Planning within the company, which corresponds to strategic planning or projection. Company planning linked to national planning and the regulatory environment, which corresponds to annual economic planning.

u Logic and methods of business planning.

Based on the strategy, policy and main programs of economic and social development of the nation and the current directions for the business economy, companies prepare their strategic plans (strategic projection), which includes the definition of values, mission and vision, carrying out the strategic diagnosis (analysis of the general environment, specific environment, internal and SWOT), and from this the definition of the objectives, strategies and actions to fulfill the objectives.

And depending on the strategic projection of the company (objectives and strategies outlined) and the directives (guidelines of the National Economy plan, indications for the preparation of the annual plan, the specific indications of the organization (ministries and CAP) and other elements collected in the governing documents of business planning, they prepare the proposals for the annual economic plan.

Thus, in the annual plan of the company, the directives of the higher level are complied with, which correspond to the fulfillment of the prioritized objectives of the economic and social development of the country and at the same time the strategic objectives of the organization are defined in the projection. strategic, in other words in the annual budgets or economic plans the objectives and strategies outlined for a longer term in the strategic planning of the organization are specified, hence the importance of the correspondence between the strategic projection and the annual economic planning of the organization.

It is important to highlight that the results of the control of the execution of the annual plan and the analysis of its final compliance can lead to rethink, update the strategic projection of the organization, and even the results of the activity in the country's business system affects the approaches for the economic and social development of the nation.

Business planning logic

Source: Resolution No. 276 of 2003 of the Ministry of Economy and Planning (MEP)

For the elaboration of the system of plans that is made in the company, different methods are used, among them 4 main ones stand out: the balance method, optimization method, normative method and scenario method; that according to the type of planning (strategic or current) have more or less use with respect to each other.

Balance method. This was the fundamental method or form of planning the economy in the socialist countries and also Cuba, until the end of the 1980s, its essence is to make a compatibility between existing resources (possibilities) and demands (needs), taking the form of a double table that reflects on the one hand the sources of the resources and on the other the destinations or uses. It is mainly used in operational planning, in the preparation of the annual economic plan, where the aspirations of the strategic plan are specified in greater detail and precision.

For example, in the company's annual economic plan, production needs are made compatible with the possibilities of material, labor, financial and capacity resources, and once the production volumes are defined, the resource needs are determined for their execution and compliance. Among the main balances that are drawn up are:

Material balance sheets Productive capacity balance sheet General balance sheet Income statement

It is important to highlight that this method is also used in the most strategic business planning, and even at the macroeconomic level, let us remember that this was the fundamental form or method of planning the economy in socialist countries and also Cuba, especially until the end of the decade of the 80 ', for the possibilities offered by the development of these economies under the planned relations and cooperation within the CAME, which fosters a high level of stability in prices, material insurance and other economic aspects, very different from how the economy works and the world market, in which we are today inserted, which has made the balance method not have the role that it once played and more and more space is gained by the use of future studies, scenario method in planning,especially strategic in Cuba, in order to face irrigation and uncertainty.

Although it continues to have important applications in our economy, in the elaboration of material balances for a group of important products, relating the sources and destinations of those resources, for example, the balance of labor power, material balances of the main resources (oil), of the productive and regulated articles, etc.

Optimization method. The application of mathematical economic models is based on the determination of the optimal variant, which, within the restrictions to be considered and based on a defined optimality criterion, reports the best result for the planned period. These methods contribute to the foundation of planning work, by allowing scientifically argued selection of the best plan variant. Among the most used models we have:

Simulation models Linear programming model Transport model

Perhaps it can be said that its application has been more experimental than as a traditional planning method, and above all in experiences related to the optimization of tasks of planning the national economy and strategic planning of the company, influenced among other causes by the complexity in the modeling of the problem, difficulties faced by the construction of the database that requires the formulation of the model, because with the development of automated computing equipment and software this is no longer a limitation.

One of the specific applications, of great utility and possibilities, although not widespread in practice, is the application of the linear programming model to optimize the company's production plan for the planned period (production plan or budget in units (physical), especially in those companies that have a broad nomenclature and production assortment, where it is practically impossible to carry out all these compatibilities, manage the different criteria and select the best variant, scientifically based on the possible plan alternatives.

Normative method. It consists in the application to the process of elaboration of the plans, of the norms established and fixed in the national economy, which has particular use in the company although it is of employment at all levels. These regulations constitute a wide range of aspects to consider, such as: regulations established in the national economy for all agencies, groups of companies and organizations, others referring to indices or standards for the quantification of the company's own expenses (normative basis).

These regulations, directives and indications, regulate certain aspects in the elaboration of the plan and therefore they are of obligatory application in the conformation of the plan. It is important to highlight that in the case of the rules related to provisions and regulations, in the Cuban Economy it has an important weight and therefore requires its consultation and control by planning specialists and technicians. For example, the food expenses per diner for the BPA dependencies cannot exceed $ 0.23 CUC, regulations that will be the basis for calculating these expenses corresponding to the budget of other expenses.

In the case of the rest of the norms that make up the normative base of the company: material consumption norms, workers' working time norms, salary expense norms, equipment time norms, constitute the base or performance indicators. calculation for the conformation of the different budgets or categories of the plan. In the material planning to conform the budgets of raw materials and fundamental materials, once the activity levels, production volumes and services (production plan) have been defined, the standards of material consumption per unit of product are applied to determine the needs of each of the company's inputs for the planned period.

It is important to highlight that in the case of the rules related to provisions and regulations, in the Cuban Economy it has an important weight and therefore requires its consultation and control by planning specialists and technicians. For example, the food expenses corresponding to the annual plan budgets in the BPA will be determined by the regulations that establish 23 cents a day per diner.

Stage method. This method consists of preparing future studies based on the prospective, seeking to establish the possible scenarios that the company will face. As is logical at the company level, this method is applicable in more perspective planning (projection or strategic planning).

In Cuba, after overcoming the greatest difficulties of the so-called Special Period and having “resumed” planning materialized in plans, the application of this method has been strengthened given the uncertainty caused by the forced insertion of the Cuban economy in the world market, unlike of assurance on all material that we had in time of economic cooperation and coordination within CAME).

If under these conditions the balance method guaranteed the foundation and elaboration of the plans, today we need more strategic planning, based on future scenarios and plan variants. This has materialized to a greater extent in the planning of the national, sectoral and territorial economy, but not in the company that is waiting for it.

Business planning methods and main jobs according to the type of planning.

Source. González Gutiérrez Alfredo. Fundamentals and general planning methods: compilation for the national training of planning teachers / Alfredo González Gutiérrez. - Havana: MEP and UH, 2004.– 198 p.

Conclusions .

In these new conditions in which the economy develops, which impose new conceptions, demands and challenges on business economic planning (current improvement of the planning system in Cuba), particular importance is, among other issues, regarding planning methods, where future studies (prospective), construction of scenarios and the application of optimization methods are promoted, which respond to the levels of foundation of the plan, in light of the risks of uncertainty and the need to increase business economic efficiency.

Bibliography

Arràez, Freddy. The Analysis of Problems in planning, Operative Planning. Berri, L. Planning of the socialist economy. / L Berri. - Moscow: Progreso Editorial, 1977. - 597 p.Bromley, Ray. Planning for development in adverse conditions. Inter-American Planning Magazine (Mexico) XVI, (55): 5, June 1983. Interview with the Minister of Economy and Planning of Cuba, José Luis Rodríguez for 40 years of planning in Cuba. Taken From: http://www.eleconomista.cubaweb.cu, 2000.España. Planning bodies in Latin America. Taken From: (www.clad.org.ve), 2005. García Valdés, Carlos Manuel. Socialism and planning. Market presence in the socialist economy . Taken From: www.gerona.inf.cu , 2002.González Gutiérrez Alfredo. Fundamentals and general planning methods: compilation for the national training of planning teachers / Alfredo González Gutiérrez. - Havana: MEP and UH, 2004.– 198 p. Ministry of Economy and Planning. Resolution No. 273/03 Tinbergen, J. The problems of economic planning. Taken From: http://www.unesco.org, 2002.

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