The biotech firm Amgen Inc. gives much attention and time to the planning process. Because the outcomes for a company like Amgen are often very unsure and many employees are quite sceptical about the use of such a planning, the main issue can be described as follows:
What is the added value of planning for a fast-growing company in an uncertain and dynamic environment?
To address this issue, an analysis will follow based on the following elements:
Amgen Inc. is a biotech company. The responsibilities of the Product Development Teams (PDT’s) can be described as “discretionary cost centres”. The output of a PDT is therefore difficult to relate to its input. Based on the long-term planning a reasonably clear definition is given what budget is available for each of the teams. Research in the early stages has less stringent policies.
Planning & budgeting
Within Amgen much time and effort is dedicated to the creation of a long-term planning (LTP). In the early stages of Amgen the strategic planning was executed by top management and implemented top-down. The PDT’s then created their own budgets and 5-year planning. Later on, the planning process of Amgen has developed into an interactive process whereby planning and information of the PDT’s is also used bottom-up. The LTP of Amgen is now mainly prepared as capital budget whereby the PDT’s have their own operational budget. The current interactive planning process ensures that employees are better informed and a bigger commitment to the planning is established.
At first the LTP was mainly financially driven. After the initial success of some of its products, Amgen’s LTP devote more attention to qualitative targets.
Performance Measurement & Management
Amgen’s planning is viewed by top management as an action control. The planning determines which actions the company must take to accomplish her targets. Based on the
Bibliography: - Merchant, K., Planning and Budgeting Systems, in: Merchant K.A., W.A. van der Stede, Management Control Systems, Performance Measurement, Evaluation and Incentives, Prentice Hall, 2007 - Simons, R., Building a profit plan, in: Simons, R., Performance Measurement & Control Systems for Implementing Strategy, Prentice Hall, 2000