Publication Details

Wijewardena, H. & De Zoysa, A. (2000). Project report on the impact of planning and control sophistication on financial performance of small and medium manufacturing enterprises in Australia Commerce-Business Links Small and Medium Enterprises Project Reports (pp. 38-43) International Business Research Institute : University of Wollongong, NSW. ( Report )


Although there has been a limited amount of prior research on the relationship between planning sophistication and small enterprise perfonnance, no attention has been given to the control aspect of planning and its possible impact on financial performance. This points to a major limitation of prior research on planning and perfonnance. It is common knowledge that effective control is often necessary for achieving the maximum results from a predetermined plan of action in any organisation. Even an excellent plan may not produce the results as expected due to numerous unforseen circumstances which are internal or external to the fInn. Therefore, measuring actual performance against planned perfonnance from time to time and taking remedial action on factors causing unfavourable deviations from the plan are important for maximising the results anticipated through planning (Koontz and Weilrrich 1988, Wildavsky 1975). Accordingly, this process, commonly referred to as 'control,' is likely to have adverse impact on enterprise perfonnance if it is not effectively utilised. Furthermore, the impact of this process on performance may vary from firm to finn depending on the extent of its use. Another limitation of prior research in this area is that most of the researchers who examined the relationship between planning and performance have concentrated on very small flnns. Nevertheless, studies have reported that while the majority of very small firms do not use any kind of written plans, the lise of planning and its extensiveness tend to increase with fmn size (Robinson and Pearce 1984, Bennan et a1. 1977). Therefore, it is important to empirically examine what extent of planning and control processes are used in both small and medium enterprises (SMEs) and how they impac;t upon their fmancial performance. Findings of such studies, while contributing to the literature, can be useful to owners and managers of SMEs.