Planning Simulation Managers

A planning simulation allows people to explore the creation of a business plan such as an annual financial plan.






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Over the years I have developed several computer business simulations where instead of moving forward participants period-by-period participants build up a business plan exploring options on a step-by-step basis. An example is my Financial Analysis simulation that takes participants through the process of creating a financial plan for the next year. The simulation involves participants selecting from a predefined list which options should be incorporated in the plan based on they way they improve some measures, worsen others and enable a viable plan to be created.

Learning Purpose

These simulations involve participants in creating a plan and when doing this think through how managerial actions impact business results and success


I developed my first planning simulation when a client asked me to create a fun, half day financial appreciation sessiion - one that covered in reasonable depth the standard financial reports and showed how management actions impacted these. I felt that although a standard business acumen simulation could meet the learning goals the time require would be a day.

Besides short duration, planning simulations allow you to focus thinking on precise business learning needs. These simulations involve participants in creating a plan and when doing this think through how managerial actions impact business results and success. Each of the options listed below showed a way managerial options impacted the business. For example, lowering prices would increase sales, revenue and profit but impact the need for fixed assets, inventories and accounts receivable (debtors) and, together, they would affect profitability and liquidity. This focus allows one to define (for each opportunity) whet the participants should discuss and consider. Further, there may be links between the options - so, for example the extra assets required when prices were cut might produce liquidity problems that can be addressed by selling and leasing back fixed assets, prompt payment discounts,, decreasing inventory availablity etc.

Learning Use

These simulations may be used

Simulation Example - Financial Analysis

Finance for non-financial managers courses can be deadly boring. To overcome this, I developed my Financial Analysis planning simulation. It was reasonably easy to define learning needs - getting business people understanding key financial reports and measures and how their actions impacted these but more difficult to decide the form of decisions and ensuring learning.

Diagram showing the jearning journey for planning simulations

Planning Simulation Learning Journey

The diagram to the left shows a typical Learning Journey for a planning simulation.

Initially, there is a projection that shows what the outcomes might be if no actions are taken. Participants analyse this to determine strengths and weaknesses and consider what actions need to be taken.

Next the create a series of plans that build on the strengths and attempt to eliminate weaknesses. Unlike tradition business simulations where the periods or stages are sequential for a planning simulation plans may be developed in parallel (Plan 1 & 2), sequentially (Plans 3 & 5) or combine previous plans (Plan 4).

For Financial Analysis, the plans were assembled from a series of options.

Planning Cycle

The diagram to the left shows the planning cycle.

Evaluate Plan involves analysing the plan to identify strengths, weaknesses, opportunities and threats.

Decide Needs takes one forward to decide which of the available options will improve the plan.

Assemble Plan involves choosing the options to add to or change in the plan.

Forecast Outcome involves using the computer's planning model to forecast the plan's results.

The participants. continue going around the planning cycle progressively improving the plan until they feel that it is acceptable. .

List of Planning Reports for Financial Analysis Planning Simulations

Financial Analysis Reports

The reports produced by a planning simulation consist of those that show business results and those that measure business performance.

For Financial Analysis (to left) the business results were Income Statement, Assets, Liabilities and Other Published Data and business performance measures were Key Measures, Business Type, Profitability and Financial Strength.

Deciding these was relatively straight forward - they were the information that you would expect to find in a company's annual report.

List of Planning Decisions for Financial Analysis Planning Simulations

Financial Analysis Decisions

The design problem?

The time taken to make decisions presented a major design problem. They needed to show comprehensively how managerial actions would impact financial results but the simulation had to take no more than a half-a-day and this meant that a conventional simulation where participants took a total enterprise through several years making decisions about price, promotion, production, capacity changes etc. would have a (substantially) longer duration - possibly several days.

How did I overcome this problem?

Instead of allowing change variables, I only allowed participants the choose to include or exclude an option. For example, traditional simulations would allow participants to decide price (where they would have to explore many price options), here they could only decide to raise or lower prices (to a predefined levels) or leave them alone. Technically, this reduced decision granularity, reduced cognitive load and shortened the simulation's duration to half-a-day.

How did the options ensure learning?

The choice of options was crucial. Not only did they have to impact business results (sales, costs, profits, assets, liabilities etc.) but also improved some results and worsened others. Finally, they were each were chosen to generate discussion about different aspects and impacts on financial measures - they were chosen to develop and challenge metacognition.

Short Circuited Experientiial Learning Cycle

Ensuring Reflection

The free form nature of Planning Simulations presents special design difficulties. There is a significant risk that participants will try to game the simulation by trying to explore thoughtlessly all combinations of options. As shown to the left this will short circuit the experiential cycle by oscillating between Active Experimentation and Concrete Experience and missing out Reflective Observation and Active Conceptualisation - the stages necessary to ensure learning. This is overcome by limiting the number of plans that can be created and in doing so forcing participants to think deeply before committing to a plan.

Planning Simulation Examples

Besides the Financial Analysis simulation I have designed simulations to explore the financial impact of the marketing mix, setting up an entrepreneurial business, one to appraise capital investments and one to explore the difference between profit and cash.

2015 Jeremy J. S. B. Hall

Most recent update: 22/01/18
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