Planning in Organizations

Planning is the fundamental function of management from which the other three functions of organizing, leading and controlling stem. It is concerned with the future impact of today's decisions.

A plan is an exposition of the intended means to accomplish a desired objective. It is common for less formal plans to be created as abstract ideas, and remain in that form as they are maintained and resources are put to use. More formal plans used for business purposes are likely to be written and stored in a form that is accessible to many people at various times and locations. This allows for more reliable collaboration in the execution of the plan.

Planning is a management function concerned with selecting goals for future organizational performance and deciding on the tasks and resources to be used in order to attain those goals. Planning can be thought of as a sequence of steps. The first step is to define the objectives; the second one is to evaluate current status vis-à-vis the desired future state and the mission. To generate future scenarios to bridge that gap is the third step. Then, as the next step, a manager should identify and choose among alternative courses of action. During the final step a manager implements the plan. True implementation also includes evaluation of results to ensure accomplishment of objectives.

Managers are involved with plans that vary in terms of time horizon: short-range plans (cover one year or less), intermediate or medium-range plans (cover one to five years), and long-range plans (cover five years or more).

Plans also differ according to frequency of use. A single-use plan is designed to be used only once to meet the needs of a unique situation. Examples of this type are budgets that commit resources to projects and schedules that tie activities to specific time frames or targets. A standing-use plan, on the other hand, is created to be used more than once. This type is represented by policies, which present broad guidelines in order to make decisions and take actions; and by rules that precisely describe what actions are to be taken in specific situations.

Planning is undertaken by managers at all levels in the organizational hierarchy. Top level managers engage chiefly in long-range planning, while short-range planning is based on the combined efforts of middle and supervisory management. The potential benefits of planning are numerous: opportunities for greater means-end capacity, improved performance, and a foundation for stability in day-to-day operations.

Strategy and Strategic Planning

Entrepreneurs and business managers are often so preoccupied with immediate issues that they lose sight of their ultimate objectives. That is why a business review or preparation of a strategic plan is a virtual necessity. Strategy is a comprehensive plan that sets critical direction and guides the allocation of resources for an organization. The process through which strategies are formulated, implemented, and evaluated is strategic planning.

An important perspective for understanding the nature of strategic planning is an understanding of the three levels of strategy. Corporate strategy sets directions and serves as a resource allocation guide for the total enterprise. Business strategy is developed for a single business by managers; and the lowest level of strategy is a functional one that guides activities within a functional area of the organization.

Four major types of strategies available to managers at the corporate level are stability, growth, retrenchment, and combination. A stability strategy is used in order to maintain the present course of action when an organization is performing well. A growth strategy is more risky to pursue but necessary for long-term survival in fast developing industries. A retrenchment strategy implies a decision to slow down and seek performance improvement through greater operating efficiency. To augment staff workloads, increase use of part-time or volunteer staff, eliminate services or programmes, reduce non-fixed expenses such as training or supplies, or streamline resource allocation are all examples of retrenchment. The most complex and most frequently used strategy is a combination – the simultaneous use of more than one strategy.

A popular approach to business strategy is the adaptation model. It suggests that managers should focus on three basic managerial problems: business opportunities, production and distribution of goods and services, and organization structure. To address these issues they can use three basic strategies:

• Defending is the most conservative strategy that aims to find a niche in the market and protect it from competitors.

• Searching for alternative means to discover and exploit new market opportunities.

• Analyzing means to move into new market areas but at a deliberate and carefully planned pace.

The six areas of functional strategies are marketing, financial, production, research and development, human resource, and organization design. They constitute the lowest level of strategy in an organization.

The basic steps in a strategic planning process are as follows:

Step one – getting ready;

Step two – articulating mission and vision;

Step three – assessing the situation;

Step four – developing strategies, goals, and objectives;

Step five – completing the written plan.

Strategic planning, though described as disciplined and uninterrupted, does not typically flow smoothly from one step to the next. It is a creative process, and the fresh insight arrived at today might very well alter the decision made yesterday. Inevitably the process moves forward and back several times before arriving at the final set of decisions.

Strategic planning can be complex and challenging, but it is always defined by the basic ideas outlined above that help to get insight into the strategic planning process.