Planning is one of the four managerial functions, the others are organizing, directing and controlling. Planning can be considered to be the most basic of managerial functions. Planning determines objectives and purposes related to the organization, so that everyone understands what they have to accomplish. All managers are involved in planning but the nature of policies and plans set out by superiors will vary with each manager’s authority. While senior executives plan the direction of the organization, managers at various levels prepare plans for their own department which are part of the overall goals of the organization.
Planning involves selecting company goals and department objectives, then finding ways of implementing them. Drafting plans starts with looking at of alternatives, and then decide which the best alternative is and then decide on what to do, how to do it, when to do it and by whom it is to be done. A plan is a predetermined course of action which helps to provide purpose and direction for members of a company. The planning process can be facilitated by working in an environment which is conducive to it. This is important because plans develop from the lower levels of administration whose reaction and responses may change and help to form plans.
The most important way management can contribute to growth is by systematic planning. Probabilities are forecast and programs developed to take advantage of them. Constant attention must be given to changing circumstances and many revisions of plans may be needed. Economists use the terms ex ante and ex post for this approach. Revisions are continuously made about the basic assumptions on which the plans were based because circumstances change and new plans have to be developed.
Principles of managerial planning
Plans should be based upon clearly defined objectives and make use of all available information;
Plans should consider factors in the environment which will help or hinder the organization in reaching its goal;
Plans should be based on the existing organization and facilitate control in order to cross check performance with established standards;
Plans should be precise, practical and simple to understand and operate;
Plans must be flexible because if circumstances are changing, the initial plan must still be valid.
Problems of planning
The biggest problem with planning is related to the future: the greater the time span, the greater the number of mistakes. Present conditions are usually being used as assumptions in the planner’s mind when he initiates a plan. The planner might well be over-stressing the present conditions. A good illustration of the effect of time on planning can be seen by comparing long and short-term weather forecasts. Many events are obviously unforeseen. However, planning can still be undertaken with the use of techniques which give probabilities of events taking place. Another important requirement for successful planning is consultation with workers and their support. Workers need to understand the plan so that they can understand the nature of obstacles and the reason why management is taking a certain course of action to overcome them. The larger the scope of the plan, the more complex the planning will become: it is far more difficult to make plans for a department than to make plans for a group of departments.
Strategic and tactical plans
One way of classifying plans is to distinguish between strategic and tactical plans. Strategic planning involves deciding upon the major goals of an organization and what policies will be used to achieve them. It involves a longer time period and relies on more unreliable long-term forecasts and occurs at more senior levels in an organization like political and technological changes. Tactical planning involves deciding on how resources will be used to help the organization achieve its strategic goals. It relies more on past records and involves shorter time periods.
Hierarchy of plans
Plans are made at various levels in an organization, and may be stated in the form of a hierarchy. It is important to decide what is the purpose and mission of a business. This is usually a very difficult decision. However, it is very essential because it makes it much easier to state clear and realistic objectives, strategies and plans. Goals give a sense of direction for the activities of an organization. They give broad guidelines towards which more detailed and specific plans are directed. They consist of the purpose, mission and objectives.
A purpose is the main role society defines for a business organization and applies to all types of such organizations like to make a profit by the production of goods and services. A mission is a narrower form of purpose, which is unique to a particular organization like to produce certain types of goods and services. Peter Drucker considers that the way an organization defines its mission is crucial to its prosperity and possible survival. The mission of an organization is the broad objective that sets a business apart from others of its type and identifies the extent of its operations in product and market terms. A mission statement clearly states the objective of the organization’s management in structuring its basic business activity.