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The Function of Planning in Management

management, business, planning, planning in management, administration, organization, leading, controlling, staffing

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 overstressing 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.

Managers usually concentrate on three elements in stating an organization’s mission: the primary market, the basic product or service and the main technology. Some companies communicate organizational values as part of their statements of purpose and mission. These statements of organization values:

•direct the behavior of staff employed in the business;
•reflect management perceptions about the way society will respond to the business;
•are (partly) determined in part by the responses of others.
Statements of organizational purpose usually include references to owners, customers, employees, profit, growth and survival considerations.
Examples of objectives relating to survival and growth could include:
•reducing dependence on certain suppliers;
•closing unprofitable lines.

Productivity objectives usually refer to the number of items sold or service calculated for a unit input like the occupancy rate for hotels.

Due to fierce competition, the nature of objectives nowadays refers to improvements in the quality of a product or service. An increase in market share is a common objective. Another area for objectives is to decide whether a company wishes to be a leader in technology or a follower. Objectives of public responsibility have become more common and refer to customers as well as society in general.

Objectives are those ends that must be achieved in order to carry out a mission. Strategies are broad programs of activity to achieve organizational objectives. They function as guides in the deployment of resources to achieve the objectives. Strategies are carried out by plans, which can be used for one purpose or a single use plan like the construction of a bridge, or by standards plans for repeated actions like a credit policy. Plans for a single use are of the following types:
1.Programs which cover a larger set of activities like developing management skills in all supervisors;
2.Projects which cover a smaller range of activities than a program and are specifically defined like developing financial skills in supervisors;
3.Budgets which are statements of financial resources needed and are used to control most activities. The process of budgeting is a key planning activity. They can be regarded as single use plans.
Plans for standard situations form a guide to enable consistency of action in similar situations.

Planning in practice

Terminology in the area of planning can be a little confusing as numerous terms are used loosely and have similar meanings. All managers plan, no matter at what level. Risk and uncertainly is minimized by planning and this is needed more today than before as social and economic conditions change very quickly and careful planning prepares an organization for change. Planning helps the organization to define its purpose and activities. It sets performance standards and results and can, therefore, be compared with the standard to make managers see how the organization is proceeding towards its goals.

Planning must be flexible to deal with a changing environment. The higher up the hierarchy of management, the more attention is paid to planning, particularly in setting out goals and strategies for a long period ahead. Managers lower in the hierarchy usually deal with sections of the total plan and are concerned with shorter periods of time.

Many persons may be involved in planning activities which must be a continuous process, but the main point is that these activities must produce a specific plan; without plans, planning activities have no real effect. One main feature of planning is to make a decision. This will involve assumptions about the future and about many variable factors. Planning is essential for the long-term survival of any business enterprise as it helps to determine the most profitable way to allocate limited resources among competing ends.
Published: 2007-04-14
Author: Martin Hahn

About the author or the publisher
Martin Hahn PhD has received his education and degrees in Europe in organizational/industrial sociology. He grew up in South-East Asia and moved to Europe to get his tertiary education and gain experience in the fields of scientific research, radio journalism, and management consulting.

After living in Europe for 12 years, he moved to South-East again and has worked for the last 12 years as a management consultant, university lecturer, corporate trainer, and international school administrator

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