�

What and Why of Planning? What is planning? Planning is one of the four functions of management. It is a primary function of Management. Planning involves:

• Defining the organization’s goals,

• Establishing an overall strategy for achieving these goals, and

• Developing plans for organizational work activities.

Formal planning

• Specific goals covering a specific time period

• Written and shared with organizational members

Purposes of Planning Planning serves a number of significant purposes.

• Planning gives direction to managers and non-managers of an organization.

• Planning reduces uncertainty by forcing managers to look ahead, anticipate change, consider the impact of change, and develop appropriate responses.

• Planning minimizes waste and uncertainty.

• Planning establishes goals or standards used in controlling. Planning and Performance

• Formal planning is associated with higher profits and returns on assets and

Positive financial results.

• Although organizations that use formal planning do not always outperform those that do not plan.

• The quality of planning and implementation affects performance more than

the extent of planning.

• The external environment can reduce the impact of planning on

performance.

• Formal planning must be used for several years before planning begins to

affect performance.

�

The Role of Goals and Plans in Planning Planning is often called the primary management function because it establishes the basis for all other functions. Planning involves two important elements:

1. Goals 2. Plans

A. Goals

• Goals (often called objectives) are desired outcomes for individuals, groups, or entire organizations.

• Goals Provide direction and evaluation performance criteria

Types of goals

a) Financial goals versus strategic goals b) Stated goals versus real goals

a) Financial goals versus strategic goals

Financial goals related to the financial performance of the organization. Strategic goals are related to the performance of the firm relative to factors in its

external environment (e.g., competitors).

b) Stated goals versus real goals Stated goals are official statements of what an organization says and what it wants its various stakeholders to believe its goals are. However, stated goals which can be found in an organization’s charter, annual report, public relations announcements, or in public statements made by managers

�

Real goals are those that an organization actually pursues, as defined by the actions of its members. Actions define priorities.

B. Plans Plans are documents that outline how goals are to be accomplished and describe how resources are to be allocated and establish activity schedules. Types of Plans

Plans can be described by their:

A. Breadth B. Time Frame C. Specificity D. Frequency of Use.

A. Breath

On the basis of Breadth plans can be Strategic or operational plans. Strategic plans

• Apply to the entire organization.

• Establish the organization’s overall goals.

• Seek to position the organization in terms of its environment.

• Cover extended periods of time as Long Term Plan

�

Operational plans

• Operational Plans specify the details of how the overall goals are to be achieved.

• Operational Plans cover a short time period as Short Term Plans.

B. Time On the basis of Time frame plans can be Short-term or long-term plans. Short term plans are plans that cover one year or less. Long-term plans are plans with a time frame beyond three years.

C. Specificity On the basis of Specificity plans can be Specific or directional plans. Specific plans are plans that are clearly defined and leave no room for interpretation. Directional plans are flexible plans that set out general guidelines.

D. Frequency of Use On the basis of Frequency of use plans can be Single-use or standing plans. A single-use plan is a one-time plan specifically designed to meet the needs of a unique situation. Standing plans are ongoing plans that provide guidance for activities performed repeatedly.