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 organizations 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 organizations 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.
B.
C.
D.

Breadth
Time Frame
Specificity
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 organizations 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.