Planning: Types, Process, Methods and Importance - Principle of Management

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Planning: Types, Process, Methods and Importance - Principle of Management

Planning: Types, Process, Methods and Importance


Planning is the primary function of management. It is called primary function because it affects all the other functions of management. Planning is concerned with deciding in advance that, when, where, why and how is to be done and who shall do it. Thus, planning is a document stating the goals, outlining the action-oriented strategies to attain these goals, and assigning organizational resources to attain them.

According to Koontz and O’Dennell, “planning is an intellectual process, the conscious determination of course of action, the basing of decisions on purpose, facts and considered estimates”

A planning Model

A planning Model

Types of planning: Planning begins with a goal or targeted outcome that the organization wishes to achieve. It may be comprehensive or limited in scope. Although the basic process of planning is same for every manager, planning can take many forms and style in practice. Thus, we classified planning according to the managerial hierarchy, they are called, strategic, tactical and operational plan.

Managerial Hierarchy and planning system

Managerial Hierarchy and planning system

  1. Strategic Plan: Strategic plan is also called grand plan. It has a strong external orientation and covers the total organization. It begins by asking question regarding the purpose or mission and the operation to which an organization is devoted. Senior executives are responsible for the development of these plans.
  2. Tactical plan: Tactical plans translate broad strategic goals and plans into specific goals and plans. It mainly focuses on functional areas of the organization. Middle level managers who are responsible for major division or branches in an organization develop the tactical plan. Tactical plans focus on the major actions that a unit must take to fulfill its parts of the strategic plan.
  3. Operational plan: Operational plans identify the specific procedures and process required at the lower level of the organization. These plans are prepared by frontline managers and supervisors. It mainly focuses on daily activities and routine jobs. They translate the tactical objectives into specific operational activities to be assigned to individual or groups.

Besides above classification, business plans are also classified according to the time period for which they are established, they are called, long-range, medium range, and short range plans. Similarly, plans are further classified according to their frequency of use, they are known as standing plans (such as, policy, procedure rule), and single use plan, (such as, program, project, budget etc)

Hierarchy of plans:

The hierarchy of the plans is as follows

  1. Vision: An organization’s vision is a non-specified directional and motivational guidance for the entire organization. Vision has emotional appeal that encourages people to commit full energies and mind to achieve it.
  2. Mission: An organization’s mission is the purpose and philosophy that will derive organization over a longer period of time usually fine to ten year. Mission provide reason for being in the business
  3. Goals: Goals provide direction to the activities of an organization. They state how the mission will be accomplished over the next year or two. They are the targeted ends that management wants to reach.
  4. Objectives: It is a specific statement of what will be done to achieve a goal. Objectives are more specified and are measurable than goals. Objectives are expected to be SMART (i.e., specific, measurable, attainable, rewarding and Timed).
  5. Strategies: Strategized are the courses of action which allocate resources in the effective and efficient way for achieving objectives.

Methods of planning:

Managers operating at different management levels are involved in planning. According to the nature and size of an organization, method of planning varies. Generally, there are three method of planning. They are:

  1. Top-Down Planning: It is also called centralized planning method. Under this method, the central office or headquarter of an organization develops and provide guidelines, which include, business definition, mission statement, economic and social objectives, etc. to other branches and levels accordingly.
  2. Button-Up Planning: It is also called decentralize planning method. Under this method middle and lower level management drafted the plan and presented to the higher level management for  its final approval. Discussion and meeting are held to make critical review and final approval of the plan at the top management level. This method encourages in participation of lower management in plan formation and ensures their full commitment.
  3. Management by Objectives (MBO): MBO is powerful management tool and is considered as a strong method of planning. Under this method all levels of management are involve in goal setting process. The value of MBO is that it communicates the mission, goals, and objectives of the organization to the lower level managers. Lower level manager’s work out their plans and target in consultation with their subordinates. These are sent o higher levels for consideration. This involvement of employees increases their motivation and commitment to their work.

The Key features of MBO are:

  1. The superior and the subordinate meet to discuss and set goals for the subordinate for a specified period of time.
  2. Both the superior and the subordinate attempt to establish goals that is realistic, challenging, clear, and comprehensive.
  3. The standards for measuring and evaluating the goals are objectives and agreed upon. The superior and the subordinate establish some intermediate review dates when the goals will be re-examined.
  4. The superior plays more of a coaching, counseling and supportive role.
  5. The entire process focus on results and on the counseling of the subordinates, and not on activities, mistakes and organizational requirements

The advantage of MBO is that it blends planning and control function. It emphasizes results rather than good intensions. MBO encourages self-management and control through participation and commitment.

Planning Process or Steps in Planning:

Planning involves complex process. The major steps in the planning process include the followings:

Planning Process or Steps in Planning

  1. Defining mission and goals: Planning process starts with the understanding mission and goals. Mission and goals direct the organization’s course of action. They maintain organization within the boundaries of stated mission, and ensure its continuing existence. Thus for effective planning mission and goals must be clearly defined.
  2. Analysis of environmental forces: Environmental forces include both external and internal components which directly and indirectly affect the overall functioning of an organization. Planning and strategy development require a thorough analysis of the forces. Management must know not only the current standing of these forces, but also have a fairly clear idea of where these forces appear to be headed.
  3. Identifying the opportunities and threats: External environment forces create both opportunities and threat for organization. To identify these opportunities and threat for an organization is also a step of planning. Plan should be able to capitalize the opportunities and neutralize the threats.
  4. Analyze the organizational resources: organizational resources include its abilities, competencies, information and other resources that are required to improve organizational performances. Optimal allocation of resources improves efficiency and effectiveness of an organization. Thus, these resources should be determined and analyzed in the process of planning.
  5. Formulation plans: After completing the above steps the draft for future activities are determined (i.e., formulating plan). Comprehensive and integrated plans are formulated which covers all the level of management and their functions.
  6. Implementation of plans: After the plans are formulated they are implemented. (i.e., activities related the plans are performed). In the implementation, manager’s main task is to ensure the availability of resources and their effective and efficient use and motivate people to complete the planned activities with the stated time.
  7. Evaluation and Control: The final step in planning process is to monitor progress of implementation. Regular evaluation helps management to understand the deviations and their causes. Feedback system helps to initiate timely actions and adjustment in the plan.

Importance of Planning:

Planning benefits everybody in the organization. It provides guidance for decision making clarifies role and responsibilities of employees and is also a means of measuring performance. The importance of planning is as follows:

  1. Provides direction: Where the organization wants to be in future and what are the activities to be performed for it are mentioned in planning. Thus, planning is looking ahead, which gives direction to different level of management in performing organizational activities.
  2. Reduce uncertainty: An organization has to work in an environment which is uncertain and ever changing. Planning involves forecasting in anticipation of future uncertainties and meets the future challenges.
  3. Help in coordination: Planning provide the basis for organized and coordinated effort to the organization. It integrates the individual activities together toward a common goals .Thus it helps in cooperation and coordination between employees.
  4. Ensure better utilization or resources: Planning primarily ensures the availability of resources as and when needed. This prevents resources shortage in an organization. A part from this, better communication and coordination also help in controlling the wastages.
  5. Innovation and creativity: Under the ever changing environment, organization growth depends on the innovative and creative actions of executives. Sound planning encourages innovation through and creative actions.
  6. Basis of control: The control function of management is directly linked to planning. It measures progress toward goals and provides information about the causes of success or failure so that plans may be adjusted for the futures.
  7. Improves competitive strength: Effective planning increase the competitive strength of an organization. Planning enables the organization to discover new opportunities and thereby shape its future. It ensures an orderly progress of the organization.

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