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Planning, Planning function, Strategic

planning
By Nishantha Ekanayake
Nishantha Ekanayake The Institute of Chartered Accountants of Sri Lanka
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Planning (also called forethought) is the process of
thinking about and organizing the activities required to
achieve a desired goal.

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 Planning means
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 “If you don't have daily objectives, you qualify as a
dreamer.” - Zig Ziglar

 “Planning is deciding in advance what is to be done. It

involves the selection of objectives, policies, procedures and
programs from alternatives” - M E Harley

 “Planning is a trap laid down to capture the future” - Allen

 “If you don't know where you are going, how can you
expect to get there?” - Basil S. Walsh
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4 Definition

Planning is the process of establishing goals an

suitable courses of actions for achieveing those
goals (Stoner and Freeman, 1995).

 Planning is the function of management that

involves determining the best course of action for
achieving the objectives of the organization
defined by the governing body (Henri Fayol,1961).
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 Nature or Features or Characteristics of Planning
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 Planning is goal oriented - Plans are made in order to seek certain

predetermined goals.

 Planning is a primary function -“Planning provides the basic

foundation from which all future management functions arise”
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  Planning is a thinking process - Involves imagination, foresight and sound
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 Planning is all-pervasive -Planning is an on-going activity at all levels of an

organizational hierarchy, right from CEO to first line managers.

 Planning is a continuous process

❖ Planning involves continuous assessment and reassessment of the resources,
directions, opportunities and problems of the organization while converting
them to achieve goals
 Planning involves choice
❖ Planning always involves choices among various alternatives.
❖ If there is only one way of doing something, there is no need for planning,
planning arises only when there are alternatives available.

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  Planning is flexible -Planning should not be rigid.
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 Planning is rational
❖ Planners should be objective and unemotional in their approach to planning.
❖ Aim would be to achieve efficiency and effectiveness while optimally
deploying resources.

 Planning is an integrated process

❖ Plans are structured in a logical way such that every lower-level plan serves
as a means to accomplish higher level plans.
❖ Plans are inter-related, interdependent and mutually supportive.

 Planning is futuristic - Planning attempts to peep into the future, analyses it and
prepare for it.
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Importance and Purpose of Planning

Planning provides direction - Planning

provides clear sense of direction and
purpose of activities of an organization.

Planning minimizes risk and uncertainty - In

fast changing organizations, planning
based on hard facts and data help
managers to reduce risk and uncertainties.

Planning ensures co-ordination - Planning

helps to establish co-ordinated efforts from
various divisions, departments and people.
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 Planning leads to economy - Planning helps accomplish an optimal utilization of
physical and human resources, leading towards cost reduction, higher efficiency
and productivity which lead to better economy.

 Planning facilitates decision-making - Planning helps in providing guidelines and

thus facilitate decision-making.

 Planning reduces overlapping and wastage of efforts - Planning avoids

duplication of efforts, and overlapping of tasks and responsibilities, reducing
wastage.

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 Planning encourages innovation and creativity –
❖ Planning helps to remain competitive.
❖ Innovation and creativity are like ‘trump cards’ in competitive world.

 Planning facilitates control - Control is key to success of any organization,

and in order to control there has to be a plan.

 Planning improves morale - If Employees participate in planning process it

boosts their morale and develops a broad mentality and thinking of
achieving organizational goals.

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11 Steps in Planning (Planning function)

 Step 1: To establish objectives which are verifiable

 Step 2: To establish planning premises
 Step 3: To determine alternative course of action
 Step 4: To evaluate the alternatives and select the best
 Step 5: To formulate derivative plans
 Step 6: To secure co-operation and participation of all employees
 Step 7: To measure and control the progress through follow-up

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12  Step 1: To establish objectives which are verifiable –
❖ Identify goals of the organization Internal(Financial position of
company, human resources available, manufacturing facility,
company image, etc.) and external environment(Government
rules and regulations, Socio-economic condition of the society,
competition level, suppliers reliability) of the organization has to be
studied,

 Step 2: To establish planning premises

❖ Planning premises are assumptions of future market conditions
which become the basis for current planning process.
❖ Planning premises usually relate to cost and availability of raw
materials, labour, power, product demands, population trends,
technology growth, government policies etc.

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  Step 3: To determine alternative course of action
❖ Search and list all possible alternatives in order to be compared and
13 analytically evaluated.
 Step 4: To evaluate the alternatives and select the best
❖ Select most suitable and best course of action.
❖ Alternatives have to be compared and evaluated with respect to their
expected contribution to organizational goals.
❖ Evaluation and selection is often done with the help of quantitative
techniques and operations research.
 Step 5: To formulate derivative plans
❖ Management has to formulate derivative plans or secondary plans to
support the basic plan.
❖ Derivative plans are sub plans or departmental plans.
❖ For Example, if the production plan of TATA MOTORS is to produce a million
of Nano’s in the next five years, the derivative plans would be plans for
various departments like fabrication, forging, casting, purchase, assembly
etc.
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 Step 6: To secure co-operation and participation of all employees

❖ Involving employees in planning process enhances their cooperation and
participation.
❖ Continuous suggestions, complaints and criticisms must be solicited from the
employees.

 Step 7: To measure and control the progress through follow-up

❖ Continuous evaluation of plans help in identifying recurring mistakes and
avoiding them in future.

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Planning Premises
❖ Planning premises are assumptions of future market conditions which
become the basis for current planning process.

❖ Planning premises have to be established even before planning.

❖ To establish planning premises means to forecast future business conditions

under which a plan has to operate.

❖ Planning premises provide bedrock upon which the plans are based.

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16 Classification of Planning Premises

 1. Internal and External premises

 2. Tangible and Intangible premises

 3. Controllable, Semi-controllable and Uncontrollable

premises

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Internal and External Premises

Internal premises
❖ Internal premises are those factors which exist within organization
and are generally under the control of management.
❖ Internal premises include – men, money, machinery, materials and
methods.
External premises
 External premises are those factors which exist outside the purview
of the organization and are generally not under the control of the
management.
 External premises include government policies, general economy of
country, technological trends, climatic conditions etc.

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Tangible and Intangible Premises
 Tangible premises
❖ Tangible premises are those which are quantifiable in nature.
❖ For Example, production quality, quality standards, capital required,
machinery to purchase.
❖ These info. Is needed for planning and are quantifiable and
measurable in nature.

Intangible premises
❖ Intangible premises are those which are abstract and
nonquantifiable in nature.
❖ For Example, company image, brand loyalty, political situation etc.,
are needed for planning but are qualitative in character.

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 Controllable, Semi-controllable and
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Uncontrollable Premises
 Controllable premises
❖ Controllable premises are those factors which are said to be completely under the
control of management. For Example, Managerial policies, rules and regulations
etc.

 Semi-controllable premises
❖ Controllable premises are those which management has partial control. For
Example, workers attitude and efficiency, firms pricing policy, firms marketing
programs, raw materials etc.

 Uncontrollable premises
❖ Internal premises are those factors over which management has absolutely no
control.
❖ For Example, Natural calamities, new inventions, wars, strikes imposition of
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emergency, government etc.

 Levels of Planning
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 The Process of Planning
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 Hierarchy of Aims
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23 1. Establish the Vision and
Mission
What is vision?

 The exercise of seeing the future

first.

 A vision provides a broad category

of long-term intention that the
organization wish to pursue.

 Vision is a powerful motivator.

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 Defining the Mission
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The mission of a business is the fundamental, unique purpose that sets
it apart from other firms of its type and identifies the scope its
operations in product and market terms.

Mission defines the business

in its scope and philosophy.

Mission’s purpose is to
provide the reasons for the
organizations existing.

Mission provide guidance for

the formulation of goals
objectives and strategies.
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 2. Environmental Analysis
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 This analysis covers
both the internal
and external
environment.
 The objective of
internal environment
analysis is to identify
the strengths and
weaknesses of the
organization.
 The objective of
external
environment analysis
is to identify
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opportunities and
 3. Establishment of Corporate Goals and Objectives
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Objectives are specific end results that the
company aims to achieve within a set time
frame.
 S – Specific
 M – Measurable
 A – Achievable
 R – Rational
 T – Time Bound

• These goals specify what the organization hopes to fulfill in the

medium to long term.
• E.g. : - Profitability, Productivity, Employee relations, Market Share,
Resourcing, Social Responsibility, Research and Development
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 4. Determination of Corporate Strategies and Policies
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This step involves generating a series of alternative strategies, given the
company’s internal strengths and weaknesses and it’s external opportunities
and threats.

Strategy means: “The broad programme for achieving an

organization’s objectives and it’s mission.” Stoner and Freeman,
1995

“A comprehensive action plan for accomplishing an

organization’s goals.” Griffin, 2013

Policies are general guidelines to the managers and employees to

make decisions, and their judgment and evaluation. These are help to
implement any strategy, actions, or decisions in and outside of the
organization.
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 5. Agree on strategic plan
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This step involves systematic presentation of the plan as a written

document.
Strategic Plans
This plan is applicable when the corporate entity is a multi – business
one. The divisional plans should specify the strategies that can be
adopted to achieve strategic goals assigned to each business.

At the business or divisional level plans are made to decide how

those strategies should be carried out and goals assigned by the
corporate plans are accomplished.
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30 Strategic Plans

 Focus : - Prepared for entire organization,

Usually for long term periods (3 – 5 years)

 Responsibility : - Top Managers

 Main Contents : - Vision, Mission, Strategies, Policies

 Main Considerations :- Critical SWOT factors, Growth potential of business, market and
products

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 6. Issue key targets to the departments
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The targets may be expressed in terms of budgets (sales volume, direct cost,
indirect cost, profit) measures such as output per employee, percentage increase in
market share, percentage utilization of machines etc.

Tactical / Functional Plans

 Focus : - Prepared for each functional level. Usually for 6 months to 1 year.
 Responsibility:- Middle level functional level managers
 Main Contents:- Functional Objectives, functional strategies, functional
policies
 Major consideration:- Contents of the corporate plans

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7. Preparation of Functional and Operational Plans
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Operational plans are plans that provide the details needed to incorporate strategy into
day-to-day operations.
Operational Plans
 Operational plans concentrates to implement tactical plans to achieve
operational goals.
 These short range plans have a time frame of one year or less or may be for day to
day activities.
 Focus:- Prepared for each operational level units. Usually for 1 month to 3 months.
 Responsibility:- Lower level operational managers
 Main Contents:- Programme, procedures, activities, schedules, budgets, rules,
regulation
 Major consideration:- Content of the functional plans, Internal resource
constraints.
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 Single – use plans
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 This plan is applied to activities that do not repeat or recur.

 Once the activity is completed, the plan is no longer needed.
 Programmes, projects and budgets are single use plans as they are no
more validity after achieving the set objectives in those plans.

Continuing or on going plans (standing plans)

 These plans are usually made once and retain their value over a period
of years with revision and updates.

 Policies, Procedures, rules and regulations are standing plans as their

validity remains for a longer time span with minor modifications and
revisions.
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36 8. Implementation

 After operational plans are prepared those should be implemented,

monitored and revised as necessary.

 Now the planning process comes full circle. Information is needed on how
well the plan is being implemented and whether it is succeeding, so that
the implementation can improve the way in which the plan is being
applied and so that the planning team may learn from experience and
respond to changing conditions

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Barriers for planning?

 Lack of knowledge and skills in

planning
 Lack of experienced personnel
 Lack of creativity and imagination
 Lack of cooperation
 Lack of top management
commitment
 Lack of facilities and resources

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 What is Strategic
Planning?
 Strategic planning is an
organization's process of defining
its strategy, or direction, and
making decisions on allocating its
resources to pursue this strategy.
 What do want to do?
 How do we best excel?
 Where do we want the company
to be?

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 Step one
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1. Gather all facts

2. When making decisions it is always best to have the maximum
amount of information available.
3. SWOT Analysis
4. Gather inputs from stakeholders, company performance analysis
of your organization
5. Internal and external limitations
6. Social and economic trends .

Among the most useful tools for strategic planning is SWOT analysis
internal and external of the organization.
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 The 4 Key Elements

Vision

Mission

Values

Strategy

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Sell your vision

Why is it important to make sure other

individuals understand the purpose
and future gains of the strategic
change.

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42 Organization Action Strategy

 Change may be outline by few but cannot be achieved without

working together as a whole

 Develop clearly written objectives for each department to

implement.

 The objectives listed must be reviewed by upper management

adjusted if needed and then finalized before the documents are sent
to each department.

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43 Great Change Leader

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 How long should your goals take to reach?
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 A strategic planning process usually

takes anywhere from 1 month to three
months to complete.

 Long term objectives.

 Short term goals and milestones

 90-day double check

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Benchmarking

 Benchmarking is used when setting standards

and goals for your organization.

 Why Benchmark?

Benchmarking involves looking at other examples

of best practices used by competitors or within
other industries. Benchmarking may be used to
evaluate products, services, processes or functions

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