Planning

I. Definition and Nature of Planning

Planning is very important. As by nature, it inquires about organizational goals and

targets and involves decision-making about desired ways and means to achieve them. It is
the most basic of all managerial functions. It is the process by which managers establish
goals and define the methods by which these goals are to be attained. It involves selecting
missions and objectives and the actions to achieve them; it requires decision-making,
which is choosing from among alternative future courses of action. It is, therefore, a
rational approach to achieving pre-selected objectives.

Planning is taken as the foundation for future activities. It is about deciding in

advance what is to be done; that is, a plan is a projected course of action. So, planning can
be thought of as deciding a future course of action. It may also be treated as a process of
thinking before doing.

Management has to plan for long-range and short-range future direction by

looking ahead into the future, by estimating and evaluating the future behavior of the
relevant environment and by determining the enterprise's own desired role. It involves
determining various types and volumes of physical and other resources to be acquired
from outside, to allocate these resources in an efficient manner among competing claims
and to make arrangement for systematic conversion of these resources into useful outputs.

As it is clear, plans have two (2) basic components: goals and action statements.
Goals represent an end state – the targets and results that managers hope to achieve.
Action statements represent the means by which an organization goes ahead to attain its
goals. Planning is a deliberate and conscious act by means of which managers determine a
course of action for pursuing a specific goal.

Planning to a manager means thinking about what is to be done, who is going to do

it, and how and when s/he will do it. It also involves thinking about past events
(retrospectively) and about future opportunities and impending threats (prospectively).
Planning enquirers about organizational strengths and weaknesses and involves decision
making about desired ways and means to achieve them. There are, however, differences
between decision-making and planning. Decisions can be made without planning but
planning cannot be done without making decisions. The nature of planning can be
understood by examining its four (4) major aspects:

1. Contribution of Planning to the Attainment of Objectives

Since plans are made to attain goals, every plan and all its support should
contribute to the achievement of the organization’s purpose and objectives. An organized
enterprise exists to accomplish group objectives through willing and purposeful co-
operation.
 2. Primacy of Planning
That planning is the prime managerial function is proved by the fact that all
other functions such as organizing, staffing, leading and controlling are designed to
support the accomplishment of the enterprise's objectives. Planning quite logically,
therefore, comes first before execution of all other managerial functions as it involves
establishing the objectives necessary for all group efforts. Also, all the other
managerial functions must be planned if they are to be effective. Likewise, planning
and controlling are inextricably bound up. Control without a plan is meaningless
because the plan provides the basis or standard of control.

3. Pervasiveness of Planning
Planning is a unique and universal function of all managers. The character and
scope of planning may vary with each manager's authority and with the nature of
the policies and plans outlined by superiors, but all managers must have some
function of planning. Because of one's authority or position in the managerial
hierarchy, one may do more or less planning, but some kind or amount of planning a
manager must do.

4. The Efficiency of Plans

Plans should not only be effective, but also efficient. The effectiveness of a
plan relates to the extent to which it accomplishes the objectives. However, a plan is
efficient if its contribution to the purpose and objectives offsets the costs and other
factors required to formulate and operate it. Plans are efficient if they achieve their
objective at a reasonable cost when such a cost is measured not only in terms of time,
money, or production but also in terms of satisfaction of the individual or group. Both
conceptual and practical reasons are put forward in support of planning. Two (2)
conceptual reasons supporting systematic planning by managers are limited resources
and an uncertain environment.

II. Types of Plans

 Hierarchical Plans – These plans are drawn at three major hierarchical levels,
namely, the institutional, the managerial, and the technical core. The plans in these
three (3) levels are a strategic plan, administrative or intermediate plan, and
operational plan.

 Frequency-of-use Plans – Plans can also be categorized according to frequency or

repetitiveness of use. They are broadly classified as:

1. Standing Plans - which are drawn to cover issues that managers face
repeatedly. Such a standing plan may be called standard operating
procedure (SOP). Generally, five (5) types of standing plans are used:
mission or purpose, strategy, policies, rules, and procedures.
2. Single-use Plans - which are prepared for single or unique situations or
problems and are normally discarded or replaced after one use. Generally,
four (4) types of single- use plans are used. These are objectives or goals,
programs, projects, and budgets.
  Contingency Plans – These are made to deal with situations that might crop up if
these assumptions turn out to be wrong. Thus, contingency planning is the
development of alternative courses of action to be taken if events disrupt a planned
course of action.

III.Planning at Different Levels in the Firm

Planning is the part of management concerned with creating procedures, rules,

and guidelines for achieving a stated objective. Planning is carried out at both the macro
and micro level. Managers need to create broad objectives and mission statements as
well as look after the day-to-day running of the company.

 Strategic Plan – This is a high-level overview of the entire business, its vision,
objectives, and value. This plan is the foundational basis of the organization and will
dictate decisions in the long-term. The scope of the plan can be two (2), three (3), five
(5), or even 10 years.

Managers at every level will turn to the strategic plan to guide their decisions.
It will also influence the culture within an organization and how it interacts with
customers and the media. Thus, the strategic plan must be forward-looking, robust but
flexible, with a keen focus on accommodating future growth.

The crucial components of a strategic plan are:

 Vision – Where does the organization want to be five years from now? How
does it want to influence the world?

 Mission – The mission statement is a more realistic overview of the company’s

aim and ambitions. Why does the company exist? What does it aim to achieve
through its existence? For instance, a clothing company might want to “bring
high street fashion to the masses”, while a non-profit might want to “eradicate
polio”.

 Values – “I inspire. Go above & beyond. Innovate. Exude passion. Stay

humble. Make it fun.” These aren’t fragments from a motivational speech.
These values will guide managers and influence the kind of employees you
hire. There is no template to follow when jotting down the values. You can
write a 1,000-page essay, or something as simple as Google’s “Don’t be Evil” –
it’s all up to you. There are really no rules to writing the perfect strategic plan.
This is an open-ended, living document that grows with the organization. You
can write whatever you want in it, as long as it dictates the future of your
organization.

 Tactical Plan – This plan describes the tactics the organization plans to use to
achieve the ambitions outlined in the strategic plan. It is a short range (i.e. with a
scope of less than one year), a low-level document that breaks down the broad
 mission statements into smaller, actionable chunks. If the strategic plan is a response
to “What?” the tactical plan responds to “How?” Creating tactical plans is usually
handled by mid-level managers. The tactical plan is a very flexible document; it can
hold anything and everything required to achieve the organization’s goals. That said,
there are some components shared by most tactical plans:

Specific Goals with Fixed Deadlines

Suppose your organization’s aim is to become the largest shoe retailer in the
city. The tactical plan will break down this broad ambition into smaller, actionable
goals. The goal(s) should be highly specific and have fixed deadlines to spur action –
expand to two (2) stores within three months, grow at 25% per quarter, or increase
revenues to Php1M within six (6) months, and so on.

 Budgets
The tactical plan should list budgetary requirements to achieve the aims
specified in the strategic plan. This should include the budget for hiring
personnel, marketing, sourcing, manufacturing, and running the day-to-day
operations of the company. Listing the revenue outflow/inflow is also a
recommended practice.

 Resources
The tactical plan should list all the resources you can muster to achieve
the organization’s aims. This should include human resources, IP, cash
resources, etc. Again, being highly specific is encouraged.

 Marketing, Funding, etc.

Finally, the tactical plan should list the organization’s immediate
marketing, sourcing, funding, manufacturing, retailing, and PR strategy.
Their scope should be aligned with the goals outlined above.

 Operational Plan – This plan describes the day-to-day running of the company. The
operational plan charts out a roadmap to achieve the tactical goals within a realistic
timeframe. This plan is highly specific with an emphasis on short-term objectives.
“Increase sales to 150 units/day”, or “hire 50 new employees” are both examples of
operational plan objectives. Creating the operational plan is the responsibility of low-
level managers and supervisors. Operational plans can be either single use, or
ongoing, as described below:

 Single Use Plans – These plans are created for events/activities with a single
occurrence. This can be a one-time sales program, a marketing campaign, a
recruitment drive, etc. Single use plans tend to be highly specific.

 Ongoing Plans – These plans can be used in multiple settings on an ongoing

basis. Ongoing plans can be of different types, such as:

1. Policy – A policy is a general document that dictates how managers

should approach a problem. It influences decision making at the micro
 level. Specific plans on hiring employees, terminating contractors, etc.
are examples of policies.

2. Rules – Rules are specific regulations according to which an

organization functions. The rules are meant to be hardcoded and should
be enforced stringently. “No smoking within premises”, or “Employees
must report by 9 a.m.”, are two (2) examples of rules.

3. Procedure – A procedure describes a step-by-step process to

accomplish a particular objective. For example, most organizations
have detailed guidelines on hiring and training employees, or sourcing
raw materials. These guidelines can be called procedures. Ongoing
plans are created on an ad-hoc basis but can be repeated and changed as
required.

Operational plans align the company’s strategic plan with the actual day to day
running of the company. This is where the macro meets the micro. Running a
successful company requires paying an equal attention to now just the broad
objectives, but also how the objectives are being met on an everyday basis, hence
the need for such intricate planning.

IV. The Planning Process

1. Define our goals or objectives by identifying desired outcomes or results in very specific
ways.
2. Determine where you stand in relation to set goals or objectives; know your strengths and
weaknesses.
3. Develop premises regarding future conditions; anticipate future events, generate
alternative scenarios for what may happen; identify for each scenario things that may
help or hinder progress toward your goals or objectives.
4. Analyze and choose among action alternatives; list and carefully evaluate possible
actions and choose the alternative most likely to accomplish goals or objectives.
5. Implement the plan and evaluate results; take corrective action and revised plans needed.

V. Planning Techniques and Tools

 Forecasting is the process of predicting what will happen in the future.

 Contingency planning involves identifying alternative courses of action that can be
implemented when an original plan proves inadequate because of changing
circumstances.
 Scenario planning is a long-term version of contingency planning that involves
identifying several alternative future scenarios or states of affairs that may occur, and
then making plans to deal with each scenario should it actually occur.
 Benchmarking is a technique that makes use of internal and external comparisons to
better evaluate current performance and identify possible actions to improve the future.
 Participatory planning includes the people who will be affected by the plans and those
who will be asked to implement them in all planning steps.
VI. Decision-making

A decision is a choice among possible alternative actions. Like planning, decision-making is

a challenge and requires careful consideration for both types of decisions, namely:

Structured or Programmed decisions are routine and repetitive, and the organization
typically develops specific ways to handle them. A programmed decision might involve
determining how products will be arranged on the shelves of a supermarket. For this kind of
routine, repetitive problem, standard arrangement decisions are typically made according to
established management guidelines.

Unstructured or non-programmed decisions are typically one-shot decisions that are usually
less structured than a programmed decision.

Everyday a manager must make hundreds of decisions in the organization. Managers do not
function in a theoretical world but they function within the reality that many things are not
known. There are three (3) conditions that managers may face as they make decisions. They
are the following:

 Certainty – This exists only when the managers knows the available alternatives as well
as the conditions and consequences of those actions. There are little ambiguity and
relatively low possibility of making a bad decision. It assumes that manager has all the
necessary information about the situation. Hence, decisions under certainty mean a
perfectly accurate decision will be made time after time. Of course, decision making
under certainty is rare.

 Risk – A state of risk exists when the manager is aware of all the alternatives but is
unaware of their consequences. The decision under risk usually involves clear
and precise goals and good information, but future outcomes of the alternatives are just
not known to a degree of certainty. A risk situation requires the use of probability
estimates. The ability to estimate may be due to experience, incomplete but reliable
information, or intelligence. Statistical analysis can be applied to
the calculation or probabilities for success or failure.

 Uncertainty – In today's complex environment, most significant decisions are made

under a state of uncertainty where there is no awareness of all the alternatives and the
outcomes, even for the known alternatives. To make effective decisions, managers must
require as much relevant information as possible. Such decisions require creativity and
the willingness to take a chance in the face of such uncertainties. In such situations,
managers do not even have enough information to calculate probabilities and degrees
of risk. So, statistical analysis is of no use. Hence, managers need to make certain
assumptions about the situation to provide a reasonable framework for decision making.
Intuition, judgment, and experience always play major roles in the decision-making
process under conditions of uncertainty.
 Hence, we can say that greater the amount of reliable information, the more likely the
manager will make a good decision. Hence, the manager should make sure that the right
information is available at the right time.

References:
Decision-making conditions. (2010). In Management. Retrieved from
http://ebusinessmgmt.blogspot.com/2010/04/decision-making-conditions.html
Types of Decisions and Decision-making Process. (2008). In Management Innovations. Retrieved from
https://managementinnovations.wordpress.com/2008/12/08/types-of-decisions-decision-making-process/
Planning in Management: Strategic, Tactical, and Operational Plans. (2013). In Udemy Blog. Retrieved from
https://blog.udemy.com/planning-in-management/
What is planning and its Nature, Importance, and Types. (2016). Retrieved from
http://www.edunote.info/2013/08/planning-nature-importance-types.html