The role of planning as a fundamental management function for achieving

effectiveness in business organizations

Katerina Kareska
Faculty of Economics, Goce Delcev Univesity - Stip
E-mail: katekareska@gmail.com

Abstract

The main aim of the paper is to investigate the process of planning as one of the fundamental
management functions and tools in more details. Moreover, the paper makes an overview of all
advantages of implementing the well planning system for achieving best companies’ results.
Planning is a process of setting companies’ goals, making assumptions about the business
environment in which those goals should be archived and making a choice about the actions,
means and ways in order to achieve the goals. Actually, planning is a system activity that
determines when, how and who will perform a separate work activity. In fact, planning is a
process that managers apply to identify and choose appropriate goals and directions for action
for the organization. On the other hand, the plan is a list of steps and procedures for using time
and resources to achieve the specified goals. The fact that planning system has significant
advantages for organizations indicate that each business organization should include planning
at all levels of management, with the aim of making a quality strategy. Accordingly, there is:
operational planning, tactical planning, strategic planning and contingent (multivariate) planning.
It’s no matter what king of planning the company is trying to implement, it’s not an easy job.
Hence, the effectiveness in making a good planning system as a step towards creating the best
corporate strategy is essential for achieving the best business results. In fact, the planning
system minimizes uncertainty, facilitates coordination, improves moral principles, increases
effectiveness and efficiency, facilitates control

Key words: planning, efficiency, business organizations, corporate strategy

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Introduction

The management of each organization has the task of using the available
resources in the best possible way to meet the set goals, and thus greater efficiency
and effectiveness.
Here is the question: how does management manage to do it? The answer is
given through the basic managerial functions:1 planning, organizing, running and
controlling. In this paper, the primary function of management-planning will be
elaborated. Planning determines the vision, mission and goals of the organization,
formulates strategies for achieving goals, develops plans, implements them, and ectr.
Efficiency2, in fact, is a measure of how well or how productively the resources are used
to achieve the goals, while effectiveness3 is a measure of the appropriateness of the
objectives that managers choose to pursue for the organization and the extent to which
it accomplishes those goals.

The concept of planning

Planning is the primary function of management. It is often thought that planning is the
first among the equal functions of management. Each management process begins with
planning that can be defined as a process of setting future goals, assumptions about the
environment in which to be realized and choosing the directions of action, the means
and ways of achieving the goals.4 It is a system activity that determines when, how and
who will perform a separate work activity. In fact, planning is a process that managers
apply to identify and choose appropriate goals and directions for action for the
organization.5 On the other hand, the plan is a list of steps and procedures for using

1
R. E. Griffin, R. J. Ebert, „Business, Prentice Hall, Englewood Cliffs“, New Jersy, 1989, p. 103
2
Gareth R. Jones, Jenifer M. George, “Современ менаџмент”, Глобал комуникации, 2008, стр.6-7
3
Ibid
4
Bahtijarevic- Siber, F., „Organizaciska teorija“, Informator, Zagreb, 1991, str. 231
5
A. Chandler, „Strategy and Structure: Chapters in the history of the American Enterprise“ (Cambridge,
MA: MIT Press, 1962)

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time and resources to achieve the specified goals. Planning should respond to six basic
questions regarding any activity, such as:
• what needs to be done?;
• when is the deadline?;
• when will be done?;
• who will be responsible for this?;
• how to do it?;
• How much time, energy and resources are needed to achieve the goal?.
As a conclusion of the previous elaborations, it can be said that managers are the ones
who plan, that is, they make the plans. Taking stock, without a pre-made plan, is a
completely wrong step. To perform the planning function, managers determine where
the organization is at the moment and where they want it to be, that is, they make
decisions about how the organization can get to the desired situation. Planning means
the formulation of objectives, business policy and plans on the prediction of the factors
and the outcome of the planned action.6 Plans perform the planning function, i.e. steps
are taken to implement the plan. The organizational plan results from planning and it
incorporates the goals of the organization and the strategies that will be implemented to
achieve those goals. Hence, strategies are planning actions to guide organizations
towards achieving mission and goals.7 There are three steps in planning, and they are:8
1. Determining the mission and the goals of the organization (defining the
business and setting the main objectives);
2. Formulation of the strategy (analysis of the current situation and development
of strategies),
3. Implementation of the strategy (allocation of resources and responsibilities for
achieving objectives).

More specifically, the planning process is shown through its phases, which are
explained below in the text

6
Шуклев, Бобек и Дракулевски, Љубомир, „Стратегиски менаџмент“, Економски факултет, второ,
изменето и проширено издание, Скопје, 2001, стр.28-29
7
Ibid, p.10
8
Gareth R. Jones, Jenifer M. George, “Современ менаџмент”, оп. цит., стр.297-300

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1. A systematic approach incorporating itself:
• setting objectives;
• making efforts to undertake activities;
• focusing management on achieving goals;
• The objectives set should be clear, unambiguous, specific and precise so that
the activities can be effective;
• setting quantitative performance for the perpetrators of the activities; And
• setting qualitative performance of the performers of the activities; A
• The goals set should be acceptable, practicable and feasible;
2. Choice of alternative and course of action, which includes:
• availability of many alternatives;
• evaluating alternatives through their strengths and weaknesses;
• objective and scientific consideration of alternatives;
• Choosing the right alternative;

3. Formulation of the basic plan as:

• the primary formulation of the plan;
• secondary plans derive from the baseline;
• secondary plans include detailed policies, rules, programs, budgets, etc. ;
• they indicate the timetable and order of accomplishment of the tasks;

4. Maximum cooperation, which includes:

• the already established plans require great cooperation and high interpersonal
relationships;
• subordinates should participate in the decision-making process;
• high motivation at all levels allows all employees in the organization to be fully
committed to the implementation of plans;

5. Implementation and monitoring of plans, or:

• following selected individual actions, the implementation of the plans follows;

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 • the implemented plans are assessed through their effectiveness;
• the process of feedback is established;
• Effective corrections of the plans are made, if separate deviations or deviations
arise;
• establish a relationship (relationship) between managerial fiction - planning and
control;
• The parallel control of the plans provides a complete idea of the direction in
which organization is moving.

Types of planning

The fact that planning influences the development and operation of organizations
is undeniable. Each organization should include planning at all levels of management,
with the aim of making a quality strategy. Accordingly, there is:
- operational planning,
- tactical planning,
- strategic planning and
- contingent (multivariate) planning.

Operational planning enables the achievement of the set operational objectives

by the sectors, working groups and individuals. These operational goals are precise and
measurable. Hence, the operational plans stem from the management, in support of the
tactical plans. Operational plans can be one-off or implemented continuously with the
general plan. The one-off plans relate to activities that do not repeat multiple times, but
only once, if it is a one-off specific phenomenon. On the other hand, continuous plans
are used over a longer period of time (for example, one year), until they are followed by
revisions and updates. It is important to note that from the management there are
policies for making important decisions, defining the processes from one level to
another, adopting working rules, and so on.
Tactical plans refer to the work of subordinate units in the composition of the
sectors at each level of management. Tactics can be defined as methods, procedures

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and tools to implement strategies for achieving goals. Tactical plans are used to achieve
short-term goals. Mid-level managers are required to undertake broad strategic plans
and, at the same time, to determine specific tactical actions.
Strategic planning is a proactive process of formulating long-term goals, policies
and plans in the envisaged environment.9 Or, more precisely, strategic planning is the
formulation of long-term plans for effectively managing the opportunities and constraints
of the environment in the function of the strengths and weaknesses of the business.10
Strategic plans are long-term plans for two, three, five, and even more years, that is,
plans that the organization wants to achieve at a certain level (ie where it wants to see
in the future). They require engagement from all levels of management.
The highest level of management sets the overall goal, develops a general strategy for
the entire organization, while lower levels, in turn, develop compatible goals and plans
for their realization. The top management's strategic plan represents a framework, and
at the same time sets the dimensions of the lower planning levels.
Contingency planning refers to changes that may occur in the future. Namely, it
is a planning that allows to create more variants of plans for different situations in the
future.11 Contingency plans, as a product of contingency planning, enable management
in organizations to have a flexible and rapid response to changes in critical factors that
affect the organization. It is very important to assess the probability of whether or not a
certain situation will occur.

Advantages of planning

Each management activity starts with planning. Planning allows management to create
and create appropriate plans, to select the best alternative strategies that will
correspond with the goals set. That is why the following advantages are achieved by
planning:
9
Шуклев, Бобек, „Менаџмент на малиот бизнис“, четврто издание, Економски факултет,
Скопје,2006, стр.190
10 th
Donald f. Kuratko, Richard M. Hodgetts, „erpreneurship- A contemporary approach, 5 ed., Harcourt
College Publishers, Fort Worth, 2001, p.468
11
Masic, Branislav i dr., „Menadzment- principi, koncepti I procesi“,Univerzitet Singidunum, cetvrto
izmenjeno i dopunjeno izdanje, Beograd, 2010, str. 131-132

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1. It is the first management function that is aimed at achieving the set goals,
- starts setting goals,
- emphasizes the need for various activities,
- Defines the goals precisely and clearly,
- focus employees on achieving goals,
- is a guide to any organization,
- provides a principle of rationality in the organization;
2. Planning minimizes uncertainty
- it eliminates the uncertainty, ie it reduces it to a minimum,
- minimize the risks in the operation,
- predict future events;
3. Planning facilitates coordination and
- is the basis for defining the organization's general plans,
- directs all activities towards the general goal,
- increases integration between sectors and departments;
4. Planning improves moral principles.
- Creates a working atmosphere and discipline in the organization
- Employees align their behavior with organizational culture,
- Motivates employees for the finest performance of tasks;
5. Planning increases effectiveness and efficiency, respectively
- enables effective and efficient accomplishment of tasks,
- provides optimal use of resources;
6. Planning facilitates control and
- provides a basis for control,
- can not imagine an effective control system without the existence of meaningful
plans,
- provides predetermined goals that are compared with actual performance,
- Planning and control are in an unbreakable correlation;
7. Planning provides a competitive advantadge and
- allows changing the methods of work, but also variations to a certain extent,
which provide a competitive advantage,

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 - it is followed by forecasting that enables the assessment of competitive
activities and facing future challenges,
- leads to the best use of resources, providing better quality, and imply greater
competitiveness in relation to other organizations;
8. Planning encourages innovation, so
- management has the opportunity to suggest ways to improve performance,
- is the basis for making decisions that involve creativity, all of which leads to
innovation.

Disadvantages of planning

Like any other function and planning, of course, there are some shortcomings,
among which are:
1. rigidity that
- involves prior determination of policies, procedures and programs and their
consistency,
- there is no room for individual freedom,
- does not allow individual experimentation;
2. inappropriate planning
- it can happen when the plans have individual goals, and not to cover the goals
of the organization,
- plans may not correspond to the set general objectives,
- there may be bias in the implementation of individual plans;
3. Time, which means that
- Sometimes it takes a long time to gather certain information for preparation of
planning,
- in certain situations, the organization should make quick decisions and
implement plans that may not correspond to the particular situation;
4. Probability, i.e.
- planning is based on forecasting,

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 - estimates can be wrong due to the uncertainty of the future,
- any change in the factors from the environment causes changes in the plans,
- plans do not always reflect real situations,
- when implementing the plans, there should always be a certain reserve;
5. Certainty that suggests that
- can cause a false sense of security for the future,
- the changes of the environment should always be monitored,
- untimely shares;
6. Resources, i.e.
- collecting, analyzing and evaluating individual information sometimes takes a lot
of time, effort and money ... (resources).

Summary

Planning, as a primary function of management, has an important role in every

organization. Namely, planning provides stability, a certain level of safety, efficacy and
directing all efforts towards accomplishing the previously set goals. This means that in
the absence if planning, the organization will face disruption, confusion and insecurity,
which will all lead to inefficient and ineffective working. Management defines planning
as a condition for efficient working. Through planning and accomplishing plans with the
appropriate strategies, the management will succeed in dealing with competition to a
certain degree and thus to achieve efficacy. Planning cannot solve all managing
problems, but it is commonly accepted that with a good plan, half of the work is done.

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Literature

1. A. Chandler, „Strategy and Structure: Chapters in the history of the American

Enterprise“, (Cambridge, MA: MIT Press, 1962)
2. Bahtijarevic- Siber, F., „Organizaciska teorija“, Informator, Zagreb, 1991
3. Donald f. Kuratko, Richard M. Hodgetts, „erpreneurship- A contemporary
approach, 5th ed., Harcourt College Publishers, Fort Worth, 2001
4. Gareth R. Jones, Jenifer M. George, “Современ менаџмент”, Глобал
комуникации, 2008
5. Masic, Branislav i dr., „Menadzment- principi, koncepti I procesi“,Univerzitet
Singidunum, cetvrto izmenjeno i dopunjeno izdanje, Beograd, 2010
6. R. E. Griffin, R. J. Ebert, „Business, Prentice Hall, Englewood Cliffs“, New Jersy,
1989
7. Шуклев, Бобек и Дракулевски, Љубомир, „Стратегиски менаџмент“,
Економски факултет, второ, изменето и проширено издание, Скопје, 2001
8. Шуклев, Бобек, „Менаџмент на малиот бизнис“, Економски факултет,
четврто издание, Скопје,2006

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