BMSH2001

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 it.

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 efficiently
among competing claims, and to make arrangements for the 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 how
an organization goes ahead to attain its goals. Planning is a deliberate and conscious act through
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 future
opportunities and impending threats (prospectively). Planning requires determining 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 logically comes first
before the 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. Control without a plan is meaningless because the plan provides the basis
or standard of control.

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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 of planning, but certainly, a manager always does a certain amount/measure of
planning.
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 (3) 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:

• Standing Plans - These are drawn to cover issues that managers face repeatedly. Such a
standing plan may be called a standard operating procedure (SOP). Generally, five (5) types
of standing plans are used: mission or purpose, strategy, policies, rules, and procedures.
• Single-use Plans - These 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 levels. 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

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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 (5) 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 Adidas’ core values:
Performance, Passion, Integrity, and Diversity – it’s all up to you. There are no rules for 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 broader 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 aims 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 (3)
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.

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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:

• 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.
• 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.
• 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
equal attention to know 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 goals or objectives by identifying desired outcomes or results in very specific ways.
2. Determine where you stand about setting 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.

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• 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 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 problems, 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.

Every day 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 know the available alternatives as well as the
conditions and consequences of those actions. There are little ambiguity and a relatively low
possibility of making a bad decision. It assumes that a 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 of 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

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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 the 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.
http://ebusinessmgmt.blogspot.com/2010/04/decision-making-conditions.html
Types of Decisions and Decision-making Process. (2008). In Management Innovations.
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.
https://blog.udemy.com/planning-in-management/
What is planning and its Nature, Importance, and Types. (2016).
http://www.edunote.info/2013/08/planning-nature-importance-types.html

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