As discussed previously, business planning is a concept that bridges the current status or position of an organisation to the future image it aspires to be/achieve. By improving the plans, organisations could help improve leadership and management as well. One can plan better by devising plans (focusing on strengths and the core morals and ideals of the organisation), defining success (the vision of where one sees the organisation in the coming years and factors driving it) and putting the plans in motion while keeping the dynamic and uncertain future in mind.
In general, there are four main types of planning:
1. Strategic Planning.
This type of planning includes a high-level overview of the entire business of the organisation and serves as the foundation that dictates the long-term goals of an organisation. Its scope ranges from three to ten years and includes the organisation’s mission, vision and values. It helps make important and bug decisions in an organisation while remembering the big picture.
It is conducted by the top management (includes chief executive officer, president, vice-presidents, General Manager, etc) and deals with the total assessment of the organisation’s strengths, capabilities, weaknesses and objective of achieving growth, improving profitability and customer service and boosting return on investments.
The top-level management develops the organisational objectives so that the middle-level and lower-level managers can create plans aligning with those objectives.
2. Tactical Planning.
The main idea of tactical planning is to support strategic planning (made by high-level management) by providing tactics for the organisation to use to achieve objectives that lie within the outlines framed by the strategic plan. Tactical plans are concerned with the functionality of lower-level departments to fulfil their parts of strategic plans by creating a set of well thought out actions that take a shorter amount of time to fulfil objectives. They are more narrow (in terms of scope) than the strategic plan but still help bring the organisation closer to its long term goal.
3. Operational Planning.
This focuses on HOW things need to happen by describing the day-to-day running of the company. They can be either single-use plans which are only used once or standing plans which can be used over and over again. They are made by the low-level management, are highly detail-oriented and deal with only the current, short-range activities that keep the organisation afloat. They cover a span of a week up to a year.
Most operational plans are divided into functional areas and determine how a specific job can be done in the best and most efficient possible way.
4. Contingency Planning.
These are made when changes are needed to be made or in times of unexpected situations arising. Contingency plans help in unforeseen situations which could not have been anticipated and are referred to as special types of planning by business experts sometimes.
Contingency plans are risky and short term and time plays an important role in the implementation of this plan. Decisions made during this are usually non-programmed with a few exceptional cases.
One might wonder what the need for planning is. Planning offers a vast expanse of advantages, a few of them being:
a. Helping Management.
Planning helps increase efficient use of resources, reduces downtime for machines and also lowers the idle time for workers. It helps management run the organisation with a minimum cost of operations.
b. Effective Utilisation of Resources.
Proper planning helps practice proper and effective utilisation of resources with minimum wastage. This consequently lowers the idle time of workers, downtime of machines and hence results in minimum cost of operations.
c. Primacy.
Despite having other managerial functions like organising, controlling, directing, etc. which helps achieve the organisational goals, planning precedes all these managerial functions by setting the objectives required for all group effort.
d. To help Motivate.
When plans are communicated clearly and well to the employees, they all feel a part of the decision-making process and have a sense of belonging. This involvement helps increase their motivation.
e. To offset changes or uncertainty
The future is uncertain and the environment is dynamic. To counter this, organisations anticipate the future scenarios and plan ahead of time to cope with the changes and keep growing as an organisation. Planning does not stop the changes but rather gears the organisation to take suitable actions to be able to meet the objectives it sets.
f. Facilities Control and Decision-making.
Planning helps provide performance standards as well as standards for measuring growth. By comparing the actual performance of an organisation with the standards, management can take control of the course of action being followed to achieve objectives and implement changes keeping the best interest of the organisation in mind.
Planning also provides a framework for decision making and the constant feedback and evaluations help take corrective measures which lead to better decision-making.
g. Planning encourages innovation and creativity while also improving competitive strength.
Knowing the benefits of planning, one must also know its limitations to think of ways to fix them.
Some of the limitations of planning are:
I. Lack of Accurate Information.
The quality of planning is determined by the quality of forecast of future events and since no management can perfectly/accurately predict the future, planning may pose problems in operation.
II. Internal Inflexibilities.
Managers/Management works with a set of given variables while planning which often provides less flexibility in planning than what is needed to cope with the changes in future. The inflexibilities can be psychological, in form of policies and procedural inflexibilities or capital investment.
III. External Inflexibilities.
Apart from internal inflexibilities, managers face external inflexibilities which are out of their control, such as political climate, trade unions and technological changes.
IV. Problems of Change.
Present conditions usually majorly influence the planning and tend to overshadow future needs. This provides room for error in judgement at times and can invalidate the efficiency of an existing plan in future due to varying conditions.
V. Cost/Uneconomical Nature.
Planning is expensive and management must ensure that the cost of planning is not in excess of its contribution.
VI. Misdirection.
Planning may be used by individuals or groups to serve their own interests by influencing the objectives being set and plans being formulated. This can hamper the purpose of planning and act as a limitation to the growth of the organisation.
Now that we have a rough idea of the overall concept of planning and its need, we would be more than willing to answer any questions you might have and clear any doubts! Feel free to ask us in the comments section or give us feedback!
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