Planning

Introduction

The need for planning derives from businesses’ need to function, thrive, and advance in a highly dynamic environment where change is the norm rather than the exception. The shift could be abrupt, substantial, or gradual and practically invisible. Changes in technology, changes in population and economic distribution, changes in consumer tastes, changes in competition, changes in government policies, and so on are all essential factors of change. These alterations frequently cause a slew of issues and provide numerous hurdles. Most of these changes are imposed on managers, forcing them to alter their actions to capitalise on favourable developments fully or to mitigate the negative effects of unfavourable ones. Successful managers attempt to visualise problems before they become emergencies. Terry states, “Successful managers cope with anticipated challenges, whereas poor managers battle with unforeseen ones.” The distinction is in the planning.” Managers responsible for meeting specific goals do not wait for the future. They shape the course of history. They introduce new activities by removing current issues, anticipating future problems, adjusting goals to accommodate internal and external changes, experimenting with innovative ideas, and taking the initiative to mould the future and create a more desirable environment.

Planning: An Overview

A plan is a prognosis for success. It is a planned course of action. It is a forecast for tomorrow’s activity made today. In other terms, a plan is to devise a strategy for future action to achieve defined outcomes at a stated cost and within a certain time frame. Management philosophers have essentially defined the term in two ways:

1. Based on futurity: “Planning is a trap laid down to capture the future” (Allen). “Planning is deciding in advance what is to be done in future” (Koontz). “Planning is informed anticipation of the future” (Haimann). “Planning is ‘anticipatory’ decision-making” (R.L. Ackoff).
2. As a thinking function: “Planning is a thinking process, an organised foresight, a vision based on fact and experience that is required for intelligent action” ( Alford and Beatty)

“Planning is deciding what to do, how to do it, when and who is to do it.”

– Koontz and O’Donnell

It is deciding what will be done in the future in the present. It is the process of considering before acting. A plan is a specific, written intention with an objective and an action statement. The objective section is the goal, and the action statement is the means to that goal. In other words, objectives provide management with targets to shoot at, whereas action statements provide the arrows to hit the targets. Properly devised plans specify what, where, and how something is to be accomplished.

Types of Plan

Plans commit individuals, departments, organisations, and resources to future actions. Effectively designed organisational goals fit into a hierarchy, allowing the achievement of lower-level goals to enable the achievement of higher-level goals. Because low-level goals lead to the achievement of high-level goals, this process is known as a means-ends chain.

Strategic, tactical, and operational plans are the three major types of plans that can assist managers in achieving the goals of their organisations. Operational plans lead to the accomplishment of tactical plans, which leads to the accomplishment of strategic plans. Managers should develop a contingency plan in addition to these three types of plans in case their original plans fail.

1. Operational plan: The operational goals are the specific outcomes expected from departments, work groups, and individuals. These objectives are specific and measurable.

(a) Process 100 sales applications per week;

(b) Publish 30 books this quarter.

Thus, an operational plan is one that a manager uses to carry out his or her job duties. Supervisors, team leaders, and facilitators create operational plans to help tactical plans succeed. Operational plans can be either one-time or ongoing.

1. Single-use plans: These are for actions that do not reoccur or repeat. A one-time event, such as a unique sales programme, is a one-time use plan because it addresses the who, what, where, how, and how much of an activity. Example: A financial plan: Because it forecasts income sources and amounts, as well as how much is spent on a specific project.
2. Ongoing or continuing plans: These are typically created once and retain their value over time while undergoing periodic revisions and updates. Examples:
   1. A policy: Because it provides a broad framework for managers to follow when making important decisions. Policies are broad statements that describe how a manager should approach routine management tasks. Human resources policies, for example, handle employee recruiting, terminations, performance reviews, salary increases, and discipline.
   2. A procedure: Because it describes how to carry out activities or tasks. Most businesses, for example, have systems in place for purchasing supplies and equipment. Typically, this procedure begins with a supervisor completing a purchase requisition. The demand is then forwarded to the next level of management for review. The demand is approved and sent to the purchasing department. The purchasing department may place an order based on the requested amount, or they may need to collect quotations and/or bids from various vendors before making the order. Procedures give a standardised approach to reacting to a recurrent problem by outlining the steps and the sequence in which they must be completed.

• A rule specifies what an employee can and cannot do. Rules are “do” and “don’t” statements that encourage employee safety, standard treatment, and behaviour. For example, rules governing tardiness and absenteeism enable supervisors to make disciplinary decisions quickly and fairly.

2. Tactical plans: A tactical plan addresses what lower-level troops within each division must perform, how they must do it, and who is in command at each level. Tactics are how a strategy is put into action and made to work. Tactical plans have shorter time limits and smaller scopes than strategic plans. Because they are considered short-term goals, these plans often last one year or fewer. Long-term objectives, on the other hand, can take many years or more to achieve. Typically, the middle management’s role is to take the broad strategic plan and establish particular tactical activities.
3. Strategic plans: A strategic plan is a series of stages planned with the organisation’s overall goals in mind rather than the aims of specific divisions or departments. The mission of an organisation serves as the starting point for strategic planning. Strategic plans look ahead two, three, five, or even ten years to get the organisation from where it is now to where it wants to be. These programmes, which necessitate multilevel involvement, necessitate harmony among all levels of management within the organisation. Lower levels of management generate suitable objectives and plans to attain them, while top-level management develops directed objectives for the entire organisation. The strategic plan for the whole organisation, developed by top management, serves as the framework and establishes dimensions for lower-level planning.
4. Contingency plans: Intelligent and successful management is based on a never-ending quest for adaptation, flexibility, and mastery of changing conditions. Strong management necessitates a “keep all alternatives open” attitude, which is where contingency planning comes in.

Contingency planning entails determining alternative courses of action that can be performed if the original plan becomes insufficient due to changing circumstances.

Remember that events beyond a manager’s control can cause even the most meticulously planned alternate future scenarios to fail. Unexpected difficulties and events are common, and managers may need to adjust their strategies if this occurs. It is advisable to anticipate change during the planning process if things do not go as planned. Management can then create alternatives to the current strategy and prepare them for implementation if circumstances warrant it.

Steps in the Planning Process

Planning is an essential management function. It is academically challenging. It takes significant time and effort on the side of planners. They must use a systematic strategy to avoid dangers, faults, and costly mistakes that could later disrupt the entire organisation. A methodical strategy like this could include the following steps:

1. Establishing objectives: The first step in planning is determining the organization’s aims. Before setting goals, the internal and external conditions affecting the organisation must be thoroughly examined. The derived objectives must clearly state what is to be accomplished, where action should take place, who will perform it, how it will be carried out, and when it will be completed. In other words, managers must establish clear standards for organisational efforts to keep activities on track.
2. Developing premises: After establishing objectives, specifying planning premises is required. Premises are assumptions about the context in which plans are developed and carried out. As a result, assumptions are made about the expected impact of significant environmental elements such as market demand for goods, raw material costs, technology to be employed, population expansion, government policy, and so on plans. In the late 1980s, the demand for fuel-efficient automobiles drove practically all Indian automobile makers to seek collaboration partnerships with foreign manufacturers from Japan, Germany, the United States, and other countries. Management should develop plans while considering the limits imposed by internal and external variables.
3. Evaluating Alternatives and Selection: Following establishing objectives and planning premises, different courses of action must be examined. Import liberalisation and the application of advanced technology have recently spurred manufacturers to develop colour television sets, electronic sets, electronic equipment, films, computers, fuel-efficient vehicles, etc. Thus, changes in government policy, technology, competition, and so on periodically present producers with numerous options for the product they should manufacture. Such alternatives must be carefully weighed against criteria such as costs, associated risks, potential advantages, availability of spare capacity, and so on. Before deciding, the advantages and cons of each potential course of action must be adequately considered.
4. Formulating derivative plans: After deciding on the appropriate action, management must create secondary plans to supplement the primary plan. ‘Derivative plans’ are detailed for numerous departments, units, activities, etc. For example, the fundamental production plan necessitates the availability of plant and machinery, employee training, enough financing, and so on. To ensure the success of a basic plan, the derivative plans must specify the schedule and order in which specific tasks must be completed.
5. Securing cooperation and participation: A strategy’s successful implementation heavily relies on the employees’ enthusiastic cooperation. In light of this, management should include operations personnel in the planning process. Suggestions, objections, and criticisms from operating people assist management in correcting flaws in planning and setting things right from the start. Subordinates participating in planning have the distinct advantage of providing a practical perspective from those closest to the scene of operations. ‘Plans must be set in an atmosphere of close participation and a high degree of unanimity,’ says Koontz. Employees can contribute their best efforts to plans when they are involved. They are also encouraged to execute the plan to the best of their abilities.
6. Providing for follow-up: Plans must be reviewed regularly to guarantee their relevance and effectiveness. Specific facts not previously considered may come to light throughout the implementation plans. Plans must be revised in light of these new circumstances. Plans may become out-of-date and useless if they are not followed up on regularly. Furthermore, such a step ensures that the implementation plans are on track. Management can detect flaws early and take appropriate corrective action. A constant examination of plans also aids in developing practical plans in the future, eliminating mistakes made while implementing prior plans.

Characteristics of Planning

Planning includes several characteristics:

1. Planning is goal-oriented. All plans begin with objectives, which provide the essential parameters for planning activities. Planning is meaningless unless it contributes positively to the attainment of defined goals.
2. Planning is a primary function: Management is built on planning. It is a management process exercise for parents. It serves as an introduction to business activity.
3. Planning is all-pervasive: Planning is a function performed by all managers. It is required and practised at all levels of management. Everything a manager does involves planning. Before starting a new firm, managers must plan.
4. Planning is a mental exercise. It requires imagination, forethought, and solid judgment. Managers must forsake guessing and wishful thinking while planning.
5. Planning is a continuous process: Planning is an ongoing process. It is a never-ending task. After making plans for a specified period, they are put into action.
6. Planning involves choice: Planning entails making decisions between several courses of action.
7. Planning is forward-looking. It entails anticipating and planning for the future, looking into it, analysing it, and planning for it.
8. Planning is flexible: Planning is based on the prediction of future events. Because the future is uncertain, plans should be somewhat adaptable.
9. Planning is an integrated process: Plans are organised logically, with each lower-level plan serving to achieve higher-level goals. They are highly interdependent and supportive of one another.

• Planning includes efficiency and effectiveness dimensions: Plans attempt to deploy resources cost-effectively and efficiently. They also attempt to achieve what has been specifically targeted. The effectiveness of plans is typically assessed by how much they can contribute to the intended goals.

Traditional Objective Setting

An aim is a precise step, a milestone that allows you to achieve a goal. Setting goals necessitates an ongoing process of research and decision-making. Setting goals requires a solid understanding of yourself and your unit.

Strategic planning is done at the highest levels, whereas operational planning is done by other management. The first stage in operational planning is to define objectives, which are the outcomes desired at the end of the budget (or other prescribed) cycle.

Setting the correct goals is essential for effective performance management. Higher profitability, shareholder value, and customer pleasure are all excellent goals, but they don’t instruct managers what to do. “They don’t specify priorities or focus.” Such goals do not chart the path ahead – the discovery of improved value and solutions for the consumer.”

The goals must be:

1. Focused on an outcome rather than an activity
2. Consistent
3. Specific
4. Measurable
5. Time-related
6. Attainable

The classic goal-setting process was developed in the industrial business in the late 1800s: You must do A, B, C, and D to manufacture X units at the end of the assembly line. While this strategy works effectively in manufacturing, it produces limited and short-term outcomes in business.

The issue with this strategy is that it solely considers the process—there is no consideration of the participant. However, being the right person is just as vital as doing the right things for long-term success. We will never build a successful habit unless we change our thinking, behaviour, and expectations fundamentally.

Strategic Management

“Strategic management is an ongoing process that evaluates and controls the company’s business and the industries in which it is involved; assesses its competitors and sets goals and strategies to meet all existing and potential competitors; and then reassesses each strategy annually or quarterly (i.e. regularly) to determine how it has been implemented and whether it has succeeded or needs replacement by a new strategy to meet changed circumstances,” writes Robert Lamb.

Thus, strategic management can be defined as the process of developing, implementing, and assessing cross-functional decisions that enable an organisation to attain its long-term goals. It is the process of determining an organization’s mission, vision, objectives, and goals; formulating policies and plans, frequently in the form of projects and programmes, to achieve these goals; and allocating resources to implement the policies and plans, projects and programmes.

Strategic management is a degree of managerial action that comes after goal setting and before tactics. A business organization’s overarching direction is provided by strategic management.

Strategy Formulation

Strategic management is comprised of three major processes, which are as follows:

1. Conducting a situation, self-evaluation, and competition analysis: internal and external; micro- and macro-environmental.
2. Objectives are established along with this assessment. These goals should be aligned with a timetable, some short-term and others long-term. This includes developing vision statements (a long-term picture of a possible future), mission statements (the organization’s role in society), overall company objectives (both financial and strategic), strategic business unit objectives (both financial and strategic), and tactical objectives.
3. These objectives should suggest a strategic strategy based on the circumstance analysis. The plan explains how to attain these goals in detail.

This three-step plan development method is also known as determining where you are now, where you want to go, and how to get there. These three questions form the foundation of strategic planning.

Strategy Implementation

Strategic implementation entails the following steps:

1. Allocating and managing adequate resources (financial, personnel, operational support, time, technology support)
2. Establishing a chain of command or another structure (such as cross-functional teams)
3. Assigning specific duties or processes to particular individuals or groups
4. It also entails process management. Monitoring results, comparing to benchmarks and best practices, evaluating the efficacy and efficiency of the process, controlling for deviations, and making process improvements as needed are all part of this.
5. Implementing specific programmes involves obtaining the necessary resources, building the process, training, process testing, documentation, and integration with (and/or conversion from) legacy processes.

Thus, during the strategy implementation process, a manager must address numerous issues, such as those involving human relations and/or employee communication. The most challenging implementation problem at this stage is usually marketing strategy, emphasising the appropriate timing of new products. An organisation with effective management should try to carry out its plans without alerting its competitors.

To be effective, a policy must be followed consistently by everyone in an organisation, including management. This needs to happen at both the tactical and strategic levels of management.

Strategy Evaluation

When assessing the efficiency of an organisational strategy, it is critical to do a SWOT analysis to determine the entity’s strengths, weaknesses, opportunities, and threats (both internal and external). This may necessitate taking preventative precautions or possibly changing the entire system. Johnson and Scholes provide a paradigm in corporate strategy in which strategic options are evaluated against three primary success criteria:

1. Applicability (Will it work?)
2. Feasibility (is it possible to make it work?)
3. Acceptance (Will they use it?)

Let us examine each one individually.

1. Suitability: Suitability is concerned with the strategy’s overall rationale. The key question is whether the strategy will address the key strategic issues highlighted by the organization’s strategic position.
   • Does it make financial sense?
   • Would the organisation benefit from economies of scale, economies of scope, or economies of experience?
   • Is it appropriate in terms of environment and capabilities?

The following tools can be used to assess suitability: (a) ranking strategic choices, (b) Decision trees, (c) What-if analysis

2. Feasibility: The feasibility of a strategy is concerned with whether the resources required to accomplish it are available, can be produced, or obtained. Funding, people, time, and information are all examples of resources.

The following tools can be used to assess feasibility: (a) cash flow analysis and forecasts, (b) break-even analysis, (c) Resource allocation analysis

3. Acceptability: Acceptability concerns the recognised stakeholders’ (primarily shareholders, employees, and consumers) expectations of the expected performance results, which can be return, risk, and stakeholder reactions.
   1. Return is concerned with the benefits anticipated by the stakeholders (financial and non-financial). Shareholders, for example, would anticipate a growth in their wealth, employees would anticipate advancement in their careers, and customers would anticipate better value for money.
   2. Risk is concerned with the likelihood and repercussions of a strategy’s failure (financial and non-financial).
   3. Stakeholder reactions are concerned with anticipating stakeholders’ anticipated reactions. Shareholders may object to the issuance of new shares, employees and unions may object to outsourcing for fear of losing their employment, and customers may have worries about a merger in terms of quality and support.

The following tools can be used to assess acceptability: (a) what-if analysis, (b) mapping of stakeholders

General Approaches

In general, two major approaches to strategic management are opposed but complement one other in various ways:

1. Sociological Approach: The Sociological Approach focuses on human interactions.

The following assumptions are made: (a) bounded rationality, (b) satisfying behaviour, and (c) profit sub-optimality.

Google Inc. is an example of a company that operates in this manner.

2. Industrial Organizational Approach: The Industrial Organizational Approach is an economic theory-based approach. It addresses topics such as competitive rivalry, resource allocation, economies of scale, etc.

Assumptions include (a) rationalism, (b) self-discipline, and (c) profit maximisation.

Types of Strategies

Due to varying aims, most (Large) organisations have several strategies developed and implemented in several divisions.

1. Corporate strategy: The overarching strategy of the diversified organisation is referred to as corporate strategy. Such a corporate strategy addresses the concerns of “Which businesses should we be in?” and “How does being in these businesses create synergy and/or add to the corporation’s overall competitive advantage?”
2. Business strategy: The aggregated strategies of a single business firm or a Strategic Business Unit (SBU) in a diverse corporation are called business strategy. According to Michael Porter, a firm must have a business strategy that involves either cost leadership, differentiation, or focus in order to attain a sustainable competitive advantage and long-term success in its chosen venues or industries.
3. Functional strategies: Marketing strategies, new product development strategies, human resource strategies, financial strategies, legal strategies, supply-chain strategies, and information technology management strategies are examples of functional strategies. The emphasis is on short and medium-term plans and is limited to the functional domain of each department. Each functional department strives to contribute to achieving general corporate goals, so their tactics are influenced by broader corporate goals. Many businesses believe that a functional organisational structure is inefficient for organising activities, hence they have reengineered based on processes or SBUs. A strategic business unit is a semi-autonomous unit in charge of budgeting, new product decisions, recruiting decisions, and price setting. Corporate headquarters views an SBU as an internal profit centre.
4. Operational strategy: Peter Drucker promoted operational strategy in his Management by Objectives (MBO) theory. It is very focused on day-to-day operational activities such as scheduling criteria. It must function within a budget but cannot change or create that budget. Business-level strategies inform operational-level strategies, which in turn inform corporation-level strategies.

Because of developments in information technology, some businesses have reverted to a more straightforward strategic structure since the millennium’s turn. Knowledge management systems, it is believed, should be utilised to share information and achieve common goals. This process is thought to be hampered by strategic divisions. This concept of strategy has been popularised by Carpenter and Sanders’ textbook under the heading of dynamic strategy. This work, which relies on the work of Brown Eisenhart and Christensen, depicts firm strategy, both business and corporate, as requiring constant strategic change and the seamless integration of strategy development and implementation. Change and implementation are typically included in the strategy via the staging and pacing components.

Elements of Strategic Management

By the 1970s, Ellen-Earle Chaffee had summarised the fundamental principles of strategic management theory.

1. Strategic management entails the organization’s adaptation to its commercial environment.
2. Strategic management is dynamic and complicated. Change generates new combinations of circumstances that necessitate unstructured, non-repetitive reactions.
3. Strategic management has an impact on the entire organisation because it provides direction.
4. Strategic management entails both strategy formulation (what she referred to as content) and strategy implementation (what she called the process).
5. Strategic management is planned and unplanned in equal measure.
6. Strategic management occurs on multiple levels, including overarching corporate strategy and particular business plans.
7. Strategic management requires conceptual as well as analytical reasoning processes.

Causes of Strategy Failure

There are numerous reasons why strategic plans fail, particularly:

1. Failure to comprehend the customer:
   • What motivates them to buy?
   • Is there a genuine demand for the product?
   • Insufficient or improper marketing research

2. Inability to forecast how the environment will react: Many factors could be at play. Examples:
   • Failure to predict what competitors will do or whether the government will act.
   • Combative brands
   • Price wars
3. Overestimation of resource competence: Managers should be able to evaluate the following to avoid overestimation of resource competence appropriately.
   • Can the existing employees, equipment, and processes support the new strategy?
   • Failure to train new employees and managers

4. Lack of coordination: The following are possible explanations:
   • Inadequate reporting and control links
   • Inflexible organisational structure

5. Failure to secure senior management commitment: Possible causes include the following:
   • Failure to include management from the outset
   • Failure to gather sufficient firm resources to complete the task

6. Failure to achieve employee commitment: Possible causes include the following:
   • The new approach was not adequately explained to employees.
   • No incentives were provided to employees to adopt the new plan.

7. Underestimation of time requirements: This could be due to a lack of critical path analysis.
8. Failure to stick to the plan: The following are possible explanations:
   • There is no follow-through after initial planning;
   • there is no tracking of progress against the plan; and
   • there are no penalties for the foregoing.

9. Inability to manage change: The following are possible explanations:
   • A lack of awareness of internal resistance to change
   • A lack of vision on the relationships between processes, technology, and the organisation

• Ineffective communication: The following are possible explanations:
  • A lack of information exchange among stakeholders
  • Stakeholders and delegates are excluded.

Limitations of Strategic Management

Although having a sense of direction is crucial, it can sometimes hinder creativity, mainly if strictly enforced. Fluidity can be more vital than a perfectly calibrated strategic compass in an uncertain and ambiguous world. When a plan is ingrained in a company’s culture, it can lead to groupthink. It can also lead to an organization’s definition becoming overly restricted. Marketing myopia is an example of this.

Many strategic management theories experience only brief periods of popularity. A description of these theories unavoidably demonstrates survivorship bias (itself an area of research in strategic management). Many theories are either too narrow in scope to support an entire company strategy, or they are too vast and abstract to be relevant to specific situations. Populism can impact a theory’s life cycle and lead to its adoption in inappropriate settings. For a more critical view of management theories, see business philosophies and popular management theories.

Gary Hamel created strategic convergence in 2000 to describe the limited scope of rivals’ strategies in different situations. He bemoaned that strategies converge more than they should since the more successful ones are replicated by corporations that do not grasp that the strategic process entails developing a unique strategy for each situation.

In keeping with a joint marketing slogan, Ram Charan believes that strategic preparation should not take precedence over execution. While not exactly what he meant, “Just do it!” is a statement that comes to mind while dealing with analytical paralysis.

10 Review Questions

1. What is the primary reason businesses need to engage in planning?
2. How do successful managers differ from poor managers in their approach to challenges?
3. Define a “plan” according to management philosophers.
4. Describe the hierarchy of plans and how operational, tactical, and strategic plans relate to each other.
5. What are the key characteristics of a contingency plan?
6. List and briefly explain the steps in the planning process.
7. What are the characteristics of planning as a management function?
8. How does traditional objective setting differ from modern approaches to goal-setting in business?
9. What are the three major processes involved in strategy formulation according to strategic management?
10. Explain the difference between corporate strategy, business strategy, and functional strategy.