Management Planning

planning process clipart


♦  Planning is the main starting function of management.

♦  Planning is a process that involves the selection of tasks, objectives and actions for their implementation and it requires decision, i.e. selection of alternative future courses of action.

♦  Plans provide rational approach to the realization of previously selected goals.

♦  Planning has to ensure the company the following:

•  to know what is there and what are the main areas of activity,

•  to know which are good and which bad sides,

•  to know what opportunities and threats poses the external environment,

•  to know how to recognize and establish appropriate standards of business conduct.

♦  It provide certain rules of conduct that must be followed by all employees in fulfilling the goals of the company.

♦  According to this, it is necessary to answer the following questions: “Where is the company now?” and “Where it wants to be in the future?”.

♦  Planning represents a bridge between the current and desired situation of the company.

♦  Without planning, business is left to chance.

♦  Intelligent planning is intellectually challenging process because it searches to consciously determine courses of action and to base decisions on purpose, knowledge and accurate assessments.

♦  Each plan and all its accompanying plans should contribute to the achievement of goals and objectives of the company.

♦  This follows from the nature of the organized enterprise which exists because of the fulfillment of a common purpose of owner, manager and employee through premeditated cooperation.

♦  Planning logically precedes the execution of all other managerial functions because manager has to plan in order to know what types of organizational relationships and personal qualifications are required, how he/she should lead employees and what type of control should he/she apply, thus, all the management functions must be planned first.


♦  In accordance with the already known hierarchy of management in the company.

♦  There is also the planning hierarchy:

•  top management is engaged in strategical planning;

•  middle management brings tactical plans;

•  operational plans are tasks of low management.

♦   The planning process starts from the top of the organizational pyramid and continues to lower levels, i.e. top management identifies the key preconditions of planning (mission, objectives, strategy) that are at lower levels reformulated into the plans.Strategic planning deals with the long term survival and development of enterprises in accordance with the principles of efficiency and effectiveness.

♦   Strategies define a set of actions and resources needed to achieve strategic goals.

♦   Their purpose lies in maximizing the benefits that a company has compared to competitors, as well as favorable opportunities occuring in the environment.

♦   At the tactical level, strategic objectives are converted into specific objectives of organizational units of the company (marketing, financial, production and other plans).

♦   This procedure defines principal activities that each of these functional units must perform in order to achieve the strategic objectives.

♦   The operational planning level is responsible for the establishment of specific procedures and processes, i.e. tasks that must be performed in a particular period of time, by taking into account the available resources.

♦   Time, to which some style of planning applies, reduces from the top to the bottom of the management pyramid.

♦   Managers plan the use of resources to prevent their exhaustion or destruction, together with the possible consequences.

♦   Managers plan also the solution of these problems by defining replacements or substitutes of critical resource, so it is necessary to plan how to shift from one resource to another.

♦   Planning makes managers conscious of all possible future changes and opportunities how to use resources more effectively.


♦   Plans can be divided as it follows:

•  purposes or mission,

•  objectives,

•  strategies,

•  policies,

•  procedures,

•  rules,

•  programs and

•  budgets.

♦   Mission or purpose defines the basic function or task of the company.

♦   Every kind of organized activity should have purpose or mission.

♦   Purpose of an industrial enterprise is the production and distribution of goods and services.

♦   Objectives are endpoints towards which activities are focused.

♦   They do not only represent the endpoint of planning, but also the completion towards which organization, working fill, accounting and controlling are directed.

♦   Each department can have its own goals that contribute to the achievement of goals of the enterprise.

♦   These objectives are constant, but differ because the production department cannot ensure the achievement of enterprise objective.

♦   Managers more often use the term strategy to refer to a wide range of company’s operations.

♦   Strategy is defined as determination of the main long-term goals of an enterprise, adoption of courses of action and allocation of resources necessary for their implementation.

♦   Strategy seeks to identify and acknowledge, through a system of major objectives and policies, the perceived image of the company.

♦   Strategy seeks to accurately determine how the company will perform its tasks, and this is actually the assignment of many major and minor supporting programs.

♦   Its usefulness in practice and importance in planning direction justifies the extrication of strategy as a special type of plan.

♦   Policies are plans because they represent general statements or agreements that lead or direct reflections in decision-making.

♦   Policies define the area of decision-making, ensure the consistency of purposeful decisions and contribution to their realization.

♦   Policies allow issues to be resolved before they become problems, what makes the recurrent analysis of the same situations unnecessary.

♦   Policies exist at all levels of organization and extend from the fundamental policies of enterprise through the policies of head departments to small policies applicable to the smallest segments of organization.

♦   There are many types of policies, for example the employment policy, the policy of motivation, etc.

♦   Policies are guidelines for decision-making, because they allow a certain freedom in decision-making, otherwise policies would be rules.

♦   The establishment of integrated policy in order to realize enterprise’s objectives is difficult because: a large number of managers is involved in the creation and interpretation of policy, what necessarily leads to different variations in comprehension; policy is difficult to control, because real policy is difficult to determine and desired policy is not always clear; it is rarely defined in writing.

♦   Procedures represent plans that affirm some required procedure in future activities.

♦   Those are chronologically arranged lines of required procedures or guidelines for action, not for thinking, which specify the way in which a specific work has to be done.


♦   According To Charles W. L. Hill, the strategic planning process can be divided into five basic steps.

♦   The first one is selection, the selection of company’s mission and its main objectives.

♦   The second one is the analysis of company’s external environment in order to identify opportunities and threats.

♦   The third one is the analysis of internal environment in order to identify strengths and weaknesses.

♦   The fourth one is the choice of strategy based on SWOT analysis.

♦   The fifth one is the implementation of strategy.

♦   The objective of external and internal environment analysis, and then of the selection of appropriate strategy, represents, in fact, the formulation of strategy.

♦   The implementation of strategy includes the design of appropriate structure and control system so that the chosen strategy could be implemented.

♦   Each round of the planning process begins with the company’s mission and its main goals.

♦   Mission is followed by the external and internal analysis and strategy choice.

♦   The implementation of strategy represents the next step; it includes the design of organizational structure and system control as a necessary condition for its successful implementation.

♦   Many organizations go through this kind of process every year, but that does not mean that organization chooses a new strategy every year.

♦   In many cases, the results of this process, which is updated every year, are reformed strategy and organizational structure that are currently applied.

♦   That also includes, in many organizations, the outset into the budgeting process for the upcoming year.


♦   Strategic planning is used to allocate resources within the enterprise.


The value, i.e. the importance of planning can be derived of its four main aspects, namely:

♦    Contribution of Planning to Goals and Objectives Each plan and its accompanying plans should contribute to the achievement of company’s goals and objectives.

♦    This understanding stems from the nature of organized enterprise which exists because of the fulfillment of group purpose through premeditated cooperation.

♦    Priority of Planning among Management Tasks Management tasks in organization, personnel filling, leadership and control are designed to support the achievement of company’s goals.

♦   Thus, planning logically precedes the execution of other management functions. Planning and control are inseparable, any attempt of control without planning is meaningless, because there is no way to detect if it is heading in good direction.

♦    Omnipresence of Planning Although the nature and extent of planning varies with the authorities of each manager and with the nature of policies and plans, planning is a function of all managers.

♦    If managers do not have a certain degree of freedom in decision-making and planning, they are not real managers.

♦    Effectiveness of Created Plans. The effectiveness of plan refers to the level on which company’s purpose or goals are achieved, while its efficiency refers to its contribution to purpose and objectives compared to the costs and other factors required for its development and execution.

♦   Plans are efficient if they fulfill their purpose with reasonable costs that are measured not only by time and money, but also by the degree of individual and group satisfaction.

♦   Before planning and conducting each significant change, it is necessary to understand the current situation.

♦   Therefore, it is necessary to conduct a universal revision, to examine all policies and to be familiar with all the procedures and tools, as well as characteristics of personnel in order to determine the strengths and weaknesses of each department.


♦   The main purpose of planning is to master two areas of problem, whose importance for business management is constantly growing.

♦   Needs for continuous adjustment: due to rapid changes in social, technological and economic size, likelihood of unforeseen events also increases.

♦   Quick changes require quick reactions to the first signs of changes in the environment.

♦   The complexity increase in enterprise: in general, the size increase of enterprises and the diversification of products and markets require new business structures.

♦   Such a movement leads to the decentralization of decisions, what results in many problems of orientation and coordination.

♦   This can be solved only by timely coordination of individual goals of partial areas.

♦   If some circumstances, which materially affect the business environment, arise and these circumstances could not, objectively, have been included in the plan, it is necessary to change the plan.

♦   The plan change is not rational if the time period to which the plan refers lasts a little longer than required time for changing the plan.

♦   Because of this, the methods of planning should foresee and determine all cases in which the plan can be changed (‘re-balance’).

♦   In general, the re-balance is justified in case if an eternal, important and timely change of the conditions occurred, regarding the implementation of recurrent plan.

♦   The methods of planning determines who has the right to take action in relation to the revision of plans.

♦   Operational plans, in principle, can not be changed during their implementation.


♦   Strategic planning has the objective to create company’s business policy.

♦   The main question is – where are we going, how we intend to get there and when?

♦   The policy of assortment is one of the major policies on which planning is based, while its foundations need to be strategically determined.

♦   Planning significantly differs according to company’s policy of assortment.

♦   Situation concerning the policy of distributional channels is similar.

♦   Also, it is important to state whether the company is strategically oriented towards the development of one form of distribution channel, or there is an idea of the development of competitive advantage through the portfolio of different distribution channels.

♦   Business policy needs to be strategically defined in relation to demands and debits, but also to costs.

♦   These are just some questions to which strategic and tactical plans should clearly give the answer.

♦   Only then can the operational planning start.

♦   Operational planning is the task of middle and low management and takes place in close cooperation with the controlling service.

♦   Controlling has the task to synchronize all planning levels into coherent annual projection near the future, with clearly defined steps how to achieve it.

♦   Operational planning is planning at the level of one calculation period.

♦   It is important that operational planning is done at the same time and with the same purpose and reason.

♦   This is a chance for a ‘thorough inventory’ of all the activities in the past year.

♦   Given the fact that planned activities for the next year should be fully completed at least a month before the end of this year, it’s clear that operational planning is actually the process of predicting results of this year.

♦   Everyone who is involved in the planning process in any part should objectively analyze the real situation and real capabilities expected in the following year.


♦   Tactical plans are operational plans that refer to smaller periods of time, as well as to the narrower segments of business and planning within the department.

♦   In practice, these weekly and daily plans are implemented within some of the company’s departments: purchase, production, sale, etc.

♦   They represent elementary performance of operational plans and are coordinated with them.

♦   Most of the authors place tactical planning in the middle of management pyramid, in which it is preceded by strategic, and followed by operational planning.

♦   Strategic and tactical planning are the tasks of top and high management (in cooperation with controlling), whose one of the main roles is creating vision and strategy by which that vision becomes reality.

♦   The appointed strategy has to be transferred to lower management levels and further all society.

♦   In practice, unfortunately, it often happens that all three levels of planning are not enough (or at all) actively connected, but everything remains only ‘in words’.

♦   Societies are often not completely sure how to clearly define that connection.

♦   Strategic and tactical planning are the tasks of top and high management (in cooperation with controlling), whose one of the main roles is creating vision and strategy by which that vision becomes reality.

♦   The appointed strategy has to be transferred to lower management levels and further all society.

♦   In practice, unfortunately, it often happens that all three levels of planning are not enough (or at all) actively connected, but everything remains only ‘in words’.

♦   Societies are often not completely sure how to clearly define that connection.

♦   It is important that plans are integrated and coordinated.


♦   In practice, errors occur frequently when short term plans are created without considering long-term plans.


♦   In selecting time range, the principle of solutions attachment must be applied.

♦   It says that logical planning necessarily encompasses future period of time, in order to achieve the today’s decisions by number of actions.

♦   This principle implies that long-term planning is not planning of future solutions, but of future consequences of today’s decisions.

♦   Short-term plans are often created regardless of long-term plans.

♦   That is a serious mistake, since any short-term plan should not be created if it does not contribute to the implementation of the relevant long-term plan.

♦   Otherwise, it comes to the loss of production factors.

♦   Responsible managers must constantly consider and reconsider current solutions to determine whether they contribute to the long-term programs.


♦   Subordinate managers must continually familiarize with long-term plans in order to make decisions in accordance with them, what is much easier than to correct discrepancies.


♦   For planning are responsible:

•  directorial board (supervisory board),

•  chief executive officer (CEO),

•  executive board,

•  line management,

•  individual planners,

•  planning board and

•  planning groups.

♦   Directorial board determines mission, goals and strategies and is responsible for their implementation.

♦   Chief executive officer is responsible for implementing a specific strategy and has a crucial role in the overall planning process.

♦   Executive board prepares all the necessary data for CEO and evaluates various strategy plans that CEO elaborates on the basis of these data.

♦   Line managers are source of information necessary for planning and planning executors.

♦   They define, analyze and recommend alternative programs and create budgets; after everything is approved, they implement the mentioned programs and budgets.

♦   Individual planners are planning holders in their organizational units.

♦   The planning department consists of a group of planning specialists organized in management services of appropriate levels.

♦   They cooperate with department or sector managers.

♦   Planning groups consist of line managers, and are organized by their area of specialization (sales planning groups, production planning groups, etc.).

♦   Their responsibility is the definition and analysis of alternative goals of their units, as well as the definition of key areas of actions for achieving the objectives.

♦   Unlike traditional, centralized modes of planning function organization, modern companies incline to decentralization and involvement of staff at all levels into the planning process.

♦   Thereby, the responsibility is distributed.

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