Planning and Plans in Business Organizations

Management Process Function of Planning and Plans
Planning is a management function involved in setting an organization's goals and objectives, and deciding how best to achieve those goals. Planning is about managing resources and priorities in an organized way. Planning, according to KOONTZ is deciding in advance what to do, when to do, and how to do. Planning bridges the gap from where we are and where we want to be, and involves systematic thinking about ways and means for accomplishing long-term goals.

Planning in Organizations
Planning is the function of management that involves setting direction, and setting objectives then determining a course of action for achieving those objectives. Planning is looking ahead into the future and predicting possible trends or occurrences which are likely to influence the working situation. Planning requires that managers be aware of environmental conditions facing their organization and forecast future conditions through situation analysis. It also requires that managers be good decision makers. The planning function in the organization can be grouped into categories such as business planning, strategic planning, operational planning and functional/tactical planning. The output of planning are plans that commit employees in different parts of the organization, and organization resources to specific actions. The different planning processes have different roles and time horizons, but their outputs (plans) are integrally related and must be managed systematically for the organization to be successful.

Plan Types
A plan is a detained proposal of doing or achieving something. It is an intention or decision about what one is going to do. Plans can be categorized into the following types:

Type #1: Objectives - A plan of Objectives is a plan of the future that will serve to provide direction for subsequent activity. Objectives can be organized in a hierarchy relative to an organization's goals hierarchy. Primary or basic objectives are determined by the top management. Each department has its own objectives within the framework of basic goals.
Type #2: Policies - A policy is a standing plan or answer to recurring questions. It is a continuing decision which applies to repetitive situations. It is a guide to action or decision of a manager. A policy helps keep work in line with objective. Policies are directives providing continuous framework for executive actions on recurrent managerial problems. Policies take the form of general statements to lead managerial activity through proper channel towards the objective. For instance, a firm has a policy of promotion from within. If a vacancy arises, naturally the first preference is given to existing employees if they meet the job requirements. A policy assists decision making.
Type #3: Rules - Rules are the simplest type of plan chosen from alternatives. A rule requires that a specific action be taken or not taken with respect to a situation. It is more rigid and more specific than a policy. It guides action but provides no discretion in its strict application. Of course, rules are essential for discipline and smooth operations of the business. No smoking rule in a factory is applicable to all including the top executives. A rule is designed to define in advance, what alternative must be selected, or what decision must be made. In effect it dictates the way an activity is to be (or is not to be) done. A rule is related to procedure.
Type #4: Procedure - It is a standing plan acting as a means of implementing a policy. A procedure lays down the manner or method by which work is to be performed in a standard and uniform way. For example the sales department lays down a policy to execute all orders within 48 hours. The procedure of execution of orders will prescribe a sequence of steps that must be followed after the receipt of an order till the dispatch of goods to the customer. These chronological series of steps or tasks constitute a procedure.
Type #5: Program - It is a single use plan. It is a sequence of activities designed to implement policies and accomplish objectives. It enables a manager to prepare carefully and systematically for difficulties, before they arise. It gives step-by step approach to guide action necessary to reach predetermined targets. It is an instrument of co-ordination, i. e., a timetable of action. A good program ensures smooth and efficient operation. A procedure tells how it is to be done, whereas a program tells what is to be done. We have detailed programs of personal selling advertising, and sales promotion in our marketing campaign to accomplish the set goals in sales and to reach the particular market.
Type #6: Schedules - Scheduling is the process of establishing time sequence of the work to be done. It is an integral part of programming. A schedule specifies the time when each of a series of actions should take place. Once the tasks to be done and the persons who must do them are clear according to our standing plans, scheduling may be the only element needing immediate management attention.
Type #7: Budgets - A budget is a projection (and a plan) defining anticipated costs of attaining an objective. It is an appraisal of expected expense against anticipated income or a future period. It may be stated in time, materials, money or other units required to perform work and secure specified result.
Type #8: forecasting - Forecasting is a systematic attempt to probe the future on the basis of known information. Planning decisions are based upon intelligent and rational forecasting the future trend of specified events, e.g., price trend.

These plan types are commonly understood as a temporal set of intended actions or decisions through which one expects to achieve a goal.

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A plan commits employees in different parts of the organization and their resources to specific actions. While there are possible number of type of plans, the four major types of plans include:

Strategic Planning - A strategic business plan helps your business outline long-term goals and fulfill the big vision.
Tactical Planning - Tactical planning supports strategic planning, and involves the development of tactical plans. Tactical plans are about what is going to happen; they typically involve many focused, specific and short-term (action) plans, where the actual work is being done.
Operational Planning - Operations plans define what processes need to be finished to achieve the strategic goals. The goal of an operations plan is to define how all departments join efforts to achieve the mission and vision.
Contingency Plan - Contingency plans are made when something unexpected happens, or when something needs to be changed.

Despite their differences and horizon, strategic, tactical and operational plans are integrally related and must be managed systematically for the organization to be successful.

Business Plan
Strategic Plan
Tactical Plan
Operational Plan

Business Planning and Plans
A business plan is used to initially start a business, obtain funding, or direct operations. A business plan is normally no more than one year, and is used to provide the structure for ideas in order to initially define the business. The business plan is used to assess the viability of a new business opportunity, and is more tactical in nature.The business plan is used to present the entrepreneurs' ideas to a bank.

Business Plan Elements
The key components of a business plan include:

Executive Summary - A good executive summary is compelling. It reveals the company’s mission statement, along with a short description of its products and services. It might also be a good idea to briefly explain why you’re starting your company and include details about your experience in the industry you’re entering.
Company and Business Description - It’s best to include key information about your business, your goals and the customers you plan to serve. Your company description should also discuss how your business will stand out from others in the industry and how the products and services you’re providing will be helpful to your target audience.
Market Analysis - Ideally, your market analysis will show that you know the ins and outs of the industry and the specific market you’re planning to enter. In that section, you’ll need to use data and statistics to talk about where the market has been, where it’s expected to go and how your company will fit into it. In addition, you’ll have to provide details about the consumers you’ll be marketing to, such as their income levels.
Competitive Analysis - A good business plan will present a clear comparison of your business to your direct and indirect competitors. You’ll need to show that you know their strengths and weaknesses and you know how your business will stack up. If there are any issues that could prevent you from jumping into the market, like high upfront costs, it’s best to say so. This information will go in your market analysis section.
Organization and Management Description - Outline the way that your organization will be set up. Introduce your company managers and summarize their skills and primary job responsibilities. If you want to, you can create a diagram that maps out your chain of command. Don’t forget to indicate whether your business will operate as a partnership, a sole proprietorship or a business with a different ownership structure. If you have a board of directors, you’ll need to identify the members.
Products and Services Breakdown - Include information about your offerings so whoever’s reading this portion of your business plan should know exactly what you’re planning to create and sell, how long your products are supposed to last and how they’ll meet an existing need. It’s a good idea to mention your suppliers, too. If you know how much it’ll cost to make your products and how much money you’re hoping to bring in, those are great details to add. You’ll need to list anything related to patents and copyright concerns as well.
Marketing Plan - Describe how you intend to get your products and services in front of potential clients. That’s what marketing is all about. As you pinpoint the steps you’re going to take to promote your products, you’ll need to mention the budget you’ll need to implement your strategies.
Sales Strategy - How will you sell the products you’re building? That’s the most important question you’ll answer when you discuss your sales strategy. It’s best to be as specific as possible. It’s a good idea to throw in the number of sales reps you’re planning to hire and how you’ll go about finding them and bringing them on board. You can also include sales targets.
Operations Plan - []
Funding Request - If you need funding, you can devote an entire section to talking about the amount of money you need and how you plan to use the capital you’re trying to raise. If you’ll need extra cash in a year or two to complete a certain project, that’s something that’s important to disclose.
Financial Projections - Describe the financial goals and expectations that you’ve set based on market research. You’ll report your anticipated revenue for the first 12 months and your annual projected earnings for the second, third, fourth and fifth years of business. If you’re trying to apply for a personal loan or a small business loan, you can always add an appendix or another section that provides additional financial or background information.

Every company is different so your business plan might look nothing like another entrepreneur’s. But there are key components that every good plan needs to have, and it’s always a good idea to provide a clear and accurate summary of your business goals in your business plan.

Strategic Planning and Plans
Strategic planning is the disciplined effort to produce fundamental decisions and actions shaping the nature of change and direction of the organization. Strategic Planning is a basic function of management, and deals with chalking out a future course of action and deciding in advance the most appropriate course of actions for achieving predetermined and/or desired goals. Strategic planning is the responsibility of executives and executive management with the best bird's eye view of the corporation.

Strategic planning entails creating strategic plans to guide an organization to successfully position the organization as a whole in a rapidly changing business environment, when the organization itself is also changing either as a result of external forces (changes in the external environment), or through internal forces (changes in structure, capability, culture, etc.).

Strategic Plan
A strategic plan is a type of business plan; there are however, several important distinctions between the two types including covering different time frames that are worth noting. A strategic plan is primarily used for implementing and managing the strategic direction of an existing established business, or organizations that are serious about growing their business/organization. A strategic plan generally covers a period of 3 to 5+ years. A strategic plan is used to provide focus, direction and action in order to move the organization from where they are now to where they want to go.

Role of Strategic Plan
A strategic plan is used to communicate the direction of the organization to the staff and stakeholders. The strategic plan is critical to prioritizing resources (time, money and people) to grow the revenue and increase return on investment. It helps the organization focus on building sustainable competitive advantage, and it is future looking. The strategic plan guides managers in their fundamental decisions and actions shaping the nature of change and direction of the organization. The strategic plan deals with the whole business organization rather than just isolated units. It is concerned with the long-term future vision, and decision choices about "who we are as an organization", "what we do", and for whom we do it to?, "where we want to play/go"?, "how the organization excels", and "how it creates and captures economic value over time". The strategic plan captures concepts/elements such as the organization's mandates, mission, products or service levels and mix, cost, financing, management or organizational design.

Strategic Plan Components
The strategic planning process involves the developing a strategic vision and mission, establishing objectives, and deciding on a strategy are basic direction-setting tasks. An exemplar process consists of the following steps:

External environmental Analysis - The vision, mission, and values drive the ongoing analysis of the organization's external environment to assess its opportunities and threats. Changes in the external environment can have direct impact on the way organizations are run and people are managed. Some of those changes represent opportunities, and some of them represent real threats to the organization.
Organizational Scan - The vision, mission and values drive the ongoing analysis of the organization's internal environment to assess its strengths and weaknesses with respect to strategic intent and relevant issues. Internal analysis provides strategic decision makers with an inventory of organizational skills, and resources as well as their performance levels. Many resources can be combined to give organizations competitive advantage. In particular the advantages due to intangible assets including people and service capability provide the most difficult to imitate or copy advantage.
Strategic issue identification - Identify issues, questions, and choices to be addressed as part of the strategic planning effort. Some example questions may include: What's the vision? Where does the organization want to play? - In other words, what's the strategic direction? What are the criteria for success? - In other words, how would you know when you get there? What are the organization's competitive advantage and core competencies? What Management Systems does the organization need in place?
Development and clarification of mission, customer/community vision, and values - Ensure there is consensus on why the organization exists, what goals or outcomes it seeks to achieve, what it stands for, and whom it serves. If it has specific mandates - things it must do, or not do based on its articles of incorporation or bylaws, or long-term contracts or grants - then these should be clearly defined. Identification and clarification of mandates when dealing with non-profit organizations.
Description of the organization in the future - The vision might describe the organization broadly, in terms of its mix of programs, reputation or status inside and outside its primary target market/community, key accomplishments, and relationship with stakeholders.
Develop a series of strategic goals - Develop a series of strategic goals or organization status statements which describe the organization's direction assuming it is successful in addressing its mission. Essentially, this entails transforming the vision into a series of key goals for the organization, preferably in the form of status statements describing the organization.
Strategy Formulation - Agree on key strategies to reach the goals and address key issues, questions, and concerns identified through the environments scan. These strategies (strategic options) should be related to specific goals or address several goals. The process requires looking at where the organization is now, and where the vision and goals indicate it wants to be, and identifying strategies to get there.
Strategy Implementation - Develop action plan that addresses goals and specifies objectives and work plans on an annual basis.
Finalize a written strategic plan that summarizes the results and decisions of the strategic planning process.
Build in procedures for monitoring, and for modifying strategies based on changes in the external environment and/or the organization.

The strategic plan, in the context of strategic management, is essential in ensuring the organization places emphasis on strategies - on how the organization will achieve its vision. The strategic plan enables managers to successfully position the organization as a whole in a rapidly changing business environment, when the organization itself is also changing either as a result of external forces (changes in the external environment), or through internal forces (changes in structure, capability, culture, etc.).

Strategic Planning Process
A good strategic planning process is one that crystalizes our intentions. It is the process through which we articulate a clear vision of where we want to go. And it is how we come to a clear agreement on which direction we are going to take. There is nothing wrong with strategic planning – except when we believe that strategy unfolds as planned. The strategic planning process involves the developing a strategic vision and mission, establishing objectives, and deciding on a strategy are basic direction-setting tasks. An exemplar process consists of the following steps:

Agree on a strategic planning process - Development of an initial agreement concerning the strategic planning effort.
External environmental assessment - The vision, mission, and values drive the ongoing analysis of the organization's external environment to assess its opportunities and threats. Changes in the external environment can have direct impact on the way organizations are run and people are managed. Some of those changes represent opportunities, and some of them represent real threats to the organization.
Internal environmental assessment - Internal analysis provides strategic decision makers with an inventory of organizational skills, and resources as well as their performance levels. Many resources can be combined to give organizations competitive advantage. In particular the advantages due to intangible assets including people and service capability provide the most difficult to imitate or copy advantage.
Strategic issue identification - Identify issues, questions, and choices to be addressed as part of the strategic planning effort. Some example questions may include: What's the vision? Where does the organization want to play? - In other words, what's the strategic direction? What are the criteria for success? - In other words, how would you know when you get there? What are the organization's competitive advantage and core competencies? What Management Systems does the organization need in place?
Development and clarification of mission, customer/community vision, and values - Ensure there is consensus on why the organization exists, what goals or outcomes it seeks to achieve, what it stands for, and whom it serves. If it has specific mandates - things it must do, or not do based on its articles of incorporation or bylaws, or long-term contracts or grants - then these should be clearly defined. Identification and clarification of mandates when dealing with non-profit organizations.
Future Vision - Description of the organization in the future in broad categories or specific characteristics. For a non-profit organization for example, would include broad categories in terms of its mix of programs, resources, status, relationships, institutional development, and governance; or specific characteristics in terms of target areas, target population, budget size, staff size and composition, etc.
Setting Organization Goals and Objectives - Develop a series of goals or organization status statements which describe the organization's direction assuming it is successful in addressing its mission. Essentially, this entails transforming the vision into a series of key goals for the organization, preferably in the form of status statements describing the organization. There are many advantages to establishing organizational goals; they guide employees efforts, justify organization's activities and existence, define performance standards, provide constraints for pursuing unnecessary goals and function as behavioral incentives. Setting organizational goals can also help a company measure their organization's progress and determine the tasks that must be improved to meet those business goals.
Strategy Formulation - Agree on key strategies to reach the goals and address key issues, questions, and concerns identified through the environments scan. These strategies (strategic options) should be related to specific goals or address several goals. The process requires looking at where the organization is now, and where the vision and goals indicate it wants to be, and identifying strategies to get there. The Board needs to provide a broad view to guide the effort, while the staff can do much of the detailed work.
Strategy Implementation - Develop action plan that addresses goals and specifies objectives and work plans on an annual basis. Once the strategic choices of the strategic plan has been developed it is time to ensure specific work plans can be established to begin implementation.
Finalize a written strategic plan that summarizes the results and decisions of the strategic planning process.
Monitoring and Control - Build in procedures for monitoring, and for modifying strategies based on changes in the external environment and/or the organization. Regularly monitor progress towards goals and objectives, and use of strategies; with strategies revised and annual objectives developed yearly, based on the progress made, obstacles encountered, and the changing environment.

This process is iterative and the completion of the steps above provides the data for completing the strategy formulation process. The process brings into play the critical managerial issue of how to achieve the targeted results in light of the organization's situation and prospects.

Benefits of Strategic Planning
Strategic planning deals with the whole business organization rather than just isolated units. It is concerned with the long-term future vision, and decision choices about "who we are as an organization", "what we do", and for whom we do it to?, "where we want to play/go"?, "how the organization excels", and "how it creates and captures economic value over time". Strategic planning can help organizations in the following ways:

Think strategically.
Clarify future direction.
Make today's decisions in light of their future consequences.
Develop a cohesive and defensible basis for decision-making.
Exercise maximum discretion in the areas under organizational control.
Solve major organizational problems.
Improve performance.
Deal effectively with rapidly changing circumstances.
Build teamwork and expertise.

Discussions are the big innovation that strategic planning brings to most organizations. It provides a structured approach to help decision makers and managers identify and resolve issues of strategic relevance facing their organizations. Strategic planning decisions typically concern the organization's mandates, mission, products or service levels and mix, cost, financing, management or organizational design.

Strategic Risks
There is always enough uncertainty about the future that managers cannot plan every strategic action in advance and pursue their intended strategy without alteration. Typically, strategic choices look at 5 years or more, with some extending their vision to 20 years horizon. Because of the time horizon and the nature of the questions addressed, mishaps (e.g., war, geopolitical shocks, etc.) potentially occurring during the execution of a strategic plan are afflicted by significant uncertainties, and may lie out of the control of management. Those mishaps, in conjunction with their potential consequences are called "strategic risks". Untapped opportunities can also be seen as strategic risks. Strategic risks are the risks that arise from the investment decisions an organization makes and the actions taken to pursue its mission and objectives.They may include macro-economic risks, transaction risks, and investor relations risks.

Tactical Planning and Plans
A tactical plan answers "how do we achieve our strategic plan?" It outlines actions to achieve short-term goals, generally within a year or less. Tactical planning is a form of action planning which takes a company's strategic plans and sets up for specific short-term actions and goals, usually by company/organization departments and/or functions. Tactical planning emphasizes the current operations of various parts of the organization deemed relevant to achieving the strategic goals and objectives by the design of operation strategy.

Managers use tactical planning to outline what the various parts of the organization must do for the organization must do for the organization to be successful at some point one year or less in the future. Much of tactical planning is about balancing immediate needs and preparing for future needs, aligning institutional arrangements to development goals, and allocating resources in a way that maximizes performance and promotes stability and adaptability. Each functional area or department (e.g., marketing, finance, HR, etc.) in the organization as identified by the Operations Strategy design is assigned the specific goals and objectives it must achieve to support the higher-level strategies. Each functional area will have its own set of needs; and the company must determine how to allocate resources to meet these needs.

Functional Area Goals and Objectives
The top-level goal of each functional area is progressively translated into tactical goals - statements of what actions need to be taken - to implement the goals of each of the functional areas define the actions - what needs to be done to achieve the top level goals. Tactical goals are defined in an action plan which takes a company's strategic plan and sets forth specific short-term action and plans, usually by company department or function.

The action plan defines the responsibility of top, middle and lower level managers focused on the creation of new strategic assets and/or enhancement and strengthening existing strategic assets needed by the entity in order to build an organization capable of carrying out the strategy and maintaining its ability to achieve future outcomes.

Tactical (Action) Plans
The tactical plan divides the strategic plan into the tasks and objectives of each functional area defined to support achievement of strategic objectives. Top and Middle Management assign ownership and accountability for each action to one or more positions in the organization. These positions and the organization units are defined by the Operating Model's organization infrastructure. Tactical plans are usually developed in the areas of production, marketing, personnel, finance, and plant facilities. The tactical (action) plans are short-term in nature and specify what the company needs to do, the order of the steps needed to accomplish those tasks, and the personnel and tools needed to meet the organization's strategic goals.

The tactical plan addresses the following questions:

Where are we now?
Where do we want to be?
How do we get there?
How do we measure our progress?

The plan maps out where the organization is intended to be headed in the short-term to medium-term with short-range performance targets, and the competitive moves and internal action approaches to be used in achieving the targeted results. The short time horizon of tactical plans and the nature of the questions dealt with, mishaps potentially occurring during the execution of tactical plans should be covered by moderate uncertainties and may lie closer to the control of management (next year's shipping prices, energy consumption, but not a catastrophic black-out, etc.). Those mishaps, in conjunction with their potential consequences are called "tactical risks".

Operations Planning and Plans
Operations includes everything that a business does on a repeated basis to deliver products and services. It is common for operations to be heavily optimized, expanded and improved in order to build competitive advantages, cut costs and generate new revenue.

Operations planning involves decisions on how to improve organization's performance and efficiency in creating and delivering value to customers. Operations planning focuses on the firm's products and services, and develops plans to maximize e.g., market share, revenue, profits, etc. Operational Planning results in the creation of Operations Plans.

Operations Plans
An operations plan is a plan to establish, expand and improve day-to-day processes and practices of a business. The operations plan specifies how a firm will employ its operations capacity/resources to support the corporate and business strategy without focusing on a particular area, other than the operations element as a system.

The operations plan describes the operations goals which state "what" capital and expense requirements the business needs to operate day-to-day. These may include physical necessities of the business operations are such as the business's physical location, facilities and equipment, information about inventory requirements and suppliers, and description of the manufacturing process.

The role operations plans play in a business depends on the nature of the business. If the business is in selling consumer goods, then it has to make sure it can get its products to clients at the times promised. A service company however, relies on operations plans to make sure customers are seen in efficient manner. Some examples of operations plans include:

Strategy - Most business strategies have an operations component. For example, if a manufacturer develops a strategic plan to expand revenue by 50% that plan will have a marketing, sales, and operations components. The operations component would include procurement, manufacturing, and logistics strategies that enable the firm to boost production to support revenue growth.
Process and Practices - Operations is a term used for the core processes and practices of a business that generate most of a firm's revenue. Operations represent most of a firm's costs and thus has a large impact on strategic goals. Operations teams plan continuous optimizations and improvements to processes and practices in order to meet performance objectives in areas such as efficiency, productivity, turnaround time, waste reduction, cost reduction, quality, customer satisfaction, and sustainability.
Contingency - An operations team may develop a contingency plan as part of risk management. A contingency plan lists risks together with an estimate of their probability - likelihood of occurrence, and the steps required to reduce each risk. A contingency plan may also include an estimate of risk impact and a risk response.
Go-To-Market - This is a plan to launch a product, or service to customers. This typically has both a marketing and operations component. The operations component of the plan is concerned with delivery of product or service to the customer. This may involve elements of information technology, manufacturing, logistics, and customer service.

The purpose of the Operational Plan is to provide organization personnel with clear picture of their tasks and responsibilities in line with the goals and objectives contained within the strategic plan. These plans help direct the organization and ensure operational control. The contents of operational plans are directed at explaining actions or programs that will be needed to achieve or implement parts of that strategy.

Type of Plans
The Operational Plan is organized around Key Results Areas which are areas of business operations where it is profoundly important to achieve results. The Operational Plan provides a highly detailed information specifically to direct people to perform the day-to-day tasks required in the running of the organization.

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Developing Operations Plans
In an operations plan, objectives and tactics are assigned to specific individuals with deadlines for accomplishment. The Operational Plan addresses the following questions::

What - Actions (the strategies and tasks) that must be undertaken.
Who - the persons who have responsibility for each of the strategic tasks.
When - the timelines in which strategies/tasks must be completed.
How much - the amount of financial resources provided to complete each strategy/task.

The Operational Plan is organized around Key Results Areas which are areas of business operations where it is profoundly important to achieve results. The Operational Plan provides a highly detailed information specifically to direct people to perform the day-to-day tasks required in the running of the organization.

Operational Risks and Risk Management
Operational risks are those arising from the people, systems, and processes through which the company operates and can include a variety of classes of risk such as fraud, legal risks, physical or environmental risks. Operational risks are those resulting from inadequate or failed internal processes, people, and systems, or from external events (man-made or natural hazards).

Strategic Planning, and Plans