In simple terms, planning is a process that determines the future course of action. To understand the concept of planning one must be able to distinguish between the planning and the plan. Planning is an activity; on the other hand, a plan is a commitment, in other words a plan is a part of planning.
Planning is the selection and relating the facts; making and using the assumptions regarding the future in the visualization of proposed activities believed necessary to achieve the desired goals. In simple language, planning is a process of determining a specific pathway in order to reach from the current state to the desired state.
Types of planning
Planning can be broadly classified into corporate planning and functional planning. Both types of planning activities are explained below:
This planning activity covers all the different levels of the management—it includes planning for the entire organization. Corporate planning includes:
1. Setting of the organizational objectives
2. Organizing the work, people and system to achieve the objectives
3. Measuring performance
4. Controlling the progress of the plan
Corporate planning can be classified in two types—strategic planning and tactical planning.
Strategic planning is also known as long-term planning. This planning activity is carried out by only the top-level management. The main aim of the strategic planning is to beat the competitors in the market, it is also known as the grand plan of the company. Strategic planning includes:
1. Deciding the objective
2. Bringing changes in the objectives
3. Formulating policies and allocating the resources in order to achieve those objectives
Tactical planning is also known as short-term planning; this planning activity happens at next-to-top level management. Tactical planning includes the process of-
1. Deciding the most effective and efficient use of the already allocated resources
2. Developing a control mechanism for effective achievement of the desired objectives.
This planning specifically covers the functional level of the management—the human resources management department, the finance department, the marketing department and so on. It also includes planning for the sub-functional levels, for example—the overall marketing plan will also cover the plan for sales, advertisement etc.
Strategic planning includes the formulation of the strategy. Strategy formulation covers-
1. Determination of basic long-term goals and objectives of the organization
2. Adoption of a particular course of action
3. Allocation of resources that is necessary to achieve the goals.
MBO (management by objective)
Management by objective—MBO—is a result-oriented, comprehensive managerial process for the effective utilization of material, physical and human resources of an organization, by integrating the individual with the organization and the organization with the environment.
MBO is a special strategy adopted by various organizations. One special feature of the MBO is “no top to bottom” and “no bottom to top” mode of objective determination i.e. in the MBO mode of management, at every level objectives get determined separately. The concept of management by objective is based upon the assumption that everybody in the organization is responsible enough.