Effective Business Planning: Objectives, Principles, and Implementation
Planning
Objectives
It gives a sense of direction or a direction to efforts. These well-defined, known, and practically raised objectives are a motivating force. “If you do not know which way to take, any wind is good.”
Integrated structure: Harmonization of targets suggests a hierarchy, with each subsidiary objective contributing to its immediate superior.
Spill objectives means first defining general and main objectives, then spreading them down.
Effective planning is based on facts, data, and actual/estimated information, not emotions or desires.
Importance, Principles, and Limitations of Planning
Planning specifies a company’s goals or objectives for a defined period, guiding all actions towards these objectives. This removes work that doesn’t fit or serve the goal; economic planning concentrates actions in a definite sense. Another key element is avoiding or reducing unnecessary risks.
* Planning allows control of company progress by establishing specific goals, comparing achievements with the program, determining deviations, and laying a basis for remedial measures and future planning.
* Planning facilitates coordinating different business functions for consistency with the overall business plan.
Principles
Flexibility: Inflexible plans undermine effectiveness.
Commitment: Plans should motivate and gain commitment from all involved, encouraging compliance.
Contribution: If plans aren’t integrated and directed towards a central purpose through linked objectives, efforts are dispersed.
Precautions
Critical to the planning system: Low accuracy in results. Inherent difficulties in activity plans, especially without a statistical basis.
Types of Plans
A. Goals or Targets: A target is a basic plan, relating to future activities and requiring planning.
B. Program: Goals should be distributed in time, with achievement resulting from gradual, partial fulfillment with exact time dimensions.
C. Budget: Budgets relate to financial aspects of expenditure or income.
D. Policy: Refers to boundaries within which action will unfold.
E. Procedures: A procedure describes the chronological sequence of tasks for an operation.
F. Methods: A method is less comprehensive than a procedure, detailing how to perform a specific task.
Strategic and Operational Planning
Strategic Planning: A long-term planning process, usually starting at managerial levels, considering internal and external factors affecting macro-development.
Operational Planning: Formulating commitments (plans) to implement policies that contribute to objectives, relating to time (programs), money (budgets), and work (procedures and methods).
Planning Policy: Guidelines or policies provide decision-making guidance and contribute to measures that help meet objectives.
Adaptive Planning: Plans must adapt to environmental conditions. Stable conditions allow easier planning, including detailed medium- and long-term plans. Instability makes the process difficult.
Strategic planning is a serious statement of intent with vision, defining current position and future goals. Its mission is to prevent threats, seize opportunities, and identify weaknesses and strengths within the system.
Developing strategic thinking is key to company success, setting the right course. It must answer four key questions: What is our current position? If we did nothing different, where would we be? Where would we be in the future? What options can we try?
Hierarchy of Objectives
Regular targets: Continuous, recurring, routine, essential, measurable, common goals linked to normal or scheduled operations.
Problem-solving objectives: Restorative, curative, at a higher level than regular targets.
Innovative Objectives: Difficult, creative, inventive, high-yield, changing the organization’s character, promoting growth and development.
Planning Stages
The planning process includes:
Determination of goals – Historical analysis – Analysis and classification of background assumptions – Formulation of alternative plans – Determination of the final plan – Review of plan progress.
Objectives of the Company
According to Peter Drucker, specific company objectives include:
Market position – Prestige – Innovation – Cutting-edge technology – Productivity – Collection of physical and financial resources – High profits – Performance – Corporate social responsibility, etc.
Management by Objectives (MBO)
MBO sets objectives and targets at all enterprise levels, not just at higher levels.
MBO emphasizes subordinate participation in goal-setting within the established hierarchical structure. It’s a formal, structured system for developing interconnected goals, from general to specific.
The traditional approach assumes target-setting is for higher levels, with subordinates receiving goals in a cascade. MBO incorporates subordinates into the process, increasing commitment, motivation, and performance, thus improving the likelihood of meeting goals.
Extras
Concept and Organizational Factors
Organizing involves determining necessary functions to achieve objectives, establishing authority, and assigning responsibility.
Organization is determining necessary activities and positions, distributing them according to functional relationships, defining authority, responsibility, and duties, and assigning them to individuals for efficient, coordinated effort. The goal is to help people work together efficiently.
This is the foundation of organization, manifested in the principle of division of labor or specialization.
Stages of the Organization
a) Determination of objectives b) Division of comprehensive work into partial operations (analysis) c) Grouping of partial operations into administrative units (summary):
Departmentalization Criteria
Uniformity – Operational category – Product – Territory – Client – Process – Task force
d) Definition of duties and responsibilities
e) Staffing
f) Delegation of authority
Authority and Power
- Reward
- Coercive
- Legitimate
- Reference
- Expert or professional
Principles of Organization
- Division of labor
- Hierarchy
- Decentralization
- Use of staff
Management Concept
Management involves performance or execution according to the chosen strategy and plan (organization), leading to the objective or goal (planning).
It includes the work function of all personnel forming the company team.
Management is associated with people, their relationships, and circumstances arising when a group aims for common goals.
Management is acting and executing, making others act.
Communications
The medium used is as important as the communication itself.
If a personnel manager suggests a new remuneration policy over the phone, it may not motivate or convince as easily, failing to sell the idea.
Whatever the medium, keep in mind basic communication principles:
- Know exactly what needs to be communicated
- Communicate the right and necessary amount, neither more nor less
- Keep in mind that broadcast communication may be altered
- Use symbols and visual elements where possible
- Allocate time to choose and select information before communicating
Benchmarking: A technique to measure system or component performance, often compared to a specific reference. It’s a comparative analysis.