Planning components are usually classified as purposes or mission objectives, policies, procedures, programs, budgets, and strategies.
An organization’s mission is its purpose or fundamental reason for existence. It is a broad statement distinguishing the organization from others of its type. It can be a written document or it may be implicit.
Purpose of a Mission Statement
A mission statement is a benchmark for managers to evaluate success. For employees, it defines the common purpose, fosters loyalty, builds a sense of community. For outside parties, like investors, the government, and the public, it gives insight into the values and future direction of the organization.
Components of a Mission Statement: Who are the customers? What are the products or services? Where does the organization compete? What is basic technology? The firm’s commitment to economic objectives. Basic beliefs, values, and aspirations of the firm. Major strengths and competitive advantages. Public responsibilities and desired image. Attitude towards employees.
The first important task of planning is to lay down objectives or goals. Objectives represent the end towards which not only planning but all other activities of management are directed. Thus, goals are set for the organization to accomplish. Similarly, staffing, direction, and control aim at reaching common objectives. In fact, managing is more effective when based on properly selected objectives. These objectives should be clearly defined and communicated throughout the organization.
Objectives can be individualistic or collective; short-term or long-term; tangible or intangible; general or specific. Peter F. Drucker1 has laid down eight such key areas: market standing, innovation, productivity, physical and financial resources, profitability, management performance and development, work performance and attitude, and public responsibility. There is also a need to decide upon the emphasis to be given to each such area keeping in view the environment within which the business operates. Similarly, objectives in different areas should be properly balanced. This is an intellectual task of great responsibility and effort which calls for a constant review of enterprise objectives in the light of technological and other changes.
Policies are a guide to thinking in decision-making. The policy lays down the course of action selected to guide and determine present and future decisions. Policy as a general statement of understanding lays down the limits within which decisions are to be made and, thereby, assures consistent and unified performance. For example, if it is the policy of a company to reinvest 50% of its earnings each year, decisions relating to the appropriation of profit and resorting to external sources of finance shall have to be made within the limits of this policy. Policies can originate at any level in the organization and a manager should lay down policies within the limits of authority and also within the limits set by earlier policies and decisions of his seniors The policy may be written, verbal, or implied. On a functional basis, policies may be classified as those pertaining to sales, production, personnel, finance, purchase, etc.
Policies are of great help in the delegation of authority by a manager. Policies sanctioned in advance help the subordinates too to take decisions within the broader framework established by the higher management. Thus, well-defined policies help the manager to delegate authority without fear since policies lay down the limits for decisions taken by subordinates and ensure uniformity in the functioning throughout the organization. However, policies never remain valid for all times to come. Changes in the business environment might render some of the policies outmoded. For effective compliance, policies should, therefore, be periodically reviewed and necessary changes are introduced in them consistent with the accomplishment of group goals. Moreover, as a guide to thinking in decision-making, policies should be flexible and allow reasonable discretion to subordinates responsible for their implementation. Strictly rigid policies tend to become rules and kill much of the subordinates’ initiative.
The budget is a single-use plan containing expected results in numerical terms. Budgets may be expressed in time, money, materials, or other suitable units capable of numerical expression. Income and expense budget, for example, projects the expected revenues and expenses for a given period. Since budget is an important control device it is often thought of in connection with controlling alone. However, budget-making is primarily a planning process, whereas its administration is part of the control.
The program refers to the outline of plans of work to be carried out in proper sequence for the purpose of achieving specific objectives. Thus, a company might embark upon an expansion program by say, sixty percent. And to implement this program, management must lay down certain policies, procedures, methods, rules, and other assignments properly related to and coordinated for its successful implementation. Program is frequently supported by capital revenue and expense budgets. Thus, a program is a complex structure of policies, procedures, methods, rules, budgets, and other assignments. Programs can originate at any level in the organization, and it can be a major program or a minor one. Basic or major programs usually call for establishing a number of derivative programs.
The strategy is a term very popular in military science. There it refers to meeting the enemy under conditions advantageous to one’s own. A commander, for instance, may allow the enemy to advance up to a certain point and then attack from the back. In the business context a specific meaning attached to a particular policy, under the prevailing circumstances and in the light of competitor’s policies, becomes the strategy. The strategy is thus interpretative planning. Anthony defines strategies as resulting from “the process of deciding on objectives of the organization, on changes in these objectives, on the resources used to attain these objectives, and on the policies that are to govern the acquisition, use, and disposition of these resources”. Chandler defines a strategy as “the determination of the basic long-term goals and objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary to carry out these goals”. The purpose of strategies is to determine and communicate, through a system of major objectives and policies, a picture of what kind of enterprise is envisioned. Strategies show a unified direction and imply a deployment of emphasis and resources. They are a useful framework for guiding enterprise thinking and action.