Effective Business Planning and Control: Objectives, Strategies, and Implementation

Effective Business Planning

Planning involves setting objectives and deciding on strategies and tasks to achieve them. Organizations cannot effectively manage and control without adequate plans:

Types of Plans

• Short-term plans: Typically have a time horizon of up to one year. These are tactical plans to achieve long-term objectives.
• Long-term plans: Have a variable duration, from 2 to 30 years, but usually span 3 to 5 years. This is called strategic planning, which involves:
  • Determining the organization's mission.
  • Analyzing the internal and external environment.
  • Setting targets to reach within a defined timeframe.
  • Developing strategies to implement the plans.

Elements of Plans

• Objectives: Targets or desired results.
• Policies: Guidelines for thinking and action, creating consistency in decision-making.
• Procedures: Steps for activities like recruitment, acquisitions, or returns.
• Rules: Define what can and cannot be done in specific situations.
• Budgets: Cash needs forecasts, revenue and expenditure budgets, and sales forecasts. Note: You are not financiers.

Control Process

After planning, organizing resources, and implementing decisions, managers must perform the function of control. The control process involves:

1. Setting standards for a future period.
2. Measuring actual results for the period.
3. Comparing actual results with expected standards.
4. Determining the reasons for any differences.
5. Taking appropriate action.

Potential Control Issues

Control has associated costs, including time spent. There is a risk of regression, focusing excessively on targets, and potential distortion of information.