Organizational Planning: Core Concepts and Hierarchy

The Purpose of Organizational Planning

Planning serves two major purposes in organizations: the protective and the affirmative. The protective purpose is to minimize risk by reducing the uncertainty surrounding the business and defining the consequences of a particular administrative action.

The purpose of planning is to raise the level of organizational success. An additional purpose is to coordinate planning efforts and resources within organizations. It has been said that planning is like a locomotive that pulls the train of the activities of the organization, direction, and control.

Definition of Planning

Planning is defined as:

• "The process of setting goals and choosing means to achieve those goals" (Stoner, 1996).
• "The process followed to determine exactly what the organization will do to achieve their objectives" (Ortiz, s/f).
• "The process of evaluating all the relevant information and likely future developments, results in a recommended course of action: a plan" (Sisk, s/f).

Hierarchy of Plans

The hierarchy of plans includes:

• Mission
• Objectives
• Strategies
• Policies
• Procedures
• Rules
• Programs
• Budgets

Mission

Developing the mission of an organization is equivalent to stating its main reason to exist. It identifies the role of society and its character and basic philosophy. The main virtue of clear thinking concerning the mission of a company is to know and be able to articulate the goals and values to help achieve and maintain the integrity and unification of the organization.

Consequences of the Absence of Mission

When you do not have a clear idea of the values or the basic character (mission) of an organization, managers tend to get carried away by their opportunism.

Objectives

• Strategy: Medium-term goals
  • Assets, technology, sales growth rate, production volume growth rate, etc.
• Specific short-term goals
  • Production and sales of the period, and so on.

Strategies

Strategies represent the projected future for the company or business areas:

• Determination of core long-term objectives, courses of action, and allocation of necessary resources for compliance.

Policies

Policies are guidelines to channel the thinking and behavior of all members of the organization during decision-making. There are explicit policies (written or oral formulations) and implicit policies.

Procedures

Procedures are guidelines for action detailing the precise and sequential manner in which certain activities must be performed. As with other plans, there is a hierarchy of procedures.

Rules

Rules refer to specific actions or omissions which are not subject to the discretion of each person. This differs from procedures, which guide action without a temporal sequence.

Programs

Programs are comprehensive plans that include the future use of different resources and establish a chronological sequence of actions to achieve the objectives set.

Budgets

A budget is the formulation of expected results expressed in numerical terms (financial, man-hours, etc.). It is also an instrument of control.