introduction to business planning
Opening thoughts
- “Plans are of little importance but planning is essential” (Winston Churchill)
- “Plans are nothing; planning is everything” (General –later President –Dwight D Eisenhower)
- Failing to plan is planning to fail
- Failing to plan makes an organisation reactive, vulnerable to threats and closed to opportunities
Plans and plan
Planning is the process of
- Setting objectives
- Determining what should be done to accomplish them
- Implementing the plan
- Evaluating
A plan is a statement of intended means to accomplish a goal
Tasks of management
- Planning
- Leading
- Controlling
- Organising
Planning is the functional task of management
The other tasks of organising, staffing, leading and controlling all stem from the planning function
Organising and staffing can only take place after goals and plans to achieve the goals are in place
Leading (motivating and influencing the behaviour of people) depends on the goal to be achieved
The planning function provides the goals and standards that drive the controlling function
Types of plan
-
Business plan - sets out the markets the business intends to serve, how it will do so and what finance is required
-
Strategic plan - sets out the overall direction for the business in broad scope
-
Operations plan - details how the overall objectives are to be achieved & specifies what senior management expects from specific departments or functions
The purpose of planning
- To clarify direction
- To motivate people
- To ensure efficient use of resources
- To provide a way of measuring progress
- To ensure that decisions are made on the basis of a wide range of evidence
- To co-ordinate activities
- To ensure someone is responsible for each significant activity
Why plan?
Planning gives:
- Certainty
- Confidence
- Route map
- Evidence to others of our thoughts
Planning helps us:
- Shape our thoughts
- Think through scenarios
- Co-ordinate activities
- Identify SWOT
- Examine risks
- Communicate ideas
- Demonstrate business control
Remember - a plan is more than a forecast
- The distinction between a forecast and a plan is best seen in the daily weather forecast – it is not a weather plan
- Forecast: are predictions, they concern events and trends over which the organisation has little or no control
- Plans are about what we intend to do Plans are about actions to be taken
- But forecasts (especially sales forecasts) are essential in planning but they are merely the backdrop to a plan
Top down or bottom up?
Top down planning
- Decisions taken at the top
- Lower level managers have little input
- Plans are passed down the line for implementation
- Planers are able to focus on strategic issues but can be divorced from the real issues
Bottom up planning
- Involves all levels of managers and others
- Ensures all are involved and all issues considered
- Functional managers able to suggest and evaluate proposed action
- There is a danger that they will have a narrow perspective without seeing the “big picture”
Advantages of planning
- Improves motivation and communication
- Provides a sense of direction, purpose and urgency
- Allocates responsibility
- Leads to better control and co-ordination and greater consistency
- Forces manages to think ahead
- Establishes a framework for decision making
- Identifies both constraint and risks
- Provides a better understanding of the organisation’s position in the market place
- Leads to a focus on key issues such quality, productivity and customer satisfaction
- Clarifies objectives
- Encourages a forward looking approach
- Prepares people for change
- Clarifies choice
- Organises priorities
- Pulls all the threads together
Characteristics of a good plan
- Tells a coherent, consistent and cohesive story
- Contains credible assumptions
- Is based on credible forecasts
- Identifies the assumptions to which the business is must sensitive
- Identifies the potential risks and any mitigating action
- Is supported by those who must implement it
- Identifies the funding requirements
Avoiding planning traps
- Why can formal planning fail?
- What should be done to reduce the danger of failure?
- Planning should not be left exclusively to planners
- It should be seen as a continuing process and not just a once a year ritual
- Planning requires commitment and an allocation of time
- Those involved in implementation must be involved in the planning
- Planning will only be successful if the broad direction and objectives for the organisation are agreed, accepted and widely understood
- Targets should be used as a measures of performance
- Organisational structure and culture should be consistent with the plans and strategy
- Flexibility should be built into the plan
- Planning must be more than a “tick box exercise” - if they are perceived as such they will fail
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