Foundation of Planning

Topics: Management, Plan, Strategic management Pages: 7 (2040 words) Published: October 4, 2014

Foundations of Planning

Assessment 4 - Essay

This essay will discuss the topic on foundations of planning. It will identify and define some of the factors that motivate an organisation to use formal planning processes (FPP). It will also look specifically into the four main outcomes managers are seeking when they are engaging in a formal planning process. The risks associated with an over-reliance on formal planning processes will also be identified and discussed in this essay. Throughout this essay, examples from academic journal articles will be used to exemplify the discussion.

Planning is arguably the most important process in an organisation. Ahlstrom and Bruton (2012) states that planning is the overall master plan that decides the destiny for a firm. Besides, planning is used to gather information systematically in a firm and then sets its mission, performance objectives and ultimately its strategy (Ahlstrom & Bruton 2010, p.105). Robbins et al. (2012) also states that planning is the primary management function because it establishes the basis for all the other things that managers do. The planning process can be done informally and also formally. Informal planning process is a plan that is without written document whereas formal planning is a plan that is written down with identification of goals and specific action plan established to achieve goal (Robbins et al. 2012). The Formal Planning Process (FPP) will be the main idea discussed in this essay. FPP is complicated and comprehensive involving many elements or stages that are coincidental and interrelated, including strategic, tactical, and operational planning (DuBrin 2012, p. 118). Armstrong (1982) suggests that formal planning is an explicit process for determining the long-range objectives in an organisation, the production procedure and evaluating alternative strategies, and a structured system for monitoring the results when implementing a plan.

FPP have been introduced a long time ago and Sinha (1990) says that it has evolved through years and critical issues have changed in a certain degree accordingly. After so many years of research on FPP, it is still debateable for its value for strategic decision making as it cost a lot of money and time spent on it. Despite the controversy on the FPP, many researches have shown factors that motivate an organisation to use FPP. According to Armstrong (1982), organisations that undergo situations such as inefficient markets, large changes, high uncertainty and high complexity are factors that are more likely to be motivated for the use of FPP. Inefficient markets is a theory which asserts that the market prices of common stocks are not constantly and accurately priced and there are always questions on the allocation of the future cash flow. Armstrong (1982) also stated that an inefficient market does not provide much information on the proper pricing strategy. Formal planning would be very useful when inefficiencies are introduced to an organisation as Robbins et al. (2012) stated that formal planning would establish the goals or standards that facilitate control by providing proper pricing strategy. Changes can occur from the external environment of a firm or the internal change within the organisation’s resources (Armstrong 1982). An organisation or firm with large changes are prone to a higher risk of failure. There was a survey done by Lindsay and Rue (1980) which shows the result of firms are more likely to use formal planning if the firm are in a more complicated and faster changing environment. Thune and House (1970) also given evidence that formal planning are most suitable for large changes in organisations where their research showed that planning is more useful in characterising a market with high rate of technological innovation and also new product introduction. Organisations with high uncertainty are likely to undergo FPP. As Armstrong (1982)...
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