Explain Corporate, Operational and Strategic PlanningPosted in Principles of Management | Email This Post
The process of planning can be adopted at different levels within the organization. In the same way, plans can be formulated for the whole organization or for only a part of the organization. When plans are formulated for the whole of the organization, the process is called corporate planning. The emphasis in case of corporate planning is on the basic goals, policies and the strategies for the whole organization. There are several functional plans that are integrated in corporate planning and in the same way it also provides for any contingencies that may arise in the future. In corporate planning, the resources of the organization are matched with the opportunities and threats provided by the external environment. Generally the process of corporate planning takes place at the highest level of management in the organization. Therefore, corporate planning can be described as the process which includes establishing the organizational goals, organizing the people, work and the systems of the organization in order to achieve these goals and motivating with the help of planning process, measuring the performance and controlling the progress made by these plans.
In this way, corporate planning includes the assumptions of management. It can be said that corporate planning covers the total planning activity.
Corporate planning has to be original and it is also considered as the starting point of the process of planning. However, corporate planning and long-term planning are not synonymous, although these two are related with future activities. However, it is not possible for the organization to engage in long-term planning without the support provided by the short-term plans. In this way, corporate planning should not be associated with any specific period. Generally, corporate planning is divided between strategic planning/long-term planning and on the other hand the tactical, operational or the short-termplanning.
Strategic planning can be described as the process of planning in which the managers try to find the ways in which the organizational goals can be achieved with the help of the resources that are available with the organization. It needs to be noted in this regard that generally the task of strategic planning is undertaken by the central management of the organization. Therefore, the top management of the organization is involved in strategic planning with a view to decide the organizational goals and then to make plans through which these goals can be achieved. In this way, in strategic planning, the resources available with the organization are evaluated by the top management and then plans are made for a period that may extend up to 10 years. In this way, basically strategic planning is related with the evaluation of the organization, its strengths and weaknesses, capabilities as well as the objective assessment of the business environment.
The need for strategic planning:
There are several reasons due to which the managers are required to be involved in strategic planning.
1. Proper use of resources: as the natural resources are becomingscarcer and in the same way, the human resources are also undergoing change, the managers are required to make strategic plans so that they can get hold of these resources and also to use these resources properly. For example the traditional workforce is being replaced by the workers with higher level of education. In the same way, there are several jobs that are being done these days by computers. Due to these reasons, it is very important that the top management of the organization makes sure that the resources available with the organization are being used judiciously and for this purpose, proper planning is required.
2. Impact of external forces: there are several factors which have an impact on the operations of the organization. Among these factors, there are the government and political policies, international environment, social and technological changes and economic trends. Therefore, strategic planning should be capable of dealing with the impact of all these factors.
3. Ensuring success of the organization: as a result of the tremendous advancements made in the field of information technology, the knowledge related with the improved methods of planning has increased significantly. Due to the reason that strategic planning allows the organization to achieve success, almost all the companies are required to be involved in strategic planning.
Operational planning or short term planning or tactical planning generally involves a period of one year or so. In case of operational planning, the strategic plans are converted into specific and detailed action plans. These plans are designed with a view to sustain the organization with its present products and markets. Generally the middle or the lower-level management of the organization is involved in operational planning. The purpose of operational planning is to support the strategic plans in case there is some difficulty in implementing the strategic plans of the organization. For example, in case of any change in the external or the internal environment of the organization, tactical plans are used to deal with these changes. For example, there can be a sudden rise in the price of a particular product or there can be unexpected moves by the competitors or the organization may face difficulties in obtaining raw materials. In all such cases, tactical plans are used to deal with these situations. However the effectiveness of tactical plans significantly depends on the flexibility and speed with which the management of the organization has acted in order to deal with these changes. The main purpose of operational planning is that the resources available with the organization should be used patiently and at the same time, a control mechanism should be developed so that the efficient implementation of plans can be ensured in order to achieve the organizational goals.
Difference between operational planning and strategic planning:
There are certain differences that are present between operational planning and strategic planning. These are:-
1. Duration: the first difference between these two types of plans is related with the duration of these plans. The duration of strategic plans is longer and it can be said that more the duration of a plan, the more strategic it is. Strategic plans are mainly related with the decisions that have a long-term impact and generally the effects of strategic plans are not easy to reverse. In this way, strategic plans can also be referred to as long-term plans. On the other hand, the operational plans are mainly concerned with short-term plans or these plans have a short duration. However, it needs to be noted that both strategic plans and operational plans complement each other and therefore, they cannot be separated from each other.
2. Scope: while the scope of strategic plans is very broad, on the other hand the operational plans have a narrow scope. Therefore, the more activities of the organization are impacted by a plan, the more strategic it is. In this way, the strategic plans of the organization guide the choices out of the broad directions towards which the organization wants to move. On the other hand, the focus of operational plan is on the ways and means in which the individual functions of the organization can programmed with a view to achieve the organizational goals.
3. Primary: it also needs to be noted that strategic planning precedes operational planning. While the strategic planning establishes the trends and the directions in which the organization wants to move, the operational planning decides the actions that are required to implement the strategic plans. Due to this reason, the period of strategic planning is longer as compared to the operational plans. In the same way, the scope of operational planning is also limited by strategic planning because operational planning has to operate within the boundaries that have been fixed by strategic planning.
Planning Time Dimensions: planning is related with the things that have to be confronted by the organization in future. In this way the effect of the decisions made today is felt in the future. According to the principle of commitment, the planning for long term is not in reality the planning for the decisions to be made in future but in reality it is the planning related with the impact of the decisions made today. The time dimension of the function of planning deals with the organization’s needs and the nature of business. An example in this regard can be given of a large public organization that my plan to have new power plants in the coming 20 to 30 years but on the other hand, there can be a small manufacturer who makes plans regarding production only for the next year. In this way, the time dimension of planning can be divided into short range and long-range.
Planning for long-range: the managers indulge in long range planning with a view to achieve the long-term goals of the company. Generally a typical plan for long term can be anything from1 to 20 years or even more. However generally it has been seen that the period of long-term plan is between three to five years. In the same way, generally the long-term plans cover all operational areas and are implemented within the present and the longterm outline of social, economic and technical factors. At the same time, the long plans also consider the impact of external factors.
The long plans also define the purpose of the company and at the same time they mention the market position of the products of the company and outlined the keypolicies and strategies that have to be adopted by the organization in order to achieve its goals. In this way the long-term plans are made after analyzing the external environment of the company and also the forecasts of the events that may have an impact on the company. The long-term plans are related with the broad technological and competitive facets of the company and also the distribution of resources fora protractedtime. As there is a lot of subtlety related with long-term plans, it is very important that these plans are flexible. The assessment of events that may take place in future can be in accordance with the expectations made under the plan therefore the plans must be capable of being adjusted according to the needs of the current situation. The long-term plans provide the criteria that can be used for decision-making and this responsibility lies on the top management of the organization.
The significance of long term planning:
Long-term plans are very important in the present day highly competitive environment. Some of the reasons due to which the management is required to make long-term plans are:-
i. As a result of the recent technological developments, the needs of the consumers have also changed. In this way the consumer preferences are undergoing a significant change. The consumers are looking for better products from the companies. Therefore, the long-term plans can help anorganization in fulfilling the demands of the consumers in future.
ii. As a result of the varyingsituations, the companies are required to come with new products constantly. It is very important that the organization is prepared to face the future.This can be possible only if the management of the organization is engaged in planning for a long-term.
iii. These days, the organizations are looking for improving their level of operations, diversification and expansions etc. However, it requires that there should be a delegation of actions in the organization. Therefore the middle as well as the lower levelmanagement needs to be given the responsibility of operating functions while the top management of the organization should indulge in long-term planning so that the organization is capable of facing the challenges in the future.
iv. In these modern times, a change is taking place in industrial relations. As a result of these changes, the workers are looking for greater wages and incentives, and also other benefits like unemployment allowance,security etc. It is inevitable that as a result of these demands, there will be extra burden on the business organizations. Therefore, the organizations are required to make plans in advance so that as a result of these changes in the future, the business may not be adversely impacted.
v. At the same time, the management techniques are also improving. For example, there are techniques like operations research, electronic forecasting, e-data processing and motivational research that can assist the management of the organization in planning. Therefore the management is no longer required to rely on intuition and guesswork alone.
Short-range plans: plans for short range are generally made by the management of the organization for one year or less. However the shortplans are detailed and specific. The short plans are made by the management within the outline of the present resources of the organizations. These plans can also be described as the breakup of the long-term plans. In this way, the short term plans are required to contribute in achieving the objectives of long-term plans. The objective of short-range plans is to sustain the organization in production/distribution of the products and services offered by it in its present markets.
Relationship between planning and controlling:
The functions of planning and controlling are related with each other. While the function of planning prescribes the organizational goals, the function of controlling ensures that these goals are achieved by the organization. In this way, while planning decides the process of control, controlling provides the basis for planning. Therefore, both the function of planning and controlling rely on each other. In order to understand the relationship between planning and controlling, it needs to be noted that:-
i. Planning originates controlling: in case of planning, the management sets the goals or targets for the organization. However in order to achieve these targets, the process of control is required. In this way, the process of planning proceeds control.
ii. Controlling sustains planning: the course of planning is directed by controlling. In this way, with the help of the process of controlling, the areas can be identified where planning is required.
iii. Controlling provides information for planning: under the function of controlling, the real performance of the organization can be compared with the set standards and in this way, any variation can be recorded. However the information that is collected for the purpose of exercising control is also used in the function of planning.
iv. The functions of Planning and controlling are interrelated: While the function of planning is primary function of management, other functions like directing, organizing and staffing have to be organized to implement the plans. In this way, the function of control evaluates the real performance of the organization and compares it with the standards that have been set in this regard. In case the performance of the organization is less as compared to the standards, the deviations are noted. Therefore, they required corrective measures that have to be taken so that the performance of the organization can be improved in future. In this way, it can be said that while planning is the first function of the management, control is the last function but they are dependent on each other.
v. Planning and control are forward-looking: both the functions of planning and control are related with the future activities of the organization. Planning is always made regarding future and in the same way control is also for the future activities of the organization. The reason is that the past cannot be controlled and it is only the future that can be controlled by the management.
In this way, both the functions of planning and control are related with achieving the organizational goals. The effort made by the management under both these functions is to achieve maximum output with the available resources. Therefore systematic planning as well as organize control is required to achieve the goals of the organization.