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1.5 Planning, Organizing, Leading, and Controlling

Learning objectives.

• Know the dimensions of the planning-organizing-leading-controlling (P-O-L-C) framework.
• Know the general inputs into each P-O-L-C dimension.

A manager’s primary challenge is to solve problems creatively. While drawing from a variety of academic disciplines, and to help managers respond to the challenge of creative problem solving, principles of management have long been categorized into the four major functions of planning, organizing, leading, and controlling (the P-O-L-C framework). The four functions, summarized in the P-O-L-C figure, are actually highly integrated when carried out in the day-to-day realities of running an organization. Therefore, you should not get caught up in trying to analyze and understand a complete, clear rationale for categorizing skills and practices that compose the whole of the P-O-L-C framework.

It is important to note that this framework is not without criticism. Specifically, these criticisms stem from the observation that the P-O-L-C functions might be ideal but that they do not accurately depict the day-to-day actions of actual managers (Mintzberg, 1973; Lamond, 2004). The typical day in the life of a manager at any level can be fragmented and hectic, with the constant threat of having priorities dictated by the law of the trivial many and important few (i.e., the 80/20 rule). However, the general conclusion seems to be that the P-O-L-C functions of management still provide a very useful way of classifying the activities managers engage in as they attempt to achieve organizational goals (Lamond, 2004).

Figure 1.7 The P-O-L-C Framework

Planning is the function of management that involves setting objectives and determining a course of action for achieving those objectives. Planning requires that managers be aware of environmental conditions facing their organization and forecast future conditions. It also requires that managers be good decision makers.

Planning is a process consisting of several steps. The process begins with environmental scanning which simply means that planners must be aware of the critical contingencies facing their organization in terms of economic conditions, their competitors, and their customers. Planners must then attempt to forecast future conditions. These forecasts form the basis for planning.

Planners must establish objectives, which are statements of what needs to be achieved and when. Planners must then identify alternative courses of action for achieving objectives. After evaluating the various alternatives, planners must make decisions about the best courses of action for achieving objectives. They must then formulate necessary steps and ensure effective implementation of plans. Finally, planners must constantly evaluate the success of their plans and take corrective action when necessary.

There are many different types of plans and planning.

Strategic planning involves analyzing competitive opportunities and threats, as well as the strengths and weaknesses of the organization, and then determining how to position the organization to compete effectively in their environment. Strategic planning has a long time frame, often three years or more. Strategic planning generally includes the entire organization and includes formulation of objectives. Strategic planning is often based on the organization’s mission, which is its fundamental reason for existence. An organization’s top management most often conducts strategic planning.

Tactical planning is intermediate-range (one to three years) planning that is designed to develop relatively concrete and specific means to implement the strategic plan. Middle-level managers often engage in tactical planning.

Operational planning generally assumes the existence of organization-wide or subunit goals and objectives and specifies ways to achieve them. Operational planning is short-range (less than a year) planning that is designed to develop specific action steps that support the strategic and tactical plans.

Organizing is the function of management that involves developing an organizational structure and allocating human resources to ensure the accomplishment of objectives. The structure of the organization is the framework within which effort is coordinated. The structure is usually represented by an organization chart, which provides a graphic representation of the chain of command within an organization. Decisions made about the structure of an organization are generally referred to as organizational design decisions.

Organizing also involves the design of individual jobs within the organization. Decisions must be made about the duties and responsibilities of individual jobs, as well as the manner in which the duties should be carried out. Decisions made about the nature of jobs within the organization are generally called “job design” decisions.

Organizing at the level of the organization involves deciding how best to departmentalize, or cluster, jobs into departments to coordinate effort effectively. There are many different ways to departmentalize, including organizing by function, product, geography, or customer. Many larger organizations use multiple methods of departmentalization.

Organizing at the level of a particular job involves how best to design individual jobs to most effectively use human resources. Traditionally, job design was based on principles of division of labor and specialization, which assumed that the more narrow the job content, the more proficient the individual performing the job could become. However, experience has shown that it is possible for jobs to become too narrow and specialized. For example, how would you like to screw lids on jars one day after another, as you might have done many decades ago if you worked in company that made and sold jellies and jams? When this happens, negative outcomes result, including decreased job satisfaction and organizational commitment, increased absenteeism, and turnover.

Recently, many organizations have attempted to strike a balance between the need for worker specialization and the need for workers to have jobs that entail variety and autonomy. Many jobs are now designed based on such principles as empowerment, job enrichment and teamwork . For example, HUI Manufacturing, a custom sheet metal fabricator, has done away with traditional “departments” to focus on listening and responding to customer needs. From company-wide meetings to team huddles, HUI employees know and understand their customers and how HUI might service them best (Huimfg, 2008).

Leading involves the social and informal sources of influence that you use to inspire action taken by others. If managers are effective leaders, their subordinates will be enthusiastic about exerting effort to attain organizational objectives.

The behavioral sciences have made many contributions to understanding this function of management. Personality research and studies of job attitudes provide important information as to how managers can most effectively lead subordinates. For example, this research tells us that to become effective at leading, managers must first understand their subordinates’ personalities, values, attitudes, and emotions.

Studies of motivation and motivation theory provide important information about the ways in which workers can be energized to put forth productive effort. Studies of communication provide direction as to how managers can effectively and persuasively communicate. Studies of leadership and leadership style provide information regarding questions, such as, “What makes a manager a good leader?” and “In what situations are certain leadership styles most appropriate and effective?”

Quality control ensures that the organization delivers on its promises.

International Maize and Wheat Improvement Center – Maize seed quality control at small seed company Bidasem – CC BY-NC-SA 2.0.

Controlling

Controlling involves ensuring that performance does not deviate from standards. Controlling consists of three steps, which include (1) establishing performance standards, (2) comparing actual performance against standards, and (3) taking corrective action when necessary. Performance standards are often stated in monetary terms such as revenue, costs, or profits but may also be stated in other terms, such as units produced, number of defective products, or levels of quality or customer service.

The measurement of performance can be done in several ways, depending on the performance standards, including financial statements, sales reports, production results, customer satisfaction, and formal performance appraisals. Managers at all levels engage in the managerial function of controlling to some degree.

The managerial function of controlling should not be confused with control in the behavioral or manipulative sense. This function does not imply that managers should attempt to control or to manipulate the personalities, values, attitudes, or emotions of their subordinates. Instead, this function of management concerns the manager’s role in taking necessary actions to ensure that the work-related activities of subordinates are consistent with and contributing toward the accomplishment of organizational and departmental objectives.

Effective controlling requires the existence of plans, since planning provides the necessary performance standards or objectives. Controlling also requires a clear understanding of where responsibility for deviations from standards lies. Two traditional control techniques are budget and performance audits. An audit involves an examination and verification of records and supporting documents. A budget audit provides information about where the organization is with respect to what was planned or budgeted for, whereas a performance audit might try to determine whether the figures reported are a reflection of actual performance. Although controlling is often thought of in terms of financial criteria, managers must also control production and operations processes, procedures for delivery of services, compliance with company policies, and many other activities within the organization.

The management functions of planning, organizing, leading, and controlling are widely considered to be the best means of describing the manager’s job, as well as the best way to classify accumulated knowledge about the study of management. Although there have been tremendous changes in the environment faced by managers and the tools used by managers to perform their roles, managers still perform these essential functions.

Key Takeaway

The principles of management can be distilled down to four critical functions. These functions are planning, organizing, leading, and controlling. This P-O-L-C framework provides useful guidance into what the ideal job of a manager should look like.

• What are the management functions that comprise the P-O-L-C framework?
• Are there any criticisms of this framework?
• What function does planning serve?
• What function does organizing serve?
• What function does leading serve?
• What function does controlling serve?

Huimfg.com, http://www.huimfg.com/abouthui-yourteams.aspx (accessed October 15, 2008).

Lamond, D, “A Matter of Style: Reconciling Henri and Henry,” Management Decision 42, no. 2 (2004): 330–56.

Mintzberg, H. The Nature of Managerial Work (New York: Harper & Row, 1973); D. Lamond, “A Matter of Style: Reconciling Henri and Henry,” Management Decision 42 , no. 2 (2004): 330–56.

Principles of Management Copyright © 2015 by University of Minnesota is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License , except where otherwise noted.

17.2 The Planning Process

• Outline the planning and controlling processes.

Planning is a process. Ideally it is future oriented, comprehensive, systematic, integrated, and negotiated. 11 It involves an extensive search for alternatives and analyzes relevant information, is systematic in nature, and is commonly participative. 12 The planning model described in this section breaks the managerial function of planning into several steps, as shown in Exhibit 17.3 . Following this step-by-step procedure helps ensure that organizational planning meets these requirements.

Step 1: Developing an Awareness of the Present State

According to management scholars Harold Koontz and Cyril O’Donnell, the first step in the planning process is awareness. 13 It is at this step that managers build the foundation on which they will develop their plans. This foundation specifies an organization’s current status, pinpoints its commitments, recognizes its strengths and weaknesses, and sets forth a vision of the future. Because the past is instrumental in determining where an organization expects to go in the future, managers at this point must understand their organization and its history. It has been said—“The further you look back, the further you can see ahead.” 14

Step 2: Establishing Outcome Statements

The second step in the planning process consists of deciding “where the organization is headed, or is going to end up.” Ideally, this involves establishing goals. Just as your goal in this course might be to get a certain grade, managers at various levels in an organization’s hierarchy set goals. For example, plans established by a university’s marketing department curriculum committee must fit with and support the plans of the department, which contribute to the goals of the business school, whose plans must, in turn, support the goals of the university. Managers therefore develop an elaborate network of organizational plans, such as that shown in Exhibit 17.4 , to achieve the overall goals of their organization.

Goal vs. Domain Planning

Outcome statements can be constructed around specific goals or framed in terms of moving in a particular direction toward a viable set of outcomes. In goal planning , people set specific goals and then create action statements. 15 For example, freshman Kristin Rude decides that she wants a bachelor of science degree in biochemistry (the goal). She then constructs a four-year academic plan that will help her achieve this goal. Kristin is engaging in goal planning. She first identifies a goal and then develops a course of action to realize her goal.

Another approach to planning is domain/directional planning , in which managers develop a course of action that moves an organization toward one identified domain (and therefore away from other domains). 16 Within the chosen domain may lie a number of acceptable and specific goals. For example, high-school senior Neil Marquardt decides that he wants to major in a business-related discipline in college. During the next four years, he will select a variety of courses from the business school curriculum yet never select a major. After selecting courses based on availability and interest, he earns a sufficient number of credits within this chosen domain that enables him to graduate with a major in marketing. Neil never engaged in goal planning, but in the end he will realize one of many acceptable goals within an accepted domain.

The development of the Post-it® product by the 3M Corporation demonstrates how domain planning works. In the research laboratories at 3M, efforts were being made to develop new forms and strengths of cohesive substances. One result was cohesive material with no known value because of its extremely low cohesive level. A 3M division specialist, Arthur L. Fry, frustrated by page markers falling from his hymn book in church, realized that this material, recently developed by Spencer F. Silver, would stick to paper for long periods and could be removed without destroying the paper. Fry experimented with the material as page markers and note pads—out of this came the highly popular and extremely profitable 3M product Scotch Post-it®. Geoff Nicholson, the driving force behind the Post-it® product, comments that rather than get bogged down in the planning process, innovations must be fast-tracked and decisions made whether to continue or move on early during the product development process. 17

Situations in which managers are likely to engage in domain planning include (1) when there is a recognized need for flexibility, (2) when people cannot agree on goals, (3) when an organization’s external environment is unstable and highly uncertain, and (4) when an organization is starting up or is in a transitional period. In addition, domain planning is likely to prevail at upper levels in an organization, where managers are responsible for dealing with the external environment and when task uncertainty is high. Goal planning (formulating goals compatible with the chosen domain) is likely to prevail in the technical core, where there is less uncertainty.

Hybrid Planning

Occasionally, coupling of domain and goal planning occurs, creating a third approach, called hybrid planning . In this approach, managers begin with the more general domain planning and commit to moving in a particular direction. As time passes, learning occurs, uncertainty is reduced, preferences sharpen, and managers are able to make the transition to goal planning as they identify increasingly specific targets in the selected domain. Movement from domain planning to goal planning occurs as knowledge accumulates, preferences for a particular goal emerge, and action statements are created.

Consequences of Goal, Domain, and Hybrid Planning

Setting goals not only affects performance directly, but also encourages managers to plan more extensively. That is, once goals are set, people are more likely to think systematically about how they should proceed to realize the goals. 18 When people have vague goals, as in domain planning, they find it difficult to draw up detailed action plans and are therefore less likely to perform effectively. When studying the topic of motivation, you will learn about goal theory. Research suggests that goal planning results in higher levels of performance than does domain planning alone. 19

Step 3: Premising

In this step of the planning process, managers establish the premises, or assumptions, on which they will build their action statements. The quality and success of any plan depends on the quality of its underlying assumptions. Throughout the planning process, assumptions about future events must be brought to the surface, monitored, and updated. 20

Managers collect information by scanning their organization’s internal and external environments. They use this information to make assumptions about the likelihood of future events. As Kristin considers her four-year pursuit of her biochemistry major, she anticipates that in addition to her savings and funds supplied by her parents, she will need a full-time summer job for two summers in order to cover the cost of her undergraduate education. Thus, she includes finding full-time summer employment between her senior year of high school and her freshman year and between her freshman and sophomore years of college as part of her plan. The other two summers she will devote to an internship and finding postgraduate employment—much to mom and dad’s delight! Effective planning skills can be used throughout your life. The plan you develop to pay for and complete your education is an especially important one.

Step 4: Determining a Course of Action (Action Statements)

In this stage of the planning process, managers decide how to move from their current position toward their goal (or toward their domain). They develop an action statement that details what needs to be done, when, how, and by whom. The course of action determines how an organization will get from its current position to its desired future position. Choosing a course of action involves determining alternatives by drawing on research, experimentation, and experience; evaluating alternatives in light of how well each would help the organization reach its goals or approach its desired domain; and selecting a course of action after identifying and carefully considering the merits of each alternative.

Step 5: Formulating Supportive Plans

The planning process seldom stops with the adoption of a general plan. Managers often need to develop one or more supportive or derivative plans to bolster and explain their basic plan. Suppose an organization decides to switch from a 5-day, 40-hour workweek (5/40) to a 4-day, 40-hour workweek (4/40) in an attempt to reduce employee turnover. This major plan requires the creation of a number of supportive plans. Managers might need to develop personnel policies dealing with payment of daily overtime. New administrative plans will be needed for scheduling meetings, handling phone calls, and dealing with customers and suppliers.

Planning, Implementation, and Controlling

After managers have moved through the five steps of the planning process and have drawn up and implemented specific plans, they must monitor and maintain their plans. Through the controlling function (to be discussed in greater detail later in this chapter), managers observe ongoing human behavior and organizational activity, compare it to the outcome and action statements formulated during the planning process, and take corrective action if they observe unexpected and unwanted deviations. Thus, planning and controlling activities are closely interrelated (planning ➨ controlling ➨ planning . . .). Planning feeds controlling by establishing the standards against which behavior will be evaluated during the controlling process. Monitoring organizational behavior (the control activity) provides managers with input that helps them prepare for the upcoming planning period—it adds meaning to the awareness step of the planning process.

Influenced by total quality management (TQM) and the importance of achieving continuous improvement in the processes used, as well as the goods and services produced, organizations such as IBM-Rochester have linked their planning and controlling activities by adopting the Deming cycle (also known as the Shewhart cycle).

It has been noted on numerous occasions that many organizations that do plan fail to recognize the importance of continuous learning. Their plans are either placed on the shelf and collect dust or are created, implemented, and adhered to without a systematic review and modification process. Frequently, plans are implemented without first measuring where the organization currently stands so that future comparisons and evaluations of the plan’s effectiveness cannot be determined. The Deming cycle , shown in Exhibit 17.6 , helps managers assess the effects of planned action by integrating organizational learning into the planning process. The cycle consists of four key stages: (1) Plan—create the plan using the model discussed earlier. (2) Do—implement the plan. (3) Check—monitor the results of the planned course of action; organizational learning about the effectiveness of the plan occurs at this stage. (4) Act—act on what was learned, modify the plan, and return to the first stage in the cycle, and the cycle begins again as the organization strives for continuous learning and improvement.

Concept Check

• What are the five steps in the planning process?
• What is the difference between goal, domain, and hybrid planning?
• How are planning, implementation, and controlling related?

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Why Is Strategic Planning Important?

• 06 Oct 2020

Do you know what your organization’s strategy is? How much time do you dedicate to developing that strategy each month?

If your answers are on the low side, you’re not alone. According to research from Bridges Business Consultancy , 48 percent of leaders spend less than one day per month discussing strategy.

It’s no wonder, then, that 48 percent of all organizations fail to meet at least half of their strategic targets. Before an organization can reap the rewards of its business strategy, planning must take place to ensure its strategy remains agile and executable .

Here’s a look at what strategic planning is and how it can benefit your organization.

Access your free e-book today.

What Is Strategic Planning?

Strategic planning is the ongoing organizational process of using available knowledge to document a business's intended direction. This process is used to prioritize efforts, effectively allocate resources, align shareholders and employees on the organization’s goals, and ensure those goals are backed by data and sound reasoning.

It’s important to highlight that strategic planning is an ongoing process—not a one-time meeting. In the online course Disruptive Strategy , Harvard Business School Professor Clayton Christensen notes that in a study of HBS graduates who started businesses, 93 percent of those with successful strategies evolved and pivoted away from their original strategic plans.

“Most people think of strategy as an event, but that’s not the way the world works,” Christensen says. “When we run into unanticipated opportunities and threats, we have to respond. Sometimes we respond successfully; sometimes we don’t. But most strategies develop through this process. More often than not, the strategy that leads to success emerges through a process that’s at work 24/7 in almost every industry.”

Strategic planning requires time, effort, and continual reassessment. Given the proper attention, it can set your business on the right track. Here are three benefits of strategic planning.

Related: 4 Ways to Develop Your Strategic Thinking Skills

Benefits of Strategic Planning

1. create one, forward-focused vision.

Strategy touches every employee and serves as an actionable way to reach your company’s goals.

One significant benefit of strategic planning is that it creates a single, forward-focused vision that can align your company and its shareholders. By making everyone aware of your company’s goals, how and why those goals were chosen, and what they can do to help reach them, you can create an increased sense of responsibility throughout your organization.

This can also have trickle-down effects. For instance, if a manager isn’t clear on your organization’s strategy or the reasoning used to craft it, they could make decisions on a team level that counteract its efforts. With one vision to unite around, everyone at your organization can act with a broader strategy in mind.

2. Draw Attention to Biases and Flaws in Reasoning

The decisions you make come with inherent bias. Taking part in the strategic planning process forces you to examine and explain why you’re making each decision and back it up with data, projections, or case studies, thus combatting your cognitive biases.

A few examples of cognitive biases are:

• The recency effect: The tendency to select the option presented most recently because it’s fresh in your mind
• Occam’s razor bias: The tendency to assume the most obvious decision to be the best decision
• Inertia bias: The tendency to select options that allow you to think, feel, and act in familiar ways

One cognitive bias that may be more difficult to catch in the act is confirmation bias . When seeking to validate a particular viewpoint, it's the tendency to only pay attention to information that supports that viewpoint.

If you’re crafting a strategic plan for your organization and know which strategy you prefer, enlist others with differing views and opinions to help look for information that either proves or disproves the idea.

Combating biases in strategic decision-making requires effort and dedication from your entire team, and it can make your organization’s strategy that much stronger.

Related: 3 Group Decision-Making Techniques for Success

3. Track Progress Based on Strategic Goals

Having a strategic plan in place can enable you to track progress toward goals. When each department and team understands your company’s larger strategy, their progress can directly impact its success, creating a top-down approach to tracking key performance indicators (KPIs) .

By planning your company’s strategy and defining its goals, KPIs can be determined at the organizational level. These goals can then be extended to business units, departments, teams, and individuals. This ensures that every level of your organization is aligned and can positively impact your business’s KPIs and performance.

It’s important to remember that even though your strategy might be far-reaching and structured, it must remain agile. As Christensen asserts in Disruptive Strategy , a business’s strategy needs to evolve with the challenges and opportunities it encounters. Be prepared to pivot your KPIs as goals shift and communicate the reasons for change to your organization.

Improve Your Strategic Planning Skills

Strategic planning can benefit your organization’s vision, execution, and progress toward goals. If strategic planning is a skill you’d like to improve, online courses can provide the knowledge and techniques needed to lead your team and organization.

Strategy courses can range from primers on key concepts (such as Economics for Managers ), to deep-dives on strategy frameworks (such as Disruptive Strategy ), to coursework designed to help you strategize for a specific organizational goal (such as Sustainable Business Strategy ).

Learning how to craft an effective, compelling strategic plan can enable you to not only invest in your career but provide lasting value to your organization.

Do you want to formulate winning strategies for your organization? Explore our portfolio of online strategy courses and download the free flowchart to determine which is the best fit for you and your goals.

About the Author

Business Planning

Written by True Tamplin, BSc, CEPF®

Reviewed by subject matter experts.

Updated on June 08, 2023

Get Any Financial Question Answered

Table of contents, what is business planning.

Business planning is a crucial process that involves creating a roadmap for an organization to achieve its long-term objectives. It is the foundation of every successful business and provides a framework for decision-making, resource allocation, and measuring progress towards goals.

Business planning involves identifying the current state of the organization, determining where it wants to go, and developing a strategy to get there.

It includes analyzing the market, identifying target customers, determining a competitive advantage, setting financial goals, and establishing operational plans.

The business plan serves as a reference point for all stakeholders , including investors, employees, and partners, and helps to ensure that everyone is aligned and working towards the same objectives.

Importance of Business Planning

Business planning plays a critical role in the success of any organization, as it helps to establish a clear direction and purpose for the business. It allows the organization to identify its goals and objectives, develop strategies and tactics to achieve them, and establish a framework of necessary resources and operational procedures to ensure success.

Additionally, a well-crafted business plan can serve as a reference point for decision-making, ensuring that all actions taken by the organization are aligned with its long-term objectives.

It can also facilitate communication and collaboration among team members, ensuring that everyone is working towards a common goal.

Furthermore, a business plan is often required when seeking funding or investment from external sources, as it demonstrates the organization's potential for growth and profitability. Overall, business planning is essential for any organization looking to succeed and thrive in a competitive market.

Business Planning Process

Step 1: defining your business purpose and goals.

Begin by clarifying your business's purpose, mission, and long-term goals. These elements should align with the organization's core values and guide every aspect of the planning process.

Step 2: Conducting Market Research and Analysis

Thorough market research and analysis are crucial to understanding the industry landscape, identifying target customers, and gauging the competition. This information will inform your business strategy and help you find your niche in the market.

Step 3: Creating a Business Model and Strategy

Based on the insights from your market research, develop a business model that outlines how your organization will create, deliver, and capture value. This will inform the overall business strategy, including identifying target markets, value propositions, and competitive advantages.

Step 4: Developing a Marketing Plan

A marketing plan details how your organization will promote its products or services to target customers. This includes defining marketing objectives, tactics, channels, budgets, and performance metrics to measure success.

Step 5: Establishing Operational and Financial Plans

The operational plan outlines the day-to-day activities, resources, and processes required to run your business. The financial plan projects revenue, expenses, and cash flow, providing a basis for assessing the organization's financial health and long-term viability.

Step 6: Reviewing and Revising the Business Plan

Regularly review and update your business plan to ensure it remains relevant and reflects the organization's current situation and goals. This iterative process enables proactive adjustments to strategies and tactics in response to changing market conditions and business realities.

Components of a Business Plan

Executive summary.

The executive summary provides a high-level overview of your business plan, touching on the company's mission, objectives, strategies, and key financial projections.

It is critical to make this section concise and engaging, as it is often the first section that potential investors or partners will read.

Company Description

The company description offers a detailed overview of your organization, including its history, mission, values, and legal structure. It also outlines the company's goals and objectives and explains how the business addresses a market need or problem.

Products or Services

Describe the products or services your company offers, emphasizing their unique features, benefits, and competitive advantages. Detail the development process, lifecycle, and intellectual property rights, if applicable.

Market Analysis

The market analysis section delves into the industry, target market, and competition. It should demonstrate a thorough understanding of market trends, growth potential, customer demographics, and competitive landscape.

Marketing and Sales Strategy

Outline your organization's approach to promoting and selling its products or services. This includes marketing channels, sales tactics, pricing strategies, and customer relationship management .

Management and Organization

This section provides an overview of your company's management team, including their backgrounds, roles, and responsibilities. It also outlines the organizational structure and any advisory or support services employed by the company.

Operational Plan

The operational plan describes the day-to-day operations of your business, including facilities, equipment, technology, and personnel requirements. It also covers supply chain management, production processes, and quality control measures.

Financial Plan

The financial plan is a crucial component of your business plan, providing a comprehensive view of your organization's financial health and projections.

This section should include income statements , balance sheets , cash flow statements , and break-even analysis for at least three to five years. Be sure to provide clear assumptions and justifications for your projections.

Appendices and Supporting Documents

The appendices and supporting documents section contains any additional materials that support or complement the information provided in the main body of the business plan. This may include resumes of key team members, patents , licenses, contracts, or market research data.

Benefits of Business Planning

Helps secure funding and investment.

A well-crafted business plan demonstrates to potential investors and lenders that your organization is well-organized, has a clear vision, and is financially viable. It increases your chances of securing the funding needed for growth and expansion.

Provides a Roadmap for Growth and Success

A business plan serves as a roadmap that guides your organization's growth and development. It helps you set realistic goals, identify opportunities, and anticipate challenges, enabling you to make informed decisions and allocate resources effectively.

Enables Effective Decision-Making

Having a comprehensive business plan enables you and your management team to make well-informed decisions, based on a clear understanding of the organization's goals, strategies, and financial situation.

Facilitates Communication and Collaboration

A business plan serves as a communication tool that fosters collaboration and alignment among team members, ensuring that everyone is working towards the same objectives and understands the organization's strategic direction.

Business planning should not be a one-time activity; instead, it should be an ongoing process that is continually reviewed and updated to reflect changing market conditions, business realities, and organizational goals.

This dynamic approach to planning ensures that your organization remains agile, responsive, and primed for success.

As the business landscape continues to evolve, organizations must embrace new technologies, methodologies, and tools to stay competitive.

The future of business planning will involve leveraging data-driven insights, artificial intelligence, and predictive analytics to create more accurate and adaptive plans that can quickly respond to a rapidly changing environment.

By staying ahead of the curve, businesses can not only survive but thrive in the coming years.

Business Planning FAQs

What is business planning, and why is it important.

Business planning is the process of setting goals, outlining strategies, and creating a roadmap for your company's future. It's important because it helps you identify opportunities and risks, allocate resources effectively, and stay on track to achieve your goals.

What are the key components of a business plan?

A business plan typically includes an executive summary, company description, market analysis, organization and management structure, product or service line, marketing and sales strategies, and financial projections.

How often should I update my business plan?

It is a good idea to review and update your business plan annually, or whenever there's a significant change in your industry or market conditions.

What are the benefits of business planning?

Effective business planning can help you anticipate challenges, identify opportunities for growth, improve decision-making, secure financing, and stay ahead of competitors.

Do I need a business plan if I am not seeking funding?

Yes, even if you're not seeking funding, a business plan can be a valuable tool for setting goals, developing strategies, and keeping your team aligned and focused on achieving your objectives.

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide , a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University , where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon , Nasdaq and Forbes .

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What Is Planning? Definition, Characteristics, Significance, And Techniques

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Building and growing a company is a strategic game from start to finish, from correctly positioning your product or service to skillfully deploying your team. While robust companies are led by strong managers and leaders, the primary secret to securing success is planning.

Planning is the first management function. It involves identifying organizational goals and objectives and predetermining a full course of action to achieve them effectively and efficiently. It is an intellectual process that requires creativity, imagination, forecasting, and sound decision-making.

“The man who is prepared has his battle half fought” – Miguel de Cervantes. We’re going to discuss the definition, characteristics, significance, and techniques of planning to create and sustain business success.

Table of Contents

What is planning, planning definition, 1. managerial function, 2. intellectual process, 3. goal orientated, 4. pervasive, 5. continuous activity, 6. futuristic, 7. decision-making, 8. flexible, importance of planning, 1. strategic planning, 2. operational planning, 3. tactical planning, 4. contingency-level planning, 10 techniques for successful planning, successful people’s thoughts about planning, pin this for later….

In the simplest term, planning is an intellectual process that enables business managers to clearly define the 5Ws:

• What task to do
• Why perform it
• And when and how to do the task
• Where to perform it
• Who should complete the task

Planning is a highly focused and functional tool in management. It involves identifying a specific purpose or destination – your goal – and mapping out a future course of action to accomplish it as efficiently as possible.

Planning reflects a company’s vision and foresight , like a blueprint of action and operation. Once managers identify and communicate the guiding purpose with employees, it helps create alignment and functionality to achieve a common desire.

Planning is defined as the process of planning activities and events in an organized manner to ensure they are successful and happen on time. It bridges the gap between where the company is and wants to be.

Planning is the first function of management. It involves identifying objectives, establishing a mission statement, defining organizational goals, and predetermining a complete course of action to achieve these objectives effectively and efficiently.

Planning is an intellectual process that requires creativity, imagination, forecasting, and sound decision-making. Managers need to look forward, anticipate the future, and choose an appropriate course of action.

Some popular definitions of planning include:

• Peter Drucker – Planning is the continuous process of making present entrepreneurial (risk-taking) decisions systematically and with the greatest knowledge of the futurity; organizing the efforts needed to carry out these decisions; and measuring the results of the expectations through organized, systematic feedback.
• Richard Steers – Planning is the process by which managers define goals and take necessary steps to ensure that these goals are achieved.
• Stephen P Robbins – Planning involves defining the organization’s goals, establishing an overall strategy for achieving those goals, and developing a comprehensive set of plans to integrate and coordinate organizational work.
• Rickey W. Griffin – Planning is setting of organization’s goals and deciding how best to achieve them.

Characteristics Of Planning

Planning is a dynamic process that involves analyzing and continuously evaluating. The nature of planning can be highlighted by 8 common characteristics.

Planning is the first and most important managerial function. It serves as a base for other management functions, i.e., organizing, directing, coordinating, staffing, reporting, controlling, and budgeting.

Planning is an intellectual process that requires management to critically analyze past achievements and the present while forecasting future activities.

Formulating plans involves creativity, critical and logical thinking, imagination, evaluating alternatives, contingency analysis, and future orientation.

Planning determines a systematic plan of action to achieve short and long-term goals. Planning identifies the resources, time, cost, and involvement necessary to achieve each goal. It also helps choose the appropriate course of action while evaluating possible alternatives.

Planning is pervasive and present at all organizational levels.

Even though all the segments of a company are interrelated, the same set of plans does not work for all levels. Each department and team member has a different function and set of activities to complete. The scope of planning will vary between levels and departments.

Planning is a continuous and ongoing phenomenon. Every company operates in a dynamic business environment subject to frequent changes, requiring frequent revisions and amendments.

Planning also involves setting short or long-term objectives and strategies. There is no set duration for short or long-term plans. Per the requirement, they can be made for a day, week, month, quarter, year, and so on. Once one plan is accomplished, another one starts.

Planning helps identify a future action plan, from what needs to be accomplished to how, when, and by whom it’ll be completed. Organizations use planning to predict future situations and make forecasts.

Forecasting is the practice of predicting future situations by considering past and present events. This decision-making tool helps organizations cope with the impact of the future’s uncertainty by mapping out actions and creating budgets to deal with the uncertainty.

Decision-making is an indispensable part of planning. Managers and leaders can choose between alternative plans and courses of action to reach a goal.

Planning requires a flexible approach due to time and circumstances’ uncertain and dynamic nature. Changes in the business environment can include internal or external elements like consumer demand, competition, government policies, etc.

There should always be room for flexibility to embrace future changes.

“By failing to prepare, you are preparing to fail” – Benjamin Franklin.

Planning is the most critical part of management and achieving organizational goals. Instead of putting out fires, effective planning helps you prevent them. Here’s the importance of planning.

• Planning helps establish appropriate goals: Planning helps develop and refine goals to ensure they are relevant and realistic. The process helps determine each team member’s role in achieving these goals.
• It gives direction: Planning ensures that all departments of an organization understand their responsibility. It channels team members’ efforts in the best way to achieve the desired goals.
• Planning breaks problems and goals into smaller pieces: Planning helps simplify problems and goals by separating them into smaller tasks.
• Planning improves decision-making: Planning ensures you gather sufficient information and weigh possible challenges to make a thoughtful, well-rounded decision.
• It improves future performance: Establishing objectives and choosing a course of action boosts future performance.
• Planning tackles risk and uncertainty: Planning helps anticipate and predict future risks with past and present data. Looking into the future helps organizations tackle uncertainty.
• Planning maximizes productivity: Planning ensures employees know what to do at all levels, preventing duplicated work activities and unproductivity.
• It ensures efficient resource usage: Both large and small organizations have limited resources. Planning provides the information necessary for management to allocate resources effectively to ensure the organization achieves its objectives.
• It supports and motivates creativity and innovative ideas: Planning is an intellectual process that enables managers and leaders to generate new ideas, think outside the box, and provide unique, innovative, and cost-effective products to customers.
• Planning facilitates decision-making and activity coordination: The planning function helps make accurate and efficient decisions. It also aligns the department-related activities of an organization and ensures that the plans of one department are understood and supported by other departments.
• It sets a standard for controlling functions: Planning and controlling are interrelated management functions. Planning sets goals and controlling ensures that they are accomplished in time. It also compares the company’s actual performance with the standard performance
• Planning creates competitive advantage: Planning gives a company a realistic view of its strengths and weaknesses related to competition. Management can identify overlooked opportunities and use competitors’ vulnerability to craft marketing strategies to their advantage.

Different Functions of Planning

Managers and leaders are responsible for a company’s short- and long-term visions, goals, and objectives. The planning function includes creating and drawing up realistic plans to reach these goals in time.

Planning helps management identify business challenges and work on future-facing initiatives like business forecasting, growth plans, and new company goals. It also allows management to decide on resource and workload allocation and management.

Managers are responsible for four primary types of planning: strategic, tactical, operational, and contingency. All of these are necessary for a business and its projects to succeed.

Strategic planning is a management process that focuses on defining an organization’s long-term and forward-focused vision, direction, and action. It seeks to anticipate future industry trends and to create strategies accordingly to ensure growth and necessary changes in business functions.

Strategic planning examines the company’s overall strengths, weaknesses, available resources, and potential opportunities. It also evaluates the results of the executed plan regarding the company’s overall long-term goals and desires.

Operational planning is a set of guidelines for accomplishing pre-set goals and missions. It involves the day-to-day running of the business, identifies what needs to be done, and then organizes the necessary actions chronologically.

Operational planning includes the short-term (less than a year) detailed planning and coordination of resources, staff, effort, and time in producing goods and services.

Operational plans can be split into two categories: single-use plans and ongoing plans.

• Ongoing plans:  Rules, policies, and procedures within a department that create routine processes for accomplishing objectives.
• Single-use plans : Procedures designed to be used once to complete an individual project or activity.

Tactical planning begins with a high-level strategic plan establishing the company’s goals. The desired goals are translated into intermediate-range (1 to 3 years) tactical plans designed to develop a relatively concrete, specific means to implement and accomplish the strategic plan.

The practice involves figuring out what needs to be done and then prioritizing and delegating the tasks to team members in a way that gets them accomplished.

Contingency-level planning is a planned response to risk. It is a course of action that prepares a company for potential crises like natural disasters, extreme weather events, or the loss of data, customers, staff, and business relationships.

Strategic and accurate planning is critical to aligning leaders, guiding management decisions, and ensuring success. It is a guiding light that guides decision-making in the immediate, short, and long term.

While it may seem like an obvious business concept, many strategic plans fail to deliver real value and outcomes due to several common pitfalls. Often, management forgets to view strategic planning as an annual process that needs frequent reviewing.

Planning can lack true strategic thinking without properly assessing the industry, competitors, market trends, and the organization’s capabilities.

Companies must develop a better understanding of approaching business planning to better manage resources and priorities. An organization can address these concerns by implementing the following nine techniques to create a successful planning process.

• Assess the industry, competition, and market trends: it is essential to assess the external forces – industry, competitors, and market trends – that shape your industry. Conduct an external assessment prior to planning to provide insights and valid data when making decisions.
• Conduct a SWOT analysis: a SWOT analysis will reveal the company’s strengths, weaknesses, opportunities, and threats. This internal information helps managers set a baseline for realistic goals and capabilities. Leaders can use the information to create offensive and defensive strategies to capitalize on opportunities and deter potential threats.
• Review mission & vision: Review the company’s mission and vision when starting strategic planning. This will inspire managers to collaborate and create meaningful goals.
• Set goals: Leaders should leverage external and internal assessments to set goals and priorities that help achieve the organization’s vision. Ensure the goals are SMART – specific, measurable, attainable, rational, and time-bound . Clearly communicate these goals with team members and encourage feedback and suggestions.
• Define objectives and initiatives: After setting goals and priorities, managers need to define clear and realistic objectives and initiatives. This will enable alignment and increase ownership toward achieving goals.
• Determine Premises: Plans are formulated on futuristic assumptions known as premises – capital requirements, market condition, organization resources, anticipated sales, employee cooperation, government policy, etc. Premises can affect a business plan directly or indirectly. Ensure business plans are based on data and market research. Planning on assumptions will override all the advantages of effective planning.
• Identify and evaluate alternatives: Managers need to use knowledge and previous experience to identify alternative plans based on foreseeing possible internal and external issues. Each alternative needs to be properly evaluated regarding its potential, required resources, cost-effectiveness, alignment of organizational goals, chances of achieving, etc. 
• Implement plans and track progress regularly: Frequently tracking and reporting progress is vital to ensure accountability, follow-through, and that plans are being implemented correctly. It also allows you to make course corrections where necessary.
• Cultivate a culture of growth: Work to create an organizational culture that values growth and efficiency. Leaders should help employees develop their skills and reward achievements to motivate employees to commit to pioneering goals and demanding plans.    
• Be committed to change: Efficient planning requires managers to revise goals and strategies, let go of outdated processes, hire and fire employees, and implement innovative ideas.

Managers need the motivation to keep moving forward during project management. Some wise words quoted by successful people will give leaders the boost and inspiration to keep going.

• “Good fortune is what happens when opportunity meets with planning” – Thomas Edison.
• “Always plan ahead. It wasn’t raining when Noah built the ark” – Richard Cushing.
• “Plan your work for today and every day, then work your plan” – Margaret Thatcher.
• “Our goals can only be reached through a vehicle of a plan, in which we must fervently believe and upon which we must vigorously act. There is no other route to success” – Pablo Picasso.
• “The man who is prepared has his battle half fought” – Miguel De Cervantes.
• “Make no little plans; they have no magic to stir men’s blood. Make big plans, aim high in hope and work” – Daniel H. Burnham.
• “The time to repair the roof is when the sun is shining” – John F. Kennedy.
• “Four steps to achievement: Plan purposely. Prepare prayerfully. Proceed positively. Pursue persistently.” – William A. Ward.

Planning is a systematic process essential for organizational success. Effective and timely planning helps a company achieve goals and objectives on time, minimize losses, and identify new opportunities to stay ahead of the competition.

“The will to win is worthless if you do not have the will to prepare” – Thane Yost.

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