Everything you need to know about the types of business plans. Business plans help the managers in managing day to day affairs, utilising resources of organisation efficiently and in regulating working behavior of subordinates.
Plans are classified as – Purposes (or) Missions, Objectives (or) Goals, Strategies, Policies, Procedures, Rules Programs and Budgets.
Some of the types of business plans are:-
1. Short-Term Plan 2. Long-Term Plan 3. Operational (or Tactical) Plan 4. Strategic Plan 5. Functional Plan 6. Single-Use Plan – i. Budget ii. Strategy iii. Objective iv. Programme 7. Standing (or Repetitive-Use) Plan – i. Policies ii. Procedures iii. Methods iv. Rules.
Types of Business Plans: Short-Term, Long-Term, Operational, Strategic, Functional, Single-Use and Standing Plans
Types of Business Plans – Classification: On the Basis of Time Span, Scope of Operation and Repetitiveness
Business plans can be of various types.
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They have been described as follows:
1. Based on Time Span:
On the basis of time span, plan is divided into two types:
i. Short-Term Plan:
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This plan relates to a relatively short period. This plan is concerned with the determination of activities to accomplish short-term objectives of the enterprise. Normally, operational (or tactical) plans are related to short periods. Short-term plans are developed within the framework of long-term planning. This plan is normally prepared for a period of one year or less.
ii. Long-Term Plan:
This plan relates to a relatively long period. This plan is concerned with achieving the long-term goals for the enterprise. This plan determines long-term objectives of the enterprise. It is normally made for the period of five years and more. This plan aims at providing the required information on various elements of the future environment. It provides a broad framework within which short-term action plans are developed.
2. Based on Scope of Operation:
On the basis of scope of operation, plan is divided into three types:
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i. Operational (or Tactical) Plan:
This plan is concerned with the optimum use of available resources for a shorter period of time. Production plan of a month is an example of operational plan. This plan is concerned with simple, routine, and repetitive problems. This plan is prepared at middle and lower levels of management. It facilitates participation and involvement of the middle and lower level managers. It is a blue print for current actions within the framework of long range plans.
Operational plan is prepared for a short period (i.e., one year or less). It helps in achieving tangible goals for a short period of time. It divides long-range and strategic plans into various sub-plans and programs. Operational planning is done at the departmental and divisional levels which deal with performance of operations. This plan involves conversion of long-range and strategic plans into detailed operational programs. Operational planning is pragmatic as it requires actual commitment and utilization of resources.
ii. Strategic Plan:
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Strategic plan determines how to achieve long-term goals of an enterprise in a dynamic business environment. This plan involves important strategic decisions for achieving long-term overall goals of the enterprise. This plan is prepared at higher level of management for the development of the enterprise. Strategic plan covers vital matters and issues concerning profitability, development, survival, and growth of the enterprise.
This plan designs the ways and means of achieving growth, diversification, stability, etc. and develops integrated program of action accordingly. Strategic plan gives special emphasis on environmental changes and uncontrollable factors. Strategic plan has a long-term perspective, and it goes beyond five years. This plan needs more managerial judgement and expertise.
Strategic plan chalks out future direction and develops a suitable course of action for the entire organization. This plan enables the top management to explore the future impact of changes and makes current decision to move towards a visional future. It enables the enterprise to predict technological changes and achieve strategic objectives successfully.
It ensures rational allocation of available resources of the enterprise for key activities. It creates greater awareness of the business environment and systematic review of the business itself. It helps the top management to respond quickly to the changed environment and manages a complex enterprise with limited resources.
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Strategic plan develops an intensive course of action for achieving organizational objectives in an ever changing environment. It aims at scanning’ organizational strengths, weaknesses, opportunities, and threats (SWOT) by making situational analysis for attaining long range goal of the enterprise. It helps in devising a course of actions in the form of a move or counter-move to competitors in the changing environment. This plan calls for creativity and farsightedness on the part of managers for attaining goals in the changing situations.
iii. Functional Plan:
This plan is prepared for various functional areas (such as purchase, production, finance, marketing, etc.) of the business enterprise like purchase planning, production planning, and finance planning, and marketing planning. This plan serves as a guide for the actions of employees of the concerned functional department. The departmental managers formulate their functional plans for one year in consultation with their subordinate officers. Functional plans require approval of the top management with or without modification. The master plan of an enterprise is based on the functional plans of various departments.
3. Based on Repetitiveness:
Plans may be single-use plans and repeated-use plans. Single-use plans lead to the development of budget, strategy, objectives, and programmes. Repeated-use (standing) plans lead to the development of policies, procedures, methods, and rules.
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A single-use plan is meant for a particular situation. It is designed to accomplish a specific objective within a relatively short period. It is tailored to fit a specific situation. This plan ceases to exist once the objective is achieved. It is basically non-repetitive in nature. Budgets, strategy, objectives, and programmes are examples of a single-use plan.
(a) Budget:
A budget is a plan covering operations of an organization for a definite period in the future. It is a statement of expected results, expressed in quantitative terms. It is an estimate of future needs, arranged in an orderly basis. It is prepared after an in-depth analysis of past, present, and future conditions.
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A budget may be prepared for all activities performed in an organization (such as purchase budget, production budget, sales budget, capital expenditure budget, cash budget, etc.). Preparation of a budget is a planning process, as it is based on certain assumptions. A budget is also a controlling device so far as its implementation is concerned. A budget furnishes budgetary standards against which actual results are compared. Therefore, budgets serve two purposes, namely, planning as well as control.
(b) Strategy:
Strategy is a comprehensive action plan designed to achieve specific objectives in the event of difficulty. It is a special kind of plan prepared basically to meet the challenge of a special situation. It is concerned with the means of gaining command over complex external problems and threats. It spells out priorities of the enterprise in specific terms to cope with external situations. Strategy may be considered as an action plan for accomplishing specific objectives in a disturbed state of affairs.
It is a set of moves and counter-moves to be used by an organization to get over a problematic situation by restricting rival organizations. It is formulated on the basis of careful situational analysis of the organization and its environment. It is formulated to handle the changes arising out of the environment. It is prepared to cope with the changing business environment and ensuring the survival and development of the organization. It is concerned with perceiving opportunities, threats, and taking initiatives to cope with them in the best possible manner.
(c) Objective:
Objective means planned target of performance. It is the desired end-result of an activity. Objective justifies the scope of operations and activities. Objective is the end-result towards which all the activities of the enterprise are directed. Objectives are multiple in natures and are laid down in numerical terms. Objectives provide the basis for planning and the focal point for all managerial functions.
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Objectives are the goals established to guide the efforts of an enterprise, its departments and sections. Objectives serve as barometers for measuring the efficiency and effectiveness of the enterprise. The objectives must be defined in clear terms. Objectives may be general or specific, short-term or long-term, tangible or intangible. A good management is always ‘Management by Objectives (MBO)’. Objectives are fixed after collecting relevant facts and figures pertaining to a particular situation. Objectives are crucial for the existence of an organization.
(d) Programme:
A programme is a sequence of activities designed to implement policies and accomplish objectives. It is a precise plan which lays down the different operations to be carried out to achieve a given task.
It is result-oriented and provides practical guidelines to managerial actions. A programme is drawn up in conformity with objectives. It consists of all steps to be taken to achieve the tasks. It involves planning for future events and establishing a sequence for required action.
A programme may be considered as a complex network of policies, procedures, task assignment rules, methods, and budget to carry out a given course of action. A programme is usually supported by capital budgets. It is developed under the umbrella of organizational goals. It can originate at any level in the organization and can be a major programme or a minor one. Different programmes are to be prepared for different situations.
ii. Standing (or Repetitive-Use) Plan:
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A standing plan is a permanent plan. It is used again and again. It is meant to serve as a standing guideline and criterion on managerial decision-making. It is repeatedly used for tackling recurring problems and issues. Policies, procedures, methods, and rules are examples of standing plans.
(a) Policies:
Policies are the guidelines (or framework) within which employees of an organization are supposed to work. Policies prescribe the most desirable ways and means for the accomplishment of a given objective. Policies are standing decisions made to ensure uniform action in the handling of repetitive problems. Policies define the boundaries within which the decisions should be made by the employees. Policies are aids to the manager on how objectives are to be achieved. Policies provide parameters within which managers have to make decisions consistent with the objectives.
The policies of an organization may be in writing (or implied from conventions and practices). Normally, policies are written and communicated to managers for avoiding confusion and to provide a ready reference. Generally, policies are formulated at the top level on major and vital matters. Sometimes, policies originate at lower levels and move upward for final sanction and approval. Policies should be pragmatic, actionable, and understandable to those employees who have to follow them. Policies should be reviewed periodically and recast as circumstances warrant.
(b) Procedures:
Procedures indicate the specific manner in which a certain activity is to be performed. These procedures determine the sequence of definite acts. Procedures outline the steps taken in performing specific jobs of a repetitive nature. They show the way to implement policies and are guides to action. The essence of procedure is a chronological sequence of required actions.
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Procedures are very rigid and do not leave scope for individual judgement. They are clear-cut administrative specifications prescribing the time sequence for the work to be done. They are formulated on the basis of analysis of the various components of the work to be done. Procedures ensure uniformity in performance and action. They are developed to avoid the chaos of random activities. They involve planned sequences and consistency.
(c) Methods:
Methods deal with the best way in which a particular task is to be performed. Methods provide details about a particular operation. They prescribe the exact manner in which the operation will be performed. A method is only concerned with a single operation. Use of standard methods brings in uniformity in action. Methods specify how each step of a procedure is to be performed.
Methods are viewed as specific, detailed, and rational means of simplifying and standardizing the work. They prescribe the way in which a particular task is expected to be performed. The use of scientific methods in performing various operations may lead to higher efficiency and less fatigue on the part of the workers. Normally, the methods are based on research and in-depth analysis of a particular operation. Methods are desirable for various administrative and managerial activities.
(d) Rules:
Rules are specific statements used for guiding what may or may not be done. Rules are prescriptive directives to employees in organizations to do or not to do certain things. Rules are generally formalized in writing and are impersonal in nature. They are meant for strict observance. Employees are expected to comply with rules (i.e. a specific set of directions) while performing an activity. Violation of the rules is associated with some sort of disciplinary action.
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Rules are framed to regulate and control the working behaviour of employees. They indicate acceptable patterns of human behaviour in an organization. Usually, rules are made in writing to avoid confusion. Rules should be very precise, specific, and clear, so that there cannot be any controversy or ambiguity. Rules are very rigid and leave no scope for description and deviation. Non-compliance of the rules attracts punishment. The rules are enforced for maintaining discipline among employees. The observance of rules by employees leads to higher efficiency and smooth functioning.
Types of Plans – Top 8 Types: Purposes (or) Missions, Objectives (or) Goals, Strategies, Policies, Procedures, Rules, Programs and Budgets
Plans are classified as:
1. Purposes (or) Missions
2. Objectives (or) Goals
3. Strategies
4. Policies
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5. Procedures
6. Rules
7. Programs and
8. Budgets.
Type # 1. Purposes (or) Missions:
Every kind of organisation has a purpose or a mission. The mission (or) purpose identifies the basic function of any organisation. For example, the purpose of college is teaching and providing services to the community.
The purpose of housing board is to design, build and distribute the houses to people with nominal price. The purpose of any business is the production and distribution of goods and services normally, the mission (or) purpose are often used interchangeably.
Type # 2. Objectives (or) Goals:
Objectives are the ends toward which activity is aimed, objectives are goals (or) aims which the management wishes the organisation to achieve. Objectives are the end points towards which all business activities like organising, staffing, directing and controlling are directed. Objectives are the specific targets to be reached by an organisation.
They are the translation of an organisation’s mission into concrete terms against which results can be measured. For example, a university can decide to admit a certain number of students (or) a hospital can decide to admit a certain number of indoor patients.
Type # 3. Strategies:
Strategy is defined as the determination of the basic long-term objectives of an enterprise and the adoption of courses of action and allocation of resources necessary to achieve these goals. Strategies analyse the organisational strengths and weaknesses and the environmental opportunities and threats and provide an optimal match between the organisation and environment.
Type # 4. Policies:
Policies are general statements (or) understandings that guide in decision making. It is a guideline for decision-making.
Policy is a verbal, written (or) implied overall guide setting up boundaries that supply the general limits and direction in which managerial action will take place. Policies provide a framework within which decisions must be mode by the management in different spheres. Thus we hear about personnel policy, recruitment policy, price policy and advertisement policy.
For example, the policy of the company is to recruit through the employment exchange. Or In some companies, policy is to promote from within. The advertisement policy id company is to avoid cut throat competition with its rivals in the field.
Policies define an area within which a decision is to be made and ensure that the decision will be consistent with, and contribute to an objective.
Objectives are end points of planning while policies channelise decisions to these ends. Policies lead to objectives in the similar way as series of alternate high way routes lead to a city.
(i) Policies of hiring only college trained engineers.
(ii) Encouraging employee involvement for management decision.
(iii) Promoting people from within the organisation.
(iv) Conforming strictly to a high standard of business ethics.
(v) Setting competitive prices etc.
Type # 5. Procedures:
Procedures are guides to action and they detail the exact manner in which certain activities must be accomplished. Procedures establish a required method of handling future activities.
The college policy may grant vacation for staff members. But procedures for implementing this policy will provide for scheduling vacations to avoid disruption of work, maintaining records to assure each staff member of a vacation and spelling out the means for applying for a vacation.
Type # 6. Rules:
Rules shows specific required actions (or) non actions, allowing no discretion. ‘No Smoking’ is a rule. The rule reflects a managerial decision that some action should be taken (or) should not be taken. The purpose of policies is to guide decision making by marking off areas in which managers can use their discretion. Rules allow no discretion in their application.
In sanctioning overtime to worker, in regulating travelling allowances, in sanctioning entertainment bills and in other similar matters, a uniform way of handling them (or) dealing with the case has to be followed. These all are covered by the rules of the organisation. These rules avoid repeated reference to higher levels for authorization of routine matters which occur frequently.
Type # 7. Programmes:
Programmes include all the activities required for achieving a given objective. Programmes are drawn in conformity with the objectives and are made up of policies, procedures, budgets etc.
For example, an organisation may have a programme of:
a. Opening five branches in different parts of the country.
b. Deputing its employees for training.
c. Acquiring a new line of business.
d. Installing new machines in the factory.
e. Introducing a new product in the market.
The most important elements for programme are:
1. Time phasing and
2. Budgeting.
Time phasing means that specific dates should be laid down for completion of each successive stage of a programme. Budgeting means that a provision should be made in the budget for financing the programmes.
Type # 8. Budget:
A budget is a statement of expected results in numerical terms.
A budget may be expressed in terms of:
a. Finance
b. Labour-hours
c. Unit of product
d. Machine hours
The important budgets are:
a. Sales budget
b. Production budget
c. Cash budget
d. Revenue and expense budget
The sales budget shows the expected sales of finished goods for a period.
The production budget shows the anticipated production over a period.
The cash budget reflects the expected flow of cash for a period in advance.
The revenue and expense budget shows the anticipated revenue and expenses for a period.
Budgets are very useful for an organisation. Since budgets are expressed in numerical terms, they facilitate-
a. Comparison of actual results with the planned ones.
b. Serve as a control device and yard-stick for measuring performance.
c. Help in identifying and removing dead heads of expenditure.
Types of Plans – 2 Main Types: Standing and Single-Use Plans
The plans help the managers in managing day to day affairs, utilising resources of organisation efficiently and in regulating working behavior of subordinates.
The plans may be classified into two categories:
Type # 1. Standing Plans:
These plans are recurring plans and they are used repeatedly in situations of a similar nature. It is used again and again over a long period of time. It helps manager in dealing with routine matters in a predetermined and consistent manner.
Standing plans are essential for smooth operations. Objectives, policies, strategies, procedures and rules are important standing plans.
The term objective indicate an end result to be sought be management. According to Robert C. Appleby, “objectives are goals they are aims which management wish organisations to achieve.” They lay down guidelines for the various activities of the organisation and decide the direction, nature and quantum of efforts needed for these activities.
The two widely accepted definitions of objectives are as follows:
i. Objectives are goals established to guide the efforts of the company and each of its components.
ii. Objectives indicate the end point of a management programme.
Objectives constituted the basic plan of the organisation, involving the planning process and represent future direction towards which organisation to move in without objectives, meaningful planning cannot be done. It is the basic responsibility of the managers to formulate of other plans like policy, strategy, rules and budgets to the large extent depends on objectives.
The organisational objectives provide strong base to design and develop a workable plan. It gives a specific direction to formulate an operational system which reflects the purpose of the organisation. The objectives should be coordinated in a manner that department’s goals may contribute of organisational or corporate goals.
The following aspects are to be considered during formulating the objectives of an organisation:
i. Productivity.
ii. Physical and financial resources.
iii. Profitability.
iv. Managerial performance and development.
v. Marketing and innovation.
vi. Worker performance and attitude.
vii. Public responsibility such as – accountability to society, ethical and moral aspects.
Characteristics of Objectives:
The important characteristics of business objectives are as follows:
(i) Objectives are Basic Plans:
The objectives of an organisation are the foundation of other plans. It provides justification for the establishment an operation of an organisation.
(ii) Objectives are Multiple in Nature:
The objectives are required in every area of business where the survival and success of the business is important. As per opinion of Peter F. Drucker, “The objectives of the business may relate to market standing, innovation, productivity, human and non-human resources, profitability, worker’s performance and development and social responsibilities”.
These multiplicities of objectives should be properly balanced to avoid class between different objectives. Managers should see the various goals exist in harmony and decide priority of 1, 2 and 3 depending on the importance of each objective.
(iii) Objective has Hierarchy:
The objectives which are based on a mission of the organisation form a hierarchy from the top level to the lower level in the organisation structure. They differ in the degree of importance that is corporate, departmental, sectional and individual objectives. The objectives in an organisation are described through means-ends chain.
The means-ends chain helps to see how broad goals are translated in to operational objectives. The objectives of each low level become means to the ends (objectives) of the next higher level in the organisation. Each level of objectives stands as ends relative to the levels below it and as a means relative to the levels above it.
(iv) Objectives may be Long Range or Short Range:
Every business organisation must have both long range and short range objectives. The long range objectives generally cover a period of five years or more while short range objectives normally cover a period of up to one year depending on the nature of business.
The long range objectives such as – survival and growth of organisation and short range objectives like market standing, maximisation of sales, product development, productivity and effective utilization of resources. The short term objective must be integrated with long term objectives in order to achieve overall objectives of the organization.
(v) Objectives are Tangible or Intangible:
The tangible objective have quantifiable value such as – productivity, market standing, physical and financial standing etc., while intangible objective have quantifiable like manager’s performance, worker’s morale and attitude.
(vi) Objective has a Priority:
Objectives implies that at a given point of time, the accomplishment of one objectives is relatively more important than that of others. For examples, an organisation which is facing difficulty in meeting pay rolls on due date on accounts, the goal of maintaining a minimum cash balance may be critically important.
Importance of Objectives:
The achievement of objectives is essential for the survival and growth of the organisation. Objectives affect the size, shape, and design of the organisation and they are important in motivating and directing personnel.
The well-defined and properly stated objectives provide the foundation for effective management and serve the following functions:
(i) Mission of Business – Objectives Provide direction to the individual tasks, efforts of the organisation and also serves as a guide to the members of the organisation. It indicates the destination of the business. A manager would be like a blind folded archer and expending useless effort without looking the target.
(ii) Legitimacy – Objectives describe the purpose of the organisation. It helps to legitimise the presence of the organisation in its environment and also serves as a basis for consistent and integration of planning.
(iii) Generates Motivation – Objectives make job worthwhile and meaningful. The setting of an objective leads to an increase in performance because it makes clear to the individual what he/she is supposed to do.
(iv) Tool for Control – Objectives serve as performance standards against which actual performance may be checked. The performance standard are helpful not only to take corrective action but also in deciding financial compensation and promotion to the individual.
(v) Decentralisation of Business – The well-designed objectives are helpful in effective delegation of authority. Objectives provide basis for fix responsibility to achieve the results.
(vi) Coordination – The effectiveness of organisation depends upon the degree of coordination between individual goals and organisational objectives. It keeps activities on right direction. The degree of coordination improves interpersonal and intrapersonal relationship among employees of the organisation.
As per opinion of Peter F. Drucker, “Objectives help to organise and explain the whole range of business phenomena in a small number of general statements, to test these statements in actual experience, to predict employee behavior, to appraisal the soundness of decisions when they are still being made, and to enable practicing businessmen to analyse their own experience and as a result, improve their production performance”.
Advantages of Objectives:
The following are the important advantages accruing from scientific and carefully chosen objectives:
(i) The various Plans prepared by several people are adjusted to a common objectives and this encourages unified planning.
(ii) Objectives provide the yardstick to measure the performance at various levels of employees.
(iii) There is a common agreement on a set of objectives.
(iv) There is a great degree of coordination of work and efforts.
(v) The assigning of decision making power to subordinate to enable them to perform their work effectively.
(vi) Objectives provide a basis for planning and for developing other types plans such as – budgets, policies and procedure.
(vii) Objectives eliminate haphazard actions which may result in the undesirable consequences.
(viii) Objectives reduce misunderstanding and conflict and facilitate communication among employees minimizing jurisdictional dispirits.
(ix) Objectives provide a basis for leading, guiding, directing and controlling the activities of employees of various departments.
(x) The fair and justifiable goal setting increases the level of motivation among employees of the organisation.
II. Policies:
Policy is a basic statement that guides decision making. The notion of guidelines is common to both objectives and policies. Objectives describe what is wanted or what is to be achieved whereas policy describes the major features of how the accomplishment of objectives will be pursued.
Policies lay down the boundaries within which decisions have to be made for accomplishing the objectives of organisation. They are the basis for executive operation and provide ready answers to all questions faced in running the organisation. They also facilitate co-ordinations by creating uniformity and consistency in individual action.
Some definitions of policy are as follows:
Policies are general statements or understandings which guide or channel thinking in decision making of subordinate. – Koontz and O’ Donnell
A policy is a verbal, written or implied overall guide setting up boundaries that supply the general limits and direction in which managerial action will take place. – G.R. Terry
Policies are standing decisions made to ensure uniform action in the handling of repetitive problems and questions that are significant to the organisation at large. – Allen It should be remembered that a policy does not provide ready-made decision, but its purpose is to secure consistency indecisions made in similar situations.
The well-defined policies enable a manager to delegate authority to his subordinates. Policy formulation becomes an important activity as the organisation balloons to gigantic proportions. There is a direct relationship between organisational structure and policies. The larger the organisation, the more elaborate its policies.
Characteristics of Policies:
The top management is responsible for developing effective policies of the organisation.
The characteristics of a sound policy are as follows:
(i) The policy should help in achieving the objectives of the organisation.
(ii) The policy should be clear, positive and in understandable language.
(iii) The policy should be constructed on the basis of facts and sound judgment and not on personal feelings.
(iv) The policy should provide a broad outline so the initiative of employees is not hampered.
(v) The policy should be fair and stable but should be flexible enough to keep the organisation in tune with the times.
(vi) The policy should reflect the internal and external business environments.
(vii) There should be as many policy as necessary to cover conditions that can be anticipated.
(viii) The policies should not be mutually contradictory and there should not be inconsistency between two policies.
(ix) The polices should be just and equitable to internal as well as external groups.
(x) The periodic review of policies is essential to avoid organisational complacency or managerial stagnation.
Importance of Policies:
The following importance of policies:
(i) Policy provides a frame work with which decisions can be made.
(ii) Policy provides guidelines which help the organisation to keep the activities on proper lines.
(iii) Policies are the base and main instrument for the delegation of authority.
(iv) It creates unity of efforts and uniformity of action.
(v) Policies have a considerable contribution to make the coordination of individual efforts and diverge activities.
(vi) Policy helps to prevent unwarranted deviations from planned course of action.
(vii) It helps the management that action taken by subordinates will be consistent with goals of the organisation.
(viii) Policy gives a practical shape to objectives by elaborating the way in which the goals are to be achieved.
Process of Policy Formulation:
The top management is responsible for formulation of policy in the organisation along with middle or lower management if necessary. The policy decision involves standing decision while other decisions taken within the frame work of a policy decision. As per view of R. Bandhopadhyay, “Policy making even today remains a subtle art form that must include a large element of programatism such as – requires judgment and experience.”
The policy formulation consists of the following steps:
i. Analysis of Environment:
The first step in policy formulation is the identification and analysis of both external and internal environment of the organisation. Both external and internal environments are interrelated and interdependent on each other.
The internal environment is concerned with human and non-human resources, union management relations, values, norms, and organisation structure while external environment relates to social, economical, political, and technological and risk opportunities.
ii. Policy Alternatives:
The relationship between goals and policies should be constantly kept in watch during identification of alternatives of policies.
iii. Examination of Alternatives:
The each and every alternative should be carefully examined in the light of his contribution to the organisation goals.
iv. Consequences of Various Alternatives:
After examination of alternatives the next step in policy formulation is the study of consequences of various alternatives in the perception of goal attainment of the organisation.
v. Selection of Policy:
The last step in this process is the selection of policy. The main emphasis on selection of policy is that the policy is helpful in getting organisation’s objectives and goals. If the selected policy does not confirm the acceptable norms then the search for new policy alternatives has to be made.
III. Strategy:
The term strategy means to counter the moves of the enemy forces. It involves preparing oneself for unforeseen and unpredictable events. In modern times the word strategy has found its way into the management field. In the context of a business concern strategy indicates a specific.
Programme of action for achieving the organisation by objectives by employing the organisation’s resources efficiently, effectively and economically. A strategies plan made in the light of the plans of the competitors and situation demands and constantly modified in the light of the moves of the rivals.
Some definitions of strategy are as follows:
Strategy in the process of defining the objectives of the organisation, on changes in their objectives, on the resources used to attain these objectives, and on the policies that are to govern the acquisition, use and disposition of these resources. – R.N. Anthony
Strategy is the pattern of objectives, purposes of goals and major policies and plans for achieving these goals stated in such a way as to define what business is in or to be in and the kind of company it is to be. – E.P. Learned
Strategy refers to the determination of purpose and the long term objectives of the enterprise and the option of courses of action and allocation of resources necessary to achieve these aims. – Horold Koontz
Strategy may be considered as an action plan, initiative of an organisation for seeking achievement of the objectives in a changed specific situation. It is also organisational response in the form of deploying, mobilising and utilizing its resources and strength either for facing problems arising out of the changing environment.
Characteristics of Strategy:
The following characteristics of strategy are:
(i) It is an integrated action plan for achieving objectives in the current and changed situation.
(ii) It relates the business organisation to its environment.
(iii) It depends on both external and internal factors.
(iv) It is flexible and dynamic in nature in order to cope with the environmental business changes
(v) It is generally drawn for a long period but it has short term implication also.
(vi) It is formulated at the top level management and not delegated downward in the organisation.
(vii) It is action oriented and more specific than objective.
(viii) It helps for deploying, mobilising and utilising limited resources for achieving objectives.
(ix) It is a means to amend and not an end in itself.
(x) It involves assumption of certain calculated risks.
IV. Procedures:
Procedure prescribes the specific way in which a piece of work is to be done. It is also called as action guidelines. Objectives and policies do not state the ways and means through which the organisational goals are to be accomplished. There is a need for procedures. It may be defined as an administrative action guide prescribing a sequence in which various activities are to be performed by management.
As per opinions of G.R. Terry, “a procedure involves a series of related tasks that make up the chronological sequence and the established way of performing the work to be accomplished”. It denotes a list of systematic steps for handling events that occur regularly. The chronological sequence of required actions is the essence of any procedure.
It involves planned sequence of operations for handling recurring business transactions uniformly and consistently. This, procedures tell how a particular activity is to be carried out in order to achieve organisational goals. Procedures are used in all major functional areas of operations.
All routine tasks can be performed effective efficiently, if unnecessary steps are eliminated and one procedure is laid down. The well-conceived procedures allow effective delegation of authority without loss of control and coordination. It helps in integrating organisational efforts and facilitates control process.
Procedures are operational guide to actions as they routines the way certain recurring jobs are to be performed. A streamlined system of procedures helps to expedite and accelerate pace of work without duplication and waste of efforts and resources.
It will lubricate the channels of information and help the management in timely decision making. The flow of information can be procedurised so that management gets information continuously in vital areas like sales performance, cash flow, inventory position and so on. However, procedures must be periodically reviewed and updated to keep pace with the changing requirements of the volume of work.
Features of Procedures:
The important features of procedures are as follows:
(i) Procedure is a systematic way of handling regular events.
(ii) Procedures are a guide to action.
(iii) Procedures are established in keeping with the objectives, policies and resources position.
(iv) Procedures are concerned with establishing the time sequence for work to be done.
(v) Procedures are generally meant for repetitive work so that some steps are followed every time that activity is accomplished.
(vi) Procedures encourages delegation of authority to the lower level manager.
Advantages of Procedures:
The following uses of procedures illustrate their utility:
(i) It should focuses on desired objectives.
(ii) It leads to simplification of flow of work and elimination of unnecessary steps.
(iii) It reduces the decision making process because the sequence of steps to be followed is standardized.
(iv) It should help in bringing coordination in the organisation.
(v) It should help in reducing the wastage that is ultimately the direct profit of the organisation.
Limitations of Procedures:
The some drawbacks of procedures are as follows:
(i) It brings rigidity in the performance of operations.
(ii) A more effective way of doing a job may not be given proper attentions
(iii) They become obsolete with the change in business operations.
V. Rules:
Rules are the simplest and most specific type of standing Plans. They specifies what is to be done and what may not be done in given situation. They do not leave any scope for decision making. It more rigid than a policy. It is generally pertain to administrative area of a procedure.
A rule may not be part of any procedure, for examples, “Hard hats must be worn in the plant at all times”, “Stop when the red light is on,” and “No smoking zone” etc., are not related to any procedure. They demand stick compliance. There violation is generally associated with some sort of disciplinary action. Rules help to regulate behaviour and to facilitate communication.
Type # 2. Single Use Plans:
These plans are non-recurring in nature and will not be repeated in the same form in future. It is designed to fit the demands of a specific situation or goal. Programmes, budgets, schedules and projects are import single use plans.
I. Programmes:
A programme is a single use plan which lays down the operations to be carried out to accomplish a given work. It lays down the definite steps in proper sequence that will be taken for the purpose of achieving a specific objective. As per views of Alien, “Programme is a sequence of action steps arranged in the priority necessary to accomplish an objective.”
A well deigned programme covers all actions that are necessary to achieve a mission and indicates who should do what and at what time. Programmes are result oriented and provide practical guidelines to managerial activities. They also provide greater motivation to the managers.
Newman and Logan have advocated a six steps process for effective programming:
(i) Stepwise Division of Work – Manager is expected to write the series of steps to be followed to achieve the objective.
(ii) Relationship and Sequence between Steps – Division of work into different elements create the problem of achieving coordination between different activities.
(iii) Fixing Responsibility – If manager is satisfied with the division of work, then he should be paid to the attention on fixing of responsibility to subordinator at each and every step.
(iv) Arranging for Resources – The success of a programme is largely dependent on the availability of both human and non-human resources.
(v) Scheduling – The manager should decide two things at this stage – (a) the date when a step can begin; and (b) the time needed to complete an operation once it is started.
(vi) Dates Sheets for Each Task – It is essential to establish a definite time schedule for each part of programme, the starting date and the completion date separately. The final schedule should be as realistic as possible.
II. Budgets:
Budget is a statement of expected results expressed in numerical terms for a definite period of time in the future. It is the blueprint of future course of action. It provides a standard by which actual operations can be measured and by which variations can be checked.
Like any other plan, the budget must have flexibility, objectivity and structural form. The important budgets prepared in a business organisation are cash budget, production budget, sales budget, capital budget and master budget.
The basic features of a budget may be as follows:
i. It is a statement in terms of money or quantity or both.
ii. It is prepared for a definite future period.
iii. It is prepared in advance; and
iv. It aims at achieving a given objective.
Advantages of Budgets:
Some of the important advantages of budgets are as follows:
(i) Budget lays down organisation goals
(ii) It is time bound and helps in introducing definiteness in planning.
(iii) It provides a basis for the future course of action by the management.
(iv) It lays down attainable targets and prescribing means to achieve them.
(v) The objectives and plans are presented in numerical terms in budget; it facilitates the verifiability of planning.
III. Schedules:
Scheduling is a part of action plan includes the process of establishing a time sequence for the work to be done. It is a core and vital part of a programme or project. A schedule specifies time limits with in which activities are to be completed. It is necessary for avoiding delays and ensuring continuity of operations.
It translates programmes into action in an orderly fashion. In all types of organisations, scheduling is necessary to provide for a systematic and even flow of operations. For example, in organisation recruitment, selection, training and placement activities are sequenced.
IV. Project:
A project is a distinct cluster of function and facilities for a definite purpose and time period. It is a part of a general programme which can be designed and executed as a distinct plan in it. It facilitates an integrated work package within a heterogeneous mass of activities and resources. The project is itself may consist of several sub plans.
For example, new product developing project may be a complex process including sub plans like developing and exploring new markets for existing products, selling existing product more intensively in current markets, and marketing new product.
As per views of J.M. Stewart a project has the following features:
(i) The activity has a clear object.
(ii) The activity is complex and critical to the organisation.
(iii) The activity is temporary with respect to duration of need.
(iv) The activity is somewhat unique and unfamiliar to the present organisation.