Approaches to Management Planning

All organizations plan; the only difference is their approach. Prior to starting a new strategic planning process, it will be necessary to access the past planning approach that has been used within the organization and determine how the organization’s cultural may have been affected. Addressing these cultural issues is critical to the success of the current planning process.

The four possible approaches to planning are:

Reactive past oriented

Reactive planning is an active attempt to turn back the clock to the past. The past, no matter how bad, is preferable to the present. And definitely better than the future will be. The past is romanticized and there is a desire to return to the “good old days.” These people seek to undo the change that has created the present, and they fear the future, which they attempt to prevent.

Inactive present oriented

Inactive planning is an attempt to preserve the present, which is preferable to both the past and the future. While the present may have problems it is better than the past. The expectation is that things are as good as they are likely to get and the future will only be worse. Any additional change is likely to be for the worse and should therefore be avoided.

Preactive predict the future

Preactive planning is an attempt to predict the future and then to plan for that predicted future. Technological change is seen as the driving force bringing about the future, which will be better than the present or the past. The planning process will seek to position the organization to take advantage of the change that is happening around them.

Proactive – create the future

Proactive planning involves designing a desired future and then inventing ways to create that future state. Not only is the future a preferred state, but the organization can actively control the outcome. Planners actively shape the future, rather than just trying to get ahead of events outside of their control. The predicted changes of the preactive planner are seen not as absolute constraints, but as obstacles that can be addressed and overcome.

Strategic Management Planning

1. Top-Down Approach:

In a centralised company, such planning is done at the top of the corporation and the departments and outlying activities are advised straightway what to do.

In a decentralised company, the CEO or the President may give the divisions guidelines and ask for plans. The plans after review at the head office are sent back to the divisions for modifications or with a note of acceptance.

2. Bottom-Up Approach:

The top management gives the divisions no guidelines but asks them to submit plans.

Such plans may contain information on:

(i) Major opportunities and threats;

(ii) Major objectives;

(iii) Strategies to achieve the objectives;

(iv) Specific data on sales/profits/market share sought;

(v) Capital requirements, etc.

These plans are then reviewed at top management levels and the same process, as in the top-down approach, is then followed.

3. Mixture of the Top-Down and Bottom-Up Approaches:

This is practised in most large decentralised companies. In this approach, the guidelines given by the top management to the divisions are broad enough to permit the divisions a good amount of flexibility in developing their own plans. Sometimes, the top management may decide basic objectives by dialogue with divisional managers in respect of sales and return on investments especially when divisional performance is measured upon those criteria.

4. Team Approach:

The chief executive, in a small centralised company, often use his line managers to develop formal plans. The same approach is used even by the president of a large company. In many other companies, the president meets and interacts with his group of executives on a regular basis to deal with all the problems facing the company so that the group can develop written strategic plans.

Within each of these approaches, there are many alternatives as follows:

(i) Complete SWOT analysis or not:

In some companies, the divisions supply the top management with perceived opportunities and threats and with the strategies to exploit opportunities and avoid threats.

(ii) Depth of analysis:

Some companies, at the initial stage, do not make in-depth analysis of all aspects of planning. They increase the intensity of analytical exercise gradually as experience is gained.

(iii) Degree of formality:

Divergent practices are in vogue as regards formality. For some large companies having centralised organisation structures, and comparatively stable environment and homogeneous product lines, planning is less formal than large diversified companies with decentralised and semi-autonomous product division structures.

High technology companies usually have more formal systems; yet, they recognise informality in decision making and managerial activities associated with planning.

(iv) Reliance on staff:

It is up-to the managers to decide the extent of delegation.

(v) Corporate planner or not:

Large corporations employ corporate planners to help in the planning process. Smaller companies cannot afford to this luxury.

(vi) Linkage with plans.

(vii) Getting the process started:

Strategic planning may begin with an effort to solve a particular problem. It may begin with a SWOT analysis or simply with a review of current strategy.

(viii) Degree of documentation:

A balance has to be struck between too little and too much paper work.

(ix) Role of CEO:

The chief executive officer’s role is critical depending on the degree of complexity of organisations.