Explains the benefits of formal planning, and discusses how formal planning can contribute to the efficiency and effectiveness of an organization.
According to Daft (2008, p210) planning is the “act of determining the organization’s goals and the means for achieving them” - source of motivation and commitment, with legitimacy, guides to action, rationale for decisions, resources allocation and standard of performance as benefits -, and goals as what define and state the organization’s purpose.
By implementing formal planning, achievements of an organization’s goals are outlined, with allocations of necessary resources, tasks, schedules and other actions being specified (Daft 2008). Explicit goals (targets) and plans at each planning stage would be developed; sending out messages to internal and external audiences. Thus, when an organization’s top management adopts formal planning, efficiency and effectiveness (financial and operational performance) are improved upon. (Daft 2008)
“The planning process starts with a formal mission that defines the basic purpose of the organization” (Daft 2008, p210): “what the organization stands for and its reason for existence” (Daft 2008, p212). The mission indicates legitimacy and reputability to external (i.e. investors, customers, suppliers) audiences, providing direction, motivation and purpose to employees (lowering their uncertainty and anxiety levels). (Daft 2008)
When employees are able to relate (identify) with the role they play within an organization they will be more motivated and committed: focusing their attention on specific targets to achieve important outcomes (Daft 2008). An example could be being able to source for (purchase) cheaper raw materials, hence increasing profit margins.
Employees would also be more willing to comply with standard procedures when they are able to identify with goals and plans of the organization; there would be better control and accountability for activities carried out. For example, if an employee adheres to the procedure of raising a ‘Purchase Requisition Form’ and getting it approved by the Product Manager, instead of purchasing the parts directly, the efficiency and effectiveness of the organization (Finance and Accounts Department) would be improved, as human resources and time would be wasted in the attempt to track and identify the ‘culprit’.
There would also be better allocation (alignment) of resources (i.e. employees, finance, equipment) by managers, with the goals of the organization (Daft 2008). For instance, managers would be able to determine areas that require allocation of more resources (i.e. headcount, budget).
Finally, formal planning not only provides a standard of assessment, but ensures that internal policies and performance are in accordance (alignment) with the desired outcomes of the organization (Daft 2008).
- Daft, R, 2008, New Era of Management, 2nd edn, Thomson South-Western, China