Successful organizations are typically the result of someone’s vision, but these visions have a tendency to become formalized as they evolve. Formal planning efforts typically follow a methodology that includes thorough investigation of the organization’s capabilities and opportunities and a mechanistic analysis that reduces the vision to a programmed routine. That can spell disaster for an organization. For instance, the rapid rise of Apple Computer in the late 1970s and throughout the 1980s was attributed in part to the creativity and anti-corporate attitudes of one of its cofounders, Steven Jobs. But as the company grew jobs felt a need for more formalized management something he was uncomfortable performing. He hired a CEO, who ultimately ousted Jobs from his own company. With Job’s departure came increased organizational formality – the very thing Jobs despised because it hampered creativity
Planning focuses managers’ attention on today’s competition not on tomorrow’s survival: formal planning has a tendency to focus on how to best capitalize on existing business opportunities within the industry. It often does not allow for managers to consider creating or reinventing the industry. Consequently, formal plans may result in costly blunders and incur catch up costs when others take the lead. On the other hand, some companies have found much of their success to be the result of forging into uncharted waters, designing and developing new industries as they go.
Formal Planning reinforces success, which may lead to failure: We’ve been taught that success breeds success. That has been our traditional thought process. After all, if it’s not broken don’t fix it. Well, maybe not. Success may, in fact breed failure in an uncertain environment. It is hard to change or discard successful plans to leave the comfort of what works for the anxiety of the unknown. Successful plans, however, may provide a false sense of security – generating more confidence than they deserve. Managers often won’t deliberately face that unknown until they are forced to do so by changes in the environment. But by then, it may be too late.
The Bottom Line: Does planning Improve Organizational performance?
Do managers and organizations that plan outperform that don’t? Or have the critics of planning won the debate? Let’s look at the evidence.
Contrary to the reasons cited by he critics of planning, the evidence generally supports the position that organizations should have formal plans. But that’s not to be interpreted as a blanket endorsement of planning. It would be inaccurate to say that organizations that formally endorsement of planning. It would be inaccurate to say that organizations that formally plan always outperform those that don’t.
Many studies have explored the relationship between planning and performance. On the basis of those studies, we can draw the following conclusions. First, formal planning in an organization generally means higher profits, higher return on assets, and other positive financial results. Second, the quality of the planning process and the appropriate implementation of the plans probably contribute more to high performance than does the extent of planning. Finally, in those organizations in which formal planning did not lead to higher performance the environment was typically the culprit. For instance, government regulations and similar environmental constraints reduce the impact of planning on an organization’s performance. because managers will have fewer viable alternatives.
Types of plans:
The most popular ways to describe plans are in terms of their breadth (strategic versus tactical) time frame (long term versus short) specificity (directional specific) and frequency of use (single use versus standing). Keeping in mind that these planning classifications are not independent of one another. For instance, a close relationship ties together the long term time frame with the strategic focus. The relationship among the types of plans is given below
Breadth of use > Strategic Tactical
Time Frame > long Term > Short Term
Specificity > Directional Specific
Frequency of Use > Single use Standing