Planning, Control and Decision making

Planning, Control and Decision making: For business control and success.

Planning:

Planning forces management to think ahead systematically in both the short-term and long-term. An organization should never be surprised by developments that occur gradually over an extended period of time because the organization should have implemented a planning process. Planning involves the following:

·         Establishing overall objectives.

·         Select appropriate strategy

·         Setting targets for each strategy

·         Detailed plans for achieving those targets.

Objectives of Organization:

Organizations often start by setting out their vision. This is a concise statement for organization’s future e.g. Microsoft vision is “to help people and businesses throughout the world realize their full potential”.

A mission statement is then created, setting out fundamental purpose of organization, which include its strategy, standards and values.

Note: The term objective, goal and aim are often used interchangeably.

The two main type of organization that you see in practice are as follows:

·         Profit making

·         Non-profit making

The profit-making organization’s main objective is to maximize profit. Whereas, the main objective of non-profit making organization’s is to provide goods and services.

Long -term strategic Planning:

Long-term planning, also known as corporate planning involves selecting appropriate strategies to attain the organizational objective through long-term corporate plan or business plan.

Typical periods for a strategic business plan are 2,5,7 or 10 years although longer planning period may be used.

Long-term strategic planning consists of four basic elements:

·         Assessment of organization and its environment

·         Determine the corporate objectives

·         Devise strategies for achieving these objectives

·         Establish a corporate plan

 Short-term technical planning:

For operational purpose it is necessary to convert the corporate (Strategic) plan into a series of short-term plans, usually covering one year, which relate to business units, functions or departments. The annual process of short-term planning should be seen as stages in the progressive fulfilment of the corporate plan as each short-term plan steers the organization towards its long-term objectives.

Control:

There are two stages in the control process:

(a)    The planned performance of the organization (set out as targets or expectations) is compared with the actual performance of the organization on a regular and continuous basis.

(b)    The corporate (strategic) plan is reviewed in light of the comparisons made and any changes in the parameters on which the plan was based, (Such as new competitors or government instructions as so on), to assess whether the objectives of the plan can be achieved.

Decision-making:

An important and key function of management is decision-making. Managers at all levels within the organization make decisions. Decisions may be taken within the routine planning and control processes. Decision making always involves a choice between alternative courses of action and it’s the prime duty of management accountants to provide information so that management can reach an informed decision. A decision to take corrective action may involve considering the different ways in which control may be applied, and choosing the preferred course from available alternatives.

Decision making Process:

One can simply analyze the decision-making process with following steps.

Final Words:

While planning is concerned with setting objectives and strategic targets, management control is concerned with decision about the efficient and effective use of an organization's resources to achieve these objectives or goals.