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.
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