Definition of Planning:
It is the process of determining in advance what should be done and how it should be done. It is the foundation of management and involves setting objectives and developing methods of achieving these objectives. Basically, it is a decision making process by which an organization decides what it wants to achieve, how it intends to achieve it and in what manner.
a) The relationship between corporate strategic plans and operational plans:
Given the variety of areas that organizations plan for, plans fall into different categories;
Are broad plans developed by top managers to guide the general direction of the firm. They follow from the major goals of the firm and indicate what business the firm is in or what business it intends to be in. Strategic plans therefore indicate how or where the firm will position itself within the environment.
Characteristics of strategic plans include:
• They are long term compared to all other plans.
• They provide a basis for more detailed plan and for day-to-day managerial functions.
• They are made by top-level management.
• They deal with fundamentals of basic problems by providing answers to questions such as ‘what is our business?’ ‘what business ought we be in?’ and ‘who are our current and potential customers?’
• They help to integrate and unify the actions of the organization over time.
• They provide guidance and boundaries for operational plans.
Operational plans are unlike strategic plans in that they are made at low levels of management and they focus mainly on current operations and efficiency. Such plans provide details of how the strategic plans will be accomplished.
Operational plans can be divided into two main types:
(i) Standing plans that are standardized approaches for dealing with recurrent and predictable situations e.g. policies, rules and regulations.
(ii) Single use plans, which are developed to achieve specific purposes and are dissolved once these have been achieved e.g. projects, programs and budgets.
Below are the main differences between strategic and operational plans
- Operational plans mainly focus on operational problems while strategic focuses on longer-term survival and development.
- Operational plans face present resources environmental constraints while strategic is concerned with future resources environmental constraint.
- Operational plans deals with information relating to present business while strategic deals with future opportunities.
- For operational plans, rewards are mainly current efficiency and stability but for strategic plan, they are the development of future potential.
- Organization in operational planning is bureaucratic but it is very flexible and entrepreneurial in strategic.
- Leadership for operational plans, problem solving is reactive, relying on past experience and analysis but it is very flexible for strategic plans. Operational plans are low risk but strategic plans are very high risk.