Of the four management functions - planning, organizing, leading, and controlling, planning is considered the most fundamental.
Everything else stems from planning. The economic, political, and social turmoil of recent years has sparked a renewed interest in organizational planning, particularly planning for crises and unexpected events.
A goal is desired future state that the organization wants to realize. Goals are important because organizations exist for a purpose, and goals define and state that purpose. A plan is a blueprint specifying the resource allocations, schedules, and other actions necessary for attaining goals. The concept of planning usually incorporates both goals and plans. Planning means determining the organization’s goals and defining the means for achieving them.
There are four levels of goals and plans in an organization – mission, strategic, tactical, and operational goals and plans. The formal mission statement is a broadly stated definition of an organization’s basic business scope and operations that distinguishes it from similar types of organizations.
Strategic plans include action steps by which an organization intends to attain strategic goals. Strategic goals are a broad statement of where an organization wants to be in the future; pertains to the organization as a whole rather than to specific divisions or departments. Operational plans identify the specific procedures or processes needed at lower levels of the organization, such as individual departments and employees. Operational goals are a specific, measurable result that is expected from departments, work groups, and individuals.
Planning helps managers think about the future rather than thinking merely in terms of day-to-day activities. Management by objectives (MBO) is a method whereby managers and employees define goals for every department, project, and person and use them to monitor subsequent performance.
Many companies have used MBO, and most managers think it is an effective management tool. Most managers believe that they are better oriented toward goal achievement when MBO is used.