Planning is the process of determining how the organization can get where it wants to go and what it will do to accomplish its objectives. In more formal terms, planning is “the systematic development of action programs aimed at reaching agreed-upon business objectives by the process of analyzing, evaluating, and selecting among the opportunities which are foreseen.”²

Planning is a critical management activity regardless of the type of organization being managed. Modern managers face the challenge of sound planning in small and relatively simple organizations as well as in large, more complex ones and in nonprofit organizations such as libraries as well as in for-profit organizations such as General Motors.³

Over the years, management writers have presented several different purposes of planning. For example, a classic article by C. W. Roney indicates that organizational planning has two types of purposes: protective and affirmative. The protective purpose of planning is to minimize risk by reducing the uncertainties surrounding business conditions and clarifying the consequences of related management actions. The affirmative purpose is to increase the degree of organizational success.⁴

Whole Foods Market, a leading provider of natural and organic foods, relies on the affirmative purpose in its planning. The company uses planning to ensure its success, as measured by the systematic opening of new stores. Currently, Whole Foods has more than 270 stores in the United States, Canada, and the United Kingdom. Whole Foods’s CEO, John Mackey, believes that increased company success is not an accident but a direct result of careful planning.⁵

Another purpose of planning is to establish a coordinated effort within the organization. Where planning is absent, coordination and organizational efficiency are also often absent. Still another purpose of planning is to ensure integration among an organization’s various business units; otherwise, the managers of these units might seek to maximize their own objectives.⁶

The fundamental purpose of planning, however, is to help the organization reach its objectives. As Koontz and O’Donnell put it, the primary purpose of planning is “to facilitate the accomplishment of enterprise and objectives.”⁷ All other purposes of planning are spin-offs of this fundamental purpose.

A vigorous planning program produces many benefits. First, it helps managers to be future-oriented. They are forced to look beyond their everyday problems to forecast what situations may confront them in the future.⁸ Second, a sound planning program enhances decision coordination. No decision should be made today without some idea of how it will affect a decision that might have to be made tomorrow. The planning function thus pushes managers to coordinate their decisions. Third, planning emphasizes organizational objectives. Because organizational objectives are the starting points for planning, managers are continually reminded of exactly what their organization is trying to accomplish.⁹

Overall, planning is advantageous to an organization, particularly in the creation of new ventures.¹⁰ According to an often-cited survey, as many as 65 percent of all newly started businesses are not around to celebrate a fifth anniversary. This high failure rate seems primarily a consequence of inadequate planning. Successful businesses have an established plan, a formal statement that specifies the objectives the organization is attempting to achieve. Planning does not eliminate risk, of course, but it does help managers identify and deal with organizational problems before they cause havoc in the business.¹¹

The downside is that if the planning function is not well executed, planning can have several disadvantages for the organization. For example, an overemphasized planning program can take up too much managerial time. Managers must strike an appropriate balance between time spent on planning and time spent on organizing, influencing, and controlling. If they don’t, some activities that are extremely important to the success of the organization may be neglected.¹²

Overall, the advantages of planning definitely outweigh the disadvantages. Usually, the disadvantages of planning result from using the planning function incorrectly.

Planning is the primary management function—the one that precedes and is the basis for the organizing, influencing, and controlling functions of managers. Only after managers have developed their plans can they determine how they want to structure their organization, place their people, and establish organizational controls. As discussed in Chapter 1, planning, organizing, influencing, and controlling are interrelated. Planning is the foundation function and the first one to be performed. Organizing, influencing, and controlling are all based on the results of planning. Figure 5.1 shows this interrelationship.