Planning Process – The 7 Steps of Planning

Published by: Madhubala Minda

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The planning process refers to the primary managerial function of many organizations which is defining goals and setting objectives.

The top-level managers closely examine the current position of the business and decide on a strategic plan as well as secondary plans that allocate resources needed to fulfill the organization’s mission and vision.

Meaning of Planning Process

The planning process is a systematic process primarily concerned with developing a business strategy and creating an action plan for future activities. The planning function examines the business plan, financial plan and the marketing plan and allocates resources needed to achieve objectives

Understanding the Planning Process

Strategic planning helps an organization to understand the various steps involved in the planning process. Effective planning is about developing detailed plans that will help to achieve predetermined organizational goals and specific objectives.

The focus of the planning process should be on the implementation of business strategies that will result in the progress, growth, development and success of the organization.

The strategic planning process is an important management process that can identify the main plan of the company, closely examine the current position, create short-term and long-term plans and then set up a course of action for actual work.

Effective planning is a business strategy that looks at the future and tries to predict where the organization will be down the line in the next few years for instance five years, ten years and even twenty years.

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The primary purpose of making detailed plans is to identify and evaluate the impact of the decisions on the company and gain a competitive advantage that will help in future activities

The detailed plans of the strategic planning process also try to identify the negative consequences of the strategy and develop secondary plans and alternative courses that will help in minimizing the collective impact of any negative decision

Components of a Strategic Plan

Planning is often considered a tracking and assessment method for gaining unlimited access to resources needed for future activities. The management is entrusted with creating goals and later developing marketing and operational plans to meet them.

The common components of a strategic plan include internal and external analyses, resource allocation, investments, marketing and branding, research and development, competition, suppliers and production processes.

The factors that play an important role in the creation of an effective business plan include mission, personnel, purpose, financial resources, competition, strengths and weaknesses and market and customer base.

Different organizations might often include different components in their business plans based on their individual needs but the basic components remain the same. The organization should research every aspect of the business strategies before incurring the costs of operations.

Approaches to Strategic Planning Process

The various approaches to the strategic planning process include the following

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Situation-Target-Proposal

A popular approach to the planning process is the Situation-Target-Proposal. It includes the following three steps

1. Situation

Evaluate the current situation and identify the reason for it

2. Target

Defining goals and objectives

3. Proposal

Focus on a possible route to the goals and objectives

Draw-See-Think-Plan

Draw-See-Think-Plan is also a popular approach to the planning process. It includes asking relevant key questions like

1. Draw

What is the desired ideal state?

2. See

What is the gap between the current situation and the ideal state?

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3. Think

What specific actions should be taken to close the gap between the current situation and the ideal state?

4. Plan

What are the resources needed to implement the specific actions?

Benefits of Strategic Planning Process

Benefits of Strategic Planning Process

The benefits of the strategic planning process in a company are as follows

1. Better business strategy

The planning process helps the company to formulate a better business strategy and draw up better plans be it marketing, financial or business plans.

2. A better approach

A company with proper planning will take a better approach while implementing the strategic plans of the business

3. Overall performance

Effective planning helps to improve the overall performance of a company

4. Increased profitability

When everything goes according to set plans then it leads to the best possible outcomes. This increases the market share of the business and boosts profitability

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5. Meeting deadlines

A dedicated process of planning encourages actual work to be completed within time with projects meeting the set deadlines.

6. Enhanced communication

The managers have to communicate openly with the employees to make them aware of the intricacies of the planning process. This leads to better communication within the company

7. Empowers employees

The increased communication between the managers and the employees across every phase of the planning strengthens employee morale. They feel an important part of the company and this results in increased employee empowerment and loyalty

8. Proactive organizations

The process of planning allows a company to foresee the future and prepare accordingly. It allows the business entity to anticipate unpleasant scenarios and take necessary precautions as preventive measures. The planning allows organizations to become proactive instead of waiting and being reactive

9. Sense of direction

One of the benefits of planning is that it gives a sense of direction within the company. An important objective of the process is to set up realistic goals that are in line with the vision and mission of the company.

10. Lays a strong foundation

Planning is an important business strategy for every company as it lays the foundation for development and growth

11. Boosts operational efficiency

Strategic planning provides the managers with a roadmap that aligns business strategy and activities to achieve desired goals. There is unlimited access to resources and actual work is completed within the time frames thus increasing operational efficiency

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The Seven Steps Involved in the Planning Process

Seven Steps Involved in the Planning Process

A business entity takes the seven steps in the strategic planning process to identify, develop and implement business opportunities in the internal and external environment of the firm. This helps the management to implement a solid action plan for achieving desired goals and objectives

The steps involved in the planning process include

1. Setting Objectives

An important step of the strategic planning process is setting objectives. The primary purpose of setting objectives is to let the employees and stakeholders know what the entire organization along with all its departments wants to achieve.

Make sure that the objectives are specific, achievable and measurable in terms of units. Departments are often involved in setting objectives of their own that align with the organizational objectives

2. Developing Planning Premises

An important step of strategic management is making certain assumptions and developing planning premises. Planning involves making short-term and long-term plans for future business activities.

Specific events can affect the policy formation hence it becomes doubly important to identify and assess the external events to avoid negative consequences. Business entities make certain assumptions about such events and then develop effective plans known as planning premises.

External assumptions of the planning premises deal with the political environment, government policies, competition, technology advancement and social environment whereas internal assumptions of the planning premises deal with resources needed, quality of management and policies

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The management should be aware of the planning premises and should agree with them to achieve objectives

3. Identifying Alternative Courses of Action

After drawing the planning premises the next Important step in the strategic planning process is to identify the alternative courses of action. The management takes an active part in finding the alternatives to achieve objectives.

There are multiple choices and each one must be available to the management so that the managers can choose the best possible course of action.

If the manager is a laidback person who does not like to experiment then he will choose a routine action plan but if he is raring and creative then he will opt for an innovative alternative. It is important to identify and narrow down the alternatives to a minimum number to make the choice easy and better

4. Evaluating Alternative Courses of Action

The next step of the strategic management planning function is to evaluate the alternative courses which the management has already narrowed down to a reasonable number. This is the phase where the key points of both the positive and negative aspects of the alternative business strategy are evaluated by the managers to achieve objectives.

If it is a financial plan then the management must consider the risk-return evaluation and if it is a marketing plan then the lower cost and higher returns from the investment.

Detailed analysis by the management ensures that the strategic plans are capable of achieving organizational objectives in an effective manner

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5. Selecting the Best Course of Action

This step of the strategic management planning function puts the focus on developing the best plan for the business that will achieve success within a specific time frame.

This is the decision-making stage where the most feasible plan must be chosen by the managers. The ideal strategic plan must prove profitable and should be adaptable to dynamic situations.

The managers take the help of scientific analysis, their experience as well as intuition to select the best possible course of action for the strategic plan

Once the main plan is finalized the managers often create secondary plans as supporting plans which help in the implementation of the main plan.

For example, a business entity on the verge of a new product launch will also develop a marketing plan as a supporting or secondary plan to push forward the main plan. Implementation of both plans side-by-side will help the team to find success more easily

6. Implementing the Strategic Plans

Implementation of the strategic plans is the most important strategic management planning function for a business. Before the managers implement the strategic plan, they have to communicate openly with all the employees about the project and explain the steps that will convert the plan into action.

Allocating the resources needed to fulfil the project, unlimited access to those resources, purchasing tools, going through the budget, rules, procedures and policies and making sure that all the human resources are capable of handling and implementing the plan is the requirement of this phase.

7. Follow-Up Action

All the steps involved in the planning process are complete as the strategic plan is in place along with a secondary plan that will support it to the fullest. The managers have even implemented the strategic plans and are now waiting for them to bear fruit.

The final step in the seven steps of the strategic management planning process is not about waiting for the results of the implementation process but taking the much-needed follow-up action.

The tracking and assessment method is the demand of the day as the plan needs to be monitored regularly. Set up a proper feedback mechanism that will record the customer response

Take feedback at regular intervals to ensure that the implementation process is going on as smoothly as predicted. Regular checks and comparisons of the results will keep the employees on their toes and set standards for the entire organization.

The final step of the planning process helps the company to make suitable changes and adjustments to achieve organizational objectives

Conclusion

A strategic planning process is a powerful tool that helps a company to know where it wants to go, how to go about it and take the necessary action to reach the predetermined goals.

It offers unique opportunities to the managers in creating appropriate plans like a business plan and marketing plan that will align with the company’s vision and mission.

A well-thought-out planning process results in employee satisfaction, increased productivity, better efficiency and company growth

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Madhubala Minda

Madhubala Minda is a content writer for Digiaide. She writes unique and research-driven content on various Brands, Competitors, Management topics and wellness. With years of content writing under her belt, Madhu Bala is one of the strengthening pillars of Digiaide content team.