Types of Plans

Why Plans Are Classified

Not all plans are the same. Some are meant for a one-time event, others are used repeatedly. Some are broad and long-term, others are detailed and short-term. The textbook classifies plans in two main ways: first, by frequency of use (single-use vs standing plans), and second, by what they seek to achieve (objectives, strategy, policy, procedure, method, rule, programme, budget). Understanding these types helps you see how a large goal like "increase profit" gets broken down into concrete steps, rules, and budgets that people actually follow.

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Single-Use Plans and Standing Plans

This is the first major classification, based on whether a plan is used once or repeatedly.

Single-Use Plan

A single-use plan is developed for a one-time event or project. It is designed for a non-recurring situation — the same course of action is not likely to be repeated in the future. The duration can vary: it may span a week, a month, or even just a single day (for example, organising a seminar or conference). These plans include details such as the names of employees responsible for doing the work.

Single-use plans include:

• Programmes – detailed statements about a project, outlining objectives, policies, procedures, rules, tasks, resources, and the budget. For example, a programme may identify the steps and procedures required for opening a new department.
• Projects – similar to programmes but differ in scope and complexity.
• Budgets – a statement of expected expenses, revenue, and income for a specified period.

Standing Plan

A standing plan is used for activities that occur regularly over a period of time. It is designed to ensure that internal operations run smoothly. Such a plan greatly enhances efficiency in routine decision-making. It is usually developed once but is modified from time to time to meet changing business needs.

Standing plans include:

• Policies – general statements that specify the organisation's response to a certain situation (e.g., the admission policy of an educational institution).
• Procedures – describe steps to be followed in particular circumstances (e.g., the procedure for reporting progress in production).
• Methods – provide the manner in which a task has to be performed.
• Rules – very clearly state exactly what has to be done (e.g., reporting for work at a particular time).

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Classification by What Plans Seek to Achieve

The textbook then presents eight distinct types of plans based on their purpose and content.

Objectives

Objectives are the desired future position that management would like to reach. They are the ends which management seeks to achieve by its operations. Simply stated, an objective is what you would like to achieve — the end result of activities.

• Example: increasing sales by 10%, earning a 20% profit from business, or earning a reasonable rate of return on investment.
• They represent the end point of planning. All other managerial activities are directed towards achieving these objectives.
• Usually set by top management and focus on broad, general issues.
• They define the future state of affairs the organisation strives to realise and serve as a guide for overall business planning.
• Different departments or units may have their own objectives, keeping in view the overall organisational goals.
• Objectives need to be expressed in specific, measurable terms — a written statement of desired results to be achieved within a given time period.

Strategy

A strategy is a comprehensive plan for accomplishing an organisation's objectives. It provides the broad contours of the business and refers to future decisions defining the organisation's direction and scope in the long run.

A strategy includes three dimensions:

1. Determining long-term objectives.
2. Adopting a particular course of action.
3. Allocating resources necessary to achieve the objective.

When formulating a strategy, the business environment must be taken into consideration. Changes in economic, political, social, legal, and technological environments affect an organisation's strategy. Strategies usually take the course of forming the organisation's identity in the business environment.

Major strategic decisions include:

• Whether to continue in the same line of business.
• Whether to combine new lines of activity with the existing business.
• Whether to seek a dominant position in the same market.

Policy

Policies are general statements that guide thinking or channelise energies towards a particular direction. They provide a basis for interpreting strategy (which is usually stated in general terms). Policies are guides to managerial action and decisions in the implementation of strategy.

• Example: a company may have a recruitment policy or a pricing policy within which objectives are set and decisions are made.
• If an established policy exists, it becomes easier to resolve problems or issues. A policy is the general response to a particular problem or situation.
• There are policies for all levels and departments — from major company policies (for all to know: customers, clients, competitors) to minor policies (applicable to insiders, containing minute details vital to employees).
• Policies define the broad parameters within which a manager may function. The manager may use his/her discretion to interpret and apply a policy.

Procedure

Procedures are routine steps on how to carry out activities. They detail the exact manner in which any work is to be performed, specified in a chronological order.

• Example: there may be a procedure for requisitioning supplies before production.
• Procedures are specified steps to be followed in particular circumstances, generally meant for insiders to follow.
• The sequence of steps is generally designed to enforce a policy and to attain pre-determined objectives.
• Policies and procedures are interlinked — procedures are steps carried out within a broad policy framework.

Method

Methods provide the prescribed ways or manner in which a task has to be performed, considering the objective. A method deals with a task comprising one step of a procedure and specifies how this step is to be performed.

• The method may vary from task to task.
• Selection of the proper method saves time, money, and effort, and increases efficiency.
• Example: for imparting training to employees at various levels — for top management, orientation programmes, lectures, and seminars can be organised; at the supervisory level, on-the-job training methods and work-oriented methods are appropriate.

Rule

Rules are specific statements that inform what is to be done. They do not allow for any flexibility or discretion. A rule reflects a managerial decision that a certain action must or must not be taken.

• Rules are usually the simplest type of plan because there is no compromise or change unless a policy decision is taken.
• Example: reporting for work at a particular time.

Programme

A programme is a detailed statement about a project which outlines:

• Objectives
• Policies
• Procedures
• Rules
• Tasks
• Human and physical resources required
• The budget to implement any course of action

Programmes include the entire gamut of activities as well as the organisation's policy and how it will contribute to the overall business plan. The minutest details are worked out — procedures, rules, budgets — within the broad policy framework.

Budget

A budget is a statement of expected results expressed in numerical terms. It is a plan that quantifies future facts and figures.

• Example: a sales budget may forecast the sales of different products in each area for a particular month. A budget may also show the number of workers required in the factory at peak production times.
• Since a budget represents all items in numbers, it becomes easier to compare actual figures with expected figures and take corrective action. Thus, a budget is also a control device. …