7.2: Planning — The First Function of Management

Planning is the function of management that involves setting objectives and determining a course of action for achieving those objectives. Planning requires that managers be aware of the environmental conditions facing their organization and forecast future conditions. It also requires that managers be good decision-makers.

Planning is a process consisting of several steps. The process begins with environmental scanning, which simply means that planners must be aware of the critical contingencies facing their organization in terms of economic conditions, their competitors, and their customers. Planners must then attempt to forecast future conditions. These forecasts form the basis for planning.

Planners must establish objectives, which are statements of what needs to be achieved and when. Planners must then identify alternative courses of action to attain these objectives. After evaluating the various alternatives, planners must make decisions about the best course of action to achieve their objectives. They must then formulate necessary steps and ensure effective implementation of plans. Finally, planners must constantly evaluate the success of their plans and take corrective action when necessary. There are many different types of plans and planning.

Levels of Management

There are three levels of management, and each level is responsible for specific planning, decision-making and organizational activities.

The level of management you work in will determine the type of planning and decision-making you will do. Figure 7.2 shows the three levels of management: top managers, middle managers, and first-line managers and the activities they do at each level. Top-level managers set objectives, scan the business environment, and plan and make decisions that affect the overall health of the organization. Middle-level managers allocate resources, oversee first-line managers, report to top-level managers and develop and implement activities. First-line managers (also referred to as customer-facing or front-line) coordinate activities, supervise employees, report to middle managers, and are involved in day-to-day operations.

Managerial Decision-Making

Decision-making is the action or process of thinking through possible options and selecting one.  It is important to recognize that managers are continually making decisions, and that the quality of their decision-making has an impact, sometimes quite significant, on the effectiveness of the organization and its stakeholders. Stakeholders are all the individuals or groups that are affected by an organization (such as customers, employees, shareholders, etc.).

Members of the top management team regularly make decisions that affect the future of the organization and all its stakeholders, such as deciding whether to pursue a new technology or product line. A good decision can enable the organization to thrive and survive long-term, while a poor decision can lead a business into bankruptcy. Managers at lower levels of the organization generally have a smaller impact on the organization’s survival, but can still have a tremendous impact on their department and its workers. Consider, for example, a first-line supervisor who is charged with scheduling workers and ordering raw materials for her department. Poor decision-making by lower-level managers is unlikely to drive the entire firm out of existence, but it can lead to many adverse outcomes, such as:

• reduced productivity if there are too few workers or insufficient supplies,
• increased expenses if there are too many workers or too many supplies, particularly if the supplies have a limited shelf life or are costly to store, and
• frustration among employees, reduced morale, and increased turnover (which can be costly for the organization) if the decisions involve managing and training workers.

Media Attributions

“Figure 7.2: The three levels of management and the tasks performed at each level” is reused from Levels of management, © 2022 by Kindred Grey, licensed CC BY 4.0..

Image descriptions

Figure 7.2

A pyramid showing the three levels of management and tasks associated with each level in bullet points. At the bottom of the pyramid is an area in beige for the First-line Managers, with four bullet points: Coordinate activities, supervise employees, report to middle managers, and be involved in day-to-day operations. The middle section of the pyramid is in orange with the heading Middle Managers, with the following four bullet points under the heading: Allocate resources, oversee first-line managers; report to top management; and develop and implement activities. The top section of the pyramid is in burnt orange and represents the Top Managers, with three bullet points associated with this section: Set objectives, scan the environment, and plan and make decisions.

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