Methods of Planning
Planning is one of the most important functions of management. It is essential in every type of organization to achieve desired goals. Based on tradition and assumption, many organizations adopt different methods of planning.
A traditional organization may formulate centralized planning whereas a liberal organization may adopt decentralized planning. Similarly, a modern organization may formulate composite planning.
The main objective of the planning methods is to develop effective corporate plans that are accepted by all the members of the organization. Following are the 4 methods of planning that are broadly used in organizations:
Top-Down Method (Top-Down Planning)
In a top-down method of planning, top-level managers are directly involved in all aspects of planning. They formulate objectives, programs, policies, action plans, and strategies for the organization.
Then the formulated plans are communicated to subordinate-level managers in a hierarchy for implementation. In this method, middle and lower-level managers have no role in plan formulation. However, they play a role in the execution based on guidelines from top management.
Top-down is a centralized method of planning, which assumes that only top-level managers have sufficient knowledge, skill, and authority to formulate effective plans
Considering the advantages and disadvantages of top-down planning, may this method take less time to prepare a corporate plan but perhaps all the subordinates do not support it.
Bottom-Up Method (Bottom-Up Planning)
This method is just the opposite of top-down planning. In this method of planning the plans, proposals are initiated and developed at first by line management and forwarded to the middle-level management for screening, adjusting modification, and necessary change. And, again modified plans are forwarded to the top-level management for review and approval.
In this method, the top-level management does not provide any suggestions and guidelines to subordinates in plan formulation. This method assumes that the operational managers have the first information and close awareness of the real information and therefore, they can formulate the practical plan.
This method creates opportunities for middle and lower-level managers to show their intelligence to top-level management.
Composite Method (MBO)
Basically, this method is a combination of both top-down and bottom-up methods of planning as stated above.
In this method, the top-level manager provides a broad planning framework and guidelines to middle and first-line managers. The top managers provide the required independence, flexibility, and support to the middle and first-line managers to formulate tentative plans.
Then the top-level managers review, modify and finalize the corporate plan in consultation with middle and first-line-level managers for wide acceptance and proper implementation. In other words, in this method of planning all levels of managers are involved.
Management by objectives (MBO) is an example of the composite method of planning. In MBO all levels of management are involved in the goal-setting process. Due to this, all members of the organization have a positive attitude towards the organization.
In this planning method, a team is formed to formulate a plan. The members of a team include both line executives and staff experts who work under the chairmanship of a chief executive.
The team does not prepare final plans but generates a basic framework to prepare corporate plans. For this, the team members scan the external and internal environments to identify opportunities and threats as well as strengths and weaknesses. Finally, the chief executive reviews and finalizes the corporate plan.
This planning method helps to create a friendly and team working environment in the organization.