Different types of plans are developed by an organisation, namely mission, strategies and policies, procedures, rules, programmes and budgets. One common thing is, they all refer to a future course of action.
However, some variances in respect of the scope and operation are found in the implementation. Some are single-use plans while some are standing plans.
Types of Plans
These are the types of plans discussed below:
Mission or Purpose
Organisations exist in society. Therefore, it is appropriate to relate their existence to society by satisfying a particular need of society. A mission may be defined as “a statement which defines the role that an organisation plays in the society”. The terms ‘mission’ or ‘purpose’ are often used interchangeably.
An organisation’s mission statement includes its philosophy and the basic purpose for which it exists. It establishes the values, beliefs, and guidelines that the organisation holds in high esteem. A mission statement suggests how an organisation is going to conduct its business. It defines the basic intentions of the firm.
A Clear definition of ‘mission’ or ‘purpose’ is necessary to formulate meaningful objectives. Answers to two important questions are provided by the mission statement; what is our business? and what should it be? These questions force the management to define their customers and their needs.
Koontz and O’Donnel define policy as “a general statement of understanding which guides the thinking and action in decision-making. Policies provide the framework within which managers operate. Policies exist at all levels in the organisation. Some may be minor or derivative policies affecting the whole organisation, while others may be minor or derivative policies affecting the functioning of departments or sections within the departments.
A policy is considered to be a guideline for action. Policies may be very clear and explicit. Good policies are flexible, easy to interpret and consistent with the overall objectives of the organisation. Policies are laid down by the management for all the important functional areas.
As such, we hear about production policies, financial policies, marketing policies and personnel policies, to mention a few. For instance, in the personnel area, specific policies may be formulated for recruitment, training, compensation, etc.
Accordingly, whenever the need for recruitment arises, the personnel manager consults the existing recruitment policy of the company and initiates the steps necessary to fill the vacancies. Thus it is evident that the personnel manager operates within the broad policy of the company in recruiting people. Thus, the policy is a one-time standing decision that helps the manager in making day-to-day decisions in their operational areas.
Policies are subdivided and stated in terms of procedures. (A series of related steps or tasks to be performed in a sequential way). For example, A company’s policy may be to sell obsolete products at a discount. The procedure may explain how to decide which product is obsolete and what percentage of discount is to be offered.
But procedures, if simple and clear would ensure order in the performance of operations. Though procedures exist at all levels in an organisation, they are more detailed at the lower levels.
In common parlance, they are called ‘Standard Operation Procedures’ (SOPs), Procedures for placing orders for material and equipment, sanctioning different types of employee’s leave, for handling grievances at the shop floor level, etc., suggesting how each of these has to be handled.
Policies and procedures are closely interrelated. For instance, a company may follow a time-bound promotion policy to promote people from within. But the operational part of the policy is specified by the procedure – the formalities to be fulfilled to effect the promotion are dictated by the procedure.
A rule is also a plan. A rule is a prescribed course of action that explicitly states what is to be done under a given set of circumstances. Rules are plans in that they suggest the required actions. A rule requires that a definite action has to be taken in a particular way with respect to a situation.
Some definiteness is associated with rules. For example, ‘no smoking’ is a rule. The essence of the rule is that it reflects a managerial decision that certain actions be taken – or not be taken. Rules should not be confused with policies and procedures.
Policies contain some operational freedom or discretion while rules allow no discretion in their application. Similarly, procedures through different forms of rules may contain rules. For example, there may be a procedure to enable customer grievances in respect of post-sale service. The procedure may contain a rule that free service is available only for a period of two years after the sale.
A programme is a broad term which includes goals, policies, procedures, rules and steps to be taken in putting a plan into action. Terry and Frankin define a programme as “ a comprehensive plan that includes future use of different resources in an integrated pattern and establishes a sequence of required and time schedules for each in order to achieve stated objectives’.
Thus, a programme includes objectives, policies, procedures, methods, standards and budgets. For instance, launching Prithvi’s” satellite is a programme Jawahar Rojgar Yojana” is a programme. The essential ingredients of any programme are time phasing’ and budgeting.
It implies that specific dates are prescribed for the completion of various phases of a programme. Adequate budgetary provisions are made for financing the programme. Programmes may be major or minor. For instance, a company may embark upon a modernisation programme of the plant and machinery and other manufacturing systems in a big way.
By all means, such an effort is a major programme. Similarly, a large organisation may start computerizing all its activities. On the other hand, the modernisation of small equipment in some sections of the factory and the computerization of a particular operation in a certain department may be considered minor programmes.
A budget is a plan statement for a given period of time in future expressed in financial or physical units. The budget contains expected results in numerical terms. A budget is a quantitative expression of a plan. Organizational budgets vary in scope.
The master budget which contains the consolidated plan of action of the whole enterprise is in a way the translated version of the overall business plan of the enterprise. Similarly, the production budget represents the plan of the production department.
Again, the capital expenditure budget, raw material budget, labour budget, etc. are a few minor budgets in the production department. One of the advantages of budgets is they facilitate the comparison of actual results with the planned ones by providing yardsticks for measuring performance.
FAQ Related to Types of Plans
What are the types of plans?
The following are the types of plans:
1. Mission or Purpose