In a market economy, planning occupies an important place in the system of internal management.
Planning is the process of developing, justifying, organizing and monitoring the implementation of plans. This is a continuous process of determining the goals and ways to achieve them, as well as assessing the possible impact of decisions on the final results of the company’s activities. It creates the basis for a clear, well-coordinated work of all structural units, allows you to develop a set of tools and methods that ensure the development and implementation of market methods of management.
The purpose of planning is to increase productivity and efficiency by:
target orientation and coordination of all events in the enterprise; identification of risks and reduction of their level; unbundling and simplification of processes; increased flexibility, adaptability to changes.
The main task of planning is to ensure the successful functioning and development of the enterprise. All subjects of the market economy are interested in this. These are, first of all, shareholders or property owners (their capital increases), employees of the enterprise (their incomes increase), the state (revenues to the budget are ensured), enterprises – suppliers of materials and components (their business is developing), banks (timely repayment of loans).
All goals contributing to the successful functioning and development of the enterprise can be grouped in three areas:
1. Material goals are the production of competitive products that are in demand in the market. Material goals are achieved through the implementation of strategies.
2. Value (monetary) objectives are the financial results expected in the future (net present value, estimated and book profit, return on equity, increase in the market value of the enterprise). Stomy goals can be characterized by absolute and relative indicators (book profit and return on equity). Value goals are realized only through the achievement of material goals.
3. Social goals (humanitarian goals) – determine the model of behavior in relation to personnel, persons and social groups in the subsystems of the enterprise itself and in the external environment. They can have a monetary and non-monetary value: the level of staff income, interesting work, the culture of the event, the image of the enterprise, environmental protection. Social goals can be achieved through the realization of material and value.
The content, scale and time horizon of the top-level goals are determined mainly by the policy of the enterprise.
An integral part of the planning process is regulation, which is the organization of the implementation of the plan by bringing tasks to each unit.
Control is an extension of the planning process and accompanies the implementation of plans. To determine the results of activities, the actual results of the implementation of decisions are compared with the planned indicators. The purpose of the control is to create guarantees for the implementation of plans and to increase production efficiency.
The planning process finds its expression in specific indicators of the goal, alternatives to achieving goals, the consequences of the impact of alternatives on the goals, the actual results of the implementation of planned decisions, deviation from the plan.
Planning in the enterprise is based on certain principles that determine the nature and content of planned activities in the enterprise, ensure the uniformity of the requirements for the development of plans. Compliance with the principles of planning creates prerequisites for the successful functioning and development of the enterprise.
Depending on the policy adopted in the state to regulate economic processes, the principles can be grouped in two directions: general and particular. The general principles of planning are applicable in both a planned and regulated and market economy. Private ones are peculiar to only one of them.
The general principles of planning include the principles of complexity, unity, continuity, balance.
The principle of complexity means that the plan covers all aspects of the enterprise’s activities: goals, resources, functional areas of activity, environmental management.
The principle of unity involves the development of a general or consolidated plan for the development of the enterprise. The unity of plans implies the commonality of economic goals and the interaction of various divisions of the enterprise at the horizontal and vertical levels of management. In-house planning is by its purpose the basis for the observance of the unity of plans at the enterprise level.
The principle of continuity implies a combination and continuity of strategic, tactical and current plans. Organizationally, this means continuity of the planning process itself, as well as linking them on the principle of direct and feedback. The strategic plan serves as the basis for the development of a tactical plan, on the basis of which the current plan is developed. An analysis of the implementation of the current plan is used to adjust the strategic plan.
The principle of balance means maintaining proportions between production and consumption, on the one hand, production and material, labor and financial resources, on the other.
The structural transformations taking place in the national economy have necessitated the use of the principles of a market economy in the planning process. These are the principles of flexibility, accuracy, participation, coordination and integration, monetary.
Flexibility means that the planning system must quickly adapt to changes in the internal and external environment of the enterprise. This is achieved by developing different options for plans: minimum, maximum and optimal.
The principle of flexibility of plans is closely related to the continuity of planning and implies the possibility of adjusting the established indicators and coordinating the planning and economic activities of the enterprise. Constant changes in equipment, technology and organization of production usually lead to a decrease in the consumption of planned resources and to the need to clarify the initial plans. In market conditions, there may also be significant fluctuations in demand, changes in current prices and tariffs, which also lead to appropriate amendments in various plans. Therefore, all plans, as is customary in world practice, should contain reserves, otherwise called “safety” allowances. If this requirement is met, it is also necessary to plan the size of such reserves, since their unjustified use affects the results of planning.
The principle of the accuracy of plans is determined by many both internal factors and its external environment. The high degree of accuracy of the plans, apparently, does not seem to be very necessary at all in the conditions of free market relations. Therefore, any plan must be drawn up with such precision as the enterprise itself wishes to achieve, taking into account its financial and market condition and many other factors. In other words, the degree of accuracy of the plans is possible any, but with the provision of acceptable production efficiency. It is mainly determined by the planning systems and methods used. With operational or short-term planning, a higher degree of planned indicators is required, with strategic or long-term planning, you can limit yourself to choosing a common goal and making approximate calculations.
The principle of participation shows the active influence of personnel on the planning process. It assumes that no one can plan effectively for someone else. It’s better to plan for yourself – no matter how bad – than to be planned by others no matter how good. The point of this is to increase your desires and ability to meet the needs of both your own and others. Planning by others cannot increase these desires and abilities, only one’s own planning provides such an opportunity. It should be as joyful as it should be productive. At the same time, the main task of professional planners is to stimulate and facilitate planning by others for themselves. Economists-managers must provide the motivations, information, knowledge, understanding, wisdom and imagination necessary for the rest of the staff to plan for themselves.
The principle of coordination establishes that the activities of no part of the organization can be planned effectively if they are carried out independently of the rest of the objects of a given level. It follows that the activities of units at one level should be planned not only simultaneously, but also interdependently with others. It does not matter where problems arise, they should be solved together with others.
The principle of integration determines that planning carried out independently at each level cannot be equally effective without linking plans at all levels. A strategy or tactic formulated at one level of the enterprise often creates new problems for other levels. Therefore, to solve it, it is necessary to change the strategy of a different level.
The combination of the principles of coordination and integration gives the well-known principle of holism. According to him, the more elements and levels in the system, the more profitable it is to plan simultaneously and in interdependence. This concept of “all at once” planning is opposed to sequential planning both from the top down and from the bottom up.
The principle of monetarity is that the entire planning system should be aimed at achieving an optimal discounted financial result and maintaining constant liquidity of the enterprise. The discounted financial result (net present value) is the sum of all discounted excesses of cash receipts over payments. If cash flows are discounted using an interest rate that reflects the minimum level of dividends of both shareholders and creditors, then the amount of net profit presented will characterize the value of the total capital of the enterprise. It is the most important goal for investors and management of the company. Shareholders have an interest in maximizing the value of equity. The net value of the enterprise is obtained after deducting dividends to shareholders from the value of equity. It is a monetary goal of both the owners of capital and the personnel of the enterprise.
Net worth of capital is based on the net returns of future periods – on the expected cash inflows by period minus: payments on the most efficient, from the point of view of the market, capital investment projects; payment of interest and dividends on the company’s obligations to its own shareholders and creditors; taxes and costs.