3 2.3: Planning and Control Functions Performed by Managers
2.3: Planning and Control Functions Performed by Managers
- Contributed by No Attribution by request
- Anonymous by request
-
- Last updated
- Oct 2, 2022
Learning Objectives
- Describe the planning and control functions performed by managers.
Question: Managers of most organizations continually plan for the future, and after the plan is implemented, managers assess whether they achieved their goals. What are the two functions that enable management to go through the process of continually planning and evaluating?
Planning
Question: Continually planning for the future is an important quality of many successful organizations, such as Southwest Airlines (discussed “Business in Action 2.1”). How do organizations formalize their strategic plans?
A budget can take a variety of forms. A budgeted income statement indicates a profit plan for the future. A capital budget shows the long-term investments planned for the future. A cash flow budget outlines cash inflows and outflows for the future. We provide more information about how budgets can be used for planning purposes in later chapters.
Business in action 2.1 – Plans for the Future
Review the annual report or 10K for just about any company, and you are likely to find information regarding plans for the future. Here are some examples:
- Southwest Airlines. A low-fare, short-haul carrier that targets business commuters as well as leisure travelers states in its annual report, “We are focused on four big initiatives: the AirTran integration, the All-New Rapid Rewards program, the addition of the Boeing 737–800 in 2012, and the replacement of our reservations system.”
- Sears Holdings Corporation. A multiline retailer that offers a wide array of merchandise and related services states in its 10K report, “We will continue to invest in our online properties. By integrating our vast store network with our online properties, we believe that Sears Holdings will succeed in the rapidly evolving retail environment.”
- Nordstrom, Inc. A fashion specialty retailer indicates in its 10K report that its “strategic growth plan includes opening new Nordstrom full-line and Nordstrom Rack stores, with 6 announced Nordstrom full-line and 18 announced Nordstrom Rack store openings, the majority of which will occur by 2012.”
As these companies go through the process of making decisions about the future, developing plans based on their decisions, and controlling the implementation of their plans,
Sources: Southwest Airlines, “Annual Report, 2010,” http://www.southwest.com; Sears Holdings Corporation, “10K Report, 2010,” www.searsholdings.com; Nordstrom, Inc., “10K Report, 2010,” http://www.nordstrom.com.
Control
Question: Although planning for the future is important, plans are only effective if implemented properly. How do organizations assess the implementation of their plans?
For example, assume Ernst & Young creates a budget indicating the labor hours needed to perform tax services for a particular client (this is the planning function). After the work is performed, actual labor hours used to complete the work are compared to budgeted labor hours. This analysis is then used to evaluate whether employees were able to complete the work within the budgeted time and often results in recommendations for the future. Recommendations might include the need for adding more labor hours to the
Planning and controlling operations are critical functions within most organizations. In today’s business environment, effective planning and
Key Takeaway
Managers continually plan and control operations within organizations. Planning involves establishing goals and communicating these goals to employees of the organization. The
Review problem 2.2
Assume you are preparing a personal budget of all income and expenses for next month.
- Describe the planning and control functions of this process.
- What benefits might be derived from performing the planning and control functions for a personal budget?
Definitions
- The process of establishing goals and communicating these goals to employees of the organization.
- The process of evaluating whether the organization’s plans were effectively implemented.
- A series of reports used to quantify an organization’s plan for the future.
