Planning from Top to Bottom

Planning works best when the goals and action plans at the bottom and middle of the organization support the goals and action plans at the top of the organization. In other words, planning works best when everybody pulls in the same direction.

Top management is responsible for developing long-term strategic plans that make clear how the company will serve customers and position itself against competitors in the next two to five years. Strategic planning begins with the creation of an organizational purpose.

The strategic objective, which flows from the purpose, is a more specific goal that unifies company-wide efforts, stretches and challenges the organization, and possesses a finish line and a time frame. Middle management is responsible for developing and carrying out tactical plans to accomplish the organization’s strategic objective.

Tactical plans specify how a company will use resources, budgets, and people to accomplish specific goals related to its strategic objective for the next five years. Lower-level managers are responsible for developing and carrying out operational plans, which are the day-to-day plans for producing or delivering the organization’s products and services.

After single-use plans and standing plans, budgets are the third kind of operational plan. Budgeting is quantitative planning because it forces managers to decide how to allocate available money to best accomplish company goals.