The principle of efficiency of plans states “The efficiency of a plan is measured by the amount it contributes to purpose and objectives as offset by the costs required to formulate and operate it and by unsought consequences.”
Plans are efficient if they achieve their purpose at a reasonable cost, when cost is measured not only in terms of time or money or production but also in the degree of individual and group satisfaction.
Type of Plans
1. Missions or purpose
The mission, or purpose, identifies the basic function or task of an enterprise or agency or any part of it.
2. Objectives or goals
Objectives or goals are the ends toward which activity is aimed. They represent the end point toward which planning, organizing, staffing, leading and controlling are aimed. While enterprise objectives are the basic plan of the firm, a department may also have its own objectives. Its goals contribute to the attainment of enterprise objectives, but the two sets of goals may be entirely different.
Strategy is defined as the determination of the basic long-term objectives of an enterprise and the adoption of course of action and allocation of resources necessary to achieve these goals. The purpose of strategies is to determine and communicate, through a system of major objectives and policies, a picture of the kind of enterprise that is envisioned. Strategies do not attempt to outline exactly how the enterprise is to accomplish its objectives, but they furnish a framework for guiding, thinking and action.
Policies define an area within which a decision is to be made and ensure that the decision will be consistent with, and contribute to, and objective. Policies help decide issues before they become problems, make it unnecessary to analyze the same situation every time it comes up, and unify other plans, thus permitting managers to delegate authority and still maintain control over what their subordinates do.
Procedures are plans that establish a required method of handling future activities. They are chronological sequences of required action. They detail the exact manner in which certain activities must be accomplished.
Rules spell out specific required actions or nonactions, allowing no discretion. They are usually the simplest type of plan. Rules are unlike procedures in that they guide action without specifying a time sequence. A procedure might be looked upon as a sequence of rules. A rule, however, may or may not be part of a procedure. The essence of a rule is that it reflects a managerial decision that some certain action must, or must not, be taken.
Programs are a complex of goals, policies, procedures, rules, task assignments, steps to be taken, resources to be employed and other elements necessary to carry out a given course of action and are ordinarily supported by budgets. A primary program may call for many supporting programs.
A budget is a statement of expected results expressed in numerical terms. It may be referred to as a “numberized” program. The major advantage of budgeting is that it makes people plan; because a budget is in the form of numbers, it forces precision in planning. A budget may be expressed in financial terms; in terms of labour-hours, units of product, or machine-hours; or in any other numerically measurable term. It may deal with operations; it may reflect capital outlays, or it may show cash flow.
Budgets vary considerably in accuracy, detail and purpose. Some budgets vary according to the organization’s level of output; these are called variable or flexible budgets.
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