Relationship Between Formal Planning And Performance In Management

Relationship Between Formal Planning And Performance In Management | Criticism / Limitations Of Formal Planning
Formal Planning (FP) is related with specific goals to be achieved within specified time period. There are strict rules & procedures, clear-cut guidelines to be followed by managers and employees working in organization.

Performance means how well the job tasks are performed by managers or employees to achieve set goals of the organization.

There is a strong positive relationship existed between formal planning and performance (i.e., existence of formal planning increases organizational performance and vice-versa) unless other factors do not affect this relationship negatively. The factors are explained below:

(i) Financial Incentives

If the financial incentives such as increase in profits, returns on investments, etc., are not obtained by the organization, then the working activities of the organization negatively affected i.e., due to low or no funds, the organization can’t run various projects, etc., which lowers working performance eventhough the organization has proper formal planning.

(ii) Lack Of Implementing Plans

Eventhough the company has made well organized planning but if the plans are not implemented, then the organization can’t outperform and achieve targets on time.

(iii) External Environment Factors

Formal planning to achieve set goals often fails due to external environment forces such government regulations, economic conditions, laws authorities, etc., restrict the manager to make quality decisions to implement the plans such as in order to increase the sales of rice in international market, the management decides to export more rice, but the government restricts the export of exported rice upto a certain limit, which affects the decision of the management to implement the plan and as a result organizational performance is negatively affected.

(iv) Time Limit

It takes time to see the effects of planning on the working performance of the organization. The manager time to see the results  of formal planning implemented on working activities of employees.

Limitations of FP

(a) Dynamic Environment

FP does not work in the dynamic environment to achieve goals. In today’s market, which is continuously changing, FP is not working effectively. Old successful plans do not work in this global market due to the advancement of information technology (IT) and internet. Due to digital markets, old traditional ways of working can’t be effective if alternative and innovative working environment is possible. For example, due to internet, the organization can make online sales which is not possible if old tradition methods are imposed by strict procedures & rules as parts of formal planning.

(b) Strict Rules

Formal planning focuses on same strict procedures and guidance which can’t work in innovative and flexible working environment. For example, a manager needs to follow strict procedures to work on activities but he can’t change his working schedule to work better in his comfort zone, i.e., he may work online and manage the work activities through online video chatting whenever it is more convenient and flexible working time for him to work effectively.

(c) Lack of Innovation And Creativity

Innovation (creating new ideas) and creativity (to invent something new) are required in today fast-growing competitive industry which is not possible in formal planning. Innovation and creativity can gain competitive advantages over competitors in the market which are impossible in set and repeated procedures and rules governed by formal planning.

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