What is the Importance of Planning in Controlling?
Planning is fundamentally crucial for effective controlling within an organization. It lays the essential groundwork that makes monitoring and evaluating performance possible.
The relationship between planning and controlling is symbiotic. Planning is the first step in the management process, determining where the organization wants to go and how it intends to get there. Controlling is the last step, ensuring that the organization is actually moving towards those planned goals.
As the reference highlights: Planning provides the basis of control because plans are formulated for the future, which determines the course of action for the organisation whose execution is evaluated and rectified in case of any deviations during the controlling process.
In essence, without a plan, there is nothing to control against. Planning sets the standards, targets, objectives, and methods that serve as benchmarks for the controlling function.
How Planning Empowers Controlling
Planning facilitates controlling in several key ways:
- Setting Standards: Planning defines the desired performance levels, whether they are sales targets, production quotas, quality standards, or budget limits. These standards are the criteria used in the controlling process to measure actual performance.
- Providing a Roadmap: A well-developed plan outlines the intended sequence of actions and procedures. Controlling then monitors if activities are being executed according to this predetermined path.
- Facilitating Deviation Detection: By providing clear standards and expected outcomes, planning makes it easier to identify when actual performance deviates from what was intended. The plan acts as the comparison point.
- Enabling Corrective Action: Once deviations are identified during controlling, the original plan often provides context for why things went wrong and helps in formulating appropriate corrective actions. The plan might need adjustment, or execution might need redirection.
Practical Importance in Business
Consider a simple business scenario:
| Aspect | Planning Phase | Controlling Phase |
|---|---|---|
| Goal | Plan to increase sales by 15% this quarter. | Monitor weekly sales reports. |
| Standard | Target weekly sales set at $X. | Compare actual weekly sales to the $X standard. |
| Action | Outline specific marketing campaigns. | Track campaign effectiveness and impact on sales. |
| Correction | Based on Plan: If sales are low, identify which marketing effort isn't working based on the original campaign plan. | If actual sales are below target, analyze why using the plan as a guide and implement corrective measures (e.g., increase ad spend, retrain sales staff). |
Without the initial plan (the 15% increase goal, the $X weekly standard, the marketing campaign outline), the controlling activities (monitoring reports, tracking campaigns, analyzing deviations) would lack context and purpose. You wouldn't know what to monitor or what constitutes a deviation.
Key Takeaways
- Planning is the prerequisite for controlling.
- It provides the goals, standards, and methods necessary for performance evaluation.
- Controlling checks if the organization is following the plan and achieving the planned outcomes.
- Deviations found during controlling are assessed and corrected based on the path set out in the plan.
In essence, planning is the brain that decides the route, while controlling is the mechanism that ensures the vehicle stays on that route, making necessary steering adjustments along the way.
