Planning & Decision Making in Financial Management

Planning is how an organization charts and defines actions that shape its future direction. It is the process through which a company determines its long-term goals and identifies the best ways to achieve them. It involves gathering internal and external environment information and conducting discussions on the organization’s future (Clarke, 2019). Strategic planning and decision making is the mandate of executives and departmental managers. Companies identify critical success factors to assess performance and actions aligned with the vision for future growth and profits. The critical elements of an organization’s plan are its mission, vision, and values. Strategic plans are critical as they enhance communications between different organizations. Communication is critical during the planning process as it enables employee participation, thereby ensuring commitment to the organization’s goals.

An organization’s mission is a statement that describes the firm’s intentions regarding its impact on the rest of the world. On the other hand, the vision statement aims to inspire the people inside to work towards the desired future. Another element of a strategic plan is the culture which is the core value that provides a framework for behavior (Smith, 2020). The social values of the communities surrounding an organization determine its culture. For instance, many people believe healthcare is a right and not a privilege; consequently, hospitals targets to prioritize their patients.

Planning is an iterative process and not a one-off event; consequently, many firms continuously engage in the process. Strategic plans contain competitive analysis that examines organizations’ Strengths, Weaknesses, opportunities, and threats. Competitive analysis entails assessing the competitors in the industry and using the information to identify the firm’s strengths and weaknesses (Wagner & Hollenbeck, 2020). Efficient strategic plans are time-bound and goal-oriented as they cater to present and future environmental opportunities. They include the company’s interventions to achieve objectives and the operation details. Effective strategic planning provides a clear link between current projects and the firm’s objectives and demonstrates the critical success factors. Key performance indicators track the success of the interventions and strategies, which are critical to reflect the progress in fulfilling the vision statement.

Factors Limiting Planning in an Organization

Strategic planning is essential in the development of an organization. However, its implementation faces many challenges. First, during the planning process, the present conditions dominate, thus overshadowing future needs and resulting in an error of judgment. Secondly, human failure and lack of alignment to the company’s mission and vision cause strategic plans to fail (Tarka, 2018). Even with proper goal setting, employees fail the process by prioritizing non-strategic objectives and lack collaboration which impedes the achievement of the overall strategic goal. Thirdly, many organizations develop elaborate plans but fail to track their progress, and in other instances, the key performance indicators are not measurable. Fourthly, rigidity impedes the implementation of strategic plans. Many managers feel that planning stifles employee initiative and adaptability to changing environments which cause delays in work performance, for example, bureaucracy in decision making.

Decision Making

Decision-making is logically choosing a preferred course of action given a set of alternatives. Tactical decisions affect organizations’ natural working environment, including human, technical, and financial resources. Strategic choices aim to harmonize the company’s resource capabilities with its threats and opportunities. The Decision-making process involves six steps: problem identification, definition, scope, the decision, actions, and feedback (Wagner & Hollenbeck, 2020). Top-level managers and supervisors make critical verdicts, and they experience the following challenges in the process.

First, the executives face difficulties making sound decisions when they have incomplete or inaccurate information, which hinders an organization, leading to losses or misappropriation of resources. Secondly, managers face time constraints that inhibit them from weighing the potential benefits or risks of a decision. Furthermore, making verdicts without proper assessment results in significant losses. Supervisors also face uncertainty when making decisions as some problems have never been experienced before (Tarka, 2018). Therefore, managers may be indecisive about the effects of making new decisions. Leaders also have personal biases making choices based on illogical and non-scientific reasoning. Potential conflicts challenge administrators, which skews their choice of alternatives. However, managers can combat biases in decision-making by ensuring that strategic planning is a team effort.

Tools and Techniques for Sound Decision Making

Decision-makers employ the following tools and techniques; the decision matrix, T- Chart, the decision tree, multi-voting, cost-benefit analysis, SWOT analysis, and PEST analysis. Strategic Plans are critical for sound decision-making as they incorporate SWOT and PEST analysis techniques (Wagner & Hollenbeck, 2020). Using a plan improves the company’s sales and profits by outlining areas for cost reduction and maximization of returns. Secondly, strategic plans assist managers to anticipate problems and formulating solutions helping the organization to gain a competitive advantage in the industry. Thirdly, strategic planning equips the managers to assess risks, thereby informing their decision to invest in safe business opportunities. Fourthly, strategic planning ensures optimum utilization of resources, thus achieving maximum output. Consequently, strategic planning is essential to an organization’s growth, development, sustainable use of resources, and realization of mission and objectives.


Clarke, C. (2019). Strategic planning in healthcare. In E. Loh, P. Long, & P. Spurgeon (Eds.), Textbook of medical administration and leadership (pp. 31-46). Springer.

Smith, R. D. (2020). Strategic planning for public relations (6th ed.). Routledge.

Tarka, P. (2018). The views and perceptions of managers on the role of marketing research in decision making. International journal of market research, 60(1), 67-87.

Wagner, J. A., & Hollenbeck, J. R. (2020). Organizational behavior securing competitive advantage (3rd ed.). Routledge.

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