What are the consequences of poor planning and poor control in business?
Why is there such an emphasis on proper business planning and controls in today’s marketplace? What could happen to your organization and bottom line absent an intelligent plan on how to run your business? Let’s take a quick look at why these areas are so important.
Without a plan on how to intelligently operate and grow your business, you’re almost sure to fail or, at the very least, not grow your company. Planning is at the core of business operations and absent a measured strategy, your bottom line will be adversely affected. You must know what it takes to operate your business and that encompasses staffing, Human Resource support, effective management and facilities planning among other important areas.
For example, you’re planning your weekly operations and your competition has specials on that are drawing away your customers. Because you didn’t anticipate the situation by keeping tabs on what your competitors are doing, your cash flow takes a serious hit for the week and there’s no recovering from a loss like that.
The same can be said of business controls that you put in place to control various aspects of your business. Without accounting controls, you will hemorrhage cash. Without proper timekeeping procedures, employee costs will spiral out of control. And absent favorable property and equipment leasing agreements, your budget will collapse.
For example, your timekeeping procedures for staff are based on the honor system. Some of your staff are leaving or returning 15 minutes off schedule which has now created a morale issue with the staff who are being honest about their time reporting. Had you put in place a reliable timekeeping protocol, you would not be faced with this situation.
Taken together, proper business planning and controls will point your organization in the right direction and help you to succeed. Without them, you’re setting yourself up for failure.
Certainly, one consequence of poor planning and poor control is a loss of financial reward. For example, if a product is being produced in mass quantity and there is a lack of planning about whether the product will be purchased, there can be a great chance that the cost of producing the product will not be matched and exceeeded with the sale of the product. This is one example where the planning phase is critical to the overall success of a product. Another instance where planning is an essential part of the successful business model is in the actual production of a product. There has to be serious planning and understanding about how a product will function when inserted into the marketplace. When purchased, what is the likelihood that normal usage will decrease its effectiveness? How does the product respond to "wear and tear"? What are the conditions which determine failure for the product? These are questions that can be answered to a reasonably secure degree with good planning and control of the specifications of a product. The consequences of not undertaking such measures could be manifold. Consumers will associate the product with failure, causing damage to both short term and long term company interests. Another consequence could be manufacturer liability, if it can be proven that reasonable planning could have prevented such mishaps with the product. The implication of this could be of a legal or civil nature, depending on the product and the malfunction within it.
Planning in business involves taking decisions on what objectives to be pursued in the business, and the planned action to be taken to achieve the set objectives. Control involves monitoring the actual business performance, and comparing it with set objectives and plans, and taking corrective actions when performance is not in line with set objectives and plans.
Poor planning results in setting up in appropriate objectives or plans. Inappropriate objectives cause the organization to direct its efforts in the wrong directions, or to put in too much or too little efforts. A business introducing a new product in a market may follow different different objectives such maximizing immediate profit, or maximizing sale sales volume, and the prices it sets for the product will be very much influenced by the objective. Immediate profit maximization may point to setting up high skimming prices, while objective of sales maximization is better served by low penetration prices. Unless thee is clarity about the objectives of setting the price levels, the likelihood of setting the prices at correct levels are low. Similarly, the selling and advertising efforts to be put in for this product will depend on target sales volume. If the sales volume targets are too low full sales potential will not be achieved. It the sales targets are too ambitious, efforts and cost incurred in sales and advertising will be wasted in following unrealistic objectives.
Poor control reduces the ability of a business to to determine how it is performing and take corrective action for improvement. For example, when a company sets a particular sales targets and plans its sales, production, and distribution activities accordingly, it is not necessary that actual sales will always be in line with plans. A company may find that the sales are lower or higher than the plans. There can be several reasons for such deviations. It is possible that the objectives were not set appropriately or the action taken is not in line with plans. Sales may be lower than projected for reasons like the original sales target being in appropriate, or performance in areas like production, distribution or sales not being adequate. Effective control allows business to determine the root cause for deviations from plan and take suitable corrective action.
thanks..i had a similar question for an asssignment of BBA(business administration)..thanks guyss