The planning process is the first basic managerial function that organizations must address. With an understanding of the environmental context, managers develop a number of different types of goals and plans. Decision making is the underlying framework of all planning, because every step of the planning process involves a decision.

Goals serve four basic purposes: to provide guidance and direction, to facilitate planning, to inspire motivation and commitment, and to promote evaluation and control. Kinds of goals can be differentiated by level, area, and time frame. All managers within an organization need to be involved in the goal-setting process. Managers need to pay special attention to the importance of managing multiple goals through optimizing and other approaches.

Goals are closely related to planning. The major types of plans are strategic, tactical, and operational. Plans are developed across a variety of time horizons, including long-range, intermediate, and short-range time frames. Essential people in an organization responsible for effective planning are the planning staff, planning task forces, the board of directors, the CEO, the executive committee, and line management. Contingency planning helps managers anticipate and plan for unexpected changes.

After plans have been developed, the manager must address how they will be achieved. This often involves tactical and operational plans. Tactical plans are at the middle of the organization and have an intermediate time horizon and moderate scope. Tactical plans are developed to implement specific parts of a strategic plan. They must flow from strategy, specify resource and time issues, and commit human resources. Tactical plans must be effectively executed.

Operational plans are at the lower levels of the organization, have a shorter time horizon, and are narrower in scope. Operational plans are derived from a tactical plan and are aimed at achieving one or more operational goals. Two major types of operational plans are single-use and standing plans. Single-use plans are designed to carry out a course of action that is not likely to be repeated in the future. Programs and projects are examples of single-use plans. Standing plans are designed to carry out a course of action that is likely to be repeated several times. Policies, standard operating procedures, and rules and regulations are all standing plans.

Several barriers exist to effective goal setting and planning. These include inappropriate goals, an improper reward system, a dynamic and complex environment, reluctance to establish goals, resistance to change, and various constraints. Methods for overcoming these barriers include understanding the purposes of goals and plans; communication and participation; consistency, revision, and updating; and an effective reward system. One particularly useful technique for managing goal setting and planning is formal goal setting, a process of collaborative goal setting and planning.