Question

1. Why is planning sometimes referred to as the “first” management function?

2. Does a healthy firm (one that is doing well) have to worry about effective management? Explain.

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Answer 1

Planning function is often referred to as the "first" management function because all other management functions depend on planning.

There are several ways of looking at this. It’s possible for a company to be successful due to a fad of some sort, a start up or an older company that finds particular product that people buy in mass quantities or are prepared to spend large amounts of money on, so much more than cost of production that the profits just roll in and pile up and can be invested in stuff that fails without bankrupting the organization… at least for a while. People usually regard whoever is managing such organizations as geniuses and highly effective… for a while. As failures pile up, that may trigger re-evaluation of those opinions as people expect more and more and aren’t getting it.

Management may be ‘effective’ in the sense of able to convince investors to keep giving them money in hopes of greater success… or they may be more broadly effective in actually producing good products, but not be able to convince banks to lend or investors to buy shares. So what constitutes ‘effective’ may be quite different for different situations.

In my view, truly ‘effective’ management engages many staff in creative innovation and continually produces new and better products on a regular basis, thus ensuring that the organization stays alive despite changing customer needs, tastes, etc., and changing supply situations, etc. So company that is healthy, but also wants to STAY healthy will definitely want this sort of effectiveness in management.