All organizations prepare plans. There is no choice whether to plan or not, but the choice lies in the way of planning. Therefore, managers should take precautions in formulating plans more effective so as to realize organizational goals in real terms. Organizations follow two methods of planning:
1. Top-down method
2. Participative method
(1) Top-Down Method: Traditionally planning was done entirely by top level managers who were often assisted by a formal planning department. Planning department consists of planning specialists whose sole responsibility was helping to write various organizational plans. The plans are reviewed and finalized by top managers. Plans developed by top-level managers flowed down through managerial hierarchy much like traditional goal setting. As they flowed down through the hierarchy, plans were tailored to the particular needs of each level.
However, this traditional top-down method of planning is still used by organization. It can be effective only if managers understand the importance of creating a workable, usable document that actually directs and guides organizational members. It should not be a document that looks impressive but is never used.
(2) Participative Method: Another method of planning is Participative Method, in which organizational members are involved in planning. It i true that top level managers must take initiative in planning and they must set strategic goals. But, it should not be considered only the job of the top managers to formulate plans and the subordinate managers to follow them.
In Participative method, plans are not handled down from one level to another. Managers at all levels must participate in the planning process. Plans are developed by organizational members at the various levels and in various work units to meet their specific needs. Top management reviews and managers we given opportunities to contribute to plan particular over which they have authority. This will lead to their commitment, loyality to planning and enthusiasm in implementing plans.