Classification of plans is done according to a number of criteria. They are: functional area (administrative, operational), personnel characteristics, time factor (long-term and short-term plans), functional level (top management, middle management and lower level management), and action requisite. Regarding the above criteria, there are four major types of planning that are applied in daily activity of an organization. They involve strategic, tactical, operational and contingency plans.
Strategic plans are prepared by the top management of the organization. They reflect the mission and vision of the firm. These plans outline the goals and objectives of the entire organization which should be deployed in all departments in order to realize anticipated future expectations. Strategic plans are long-term plans. This implies that they can only be realized over a period of about 3-5 years. These plans are mainly concerned with expansion of the firm and increasing of shareholders’ capital. They define to some extent the future image of the organization in terms of profitability and production. Strategic plans carry the largest capital investment of the shareholders and hence are referred to as capital expenditure plans. They represent the major plans of the organization, which apply to the entire firm, hence providing an outline to other plans. Strategic plans are proactive in nature.
Tactical plans are complementary to the strategic ones. They are concerned with the responsibility of the departmental level to realize the main objectives of strategic plans. These plans are generated by the departmental managers, who form the middle level of management. The core function of tactical plans is to put strategic plans into action. Tactical plans are short-term plans of the organization, which are realized within a single trading period. Therefore, tactical plans are used to determine the capability of the organization to meet its anticipated future target. These plans are just a component of strategic plans and thus can be used to evaluate the performance of strategic plans. Estimated performance of these plans helps managers to decide whether to terminate, change or continue with implementation of strategic plans. Just like strategic plans, tactical plans are proactive in nature.
Operational plans are subsections of tactical plans, which are designed and implemented by the lower level of management, specifically by the frontline managers. These plans are concerned with day-to-day operations of the organization. They act as supportive plans to the tactical plans in realizing its target. Operational plans focus on specific procedures and processes which happens within the lowest level of the organization, i.e. the individual one. Tactical plans depend majorly on these plans to accomplish their departmental part in strategic plans. As well as tactical and strategic plans, operational plans are also proactive.
Contingency plans are substitute plans made by managers to be used in unforeseen situations. As a rule, not all plans are successful. Some may fail, and thus contingency plans are made to tackle such situations. These plans act as an alternative in case the original plan fails. Contingency plans are not part of the main plans but alternative plans, which are made to increase flexibility of the managers in meeting their target. These plans can be made at the start of the project or after the original plan fails to provide the anticipated results. Thus, contingency plans, unlike the other plans, can be either reactive or proactive depending on when they were generated.