Chapter 4: Planning

Meaning

• Planning is deciding in advance what to do and how to do. It is one of the basic managerial functions. Before doing something, the manger must formulate an idea of how to work on a particular task. Thus, planning is closely connected with creativity and innovation. But the manager would first have to set objectives, only then wall a manager know where he has to go.
• Planning involves setting objectives and developing appropriate courses of action to achieve these objectives. Objectives provide direction and for all managerial decisions and actions. Planning provides a rational approach for achieving predetermined objectives.
• Planning means setting objectives and targets and formulating an action plan to achieve them. It is concerned with both ends and means What is to be done and how it is to be done.

Importance of planning

Planning is certainly important as it tells us where to go, it provides direction and reduces the risk of uncertainty by preparing forecasts. The major benefits of

1. Planning provides directions:-  By stating in advance how work is to be done planning provides direction for action. Planning ensures that the goals of objectives are clearly stated so that they act as a guide for deciding what action should be taken and in which direction. If goals are well defined, employees are aware of what the organization has to do and what they must do to achieve those goals. Departments individuals in the organization are able to work in coordination. If there was no planning, employees would be working in different directions and the organization would not be able to achieve its desired goals.
2.  Planning reduces the risk of uncertainty:- Planning is an activity which enables a manager to look ahead and anticipate changes. By deciding in advance the takes to be performed, planning shows the way to deal with changes and uncertain events. Changes or events cannot be eliminated but they can be anticipated and managerial responses to them can be developed.
3.  Planning reduced overlapping and wasteful activities:- Planning serves as the basis of coordinating the activities and efforts of different divisions, department and individuals. It helps in avoiding confusion and misunderstanding. Since planning ensures clarity in thought and action, work is carried on smoothly without interruptions. Useless and redundant activities are minimized or eliminated. It is easier to detect inefficiencies and take corrective measures to deal with them.
4. Planning promotes innovative ideas :-  Since planning is the first function of management, new ideas can take the shape of concrete plans. It is the most challenging activity for the management as it guides all future actions leading to growth and prosperity of the business.
5. Planning facilitates decision making :- Planning help the manager to look into the future and make a choice from amongst various alternative courses of action. The manager has to evaluate each alternative and select the most viable proposition. Planning involves setting targets and predicting future conditions, thus helping in taking rational decisions.
6. Planning establishes standards for controlling :- Planning involves setting of goals. The entire managerial process is concerned with accomplishing predetermined goals through planning. Organizing, staffing, directing and controlling. Planning provides the goals or standards against which actual performance is measured. By comparing actual performance with some standard, managers can know whether they have actually been able to attain the goals.

FEATURES OF PLANNING:-

The planning function of the management has certain special features. These features throw light on its nature and scope.

1. Planning focuses on achieving objectives:- Organizations are set up with a general purpose in view. Specific goals are set out in the plans along with the activities to be goals. Thus, planning is purposeful. Planning has no meaning unless it contributes to the achievement of predetermined organizational goals.
2. Planning is a primary function of management:- Planning lays down the base for other functions of management. All other managerial functions are performed within the framework of the plans drawn. Thus, planning precedes other functions. This is also referred to as the primacy of planning. The various functions of management are interrelated and equally important. However, planning provides the basis of all other functions.
3. Planning is pervasive:- Planning is required at all levels of management as well as in all departments of the organization. It is not an exclusive function of top management or of any particular department. But the scope of planning differs at different levels and among different departments. For example, the top management undertakes planning for the organization as a whole. Middle management does the departmental planning. At the lowest level, day-to-day operational planning is done by supervisors.
4. Planning is continuous:- Plans are prepared for a specific period of time, may be for a month, a quarter, or a year. At the end of the period there is need for a new plan to be drawn on the basis of new requirements and future conditions. Hence, planning is a continuous planning is a continuous process. Continuity of planning is related with the planning cycle. It means that a plan is framed, it is implemented, and is followed by another plan, and
5. Planning is futuristic:- Planning essentially involves looking ahead and preparing for the future. The purpose of planning is to meet future events effectively to the best advantage of an organization. It implies peeping into the future, analyzing it and predicting it. Planning is, therefore, regarded as a forward looking function based on forecasting. Through forecasting, future events and conditions are anticipated and plans are drawn accordingly. Thus for example, sales forecasting is the basis on which a business firm prepares its annual plan for production and sales.
6. Planning involves decision making :- Planning essentially involves choice from among various alternatives and activities. If there is only one possible goal or a possible course of action, there is no need for planning because there is no choice. The need for planning arises only when alternatives are available. In actual practice, planning presupposes the existence of alternatives. Planning, thus, involves thorough examination and evaluation of each alternative and choosing the most appropriate one.
7. Planning is a mental exercise:- Planning requires application of the mind involving foresight, intelligent imagination and sound judgment. It is basically an intellectual activity of thinking rather than doing, because planning determines the action to be taken. However, planning requires logical and systematic thinking rather than guess work or wishful thinking. In other words, thinking for planning must orderly and based on the analysis of facts and forecasts.

LIMITATIONS OF PLANNING

The major limitations of planning are given below:

1. Planning leads to rigidity:- In an organization, a well-defined plan is drawn up with specific goals to be achieved within a specific time frame. These plans then decide the future course of action and managers may not be in a position to change it. This kind of rigidity in plans may create difficulty. Managers need to be able to cope with the changed circumstances. Following a pre-decided plan, when circumstances have changed, may not turn out to be in the organization interest.
2. Planning may not work in an dynamic environment:- The business environment is dynamic, nothing is constant. The environment consists of a number of dimensions, economic, political, physical, legal and social dimensions. The organization has to constantly adapt itself to accurately assess future trends in the environment if economic policies are modified or political conditions in the country are not stable or there is a natural calamity.
3. Planning reduces creativity:- Planning is an activity which is done by the top management. Usually the rest of the members just implements these plans. As a consequence, middle management and other decision makes are neither allowed to deviate from plans nor are they permitted to act on their own. Thus, much of the initiative or creativity inherent in them also gets lost or reduced. Most of the time, employees do not even attempt to formulate plans. They only carry out orders. Thus, planning in a way reduces creativity since people tend to think along the same lines as other. There is nothing new or innovative.

Planning process – Planning, as we all know is deciding in advance what to do and how to do. It is a process of decision making how do we go about making a plan? Since planning is an activity there are certain logical steps for every manager to follow.

I. Setting Objectives :-

• The first and foremost step is setting objectives. Every organization must have certain objectives. Objectives may set for the entire organization and each department or unit within the organization.
• Objectives or goals specific what the organization wants to achieve. It could mean an increase in sales by 20% which could be objective of the entire organization. How all departments would contribure to the organization goals is the plan that is to be drawn up.
• Objectives should be stated clearly for all departments, units and employees. They give direction to all departments. Departments/ units then need to set their own objectives within the broad framework of the organization’s philosophy.
• Objectives have to percolate down to each unit and employees at all levels. At the same time, managers must contribute ideas and participate in the objective setting process. They must also understand how their actions contribute to achieving objectives. If the end result is clear it becomes easier to work towards the goal.

II. Developing Premises:- Planning is concerned with the future which is uncertain and every planner is using presumption about what might happen in future. Therefore, the manger is required to make certain assumptions about the future. These assumption are called premises. Assumptions are the base material upon which plans are to be drawn. The base material may be in the form of forecasts, existing plans or any past information about policies.’

III. Identifying alternative courses of action:- Once objective are set, assumptions are made. Then the next step would be to act upon them. There may be many ways to act and achieve objectives. All the alternative courses of action should be identified. The course of action which may be taken could be either routine or innovative. An innovative course may be adopted by involving more people and sharing their ideas. If the project is important, then more alternatives should be generated and thoroughly discussed amongst the members of the organization.

IV. Evaluating alternative courses:- The next step is to weigh the pros and cons of each alternative. Each course will have many variables which have to be weighed against each other. The positive and negative aspects of each proposal need to be evaluated in the light of the objective to be achieved. In financial plans, for example, the risk-return trade-off is very common. The more risky the investment, the higher the returns it is likely to give.

V. Selecting an alternative:- This is the real point of decision making. The best plan has to be adopted and implemented. The ideal plan of course, would be the most feasible, profitable and with least negative consequences. Most plans may not always be subjected to a mathematical analysis. In such cases, subjectivity and the manager’s experience, judgement and at times, intuition play an important part in selecting the most viable alternative.

VI. Implementing the plan:- This is the step where other managerial functions also come into the picture. The step is concerned with putting the plan into action, I.e., doing what is required. For example, if there is a plan to increase production than more labour, more machinery will be required. This step would also involve organizing for labour and purchase of machinery.

VII. Follow-up action :- To see whether plans are being implemented and activities are performed according to schedule is also part of the planning process. Monitoring the plans is equally important to ensure that objectives are achieved.

TYPES OF PLANS

1. Single-use and standing plans – An organization has to prepare a plan before making any decision related to business operation, or undertaking any project. Plans can be classified into several types depending on the use and the length of the planning period. Certain plans have a short-term horizon and help to achieve operational goals. These plans can be classified into single-use plans and standing plans.
2. Single use plan – A single use plan is developed for a one-time event or project. Such a cource of action is not likely to by repeated in future, i.e., they are for non-recurring situation. The duration of this plan may depend upon the type of the project. It may span a week or a month. A project may something be of only one day, such as, organizing an event or a seminar or conference. These plans include budgets, programmes and projects.
3. Standing plan – A standing plan is used for activities that occur regularly over a period of time. It is designed to ensure that internal operations of an organization run smoothly. Such a plan greatly enhances efficiency in routine decision-making. It is usually developed once but is modified from time to time to meet business needs as required. Standing plans include policies, procedures, methods and rules.

Step of planning

1. Objectives – The first step in planning is setting objectives. Objectives, therefore, can be said to be the desired future position that the management would like to reach. Objectives are very basic to the organization and they are defined as ends which the management seeks to achieve by its operations. Therefore, an objective simply stated is what you would like to achieve, i.e., the end result of activities. For example, an organisation may have an objective of increasing sales by 10% or earning a reasonable rate of return on investment, earn a 20% profit from business. They represent the end point of planning.
2. Strategy – A strategy provides the broad outline of an organization’s business. It will also refer to future decisions defining the organizations direction and scope in the long run. Thus, we can say a strategy is a comprehensive plan for accomplishing an organization objectives. This comprehensive plan will include three dimension (i) Determining long term objectives, (ii) Adopting a particular course of action (iii) Allocating resources necessary to achieve the objective. Whenever a strategy is formulated, the business environment needs to be taken into consideration. The changes in the economic, political, social, legal and technological environment will affect an organization’s strategy.
3. Policy – Policies are general statements that guide thinking or channelize energies towards a particular direction. Policies provide a basis for interpreting strategy which is usually stated in general terms. They are guides to managerial action and decisions in the implementation of strategy. For example – the company may have a recruitment policy, pricing policy within which objective are set and decision are made. If there is an established policy, it becomes easier to resolve problems or issues. As such, a policy is the general response to a particular problem or situations.
4. Procedure – Procedures are routine steps on how to carry out activities. They detail the exact manner in which any work is to be performed. They ate specified in a chronological order. For example, there may be procedure are specified steps to be followed in particular circumstance. They are generally to meant for insiders to follow. The sequence of steps or actions to be taken are generally to enforce a policy and to attain pre-determined objectives. Policies and procedures are interlinked with each other. Procedures are steps to be carried out within a broad policy framework.