•UNIT – III PLANNING

Syllabus:
Nature and purpose of planning – planning process – types of
planning – objectives – setting objectives – policies – Planning
premises – Strategic Management – Planning Tools and Techniques
– Decision making steps and process.
 PLANNING
DEFINITION
• Planning as a process involves the determination of
future course of action, that is why an action, what
action, how to take action, and when to take action.
These are related with different aspects of planning
process.
• Terry has defined planning in terms of future course of
action i.e., “planning is the selection and relating of
facts and making and using of assumptions regarding
the future in the visualisation and formalisation of
proposed activities believed necessary to achieve
desired result.”
MG6851 PRINCIPLES OF MANAGEMENT 2
• McFarland has defined Planning as “a concept of
executive action that embodies the skills of
anticipating, influencing and controlling the nature and
direction of change.”

• In the words of Koontz and O’Donnell, “planning is

deciding in advance what to do, how to do it, when to
do it, and who is to do it. Planning bridges the gap from
where we are to here we want to go.”

• According to Theo Haimann, “planning is the function

that determines in advance what should be done. It
consists of selecting the enterprise objectives polices,
programmes, procedures and other means of achieving
these objectives.”

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NATURE OFPLANNING

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What is Planning – Nature
There are number of ways available to complete a certain job. Planning chooses any one of the
best alternatives out of the available ones. Economy and certainty are considered while
selecting the best alternative.
Thus, the nature of planning is briefly discussed below:
1. Primary of Planning:

The functions of management include planning, organising, staffing, directing and controlling.
Eminent writers may add other new ones to these functions or those which have not been
included in these functions. Anyway, writers unanimously accept that planning is the primary
function of all the other functions. The reason is that the manager wants to achieve the pre-
determined objectives in a better way.
2. Planning Contributes to Objectives:
There is a close connection between objectives and planning. Planning is based on the
objectives. If there is no link between planning and objectives, the former will only be a mental
exercise and of no use. Planning contributes to the attainment of objectives.
3. Planning an Intellectual Activity:
Planning includes the selection of the best alternative available and thinking before selection of
the best alternative. It involves the ability to foresee mishaps in future which might affect the
smooth functioning of an organisation. So, planning is an intellectual activity.
4. Planning Results in Higher Efficiency:

Planning efficiency is measured in terms of input and output ratios. Planning leads
to maximum output with minimum expenditure. This input and output
relationship is not only determined by money, labour hours and production units
but also by the degree of satisfaction available to the individual as well as the
group. The high degree of human satisfaction motivates the workers to produce
more within the specified time.
5. Planning is a Continuous Process:
Planning does not come to an end with the establishment of a business concern.
Planning in other functions is also required. After the establishment of a business
concern, certain decisions are taken. Planning is necessary to implement the
decisions. A number of decisions are taken during the life time of the business
concern. So, planning is necessary throughout the running of the business concern
as a continuous process.
6. Planning is Flexible:
While planning, any one of the available alternatives is selected. Planning selects
the best alternative based on certain assumptions. If the assumptions are proved
wrong, the selected alternative tends to be an incorrect one. There is a possibility
of a dead log in the functions of the management. Planning has one more
alternative to suit future situations.
7. Unity and Consistency:
Every department manager resorts to planning at different times. The planning is
related to the achievement of objectives. In other words, managerial actions of
different managers are unified in order to achieve the objectives. Policies and
procedures of the organisation provide a basis for the consistency of executive
behaviour and action in matters of planning.
8. Planning is Common to All:
Planning work is done by every person who is working in a business unit. He may be
a managing director or a foreman.
Being of a higher place, the planning for a managing director is to frame the policies
and procedures to be adopted. Being at a lower place, planning for a foreman is to
allocate the work to his subordinates. So, planning is common to all.
9. Basis for All Managerial Functions:
Planning is found at all levels of management. Top management looks after strategic
planning. Middle management looks after administrative planning and the lower
level management looks after operational planning. 10. Getting Co-Ordination:
Planning co-ordinates various business activities. Without planning, nothing can be
co-ordinated.
11. Considering Limiting Factors:
Every plan is formulated after considering the limiting factors. The limiting factors
may be money, skilled labour, quality materials, plant and machinery.
 IMPORTANCE OF PLANNING
1. PLANNING PROVIDES DIRECTION. ONCE THE GOALS OF ALL
EMPLOYEES AND DEPARTMENTS ARE SET THEY ARE PROPERLY
GUIDED IN THE REQUIRED DIRECTION.
2. PLANNING REDUCES THE RISK OF UNCERTAINTY. A GOOD PLAN
CANNOT ELIMINATE
• UNCERTAINTIES OF FUTURE. HOWEVER IT CAN REDUCE
UNNECESSARY RISKS.
3. PLANNING REDUCES OVERLAPPING AND WASTEFUL ACTIVITIES.
EVERY PERSON AND DEPARTMENT IS ASSIGNED AN OBJECTIVE
AND DIRECTION WHICH RULES OUT POSSIBLE CONFUSION.
4. PLANNING INVOLVES INNOVATIVE IDEAS. PLANNING IS ALL
ABOUT THINKING IN A
• UNIQUE AND IMPROVED WAY SO IT INVOLVES INNOVATION.
5. PLANNING HELPS IN DECISION MAKING. DECISION MAKING
INVOLVES CHOOSING THE BEST AMONG THE IDENTIFIED OPTIONS.
6. PLANNING SETS STANDARDS FOR CONTROLLING. CONTROLLING
ONLY TRIES TO MEET THE
• OBJECTIVES SET AT THE STAGE OF PLANNING.
 TYPES OF PLANS
• I. MISSION OR PURPOSE –IDENTIFIES THE BASIS FUNCTION OR TASK
OF AN ENTERPRISE OR AGENCY OR ANY PART IF IT.
• II. OBJECTIVES - OBJECTIVES ARE THE ENDS TOWARDS WHICH THE
ACTIVITIES ARE DIRECTED.

• (III) STRATEGY -A STRATEGY IS A COMPREHENSIVE PLAN TO

ACHIEVE THE ORGANISATIONAL OBJECTIVES.

• (IV) POLICIES- POLICIES ARE GENERAL STATEMENTS THAT GUIDE,

THINK OR CHANNELISE ENERGIES TOWARDS A PARTICULAR
DIRECTION

• (V) PROCEDURES -PROCEDURES ARE REQUIRED STEPS

ESTABLISHED IN ADVANCE TO HANDLE FUTURE CONDITIONS. THE
PROCEDURE CAN BE DEFINED AS THE EXACT MANNER IN WHICH
AN ACTIVITY HAS TO BE ACCOMPLISHED.
 TYPES OF PLANS
• (VI) RULE -RULES ARE SPECIFIC STATEMENTS THAT
INFORM WHAT IS TO BE DONE. THEY DO NOT ALLOW FOR
ANY FLEXIBILITY .

• (VII) PROGRAMME - PROGRAMME ARE DETAILED

STATEMENTS ABOUT A PROJECT WHICH OUTLINES THE
OBJECTIVES, POLICIES, PROCEDURES, RULES.
• (VIII) BUDGET- A BUDGET IS A STATEMENT OF EXPECTED
RESULTS EXPRESSED IN NUMERICAL TERMS.
CLASSIFICATION OF PLANS: BASED ON IMPORTANCE, TIME,
LEVEL, FORMALITY AND APPROACH
• 1. BASED ON IMPORTANCE:

• PLANS CAN BE STRATEGIC, TACTICAL, OR OPERATIONAL. STRATEGIC PLANS ARE IMPORTANT,

FUTURE-ORIENTED PLANS THAT FORM THE HUB OF FULFILLING THE VISION. USUALLY, THEY
CONCERN THE ENTIRE ORGANISATION. TACTICAL PLANS ARE REQUIRED TO IMPLEMENT
STRATEGIC PLANS. EXAMPLES, ARE REDESIGNING THE SHOP FLOOR LAYOUT OR CLOSING A FEW
NON-PERFORMING OUTLETS OF A RETAIL CHAIN.

• OPERATIONAL PLANS ARE RELATED TO DAY-TO-DAY FUNCTIONING SUCH AS PRODUCTION,

DELIVERY, OR PURCHASE OPERATION. TAKE FOR INSTANCE, THE PLAN OF PRECISION
CONNECTORS TO DELIVER CONNECTORS TO THE TWO-WHEELER MANUFACTURER, WHICH IS AN
ILLUSTRATION OF OPERATIONAL PLANS.

• 2. BASED ON TIME:

• PLANS CAN BE SHORT, MEDIUM, OR LONG TERM. SHORT TERM USUALLY REFERS TO PLANS OF ONE
YEAR OR LESS; MEDIUM TERM, TO TWO TO FIVE YEARS; AND LONG TERM, TO FIVE TO 10 OR EVEN
20 YEARS. IT DEPENDS ON THE NATURE OF THE PROJECT. SOME PROJECTS SUCH AS BUILDING
THE METRO IN MUMBAI OR BENGALURU MAY HAVE A SHORT-TERM PLAN THAT COVERS 50 KM OF
METRO IN FIVE YEARS; A MEDIUM- TERM PLAN THAT COVERS 200 KM IN 10-12 YEARS, AND A LONG-
TERM PLAN THAT COVERS 300 OR 400 KM OF RAIL THAT IN 20 TO 30 YEARS.
3. Based on Level:
A plan can be called corporate level, business level, or functional level plan. The
Tatas entering the airlines business is an example of corporate-level plan and
Precision Connectors becoming an OEM is an example of a business-level plan.
Functional-level plans are made by departments, for example, a plan on how the
marketing department will achieve its goals.
4. Based on Formality:
A plan can be formal or informal. It is formal when planning is done as per the
defined steps and documented, and informal when the documentation is not
very rigorous.
5. Based on Approach:
A plan can be called proactive when it is meant to meet an anticipated situation.
For instance, a compensation plan based on a three-year salary negotiation is a
proactive plan to ensure industrial peace. If the same compensation plan came
up as a result of a flash strike, it would be a reactive plan. The former leads to
growth and the latter helps to regain balance and to ensure survival
 ADVANTAGES OF
PLANNING
• 1. PLANNING FACILITATES MANAGEMENT BY OBJECTIVES.
• 2. PLANNING HELPS IN FOCUSING THE ATTENTION OF EMPLOYEES ON THE OBJECTIVES OR GOALS OF
ENTERPRISE.
• 3. WITHOUT PLANNING AN ORGANIZATION HAS NO GUIDE.
• 4. PLANNING COMPELS MANAGER TO PREPARE A BLUE-PRINT OF THE COURSES OF ACTION TO BE
FOLLOWED FOR ACCOMPLISHMENT OF OBJECTIVES
• 5. PLANNING MINIMIZES UNCERTAINTIES.
• 6. PLANNING FACILITATES CO-ORDINATION.
• 7. PLANNING IMPROVES EMPLOYEE’S MORAL.
• 8. PLANNING HELPS IN ACHIEVING ECONOMIES.
• 9. PLANNING FACILITATES CONTROLLING.
• 10. PLANNING PROVIDES COMPETITIVE EDGE.
• 11. PLANNING ENCOURAGES INNOVATIONS.
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 PROCESS OF PLANNING (OR) STEPS IN PLANNING
• BEING AWARE OF OPPORTUNITY: AN AWARENESS OF OPPORTUNITY IN THE EXTERNAL ENVIRONMENT AS
WELL AS WITHIN THE ORGANISATION IS THE REAL STARTING POINT OF PLANNING.
• [Link] OBJECTIVE: THE FIRST STEP IN PLANNING IS SETTING OBJECTIVE AS THEY SPECIFY WHAT THE
ORGANIZATION WANTS TO ACHIEVE.

• 2. DEVELOPING PREMISES: ASSUMPTIONS MADE FOR FUTURE ARE CALLED PREMISES. PREMISES MUST BE
SAME FOR ALL I.E. THEY SHOULD BE USING THE SAME ASSUMPTIONS. TWO TYPES OF PREMISES-INTERNAL
AND EXTERNAL

• 3. IDENTIFYING ALTERNATIVE COURSE OF ACTION: ONCE THE OBJECTIVE ARE SET, ASSUMPTIONS ARE
MADE THE NEXT STEP IS TO FIND OUT ALTERNATIVE COURSES OF ACTION
• .
• 4. EVALUATING ALTERNATIVE COURSES: THE POSITIVE AND NEGATIVE ASPECTS OF EACH PROPOSAL ARE
EVALUATED IN THE LIGHT OF OBJECTIVE.

• 5. SETTING AN ALTERNATIVE: THE IDEAL PLAN WOULD BE THE MOST FEASIBLE, PROFITABLE AND WITH
LEAST NEGATIVE CONSEQUENCES.

• 6. IMPLEMENT THE PLAN: REQUIRED RESOURCES ARE ACQUIRED TO PUT THE PLAN INTO ACTION.

• 7. FOLLOW UP ACTION: PLANS ARE MONITORED TO ENSURE THAT OBJECTIVE IS ACHIEVED

 LIMITATIONS OF
PLANNING
(A) INTERNAL LIMITATIONS

1. PLANNING LEADS TO RIGIDITY.

2. PLANNING MAY NOT WORK IN A DYNAMIC ENVIRONMENT.

3. PLANNING REDUCES CREATIVITY

4. PLANNING IS A TIME-CONSUMING PROCESS.

5. PLANNING DOES NOT GUARANTEE SUCCESS.

6. FALSE SENSE OF SECURITY

• B) EXTERNAL LIMITATIONS :-THEY ARE THOSE LIMITATIONS OF PLANNING WHICH ARISES DUE TO
EXTERNAL FACTORS OVER WHICH AN ORGANIZATION HAS NO CONTROL.

• 1. CHANGES IN GOVERNMENT POLICIES WAY LEADS TO FAILURE OF PLANNING.

• 2. NATURAL CALAMITIES SUCH AS FLOOD, EARTHQUAKE ETC. ALSO ADVERSELY AFFECT THE SUCCESS OF
PLANNING.

• 3. CHANGES IN THE STRATEGIES OF COMPETITORS ALSO LEADS TO FAILURE OF PLANNING MANY TIMES

• 4. REGULAR TECHNOLOGICAL CHANGES MAY AFFECT PLANNING.

• 5. CHANGES IN THE ECONOMIC AND SOCIAL CONDITIONS ALSO REDUCES THE EFFECTIVENESS OF
PLANNING