CHAPTER 4 :PLANNING(basic managerial function)

Concept: planning is deciding in

advance what to do and how to
do. It is closely connected with
innovation and creativity of
managers. It seeks to bridge the
gap between where we are and
where we want to be. Planning is
concerned with both ends and
means i.e., what is to be done and
how it is to be done.
Features of planning;
1Planning focuses on achieving
objectives:
Every organization set up with
general purpose.
Specific goals are set out in the
plans along with the activities
to be taken to achieve the goals
Planning has no meaning unless
it contributes to the
achievement of predetermined
organizational goals. Thus
planning is purposeful.
2 Planning is a Primary functionof
Management:
planning is the base for other
managerial functions.
All other managerial functions
are performed within the
framework of the plan drawn.
 planning precedes other
functions. This is also referred
to as the primacy of planning.
3. Planning is Pervasive:
Planning is required at all the
levels as well as in all the
 departments of the
organization.
It is not an exclusive function of
top management nor of any
particular department.
 But the scope of planning
differs at different levels and
among different departments
4.Planning is Continuous:
Plans are formed for a specific
period.
 At the end of period there is
needed to draw plan on the
basis of new requirements.
Continuity of planning is
related with planning cycle.
It means that a plan is framed,
it is implemented, and
followed by another plan, and
so on.
5. Planning is Futuristic:
The purpose of planning is to
prepare for future.
 It implies peeping into future,
analyzingit, predicting it and
plans are drawn accordingly.
Through forecasting, future
events and conditions are
anticipated and plans are
drawn accordingly.
 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 involves choice from
among various alternatives and
activities
If there is one possible course
of action there is no planning as
there is no choice.
But planning presupposes the
existence of alternatives.
Planning, thus, involves
thorough examination and
evaluation of each alternative
and choosing the best one
7. Planning is mental exercise:
Planning requires foresight,
intelligent imagination and
sound judgment.
Planning requires logical and
systematic thinking rather than
guess work.
It is based on analysis of facts
and forecasts.
CASE BASED QUESTIONS
Planning process or how do we
go about making plans? ( S DIES
IF )
1Setting objectives:
Every organization must have
certain objectives. For example
increase in sales by 20%
These objectives specify what
the organization wants to
achieve.
It gives direction to whole
organization.
 If the end results are clear it
becomes easier to work
towards the goal.
2. Developing premises:
Future is uncertain so every
manager has make
assumptions regarding future.
These assumptions are called
premises.
 Assumptions are the base
material upon which future
plans are to be drawn.
 The base material may be in
the form of forecasts, existing
plans or any past information
about policies
3. Identifying alternative course
of action:
Now next step is to take action.
There are many way to act and
achieve objectives.
All the alternative course of
actions is to be identified.
It may be of routine nature or
innovative.
4. Evaluating alternative courses:
Now the next step is to weigh
the pros and cons of each
alternative in light of objectives
to be achieved.
Each course will have many
variables which have to be
weighed against each other.
 Alternatives are evaluated in
the light of their feasibility and
consequences
 For example in financial plans
the calculation ofearnings per
 share, interest, taxes are made
and decision taken.
5. Selecting an alternative:
This is 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
The manager will have to apply
permutation and combination
 to select the best alternative. In
some cases manager’s
experience, judgment and
intuition plays an important
part in selecting the best
alternative.
6. Implementing the plan:
This is the step where other
managerial functions also come
into the picture.
This step is concerned with
putting the plan into action.
For example, if there is a plan
to increase production then
more labour, more machinery
will be required. This step
would also involve organising
for labour and purchase of
machinery
7. Follow up action:
To see whether activities are
performed according to
schedule monitoring of plan is
done.
 Followup action is important
to ensure achievement of
goals of organization.

Importance of planning ( DR.

SODI )
1Planning Provides direction:
By stating in advance how work
is to be done planning provides
direction for action
If goals are well defined,
employees are aware of what
 the organisation has to do and
what they must do to achieve
those goals.
departments and individuals in
the organizations are able to
work in coordination. In
absence of planning there will
be chaos in the organization
2 Planningreduce the
risk of uncertainty:
It enables the manager to
anticipate the changes.
By deciding in advance the
tasks to be performed, planning
shows the way to deal with
changes and uncertain events
 Changes cannot be eliminated
but can be anticipated and
managers can develop the way
to deal with them.
3.Planning establishes
standards for
controlling:
the entire managerial process is
connected with accomplishing
predetermined goals.
Planning provides the
standards against which actual
performance can be measured
and corrective actions can be
taken if there are deviations.
If there were no goals and
standards, then finding
deviations which are a part of
controlling would not be
possible
Planning Reduces
overlapping and
wasteful activities:
by coordinating the efforts of
different department and
individuals planning helps to
avoid confusion and
misunderstanding.
Since planning ensures clarity in
thought and action, work is
carried on smoothly without
interruptions.
As a result useless and
redundant activities are
minimized.
5. Planning Promotes
innovative ideas.
Since planning is the first
function of management, new
ideas can take the shape of
concrete plans
As it is connected with growth
and prosperity of company so
mangers will think of new
 ideas. Thus planning promotes
innovative ideas.
6. Planning Facilitates
decision making:
planning involves setting
objectives and predicting
future conditions and
identify and evaluating
various alternatives and
selecting the viable
alternative.
Limitations of planning
1 Planning leads to rigidity:
In an organisation, 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.
Following a pre-decided
plan, when circumstances
 have changed, may not turn
out to be in the
organisations interest
2 Planning may not work in a
dynamic environment:
The business environment is
dynamic
The organisation has to
continuously adapt itself to
changes.
Planning cannot foresee
everything and thus, there
 may be obstacles to effective
planning.
Just for reading It becomes
difficult 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. Competition in
the market can also upset
financial plans
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 result, middle
management and others are
neither allowed to deviate
from plans nor are they
permitted to act on their
own.
 Thus, much of the initiative
or creativity of workers gets
killed
4. Planning involves huge costs:
There is huge costs involved in
the formulation of plans .
These may be in terms of time
and money for example,
checking accuracy of facts may
involve lot of time. Detailed
plans require scientific
calculations to ascertain facts
and figures.
The costs incurred sometimes
may not justify the benefits
derived from the plans.
There are a number of
incidental costs as well, like
expenses on boardroom
meetings, discussions with
professional experts and
preliminary investigations to
find out the viability of the
plan
5Planning is a time-consuming
process: Sometimes plans to be
drawn up take so much of time
that there is not much time left
for their implementation.
6 Planning does not guarantee
success:
Managers have a tendency
to rely on previously tried
and tested successful plans.
It is not always true that just
because a plan has worked
before it will work again.
 there are so many other
unknown factors to be
considered. This kind of
complacency and false sense
of security may actually lead
to failure instead of success.

TYPES OF PLANS
OBJECTIVES :
they are defined as ends which
the management seeks to
achieve by its operations.
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 are usually set by top
management of the
organisation and focus on
broad, general issues.
 They define the future state of
affairs which the organisation
strives to realise.
They serve as a guide for
overall business planning.
STRATEGY:
A strategy provides the broad
contours of an organisation’s
business.
It will also refer to future
decisions defining the
organisations direction and
scope in the long run.
strategy is a comprehensive
plan for accomplishing an
organisation objectives.
 This comprehensive plan will
include three dimensions,
(i) determining long term
objectives, (ii) adopting a
particular course of action,
(ii) allocating resources
necessary to achieve the
objective.
Major strategic decisions will
include decisions like whether
 the organisation will continue
to be in the same line of
business, or combine new lines
of activity with the existing
business or seek to acquire a
dominant position in the same
market.
 For example, a company’s
marketing strategy has to
address certain questions i.e.,
who are the customers? what is
the demand for the product?
which channel of distribution to
 use? what is the pricing policy?
and how do we advertise the
product.
POLICY
Policies are general
statements that guide thinking
or channelise energies
towards a particular direction.
Policies provide a basis for
interpreting strategy
They are guides to managerial
action and decisions in the
implementation of strategy
it becomes easier to resolve
problems or issues. As such, a
policy is the general response
to a particular problem or
situation.
Policies define the broad
parameters within which a
manager may function.
For example, the decisions
taken under a Purchase Policy
would be in the nature of
manufacturing or buying
decisions. Should a company
 make or buy its requirements
of packages, transport
services, printing of
stationery, water and power
supply and other items? How
should vendors be selected for
procuring supplies? How
many suppliers should a
company make purchases
from? What is the criteria for
choosing suppliers.
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 are specified in a
chronological order
Procedures are steps to be
carried out within a broad
policy framework
METHOD
Methods provide the
prescribed ways or manner in
 which a task has to be
performed considering the
objective.
It deals with a task comprising
one step of a procedure and
specifies how this step is to be
performed.
Selection of proper method
saves time, money and effort
and increases efficiency.
RULE
Rules are specific statements
that inform what is to be done.
  They do not allow for any
flexibility or discretion.
It reflects a managerial decision
that a certain action must or
must not be taken.
They are usually the simplest
type of plans
PROGRAMME
Programmes are detailed
statements about a project which
outlines the objectives, policies,
procedures, rules, tasks, human
and physical resources required
and the budget to implement any
course of action.
BUDGET
A budget is a statement of
expected results expressed in
numerical terms. It is a plan which
quantifies future facts and figures.
budget represents all items in
numbers, it becomes easier to
compare actual figures with
expected figures and take
corrective action subsequently.