PLANNING

Planning is the basic function of management. It is a continuous process. It involves the

determination of future course of action, and laying down the sequence of actions to accomplish
the objectives. It is the preparation of a blue print. Planning is a bridge between the present and
the future; it has been called the primary management function.

According to H. Koontz and O. Donnel "planning is an intellectual process, the conscious

determination of the course of action and taking of decisions on purpose, knowledge and
considered estimates".

According to Allen, "Management planning involves the development of forecast, objectives,

policies, programmes, procedures, schedules and budgets".

In the words of Haimann, "Planning is deciding in advance what is to be done."

Planning is concerned with thinking before doing and deciding in advance what is to be done,
how is to be done, when is it be done and who is to do it.

Features of Planning

1. It is done on the basis of objectives 2. Planning is pervasive

4. It involves selection of best course of
3. It is futuristic
action
5. It is the primary function of
6. It should be flexible
management
7. Planning is a mental activity 8. It should be participative
9. It is a continuous process 10. It is to be directed towards efficiency
11. It is dynamic 12. Planning is forward looking

Planning Process

1.Determination of objectives: Planning is not possible without definite objectives. It is the first
step in planning process. Objectives are the goals, which an enterprise would like to achieve.
After determining organisational objectives, objectives of departments, sub-departments and
other sections should be determined. The objectives help the employees to understand what is
expected from them.

2. Construction of planning premises: Planning premises are the assumption about future. That
is the expected environmental and internal conditions. So, planning premises involves:

(a) External premises – political. Social, technological, competition plans and actions, govt.
policies, etc and
(b) Internal premises – sales forecast, the existing policies and programmes of the organisation,
capital investment policies and philosophy of management.

3. Collection, classification and processing of information: The information required for

planning process should be collected, classified and analysed.

4. Identification of alternative course of action: The next step in planning is to find out the
various courses of action that are available for the accomplishment of objectives. The number of
alternatives should be reduced to minimum and only viable alternatives are considered for final
selection.

5. Evaluation of alternatives: After selecting the viable alternatives, the next step is to evaluate
these alternatives in the light of its resources and constraints.

6. Selecting the best course of action: After the evaluation of various alternatives, the fit one is
selected. Sophisticated technique of planning and decision-making should be applied to choose
the best alternative course of action.

7. Preparation of subsidiary plans: After preparing the basic plan, the supporting plans are to
be prepared, e.g.: plan for buying equipments.

8. Implementation and follow up: The plan is to be implemented and results are evaluated. For
this purpose, a sequence of action is to be determined. It includes formulation of policies,
procedures, schedules, methods and budgets etc.

9. Assessment of strength and weakness: The strength and weakness of the plan should be
assessed. Corrective action should be taken to rectify it.

Business Objectives

The process of management begins with setting organizational objectives. They are the end
points or goals or predetermined results towards which all business activities are directed.
Objectives may be defined as the end results, which an organisation tries to achieve.

Features of business objectives

1. It is multiple in nature.
2. Objectives have hierarchy.
3. Objectives form a network.
4. Objectives may be tangible or not
5. Objectives have priority
6. Objectives are verifiable
7. Chance to clash between
Merits of Objectives

1. Clear definition of objectives encourages unified planning. Departmental objectives are

prepared on the basis of overall objectives of the organization. So it will contribute a
unified planning.
2. Objectives form the basis of decentralization of authority at different levels of
management.
3. It facilitates the co-ordination of works, efforts and resources of the organization.
4. They motivate the individuals. Objectives specify the purpose of each job and fit the
individual purposes or goals into the overall company goal. By making the job
meaningful and worthwhile, it motivates the individuals in the organization.
5. It provides the basic standards for control by way of establishing the objectives
specifically. It specifies the expected result.
6. It indicates the contribution to be made by each unit.
7. Objectives eliminate haphazard action.
8. They facilitate better management of the enterprise by providing a basis for leading,
guiding, directing and controlling the activities of people of various departments.

Types of plan

• Policies
It is one of the important components of planning. It is basically a statement, either expressed or
implied of those principles and rules that are set up by exclusive leadership as guides and
constraints for the organization thought and action. Policymaking is an important part of
managerial planning.
• Procedures
Procedures are operational guides to action. So, a procedure tells how a work is to be done.
These are plan-specifying ways to perform various tasks to achieve the objectives. Procedures
are guide to action. An established procedure ensures uniformity of action. It indicates the
standard way of doing the work.
• Rules
A rule is a specific action to be taken or not to be taken with respect to a situation. Rules are
definite and rigid. There is no deviation from the stated action, except in few rare cases. They are
the standing plans. It presents in advance what is to be done or not to be done in specific
situation. A rule may be a part of procedure. The rule does not allow any discretion.
• Strategies

The term strategy is derived from military where it is taken to mean the process of planning the
movements of troops so as to outplay the enemy in the battlefield. In business it means plans
made in the light of plan of competitors.
• Programmes
Programme is a sequence of activities to be undertaken for implementing the policies and
achieving the objectives of an organisation. It is a single use plan; ordinarily it is laid down for
new and non-repetitive activities. It tells what is to be done to achieve the goal. Programmes are
framed in the light of resources available, making best use of them.
• Budgets
A budget is a statement of expected results expressed in quantitative terms for a definite period
of time. It is prepared keeping in view of the objectives, policies and resources of the enterprise.
Budget serve as a useful control device by laying down predetermined standards with which
actual performance can be evaluated.
ON THE BASIS OF USE

1. Standing plan: Standing plans are the plans which are followed in each, time a particular
situation is encountered. These plans are meant for repeated use. It is mainly used to meet
recurring situations. They are ready guides to action and are of use for a long period of time.

2. Single use plan: These are the plans which are not followed once the goal is achieved. This
plan has a single use. It is used to solve a particular problem.

ON THE BASIS OF THEIR ORIGIN

Plans may be imposed origin and appealed origin. Imposed plans are formulated at the top level
and it is imposed to lower level. Appealed plan originates from the lower level. It seeks guidance
from the superiors to meet some exceptional situations.

Along with this type plans there may be short term and long-term plans. It depends upon the time
duration which is provided to achieve the objectives of the organization.

Importance of Planning

1. Focuses attention on organisation objectives: Formulation of objectives is the first step in

planning. The course of action can be decided on the basis of objectives. Planning keeps
everyone informed of the objectives. Every person can tune his activity on the basis of
objectives. So there is a harmony in the activities of the people in the organisation to achieve
over all objectives.

2. To offset uncertainty: Planning helps management to foresee various uncertainties due to

changes in technology, taste and fashions, and other environmental conditions. Sufficient
provision can be made in plans to meet these uncertainties.

3. Helps in co-ordination: Well considered overall plans unify interdepartmental activities to

achieve overall objectives. The various departments work in accordance with the overall plan,
and harmony is achieved.

4. Facilitates control: Control cannot be exercised without planning. Through planning

management decides the standard of performance. With the help of these standards, comparisons
can be made with the actual. If there is a difference. proper steps can be taken to correct it. It
constitutes control.

5. Planning brings economy into operation: Planning helps to anticipate the manpower
requirements, raw materials etc. Therefore, they can be obtained at the most favourable terms.
Resources can be properly allocated. So, wastages can be avoided. All these lead to economy in
operation.

6. Enhances efficiency: Planning determines the various activities to be undertaken by various

departments. This enhances the efficiency of various departments.

7. Helps motivation: The targets are already decided and it is communicated to workers. The
managers can encourage them to attain targets.

Limitations of Planning

1. Expensive: Planning is a time consuming and expensive process. Small and medium
enterprises find it difficult to make comprehensive plans. A lot of money is to be spent for
collection, analysis, and editing of data. Specialised staffs are necessary.

2. Lack of reliable data: It is difficult to procure reliable data. Absence of accurate data will
upset the plan.

3. Time consuming: It will take a lot of time to define objective, for collecting. analysing and
editing data. A number of steps are required to complete planning process. So a lot of time may
be taken.

4. Restricts initiation: Everyone is required to work as per plan. There is no room for the
application of a workers own initiative. He has to act in a mechanical way.

5. It encourages a false sense of security: Every manager thinks that he has to work according
to plan.

6. Technological changes: The rate and nature of technology changes present difficulties in
planning. The plans are prepared under the existing technology. When there is a change in
technology. It has to face numerous problems. It results higher cost of production.

7. External factors: Planning is based on future assumptions. There is the chance of changes in
assumption in future. E.g.: changes in demand, technology, Govt policy etc. The management
does not have any control over these factors. These factors will affect planning process.

8 Limitations of forecasting: We know that future is uncertain. Planning depends on forecasting

of future. So the success of planning depends upon the management's ability to forecast future
situations. If forecast is a failure, plans will also be a failure.
Barriers to Effective Planning

1. Difficulty of accurate premising: - Planning exercise is undertaken under certain

assumptions of future events which are determined by a large number of factors in the
environment. One of the limiting factors in planning is the difficulty of formulating the correct
planning premises.

2. Lack of appropriate planning climate: Lack of an appropriate 'planning climate within the
organisation as a whole is one of the barriers of planning. There may be lack of top management
support.

3.Internal Inflexibility: At the time of planning the objectives of the organisation, its policies,
procedures, rules, programmes, etc. are determined. It is very difficult to bring changes in time
and again. It is known as internal inflexibility.

4. External Inflexibility: External inflexibility means various external factors that cause limited
flexibility in planning. Planning is affected by certain factors which are not within the control of
the planners. These factors are political, social, economical and technological. Political situations
at the national and international level put a limitation to planning.

5. Uncertainty: Due to the complexity and changes, planners and managers do not have
complete information about all factors influencing the decision.

6.Inability to plan or inadequate planning. Managers are not born with the ability to plan.
Some managers are not successful planners because they lack the background, education, and/ or
ability. Others may have never been taught how to plan. When these two types of managers take
the time to plan, they may not know how to conduct planning as a process.

7.Substandard information: Facts that are out of date, of poor quality, or of Insufficient
quantity can be major barriers to planning. No matter how well managers plan, if they are basing
their planning on inferior information, their plans will probably fail.

8. Procedural inflexibility: Procedural inflexibility (which can weaken the effectiveness of

planning) and continued pressure on line managers to act quickly, so that there is no sufficient
time to prepare effective plans, may create severe problems for those who have to forecast and
act accordingly.

9. Lack of knowledge in forecasting techniques: The very process of forecasting (essential for
planning) is complicated and inexact. Various forecasting and planning techniques now in use
require sound knowledge of mathematics and operations research for managers. Therefore, lack
of ability in this area or lack of training in quantitative methods to planning creates insuperable
difficulties.
10. Technical Problems: Technical problems which occur frequently are a major source of
difficulty for the managerial planner. If the manager is deficient in organizing ability, he will be
unable to understand or solve some of the technical organisational problems which accompany
planning. If the manager lacks training in the effective utilization of time, he cannot solve the
technical demands of arranging time in order to cope with the burdens of planning.

11. Psychological Difficulties: These difficulties mainly arise from lack of confidence among
planners. If there is a fear of the future then there may be a preference for day-to-day activities
without considering the future.

A manager's attitude may be such that he prefers playing safe or he avoids risk-taking which is
inherent in most planning activity. He may be over-confident as to the present, or over-
pessimistic as to the future. His approach may be completely non-rational in relation to the
essence of planning.

12. Constraints: Another major obstacle to planning arises due to constraints that limit what an
organisation can do. For example, an organisation may have heavy investment in plant and
equipment. So, it cannot acquire new equipment. Labour contracts can also be major constraints.
Other possible constraints include governmental regulations, a shortage of managerial talent, and
a scarcity of raw materials.

13. Reluctance of managers: Another barrier to effective planning is the reluctance on the part
of some managers to establish goals for themselves and their units of responsibilities. The main
reason for this reluctance is lack of confidence or fear or failure. A manager is reluctant to
disclose his failure. It means that the managers try to avoid this degree of accountability
consciously or unconsciously which will hinder the planning efforts of their organisation.