What is Planning: Meaning and Definitions, Objectives, Features, Types, Model, Advantages, Components and Limitations
- Meaning and Definitions of Planning
- Concept and Nature of Planning
- Characteristics of Planning
- Objectives of Planning
- Steps to Make Plans Effective
- Measures for Making Planning Effective
- Types of Planning
- Principles of Planning
- Categories and Levels of Planning
- Reasons of Planning
- Components of Planning
- Steps Involved in Planning
- Advantages of Planning
- Limitations of Planning
What is Planning – Meaning and Definitions: Provided by Koontz and O’Donnell, Theo Haimann, McFarland, Hart and M.F. Yarlay
Bridging the Gap between Where One is and Where One Wants to Go:
Planning is deciding in advance what to do, how and when to do it and who is to do it. Planning bridges the gap between where we are and where we want to go. It makes it possible for things to happen which would, but for planning, not happen.
Fixing Objectives and Deciding Plans to Achieve them:
Planning as the function that determines in advance what should be done. It begins with selection of organization objectives; the manager must decide which of the alternative plans to achieve the objectives are to be followed and executed. Planning is intellectual in nature. It is mental work. It is looking ahead and preparing for the future.
McFarland describes planning as a concept of executive action that embodies the skills of anticipating, influencing and controlling the nature and direction of change.
A plan is a commitment to particular course of action whereas planning is an activity consisting of a process. In the words of Haiman, “Planning is the function that determines in advance what should be done. It consists of selecting the enterprise objectives, policies, programmes, procedures and other means of achieving these objectives”.
In the words of Hart planning is, “The determination in advance of a line of action by which certain results are to be achieved”, Kuntz and O’Donnell defines planning as – “The selection from among alternatives for future courses of action for the enterprise as a whole and each department with it”. In the words of M.F. Yarlay, “Planning is deciding in advance what is to be done. It involves the selection of objectives, policies, procedures and programmes from among alternatives.”
Planning is a process requiring the selection of a course of action. The ways and means required to achieve organisational goals form the essential part of planning.
What is Planning – Concept and Nature
An organization can be successful in effective utilization of its human financial and material resources only when its management decides in advance its objectives, and methods of achieving them. Without it purposive and coordinated effort is not possible, and what results are chaos, confusion and wastage of resources.
Planning involves determination of objectives of the business, formation of programmes and courses of action for their attainment, development of schedules and timings of action and assignment of responsibilities for their implementation. Planning thus precedes all efforts and action, as it is the plans and programmes that determine the kind of decisions and activities required for the attainment of the desired goals.
It lies at the basis of all other managerial functions including organizing, staffing, directing and controlling. In the absence of planning, it will be impossible to decide what activities are required, how they should be combined into jobs and departments, who will be responsible for what kind of decisions and actions, and how various decisions and activities are to be coordinated.
And, in the absence of organizing involving the above managerial activities, staffing cannot proceed, and directing cannot be exercised. Planning is also an essential prerequisite for the performance of control function, as it provides criteria for evaluating performance. Planning thus precedes all managerial functions.
Nature of Planning:
Planning permits co-ordinated effort towards the attainment of predetermined objectives. It helps the manager to shape the organisation’s future. Thus, the purpose of planning is to provide rationality to the organisation. According to Lyndal Urwlck’s principle of objective, all actions in the organisation must be directed towards the attainment of the enterprise’s objectives, and a wisely-conceived plan facilitates just this.
Planning is a function of every manager. Every manager plans, irrespective of the level at which he operates in the organisation. From the managing director down to the first-line supervisor — all plan in an organisation, although the breadth and scope vary with the level of the hierarchy.
Planning, controlling, organising, staffing and directing all these are managerial functions designed to realise the organisational objectives. Planning, however, precedes all other functions. It is through planning alone that the manager decides what to do, when to do and who will do. Planning and control go together. No doubt, planning and control are like the Siamese twins — one cannot survive without the other. However, one cannot control what is not planned without predictability.
What is Planning – 13 Important Characteristics
The following are the characteristics of planning:
1. Planning is looking into the future.
2. Planning involves pre-determined line of action.
3. Planning discovers the best alternative out of available many alternatives.
4. Planning requires considerable time for implementation.
5. Planning is a continuous process.
6. Planning’s object is to achieve pre-determined objectives in a better way.
7. Planning integrates various activities of organisation.
8. Planning is done for a specific period.
9. Planning not only selects the objectives but also develops policies, programmes and procedures to achieve the objectives.
10. Planning is required at all levels of management.
11. Planning is an inter-dependent process which co-ordinates the various business activities.
12. Planning directs the members of the organisation.
13. Growth and prosperity of any organisation depends upon planning.
What is Planning – 6 Main Objectives
Planning in any organisation serves to realise the following objectives:
1. Reduces uncertainty – Future is an uncertainty. Planning may convert the uncertainty into certainty. This is possible to some extent by, planning which is necessary to reduce uncertainty.
2. Brings co-operation and co-ordination – Planning can bring co-operation and co-ordination among various sections of the organisation. The rivalries and conflicts among departments could be avoided through planning. Besides, planning avoids duplication of work.
3. Economy in operation – Planning selects best alternatives among various available alternatives. This will lead to the best utilisation of resources. The objectives of the organisation are achieved easily.
4. Anticipates unpredictable contingencies – Some events could not be predicted. These events are termed as contingencies. These events may affect the smooth functioning of an enterprise. The planning provides a provision to meet such contingencies and tackle them successfully.
5. Achieving the pre-determined goals – Planning activities are aimed at achieving the objectives of the enterprise. The timely achievements of objectives are possible only through effective planning.
6. Reduce competition – The existence of competition enables the enterprise to get a chance for growth. At the same time, stiff competition should be avoided. It is possible, to reduce competition through planning.
What is Planning – 5 Steps to Make Plans Effective
Step # 1. Create Suitable In-House Systems:
Management should create a system that facilitates planning. All conceivable hurdles to planning should be foreseen, analyzed and action-plans should be prepared in advance. Managers at all levels should be instructed to plan their goals and activities in consultation with their respective subordinates and provided technological and financial resources to accomplish them.
Step # 2. Encourage Wider Participation in Planning:
While long-term planning for the organization should be undertaken by owners and top management, its implementation will be in the hands of middle and lower-level managers. In fact, the most effective way to plan for the organization is to leave it to the middle and lower managers to devise own plans for their areas of activity to translate the organizational plans into reality. It will be still better if they too involve their subordinates in decision-making.
Participation by subordinates may be made possible through various ways, such as (a) Management by objectives, under which goals at each level of activity are established by managers and workers together; (b) Formation of planning committees at various levels, which may be made responsible for providing planning information, inviting suggestions and reaction from subordinate managers in respect of planning and formulation of plans; and (c) Grass-root budgeting, under which every unit within the organization prepares its own performance budget and sends it to its superior for incorporation in the overall budget.
Step # 3. Ensure Effective Communication of Planning Information:
The organization should have an effective network to communicate all the information that is relevant to planning of the goals at every level. This should include specific and clear information regarding organizational policies, strategies, resource availability, and so on.
Step # 4. Integrate Long-Term and Short-Term Plans:
Long-term plans are split into several short-term plans to make for easy implementation. However, they need to be effectively integrated to achieve accomplishment of both.
Step # 5. Make Plans Flexible and Alterable:
Planning must provide for occurrence of unforeseen events, whether inside or outside the organization. Therefore, each plan should be flexible enough to be modified and altered in the light of new developments. To this end, alternative plans and contingency strategies should be formulated in advance.
After identifying the essential features of a sound plan, managers can adopt various measures to make their planning exercise effective.
These measures are as follows:
1. Initiative at Top Level:
Planning can be effective only when it is initiated at top management level. Role of top management in planning is quite unique because overall organizational objectives are set at this level. These objectives provide base for undertaking planning organization-wide. If objectives have been defined properly, other steps of planning become comparatively easier.
2. Establishing Climate for Planning:
Organization should create a climate in which every person takes planning action. Every superior manager should present facilities for planning and remove its obstacles. This can be done by establishing and communicating planning premises, involving all managers in planning process, reviewing subordinates’ plans and their performance, and ensuring that managers have appropriate staff assistance and information.
3. Participation in Planning Process:
No doubt, top management can initiate planning process by providing objectives and planning premises, effective planning can take place by the participation of subordinate managers. Planning is likely to be effective when managers are given opportunities to contribute to plans affecting their areas of operations, sharing relevant information with them, and encouraging them to give their suggestions and incorporating worthwhile suggestions in planning process. Participation in planning by managers leads to their commitment to plan and enthusiasm to implement it.
4. Integration of Long-Term and Short-Term Plans:
To be effective, it is necessary that both long-term and short-term plans are fully integrated in which short-term plans should be taken as means for contributing to long-term plans. If managers emphasize only short-term plans, they cannot set direction for their future course of action. Long-term and short-term plans can best be integrated if the latter is prepared in the light of the former. Similarly, if the long-term plans are prepared keeping in view what the organization can implement by way of its short-term plans, integration between the two can be achieved easily.
5. An Open System Approach:
Planning can be made effective by taking it as an open system approach. It suggests that managers must take into account total environment in every aspect of planning. Objectives, the starting point in planning, should be set taking into account the various environmental forces; planning premises represent a clear recognition that plans cannot be formulated in vacuum; plan formulation is a process involving analysis of large number of variables. This fact should be recognized in the planning process. Therefore, it should not be taken as a simple process, but the process of many interactions and influences.
What is Planning – Types: Corporate, Functional, Strategic, Operational, Long-Term and Short-Term Planning
There are various types of planning (also known as scope of planning).
These are identified on different dimensions which is as follows:
a. Coverage of activities – Corporate planning and functional planning
b. Importance of contents – Strategic planning and operational planning
c. Time period involved – Long-term planning and short-term planning
The above classification of types of planning is not mutually exclusive but iterative. For example, strategic planning tends to have long-term orientation while operational planning has short-term orientation. Further, the basic process of planning remains same in these types of planning though level of complexity of different steps in different types of planning may vary. For example, steps involved in strategic planning are more complex as compared to operational planning.
Let us discuss different types of planning:
Type # 1. Corporate Planning and Functional Planning:
Planning activity is pervasive and can be undertaken at various levels of an organization. It may be for the organization as a whole or for its different functions. Thus, based on the coverage of activities, there may be planning for the organization as a whole, known as corporate planning or for its different functions, known as functional planning.
i. Corporate Planning:
Corporate planning is undertaken at the top level, also known as corporate level, and covers the entire organizational activities. It is of integrative nature and integrates entire planning process of the organization. The basic focus of corporate planning is to determine the long- term objectives of the organization as a whole and to generate plans to achieve these objectives bearing in mind the probable changes in the environment. Corporate planning, generally, has long-term orientation and provides basis for functional planning.
ii. Functional Planning:
Functional planning is of segmental nature and is undertaken for each major function of the organization like production/operations, marketing, finance, human resource, etc. At the second level, functional planning is undertaken for sub-functions within each major function. For example, marketing planning is undertaken at the level of marketing department and to put marketing plan in action, planning at sub-functions of marketing like sales, product promotion, marketing research, etc. is undertaken.
A basic feature of functional planning is that it is derived out of corporate planning and, therefore, it should contribute to the latter. This contribution is achieved by integrating and coordinating functional planning with corporate planning.
On the basis of importance of contents, planning may be divided into:
i. Strategic planning and
ii. Operational planning.
Strategic planning involves setting long-term direction of the organization in which it wants to proceed in future. It is the process of deciding long-term objectives of the organization and defining where the organizational resources and efforts should be put to achieve organizational objectives.
Strategic planning deals with strategic issues like type of business to be undertaken, diversification of business into new lines, type of products to be offered, and so on. This way, strategic planning encompasses all the functional areas of business and is effected within the existing and long-term framework of environmental factors. Strategic planning also involves rigourous analysis of various environmental factors to relate the organization relates to its environment.
Operational planning, also known as tactical planning, is the process of deciding the most effective use of the resources already allocated though strategic planning and to develop a control mechanism to ensure effective implementation of the actions so that organizational objectives are achieved.
Usually operational planning covers one year or so. It aims at sustaining the organization in its production/generation and distribution of current products (goods and services) to the existing markets.
Operational planning answers the questions about a particular action as follows:
a. Why is the action required?
b. What action is to be taken?
c. What will the action accomplish?
d. What are the likely results of the action?
e. What conditions must be met in putting the action in operation?
Operational planning is undertaken within the framework of the strategic planning. Examples of operational planning are adjustment of production within given capacity, increasing the efficiency of operating activities through analysis of past performance, budgeting future costs, specific details of future short-term operations, and so on.
Apart from the period of time involved in strategic planning and operational planning, there are certain differences between the two.
The major differences between the two are as follows:
i. Range of Choice:
Strategic planning guides the choice among the broad directions in which the organization seeks to move and allocation of its financial, physical, and human resources over future specified period of time. Operational planning, on the other hand, focuses on the ways and means in which each of the individual functions may be programmed so that progress may be made towards the attainment of organizational objectives.
ii. Type of Environment:
The type of environment for two types of planning is different. Strategic planning takes into account the external environment and tries to relate the organization with it. The nature of external environment, thus, is of prime concern of strategic planners. Operational planning mostly focuses on internal organizational environment so as to make the effective use of given resources.
Strategic planning focuses on setting long-term trend and direction for managerial actions. Focus of operational planning is on making effective use of organizational resources allocated by strategic planning process.
iv. Sequence of Formulation:
Strategic planning precedes operational planning and the latter is primarily concerned with the implementation of the former. Therefore, operational planning is based on strategic planning.
v. Level of Formulation:
Strategic planning is formulated by top-level management with the support of specified planning staff in the organization. At this level, managers can take overall view of the organization and have necessary capability to relate the organization with its environment. Operational planning is usually spread over a wide range within the organization and is generally performed by operating managers with the help of the subordinate staff.
Planning is concerned with future course of action. This may be of long term or short term. Thus, there are long-term planning and short-term planning.
Long-term planning is of strategic nature and involves more than one year period, usually 3- 5 years though period of 5 years is more common in Indian context. Long-term planning usually covers all the functional areas of the business and is undertaken within the existing and long-term future environmental scenario. In the long-term planning process, high emphasis is placed on analysis of environmental factors.
Sometimes, basic changes in the organization like change in organizational vision and mission, major change in organization structure, change in key personnel of the organization, etc. become the significant factor for long-term planning.
Short-term planning usually covers one year. This aims at making effective use of organizational resources — financial, physical, and human resources. Short-term planning directly and immediately affects functional areas — production, marketing, finance, etc.
Coordination of Short-Term Planning and Long-Term Planning:
In fact, in a successful planning process, short-term plans are made with reference to long-term plans because short- term plans contribute to long-term plans. As such, there is a need for coordination between these two plans. While preparing the short-term plans, the managers should consider that they Eire contributing to the long-term plains.
For this purpose, they should scrutinize the former in the light of the latter. People at comparatively lower levels should also be made aware of this fact. Sometimes, the short-term plans do not contribute to long-term plans, though they may contribute to achieve immediate organizational objectives, for example, cutting cost of research and development to show higher profitability. This type of problem may be overcome by coordination in short-term planning and long-term planning.
What is Planning – 6 Important Principles
Planning is a rational approach. It is usually characterized by choosing appropriate means for desired results.
To make planning effective, it is supported by important principles:
1. Principle of Contribution to Objectives – Managerial planning facilitates the realization of organizational objectives. A plan should be prepared and put into operation to contribute to the achievement of organizational objectives. Plans only seek to achieve pre-determined goals by meshing long-term plans and short-term plans.
2. Principles of Limiting Factors – Managerial planning must take into account the limiting factors and managers must concentrate on them while developing plans and their components. Organizations have limited resources to achieve the objectives and these constraints must be considered by the management.
3. Principle of Flexibility – The principle of flexibility states that management should be able to change an existing plan because of change in environment. Planning should be flexible enough to incorporate unforeseen future events as the organization is an open system and it interacts with the external environment.
When some types of changes take place in the external environment, this forces the organization to change their strategies, when managers take all these into account, they will be in a position to incorporate these in future, they are in a better position to plan and execute their action.
4. Principles of Navigational Change – This principle is based on a Navigator’s example of checking periodically where his ship is going in the vast ocean, whether his ship is following the right direction as scheduled.
Similarly, a manger, like a navigator, should constantly check his plans that these are proceeding in the right way, and if these are proceeding in the right way; what type of actions are required to achieve the desired objectives of the organization. They should change the direction of plans to achieve the pre-determined targets.
5. Principles of Commitment – Principle of commitment helps in determining the length of the planning period. Planning should cover a time frame taking into account the future risk and fulfillment of commitments.
6. Principle of Primary of Planning – Planning is the basic and primary function of management process. Planning precedes all other managerial functions. Every function and activity of an organization basically depends upon planning. It is planning that provides the area of implementation. Other managerial functions have to follow planning. So managers should devote their attention to make an effective planning premise.
What is Planning – Categories and Levels
Planning can be classified on different bases, which are discussed below:
1. Strategic and Functional Planning:
In strategic or corporate planning, the top management determines the general objectives of the enterprise and the steps necessary to accomplish them in the light of resources currently available and likely to be available in the future. Functional planning, on the other hand, is planning that covers functional areas like production, marketing, finance and purchasing.
2. Long-Range and Short-Range Planning:
Long-range planning sets long-term goals of the enterprise and then proceeds to formulate specific plans for attaining these goals. It involves an attempt to anticipate, analyze and make decisions about basic problems and issues which have significance reaching well beyond the present operating horizon of the enterprise.
Short-range planning, on the other hand, is concerned with the determination of short-term activities to accomplish long-term objectives. Short-range planning relates to a relatively short period and has to be consistent with the long-range plans. Operational plans are generally related to short periods.
3. Ad Hoc and Standing Planning:
Ad hoc planning committees may be constituted for certain specific matters, as for instance, for project planning. But standing plans are designed to be used over and over again. They include organizational structure, standard procedures, standard methods, etc.
4. Administrative and Operational Planning:
Administrative planning is done by the middle level management, which provides the foundation for operative plans. The lower level managers to put the administrative plans into action, on the other hand, do operative planning.
5. Physical Planning:
It is concerned with the physical location and arrangement of building and equipment.
6. Formal and Informal Planning:
Various types of planning discussed above are of formal nature. The management carries them on systematically. They specify in black and white the specific goals and the steps to achieve them. They also facilitate the installation of internal control systems. Informal planning, on the other hand, is mere thinking by some individuals, which may become the basis of formal planning in future.
What is Planning – 7 Reasons Emphasise the Need for Planning: Essential for Modern Business, Related to Performance, Focus on Objectives and a Few Others
Planning is the first step in management. The increasing complexities of business, technological changes, increasing marketing competition, changing consumer preferences have necessitated proper planning.
Following reasons emphasise the need for planning:
1. Essential for Modern Business:
The growing complexities of modern business, rapid technological changes, opening of economies to international competition, changes in consumer tastes necessitate planning not only in the current context but also in the future environment. Planning has a future outlook and it takes into account all possible future developments.
2. Related to Performance:
Planning helps in setting goals for each function and for each employee. The concerns having formal planning have performed better as compared to those where planning is not taken up as a regular activity. The variables for assessing performance may be return on investment, sales target, earning per share etc. Studies have proved that planning has been an instrument in improved performance.
3. Focus on Objectives:
The thrust of formal planning is on setting objectives and providing guidelines for reaching them. Objectives provide a direction and all planning decisions are directed towards achieving them. It ensures maximum utilisation of managerial time and efforts.
4. Proper Allocation of Resources:
The needs of the organisation are anticipated with the help of planning. The acquisition and allocation of resources can be properly planned thus minimising wastages and ensuring optimal utility of these resources.
5. Facilitates Control:
Planning can be used to devise a mechanism of control. There can be quantitative targets and their comparison with actual performance can bring to notice any deviations. A periodical review can also help in pointing out low performance. The deviations in production, sales, profits etc., may come to light during periodic investigations and remedial action can be taken.
6. Helpful in Decision making:
Planning is helpful in the process of decision-making. Since planning helps in specifying the actions to be taken for achieving organisational objectives, it serves as a basis for decision-making for the future. The objectives, plans, policies, schedules, rules etc., serve as guidelines for routine decision making.
7. Avoiding Business Failures:
Business failures may be due to wrong and unscientific planning. A bad planning may result into wastage of human and physical resources. The enterprise may not be able to face competition from well-planned units. Good planning will help in utilising available resources in a best possible way thus reducing the chances of failures.
What is Planning – Components: Objectives, Policies, Procedures, Rules, Budgets, Programmes and Strategies
The ingredients of planning are as follows:
The activity in the organisation is directed to its objectives. Corporate objectives are framed for the organisation as a whole. In consonance with these objectives, departmental objectives are framed.
Objectives determine the ‘what-to-do’ aspect for the persons in the organisation, while policies tell ‘how-to-do’ aspect. Policy statements present broad guidelines for the executives. We should purchase our raw materials from the local dealers only. This is policy statement of the purchase department.
All promotions should be from within the organisation. All bills must be collected within 30 days. These are examples of policy statements. They prove to be solutions for recurring problems. We should make clear our policies to our employees and the logic behind our policies. Then the employees will enthusiastically carry-out the policies.
Policy statements are broad guidelines. While implementing them a detailed step-by-step routine is necessary. It is called procedure. Procedure the mechanical part of policy implementation. We should collect our bills within 30 days is a policy statement. Now it is for those who execute this policy to set a procedure for its implementation. Who shall write to the debtor? How? How many times? What is the final action?
Who shall approach him personally for collection? These are the procedural aspects. Procedures are different for different levels in the organisation. They also charge from department-to-department, and from policy- to-policy. Procedure can exist without planning, but planning cannot exist without procedure.
Rules is the ultimate analysis of a plan. It is the simplest possible version of the plan as it directs a particular activity in a particular way, and prevents us doing a particular activity in a particular way. Procedure and rules are different in the sense that procedure is a routinized step-by-step arrangement, whereas rule has no order. ‘Do not smoke in factory premises’ is a rule, but ‘how to requisition goods from the stores’ is a procedure.
Budget is also a plan where estimated results are shown in terms of money. Budget is a very important tool for planning in many organisations, though it is also a tool of control budget fails as a control device if there is no plan to compare the actuals against the estimated figures. Budget is a device for cost control also.
Programme is the composite of many small plans, where each plan contributes to the objective of the overall plan called programme. Sales campaign with the objective of increasing sales by 25% is a programme.
It is made up of several small plans — promotion through advertising, promotion through salesmen, promotion through dealers, promotion through direct mailing. Each small plan contributes to overall objective of the programme, till it climaxes into the desired level of sales increase.
Strategy means tactical planning in competitive environment. We should plan not in isolation, but in keeping with the forces of external environment — our suppliers, our customers, government and competitors. There is inherent resistance to change, and so strategical plans are also plans that invite least resistance of our employees.
The plan should have lesser obstacles from competitors also, and so a strategic approach towards planning is necessary. Even the process of selecting one out of several alternatives available is a strategic process.
What is Planning – Steps Involved in Planning
1. Gathering Information:
The first step in planning is the gathering of information, i.e., relevant facts and figures. In fact, before objectives are formulated and ways and means to achieve them are developed, it is important for the manager to have relevant information.
Thus, a company constantly asks itself questions like:
i. Who are our customers?
iii. Under what circumstances does a customer become a non-customer?
iv. What are the functions and values of our product to our customers?
v. What is our main strength?
vi. Are we making the product or selling it?
Answers to such questions provide vital information based on which the company sets itself realistic objectives and seeks the most promising courses of action to achieve them. McGraw-Hill which is in the publishing business, for instance, may decide to publish fiction. But before it can plan its activities, it would need specific information such as the reading habit, the buying capacity, the level of education, etc. of its customers. Only then can realistic plans be drawn.
2. Identifying and Studying Vital Factors Affecting the Company’s Growth and Efficiency:
Just as the most scientifically-prepared manpower inventory is of little use to a company unless manpower audit is carried out to project the trend, a company having information may not be able to plan its future activities unless it identifies and makes a careful study of the factors which may limit a company’s growth and efficiency.
In fact, an organisation which behaves in scientific planning does involve itself in such an exercise. It constantly seeks to find out its strengths and weaknesses, where the opportunities exist and what could be regarded as potential threats to the company’s survival and growth.
3. Laying Down Plan Objectives:
Objective-formulation is the third logical step in the planning process. Objectives specify the end results which a plan seeks to achieve and determine as to what is to be achieved by the complex of policies, rules, programmes and procedures. Objectives should be formulated at every level. From the corporate objectives emerge the unit-level objectives.
4. Determining and Evaluation of Action Patterns:
The next step in planning obviously is to find out the various courses of action that are available for the accomplishment of the plan objectives.
Of course, several alternatives may be available to realise the plan but what is important is to narrow down the number of alternatives available and then to select the most promising courses of action. Herein lies the task of evaluating the courses of action against the plan objectives and the planning assumptions before the final choice is made.
5. Selection of a Course of Action:
The fifth step in planning is to select the best course of action. The evaluation of various courses of action would reveal that of the different alternatives available, one or two prove to be the most suitable for the accomplishment of the plan objectives.
6. Setting up of a Timetable:
Setting up of a timetable is as important as any other step in planning. Though not often mentioned in the textbooks on management, its importance need hardly be emphasised. Today, constantly an enterprise operates in an environment which is highly dynamic and changing.
Thus, when the future is uncertain, it is important to determine in advance the plan period. No plan period should be longer than what is economically desirable. On the other hand, the plan period should not be too short. Hence, the manager must ensure that the plan period is long enough to enforce, through a series of actions, the fulfilment of commitments involved in a decision.
As elusive as this may be, this perhaps is the only realistic standard available. The plan period thus must take into account certain factors such as- (i) lead time, (ii) length of time required to recover the capital funds invested in plant and equipment and in training personnel, (iii) expected future availability of customers, and (iv) expected future availability of raw materials and components.
What is Planning – 10 Main Advantages of Planning to an Organisation
Planning is one of the crucial functions of management. It is basic to all other functions of management. There will not be proper organisation and direction without proper planning. It states the goals and means of achieving them.
Above all other things, planning is important for the following reasons:
1. Facing Complexities of Modern Business:
The business is becoming more and more complex. There is a globalisation of business, competition is increasing, and constant need for creativity and many more issues crop up in day to day working. There is a constant need to plan the things to face complex situations. Planning helps as a tool in anticipating emerging business situations and suggesting ways to take advantage from it. Planning helps a businessman to face emerging situations in a systematic way.
2. Forewarn against Business Failures:
Business failures may be due to wrong and unscientific planning. A bad planning may cause wastage of resources and loss of opportunities. The business may fail to face competition from efficiently run units. The indications of future failures will be visible from the current situation. Better planning and proper implementation will be able to save the business from failures.
3. Attention on Objectives:
Planning helps in clearly laying down objectives of the organisation. The whole attention of management is given towards the achievement of those objectives. There can be priorities in objectives, important objectives to be taken up first and others to be followed after them.
4. Minimising Uncertainties:
Planning is always done for the future. Nobody can predict accurately what is going to happen. Business environments are always changing. Planning is an effort to foresee the future and plan the things in a best possible way. Planning certainly minimises future uncertainties by basing its decisions on past experiences and present situations.
5. Better Utilisation of Resources:
Another advantage of planning is the better utilisation of resources of the business. All the resources are first identified and then operations are planned. All resources are put to best possible uses.
6. Economy in Operations:
The objectives are determined first and then best possible course of action is selected for achieving these objectives. The operations selected being better among possible alternatives, there is an economy in operations. The method of trial and error is avoided and resources are not wasted in making choices. The economy is possible in all departments whether production, sales, purchases, finances, etc.
7. Better Co-Ordination:
The objectives of the organisation being common, all efforts are made to achieve these objectives by a concerted effort of all. The duplication in efforts is avoided. Planning will lead to better co-ordination in the organisation which will ultimately lead to better results.
8. Encourages Innovations and Creativity:
A better planning system should encourage managers to devise new ways of doing the things. It helps innovative and creative thinking among managers because they will think of many new things while planning. It is a process which will provide awareness for individual participation and will encourage an atmosphere of frankness which will help in achieving better results.
9. Management by Exception Possible:
Management by exception means that management should not be involved in each and every activity. If the things are going well then there should be nothing to worry and management should intervene only when things are not going as per planning.
Planning fixes objectives of the organisation and all efforts should be made to achieve these objectives. Management should interfere only when things are not going well. By the introduction of management by exception, managers are given more time for planning the activities rather than wasting their time in directing day-to-day work.
10. Facilitates Control:
Planning and control are inseparable. Planning helps in setting objectives and laying down performance standards. This will enable the management to check performance of subordinates. The deviations in performance can be rectified at the earliest by taking remedial measures.
What is Planning – 5 Limitations: Lack of Accurate Information, Resistance to Change, Inflexibility, Inadequate Planning and Time and Cost Factors
Planning has some limitations, though most of the limitations are related with the uncertainties of the future. The reasons why people fail in it, planning emphasize the practical difficulties encountered in planning.
Efficient planning is not an easy task. Managers encounter various barriers in making and implementing plans despite the primacy of management process. Managers should develop awareness of these limitations.
The major limitations are described below:
1. Lack of Accurate Information:
Planning involves forecasting and future is quite uncertain and complex and loses its value if information is not accurate. Planning concerns future activity and quality of information determines the basic output of planning. Sometimes, managers do not know how to use the information efficiently; in that case planning may pose problems in operations.
2. Resistance to Change:
Resistance to change is another factor which puts limits on planning. Most people resist change due to fear of failure and uncertainty. However, planning changes the attitude of people to make planning more effective. Planning gives a false sense of security to the people in the organization.
Planning gives the spectrum of every activities and generally planning results in rigidity in the internal working of the organization. Managers are required to follow the procedures rigidly. Internal inflexibilities that may limit planning are related to human psychology, organizational policies and procedures, and long-term capital investment.
Beside this, managers are confronted with much external inflexibility, and they do not have control over men. These factors are social, legal, technological, etc. The managers have to formulate their plans keeping in view the demand of these factors. Thus, their scope of action is limited for planning effectively in many cases.
4. Inadequate Planning:
There are many reasons why people fail in planning, both at the formulation level as well as implementation level. Some of the drawbacks are lack of commitment to planning, ambiguous objective, tendency to overlook planning premises, reliance on past happenings, lack of management support, lack of controlling techniques and resistance to change, etc. These factors are responsible for either inadequate planning or wrong planning in the concerned organizations.
5. Time and Cost Factors:
Time and cost factors are considered as real limitations to planning. Managers should also take into account both time and cost factors. Planning suffers because of time and cost factors. Time is a limiting factor for every manager in the organization, because enough time may not be available to go through the entire planning process.
The Planning involves cost on the part of the organization. Costs increase in planning if it becomes more detailed. Thus, planning cannot be undertaken beyond a certain limit, but it must justify its costs. With regard to cost, it should not be, in any situation, more than the value of planning or benefits derived from it.
Often, the philosophy of management may also impede the process of planning. Once the managers become accustomed to a particular philosophy continued over a long period of time, it tends to impose internal inflexibility limitations to planning.
The various factors analyzed above contribute to the limitations of planning either making planning ineffective or making lesser degree of planned work. However, it should be recognized and accepted that planning is essential, and managers must take steps to make it more effective.