Introduction
Planning is the primary function of management. Planning concentrates on setting and
achieving objectives through optimum use of available resources. Planning is necessary for any organization
for its survival growth and prosperity under competitive and dynamic
environment. Planning is a continuous
process to keep organization as a successful going concern,
In
the words of:
Koontz and O’Donnel – “Planning is deciding in advance, what to
do, how to do it, when to do it, and who is to do it. It bridges the gap from where we are to where
we want to go.”
Allen – “Management planning involves the development of
forecasts, objectives, policies programmes, procedures, schedules and budgets.”
Haynes and Massie - Planning is a decision making process of a
special kind. It is an intellectual
process in which creative thinking and imagination is essential.”
Alfred and Beatty - “Planning is the thinking process, the
organized foresight, the vision based on fact and experience that is required
for intelligent action.
Nature and
Characteristics of Planning
a)
Primacy of planning or primary function:
.Planning is a primary function. That is, it is a primary requisite to the
managerial functions of organizing, staffing directing, motivating,
coordinating, communicating and controlling. A manager must do planning before
he can undertake the other managerial functions.
b)
Goal-oriented or focus on
objectives: Planning is goal-oriented. That is, planning is linked with
certain goals or objectives. A plan starts with the setting of objectives; and
then, develops policies, procedures, strategies, etc. to achieve the
objectives.
c)
Pervasiveness of planning:
Planning pervades all levels of management. That is planning is done at all
levels of .management. In other words, every manager, whether he is at the top,
in the middle or at the bottom or organizational structure, plans.
d)
Essentially a decision-making
process: Planning is essentially a decision-making process, since it
involves careful analysis of various alternative courses of action and choosing
the best.
e)
Integrated process:
Planning is an integrated process. That is it facilitates and integrates all
other functions of management.
f)
Selective Process: Planning
is a selective process. That is, it involves the selection of the best course
of action after a careful analysis of the various alternative courses of
action.
g)
Flexible: Planning
must be flexible. That is, generally, the process of pi3nning must be capable
of being adapted to the changes in the environment. In fact, successful
planning should be flexible.
h)
Formation of premises:
Planning requires the formation of premises (i.e., assumptions). It is only on
the basis of premises or assumptions regarding the future (i.e., the future
political, social and economic environments) that the plans will be ultimately
formulated.
i)
Directed towards efficiency:
The main purpose of planning is to increase the efficiency of the enterprise.
That means, planning is directed to wards efficiency.
j)
Continuous Process:
Planning is a continuous process. That is, the management has to keep itself
engaged in planning at the times because of the uncertainties of the future.
k)
Planning
and control are inseparable: Planning, which is looking ahead,
and control, which Is looking back, are inseparable. They are the Siamese twins
of management. Unplanned action cannot be controlled, for control involves
keeping activities in course by correcting deviations from plans.
l)
Future
Oriented: Planning is future-oriented. 1ts essence is looking ahead. It is undertaken to handle future
events effective and achieve some objectives in the future.
m)
Action
oriented: Planning is action-oriented. That is, planning should be
undertaken in the light of organizational preferences. The course of action
determined must be realistic. That is it should be neither impossible nor too
easy to achieve.
n)
Inter-dependent
process: Planning is an inter-dependent process. It requires the Co-operation of the various sections and
sub-sections of the organization.
o) Involves participation: Planning
involves the participation of all the managers as well as the subordinates. In
the words of Koontz and O'Donnell, "Plans must be formulated in an
atmosphere of close participation and high degree of concurrence".
p) A means and not an end:
Planning is riot an end. It is only a means to achieve an end. i.e., the
accomplishment of the pre-determined objectives or goals of the organization.
Objectives of
Planning- Planning in an organization is essential for achieving the
following objectives.
a)
To reduce uncertainty about future conditions.
b)
To promote co-ordination and co-operation among various activities
of the organization.
c)
To achieve economy in operation through making optimum use of
available resources.
d)
To achieve predetermined objectives efficiently and effectively.
e)
To enable the organization to survive and grow under competitive
and dynamic environment.
Importance and
Advantages of Planning
Planning is of vital importance in the managerial
process. No enterprise can achieve its objectives without systematic planning.
“Planning is the heart of management” The following points highlight the
importance of planning function of management:
a.
Planning provides directions: By stating i n advance how work is to be done, planning provide
direction for action. 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
and individuals in the organization are able to work in coordination
b.
Planning reduces the
risks of uncertainty: Business enterprises
operate in an uncertain environment and face several types of risks. Planning
enables these enterprises to predict future events and prepare to face the
unexpected events. With the help of planning, managers can identify potential
dangers and take steps to overcome them. Thus, planning helps risk and
uncertainty.
c.
Planning facilitates
decision-making: Decision-making involves searching for various
alternative courses of action, evaluating them and selecting the best course of
action. Under planning, targets are laid down. With the help of these targets,
managers can better evaluate alternative courses of action and select the best
alternative. Plans lay down in
advance what is to be done and how it is to be done. Therefore, decisions
can be taken with greater confidence.
d.
Planning reduces
overlapping and wasteful activities: Since planning
ensures clarity in thought and action, work is carried on smoothly without
interruptions. There is no confusion and misunderstanding. Useless and
redundant activities are minimized or eliminated. It is easier to detect
inefficiencies and take corrective measures to deal with them.
e.
Planning promotes
innovative ideas: Planning is thinking in advance and, therefore, there
is scope of finding better ideas and better methods and procedures to reach the
objectives/goals of the enterprise. This forces managers to think differently
about the future of the organizations from the present. Thus, planning makes
the managers innovative and creative.
f.
Planning establishes
standards for controlling: Planning provides the
goals or standards against which the actual performance can be measured and
evaluated. A comparison of actual performance with the standards helps to
identify the deviations and to take corrective action. Planning makes control
meaningful and effective. ‘Control
is blind without planning.” Thus,
planning provides the basis of control.
Limitations of Planning.
Planning is essential for a business organisation. It
is difficult to manage operations without formal planning. It is important for
the organisation to move towards achieving goals. But often things to not
always go according to plan. Unforeseen events and changes, rise in costs and
prices, environmental changes, government interventions, legal regulations, all
affect our business plans. Plans then need to be modified. Therefore, planning might fail due
to the following limitations:
a.
Planning does not work
in dynamic environment: The business
environment is dynamic, nothing is constant. The environment consists of a
number of dimensions— economic, political, technological, legal and social
dimensions. The organisation has to constantly adapt itself to the changes in
business environment. However, it is not always possible to accurately assess
future trends in the environment.
i.
Competition in the market can upset financial plans.
ii.
Sales targets have to be revised and according is cash
budgets also need to be modified since then are based on sales figures.
Thus, planning cannot foresee everything
and thus these are obstacles to effective planning.
b.
Planning is a time
consuming process: Planning is a time
consuming process. It requires collection of information, its analysis and
interpretation. These activities may take considerable time. Sometimes plans to
be drawn up take so much of time that there is not much time left for
implementation of plans.
c.
Planning involves huge
costs: Planning is an expensive process in terms of money.
When plans are drawn up, huge costs are involved in the formulation of plans.
If the costs are not justified by the benefits derived from the plan, it may
have adverse effect on the enterprise. There are a number of incidental costs
as well, like expenses on Board’s meetings, discussions with professional
experts and preliminary investigations to find out the
d.
Planning creates
rigidity: Planning leads to rigid mode of functioning for
managers. This has adverse effect on the initiative to be taken by them.
e.
Planning does not
guarantee success: The success of an
enterprise is possible only when plans are
f.
Planning reduces
creativity: Planning is an activity which is done by top
management. Usually the rest of the
organisation just implements these plans. As a consequence, middle management
and other decision makers are neither allowed to deviate from plans nor are
they permitted to act on their own. They only carry out orders.
Principles of
Planning
A number of fundamental principles have been devised over the year
for guiding managers undertaking planning. Some of these principles are
discussed as under,
a)
Principle of contribution to
objective: All types of plans are prepared to achieve the objectives of the
organization. Both major and derivative plans are prepared to contribute to the
objectives of the enterprise. Planning is used as a means to reach the goals.
b)
Principles of primacy of Planning:
This principle states that planning is the first or primary function of every manager;
He has to plan first and then proceed to carry out other functions. Other
managerial functions are organized to reach the objectives se in planning.
c)
Principle of Planning Premises:
In order to make planning effective, some premises or presumptions have to be
made on the basis of which planning has to be undertaken. Plans are, generally
not properly structures. The reason being that planning premises are not
properly developed. This principle lays emphasis on properly analyzing the
situation which is going to occur in future.
d)
Principle of Alternatives:
Planning process involves developing of many alternatives and then selecting
one which will help in achieving desired business goals. In the absence of
various alternatives proper planning will be difficult.
e)
Principle of Timing:
Plans can contribute effectively to the attainment of business goals if they
are property timed. Planning premises and policies are useless without proper
timing.
f)
Principle of Flexibility:
This principle suggests flexibility in plans if some contingencies arise. The
plans should be adjusted to incorporate new situations. The dangers of
flexibility should be kept in mind. The changes may upset the earlier
commitments. So the cost of changes should be compared to the benefits of
flexibility.
g)
Principle of Commitment:
There should be a time frame for meeting
the commitments made. This will ensure the achieving of targets in time.
h)
Principle of Competitive
Strategies: While formulating own. Plans a manager should keep in mind the
plans of competitors. The plans should be framed by thinking of what the. Competitors
will do in similar situations.
Types or Components
of Plan:
In the process of planning, different types of specific plans are
prepared to make the whole process of planning effective and efficient. These plans may broadly be classified into
two categories.
PLANS
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STANDING
PLANS
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SINGLE
USE PLANS
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1.
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Mission
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1.
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Programmes
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2.
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Objectives
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2.
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Projects
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3.
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Policies
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3.
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Schedules
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4.
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Procedures
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4.
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Budgets
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5.
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Rules
and Methods
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5.
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Standards.
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6.
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Strategies
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Standing Plans- There
are the plans which are used repeatedly over large period as and when required.
1.
Mission—It
is the central guiding concept which describes the fundamental reason for the
existence of the organization. It
explains what need of the society the organization is going to serve and what
line of business it is going to adopt.
It also reflects the philosophy of management, and gives clear idea
about the basic long run commitment of the organization.
2.
Objectives --
Objectives are open ended attributes and indicate end point of planning. As Mc farlnd has pointed out objectives are
goals, aims or purposes that organizations wish to achieve over various periods
of time” Thus objectives are expressed
in broad terms like “ Our aim is to improve the image of the organization.” Objectives decide where the organization
wants to go, what it wants to achieve and what its destination is. As objectives are end points and giving
direction to the planning, without objectives planning cannot be undertaken.
3.
Policies
– Policies are guidelines for action, which helps in achieving objectives of
the organization policies, are general statements or understandings, which
guide or channel thinking in decision making of subordinates. Thus policies provide broad ways in which the
objectives can be realized. Most of the
organizations provide policy manual to make policies easily available for reference
and guidance of the subordinates.
4.
Procedure
- Procedure refer to a specific
administrative directive prescribing in-sequential manner in which a repetitive
activity is to be initiated, carried forward and completed in goal oriented
manner. Procedures are laid down to standardize and routines the pattern and
pace of work flow at the operational level.
As terry has pointed out” A procedure is a series of related tasks that
make up the chronological sequence and established way of performing the work
to be accomplished.
5.
Rules and Methods
- The term rule may be defined as a prescriptive, directive to the people on
their conduct and action. Rules are like
commandments aiming at maintaining discipline, structure and restrain behaviour
and task performance of people in formal organizational settings. A rule is definite and rigid and hence any
breach of rule is followed by penalty.
A method is a prescribed process
in which a particular operation or task is to be performed. It specifies one best way of performing each
step in a task. Thus it defines the
technology of individual operations in a work situation.
6.
Strategies -
Strategy is the complex plan for bringing the organization from a given
position to a desired position in a future period of time. The main purpose of strategy is to overcome
the competitive forces and achieving organizational objectives the strategy is
formulated by the top management for the purpose of interpreting and shaping
the meaning of other policies.
Single
Use plans - Single use plans are prepared to meet the demands of particular
situation. These plans are used only for
specific periods.
1.
Programmes -
A programmes is a single use comprehensive plan designed to implement the
policies and accomplish the objectives.
It deals with step by step approach to guide the action necessary to
reach the predetermined goals. It is a
combination of policies, procedures, rules, budgets, task assignments etc for
the specific purpose for carrying out a given course of action. a programme is a single use plan for example,
expansion programme of a factory.
2.
Projects-
Project may be defined as any scheme or part of major scheme for investing
resources, which can be analyzed and evaluated as an independent unit. It is basically a proposal of investment
which can be separately appraised with the help of cost benefit analysis.
3.
Schedules -
Scheduling is a process of establishing a time sequence for the work to be done
it is an essential part of an action plan.
It prescribes exact time for the beginning and finishing each step. Scheduling is useful for saving time and
energy of the employees.
4.
Budgets—Budgets
are single use plans expressed in quantitative terms, so they are called as Numerated
plan. A budget is a plan which is a
statement of expected results expressed in numerical terms. Budgets are prepared in terms of time, money,
material, and other units required to perform work and accomplish specified
results. The preparation of budget is
nothing but planning as it calls for compilation of all relevant fats and
figures like other plans.
5.
Standards -
A standards is a norm or criteria used for evaluation or comparison of
performance. A company sets standards
expressing anticipated results of the plans.
Generally for each area of business, qualitative and quantitative
standards are established like physical standards, quality standards, personnel
standards, performance standards etc. In
practice financial ratios such as liquidity ratios, current ratios etc are used
as standards in the field of financial management for evaluating economic
performance of the organization.
Planning Process
Planning
process involves the setting up of business objectives and allocation of
resources for achieving them. Planning determines the future course of action
for utilizing various resources in a best possible way. It is a combination of
information handling and decision making systems based on information inputs,
outputs and a feedback loop.
steps in the process of Planning.
a)
Setting organizational
objectives: The first and foremost step in the planning process
is setting organizational objectives or goals, which specify what the
organisation wants to achieve. For example, an increase in sales by 20% could
be the objective of the organisation. Objectives may also be set for each
individual department. They give direction to all departments.
b)
Developing planning premises: Planning is concerned with the future, which is uncertain.
Therefore, the manager is required to make certain assumptions about the
future. These assumptions are called premises.
Assumptions are made in the form of forecasts about the demand for a particular
product, government policy, interest rates, tax rates, etc. Therefore, accurate
forecasts become essential for successful plans.
c)
Identifying
alternative courses of action: Once objectives are
set and assumptions are made, then the next step is to identify all possible
alternative courses of action. For example,
in order to achieve the organizational objectives of increasing profit, the
alternatives may be
a.
increase the sales of an existing product,
or
b.
produces and sells a completely new product.
d)
Evaluating alternative
courses: The positive and negative aspects of each proposal
need to be evaluated in the light of the objective to be achieved, its feasibility
and consequences. For example,
the risk-return trade-off is very common. The more risky the investment, the
higher is the possibility of returns. To evaluate such proposals, detailed
calculations of earnings, earnings per share, interest, taxes, dividends are
made.
e)
Selecting the best
possible alternative: This is the real
point of decision making. The best/ideal plan has to be adopted, which must be
the most feasible, profitable and with least negative consequences. The manager
must apply permutations and combinations and select the best possible course of
action. Sometimes, a combination of plans. may be selected instead of one best
plan.
f)
Implementing the plan: Once the plans are developed, they are put into action. For this,
the managers communicate the plans to all employees very clearly and allocate
them resources (money, machinery, etc.
g)
Follow-up action: The managers monitor the plan carefully to ensure that the
premises are holding true in the present condition or not. If not, adjustments
are made in the plan.
Objectives v/s
Policies
Objectives:
In the words of Koontz and O'Donnell, "Management terminology, objectives
are the end-point's of a management programme whether stated in general or
specific terms".
Characteristics of Objectives
a)
Objectives are multiple in natures
b)
Objectives have a
hierarchy
c)
Objectives form a
network
d)
Objectives are both long range and short range
e)
Business objectives are verifiable
f)
Business objectives may be specific or general
g)
Objectives may be tangible or intangible
h)
Objectives have priority
i)
Objectives may clash with one other
Policies:
In the words of George R, Terry, "Policy is a verbal, written or implied
overall guide setting up boundaries that supply the general limits and
directions in which the managerial action will take place". They are the
guidelines or executive action at all levels of management.
Differences
between objectives and policies:
a)
Objectives are the end points of planning. That is, objectives can
be regarded as the places which have to be approached through roads (i.e.,
policies). But policies are the means. That is, policies are the broad ways or
roads through which the places (i.e., the objectives) have to be reaches
b)
Objectives are basic to his existence and functioning of an
organization. But policies are not basic to the existence and functioning of an
organization.
c)
There is no room for discretion in the case of objectives. On the
other hand, policies may leave some room for discretion on the part of those
who are to be guided by them.
d)
Objectives are determined by the top management, where as policies
are left to be determined, to some extent by the lower levels of management.
e)
Objectives may, sometimes, remain, only on paper. On the other
hand, policies reflect the true intents of the organization.
f)
Objectives have to be achieved, while policies have to be
observed.
Making Planning
successful
In order to make planning function effective. It is necessary to
create climate for planning. In this
context the following points may be taken into consideration.
a)
Planning should be participative.
b)
All the senior managers should remove any type of obstacles to
planning and try to develop climate in which their subordinates will be
motivated to participate in the process of planning.
c)
Planning should originate from the top management who are in
charge of preparing strategic or long term plan, and other plans can be based
upon it.
d)
Planning must be organized - An ideal organizational structure
through appropriate grouping of activities and clear delegation of authority,
are necessary to establish suitable environment for planned performance.
e)
A long range plan must be integrate with short term plans, for achieving
pre-determined goals.
f)
Flexible organizations
g)
The managers should build organization in such away that it will
be willing and ready to accept challenges of change. It should be able to predict changes and be
ready to welcome changes. Development of
pro change attitude is highly desirable for growth of organization.