Planning

Planning is deciding in advance what to do and how to do it. It is one of the basic managerial
functions.
Before doing something, the manager must formulate an idea of how to work on a particular
task.
Planning seeks to bridge the gap between where we are and where we want to go.
It involves 2 aspects -
❖​ Setting of aims and objectives of the organization
❖​ Selecting and developing an appropriate course of action to achieve these objectives.
Definition :
Koontz and O‘Donnell define Panning as “Planning is deciding in advance what to do,
how to do, when to do, and who to do it. Planning bridges the gap from where we are to
where we want to go. It makes it possible for things to occur which would not otherwise
happen.”
Planning involves setting objectives & developing an appropriate course of action to achieve
these objectives.
Importance of Planning
Planning is certainly important as it tells us where to go, it provides direction and reduces the
risk of uncertainty by preparing forecasts. The major benefits of planning are given below:
1.​ Planning provides direction:
Objectives are clearly stated so they act as a guide for deciding what action should be taken
and in which direction.If goals are well defined, employees are aware of what the org. has to
do & what they must do to achieve those goals. Departments and individuals in the org. are
able to work in coordination.In the absence of planning, employees will be working in different
directions and the organization would not be able to achieve its objectives or goals.
2.​ Planning reduces Risks Of Uncertainty
Business operates in an uncertain environment & faces several types of risks.
Planning pre-assesses the future uncertainties & enables a firm to face these uncertainties
with minimum wastage of resources. Changes or events can’t be eliminated but can be
anticipated & managerial responses can be developed.
3.​ Planning reduces overlapping and wasteful Activities
Provides the basis for coordinating activities of different departments & individuals.Avoiding
misunderstandings, eliminates useless activities provides clarity of thought &action so
work is carried out smoothly without interruption. It is easier to detect inefficiencies and
take corrective action to deal with them.
4.​ Planning promotes innovative ideas
Planning is an intellectual process. It looks for scope for finding better ideas, methods and
procedures to perform a particular job. Forces managers to think differently & assume
future conditions. Thus planning makes managers creative and innovative.
5.​ Planning facilitates decision making
Planning helps the manager to look into the future and make a choice from amongst various
alternative courses of action. Manager has to evaluate the positive and negative aspects of
each alternative and select the most feasible and profitable plan, with least negative
consequences.Planning involves setting targets & predicting future conditions, thus helping in
taking rational decisions.
6.​ Planning establishes standards for controlling
Planning provides the goals or standards against which performance can be measured. A
comparison of actual performance with the standards helps managers to identify deviations
and take corrective action.Planning makes controlling meaningful and effective. Thus planning
is the basis /perquisite for controlling.
Features of Planning
The planning function of the management has certain special features. These features throw
light on its nature and scope.
1.​ Planning focuses on achieving objectives:
Planning is not an end in itself but means towards achievement of an objective. It specifies the
objectives to be attained in future and steps necessary to achieve them. It acts as a guide for
deciding what action should be taken & in which direction.
Thus planning is purposeful. It has no meaning unless it contributes to achievement of
pre-determined organizational goals.
2.​ Planning is a primary function of management:
Planning forms the basis of other managerial functions to be performed. It precedes all other
functions & all other functions are done within the framework of the plans drawn.
Without planning, there is nothing to organize, no one to direct & no need of control.
3.​ Planning is Pervasive:
Planning is not an exclusive function of top-level management. It is required in all
organizations, all levels & all depts. However, the scope, nature & extent of planning differ &
go on decreasing as we move towards lower level:
Top Level Management → Plans for organization. as a whole
Middle Level Management → Prepares departmental plans
Lower Level Management → Supervisors formulate day-to-day operational plans.
4.​ Planning is continuous:
Plans are prepared for a specific period.At the end of that period new plans have to be prepared
on the basis of future conditions & new requirements. Hence it is a continuous process.
Planning is related to the planning cycle where a new plan is framed ,implemented and
followed by another plan and so on.
5.​ Planning is Futuristic:
Considered to be forward looking, as it requires looking ahead & forecasting future events
(customers‘ demand, competition, government policies etc.).It involves looking ahead &
preparing for future opportunities/ threats so as to take advantage of them or deal with them
effectively.
6.​ Planning is a mental exercise:
Planning requires application of mind and sound judgment. It is an intellectual activity that
requires logical & systematic thinking rather than empty guesswork. Thus, closely related with
creativity & innovation & based on proper analysis.
Limitations of Planning
Planning is an important tool of management, yet not a solution to all problems. Unforeseen
events & changes, rise in costs and prices, environmental changes, government interventions,
legal regulations, all affect the business plans hence they need to be modified. Sometimes
plans do fail due to the best efforts of management due to the following limitations:
1.​ Planning leads to rigidity:
Plan is drawn up with specific goals to be achieved within a specific time frame.
But circumstances may change & following the plan may actually turn out to be detrimental to
the org if there is no scope for flexibility. Also once policies, procedures, rules & methods are
designed & employees start following them, it becomes difficult to make changes in them.
This leads to rigidity.
2.​ Planning may not work in a dynamic environment:
The environment consists of a number of dimensions (Economic, political, physical, legal &
social).External dynamic factors (govt. policies, political factors, industrial or trade
policy) are not constant. They keep changing and disturb the functioning of the
organization .Competition in the market can also upset financial plans, sales targets
need to be revised & cash budgets need to be modified. It becomes difficult to accurately
assess future trends in the environment & this poses obstacles to effective planning.
3.​ Planning reduces creativity:
Plans, policies & procedures are determined by the top management, Middle & Lower
management only follow & carry out the orders in a manner laid down in the plan. So
planning may suppress the spirit to take initiative among the employees & compel them to
work in a rigid manner, leaving no scope for creativity among employees.
4.​ Planning involves huge Costs:
Planning is an expensive process. Money, time and effort have to be spent in forecasting,
collection of info, verifying accuracy of facts, evaluating alternatives etc. Also there may
be incidental costs incurred namely, expenses on boardroom meetings, discussions with
experts etc.Planning should be economical i.e. cost of planning should not exceed the gains
expected from it.
5.​ Planning is time consuming:
Considerable time is required. for collection, analysis & interpretation of information for
planning.Any delay caused by planning may deprive the business of a profitable
opportunity.May become impractical during emergencies & crisis when on the spot & quick
decisions are necessary.In such situations the existing plans may have to be abandoned.
6.​ Planning does not guarantee success:
Firstly, Planning will be successful only when plans are implemented properly. Managers have
a tendency to rely on previously tried and successful plans. Planning provides a base for
analyzing future courses of action. But it is not a solution for all problems. So even
previously tried & tested successful plans may not work again because of change in
circumstances .Besides, there are unknown factors in which managers have no control eg .
natural calamities.
Planning Process (Steps in Planning
Planning is deciding in advance what to do and how to do. It is a process of decision making.
Planning process involves certain logical steps as follows:

1.​ Setting Objectives:

Objectives specify what the organization wants to achieve. Objectives can be set for the
entire organization & stated to each department within the organization very clearly, to
determine how all departments would contribute towards overall objectives. Then these have to
reach down to all employees at all levels so that they understand how their actions contribute
to achieving objectives.E.g. Objectives could be to achieve sales, expansion of business etc.

2.​ Developing Premises:

Plans are made on the basis of some assumptions about the future.These assumptions,
which provide the basis for planning, are called premises.All managers involved in planning
should be familiar with them, because plans are expected to operate & reach their destination
subject to these. They can take the form of demand for company’s product, price of
capital goods, tax rate, Changes in technology, population growth, competition,
government policies etc
3.​ Identifying Alternative Courses Of Action:
After setting the objectives, managers make a list of alternatives through which the
organization can achieve its objectives as there can be many ways to achieve the objectives
& managers must know all of them.
Eg. Sales could be increased through any of the following ways:
●​ By enhancing advertising expenditure
●​ Appointing salesmen for door-to-door sales
●​ By offering discounts
●​ By adding more product lines.
All the alternative courses of action should be identified .The course of action taken out could
be routine or innovative.
4.​ Evaluating alternative courses of action
Positive & negative aspects of each & every proposal need to be evaluated to determine their
feasibility and consequences in the light of each objective to be achieved.
E.g. In financial plans, risk-return trade-offs are important. Riskier the investment, higher the
returns it is likely to give. To evaluate such proposals, detailed calc. of earnings, taxes,
earnings per share etc should be done.
5.​ Selecting the best alternative
Real point of decision-making Best plan has to be adopted and implemented.The ideal plan
must be most feasible, profitable and with least negative consequences.Most plans may
not be subjected to mathematical analysis. In such cases, subjectivity & manager‘s experience,
judgment and intuition are important to select the most viable alternative.Sometimes a
combination of plans may be selected instead of one best course.
6.​ Implementing the plan
Concerned with putting the plan into action.For implementing the plans, managers start
organizing & assembling resources for it. E.g. If there is a plan to increase production, then
more labour, more machinery will be required This step would also involve organizing for more
labour and purchase of machinery.
7.​ Follow Up Action
This involves monitoring the plans and ensuring that activities are performed according to the
schedule.Whenever there are deviations from plans, immediate action has to be taken to
bring implementation according to the plan or make changes in the plan.
Types of Plans
Single-use and standing plans are part of the operational planning process.
Single use plans apply to activities that do not recur or repeat.
It is a one-time plan specifically designed to achieve a particular goal that, once achieved, will
not recur in the future. Such a Plan is developed to meet the needs of a unique situation.
The length of a single-use plan differs greatly depending on the project in question, as a single
event plan may only last one day while a single project may last weeks or months. Examples :
budgets, programmes and projects.
Standing plans are used over and over again because they focus on organizational
situations that occur repeatedly .They are usually made once and retain their value over a
period of years while undergoing revisions and updates. That is why they are also called
repeated use plans. They include policies, procedures, methods and rules.
There are other types of plans which usually are not classified as single-use or standing
plans namely Strategy, Objective.
Following are the types of plans:
A)​ OBJECTIVES:
Objectives are defined as the ends which the management seeks to achieve towards within a
given time period. They represent the end point of planning. They define the future state of
affairs which the organization would like to realize. Objectives are formulated by the top
management & they serve as guide for overall business planning. Objectives should be
measurable in quantitative terms.
Example: Increasing sales by 10% in next quarter.
B)​ STRATEGY:
Strategy is a comprehensive plan for accomplishing an organization‘s objectives.This
comprehensive plan will include (3 dimensions):
a.​ Determining long term objectives
b.​ Adopting a particular course of action.
c.​ Allocating resources necessary to achieve objectives.
It defines an organization’s scope in the long run. Whenever a strategy is formulated, the
business environment needs to be considered.
Example: A company’s marketing strategy may include choice of channels of
distribution,pricing strategy, choice of advertising media, promotion techniques etc.
C)​ POLICY
Organization’s general response to a particular problem or situation.
These are general statements or understandings, which guide thinking &
decision-making. A policy is an organization’s intention to act in certain ways when specific
types of circumstances arise.
Policies define the boundaries within which decisions can be made and they direct
decisions towards accomplishment of objectives.
Examples: Recruitment policy, Goods sold on cash basis only is a policy of the sales
dept.
D)​ PROCEDURE:
A procedure consists of sequential steps to carry out activities within a policy framework..
They are guides to action, rather to thinking. They are detailed in a manner in which work is
to be performed. Procedures are generally meant for insiders to follow.
It specifies tasks to be performed or done sequentially for completing a piece of work.
Examples: Admission procedure, Selection procedure for employees, procedure for
placing an order, redressal of grievances.
E)​ METHOD:
Method is the standardized way or prescribed manner in which a task has to be performed. It
deals with a task comprising one step of a procedure. Selection of right method saves time,
money & effort increases efficiency in completion of a task
Examples
Depreciation methods: Straight line method, Written down value method, Training
methods (e.g. orientation programmes, lectures etc.)
F)​ PROGRAMME :
It is a detailed statement about a project which outlines the policies, objectives,
procedures, tasks , and resources required to implement any course of action.
It spells out clearly the steps to be taken, resources to be used and the time taken to
complete the task. The smallest of all details are worked out within a broad policy framework.
Examples - Launching a new product, Advertising program, construction of a shopping mall.
G)​ RULE:
Rules are specific statements that specify what is to be done. It is a guide to behavior. They
do not allow any flexibility or discretion or compromise. It prescribes fine or penalty for
violation
Examples : No smoking, No admission without permission
H)​ BUDGET :
Budget is a plan, a statement of expected results of a given future period expressed in
numerical terms like rupees, production units or man-hours. It is also a control device as it
serves as a standard against which performance can be measured , deviations can be found
and corrective action can be taken.
Examples: Cash budget, Sales budget etc.

Answer the following Questions

I Choose and write the correct answer:
1. Name the function of management which involves setting objectives
a. Directing b. Planning
c. Staffing d. Organising
2. Which of the following is a type of standing plan?
a. Budget b. Project
c. Programmes d. Rule
3. Which of the following is not a type of plan?
a. Objectives b. Coordination
c. Budget d. Rule
4. First step in the planning process is
a. Implementing plan b. Evaluate alternative courses
c. Setting an objective d. None of the above
5. Which of the following is an example of a single use plan?
a. Policy b. Procedure
c. Budget d. Method
6. Name the type of budget which determines the net cash position
a. Purchase budget b. Sales budget
c. Cash budget d. Production budget
II Fill in the blanks by choosing appropriate answers from those given in
the brackets
(Planning, Single use, Dynamic, Standing plan, Budget, Rule, Primary)
1. __________ is a statement of expected results expressed in numerical terms.
2. __________ is deciding in advance what to do and how to do it.
3. Planning is a _________function of management.
4. __________ plan is developed for a one time event.
5. __________ plan is likely to be repeated in future.
6. __________ are specific statements that inform what is to be done..
7. Planning may not work in a __________ environment.
III Match the following :
A B
a. Planning i. General statement
b. Implementing the plan ii. Comprehensive plan
c. Strategy iii. Assumption about the future
d. Policies iv. Primary function of management
e. Planning premises v. Putting plan into action
IV Answer the following questions in one word or one sentence each:
1. Which function of management involves decision making?
2. What is Planning?
3. Give an example for a standing plan.
4. Give an example for a single use plan.
5. Give an example for policy in planning.
6. “No smoking in office” is an example of which type of plan?
7. Name the plan which specifies a detailed step by step presentation of a job.
8. Name the type of plan in which expected results are expressed in numerical
terms.

V Answer the following questions in 2 or 3 sentences each. Each question

carries 2 marks.
1. Define Planning.
2. State the first two steps in planning.
3. Give the meaning of planning premises.
4. Mention any two standing plans.
5. Give any two examples for policy in planning.
6. What are the Rules? Give an example
7. What is “Budget”? Give an example.
VI Answer the following questions in 10 to 12 sentences each. Each question
carries 4 marks.
1. Explain any four features of planning.
2. Is planning actually worth the huge cost involved? Give four reasons.
(OR)
Explain the importance of Planning with any four points.
3. Explain any four limitations of planning.
4. Briefly explain any two types of plans.
(OR)
Write a short note on (a) Policy (b) Strategy
5. As a manager of an enterprise what steps you will follow in the planning process.