Planning: Meaning, Types and Advantages

After reading this article you will learn about:- 1. Meaning of Planning 2. Types of Planning 3. Components 4. Advantages 5. Limitations.

Meaning of Planning:

Planning is very important for successfulness and the effective performance of an organisation not only for organisations but also for individuals. It is the most basic of all the managerial functions. It involves selecting missions and objectives and the actions to achieve them. Therefore every organisation gives a greater emphasis on planning.

Planning as a process involves the determination of future course of action, that is why an action, what action, how to take action, and when to take action. These are related with different aspects of planning process.

Thus, Terry has defined planning in terms of future course of action i.e., “planning is the selection and relating of facts and making and using of assumptions regarding the future in the visualisation and formalisation of proposed activities believed necessary to achieve desired result.”

McFarland has defined Planning as “a concept of executive action that embodies the skills of anticipating, influencing and controlling the nature and direction of change.”

Peter Drucker defined as “planning is the continuous process of making present entrepreneurial decisions systematically and with best possible knowledge their futurity, organizing systematically the efforts needed to carry out these decisions and measuring the results of these decisions against the expectation through organised systematic feedback.”

In the words of Koontz and O’Donnell, “planning is deciding in advance what to do, how to do it, when to do it, and who is to do it. Planning bridges the gap from where we are to here we want to go.”

According to Theo Haimann, “planning is the function that determines in advance what should be done. It consists of selecting the enterprise objectives polices, programmes, procedures and other means of achieving these objectives.”

Types of Planning:

The process of planning may be classified into different categories on the following basis:

(i) Nature of Planning:

a. Formal planning.

b. Informal planning.

(ii) Duration of planning:

a. Short term planning.

b. Long term planning.

(iii) Levels of Management:

a. Strategic planning.

b. Intermediate planning.

c. Operational planning.

(iv) Use:

a. Standing plans

b. Single-use plans.

(i) Nature of Planning:

a. Formal Planning:

Planning is formal when it is reduced to writing. When the numbers of actions are large it is good to have a formal plan since it will help adequate control.

The term formal means official and recognised. Any planning can be done officially to be followed or implemented. Formal planning is aims to determine and objectives of planning. It is the action that determine in advance what should be done.

Advantages:

1. Proper Cooperation among employees,

2. Unity of Action,

3. Economy,

4. Proper coordination and control,  

5. Choosing the right objectives, and 

6. Future plan.

b. Informal Planning:

An informal plan is one, which is not in writing, but it is conceived in the mind of the manager. Informal planning will be effective when the number of actions is less and actions have to be taken in short period.

(ii) Duration of Planning:

a. Short term Planning:

Short term planning is the planning which covers less than two years. It must be formulated in a manner consistent with long-term plans. It is considered as tactical planning. Short-term plans are concerned with immediate future; it takes into account the available resources only and is concerned with the current operations of the business.

These may include plans concerning inventory planning and control, employee training, work methods etc.

Advantages:

1. It can be easily adjustable.

2. Changes can be made and incorporated.

3. Easy to Gauge.

4. Only little resources required.

Disadvantages:

1. Very short period-left over things will be more.

2. Difficult to mobiles the resources.

3. Communication cycle will not be completed.

b. Long-Term Planning:

Long-term planning usually converse a period of more than five years, mostly between five and fifteen years. It deals with broader technological and competitive aspects of the organisation as well as allocation of resources over a relatively long time period. Long-term planning is considered as strategic planning.

Short-term planning covers the period of one year while long term planning covers 5-15 years. In between there may be medium-term plans. Usually, medium term plans are focusing on between two and five years. These may include plan for purchase of materials, production, labour, overhead expenses and so on.

Advantages:

1. Sufficient time to plan and implement.

2. Effective control.

3. Adjustment and changes may be made gradually.

4. Periodic evaluation is possible.

5. Thrust areas can be identified easily.

6. Weakness can be spotted and rectified then and there.

Disadvantages:

1. Prediction is difficult.

2. Full of uncertainties.

3. Objectives and Targets may not be achieved in full.

4. More resources required.

(iii) Levels of Management:

a. Strategic Planning:

The strategic planning is the process of determining overall objectives of the organisation and the policies and strategies adopted to achieve those objective. It is conducted by the top management, which include chief executive officer, president, vice-presidents, General Manger etc. It is a long range planning and may cover a time period of up to 10 years.

It basically deals with the total assessment of the organisation’s capabilities, its strengths and its weaknesses and an objective evaluation of the dynamic environment. The planning also determines the direction the company will be taking in achieving these goals.

b. Intermediate Planning:

Intermediate planning cover time frames of about 6 months to 2 years and is contemplated by middle management, which includes functional managers, department heads and product line mangers. They also have the task of polishing the top managements strategic plans.

The middle management will have a critical look at the resources available and they will determine the most effective and efficient mix of human, financial and material factors. They refine the broad strategic plans into more workable and realistic plans.

c. Operational Planning:

Operational planning deals with only current activities. It keeps the business running. These plans are the responsibility of the lower management and are conducted by unit supervisors, foremen etc. These are short-range plans covering a time span from one week to one year.

These are more specific and they determine how a specific job is to be completed in the best possible way. Most operational plans .ire divided into functional areas such as production, finance, marketing, personnel etc.

Thus even though planning at all levels is important, since all levels are integrated into one, the strategic planning requires closer observation since it establishes the direction of the organisation.

(iv) Use:

a. Standing Plan:

Standing plan is one, which is designed to be used over and over again. Objectives, policies procedures, methods, rules and strategies are included in standing plans. Its nature is mechanical. It helps executives to reduce their workload. Standing plan is also called routine plan. Standing or routine plan is generally long range.

b. Single Use Plan:

Single use plan is one, which sets a course of action for a particular set of circumstances and is used up once the particular goal is achieved. They may include programme, budgets, projects and schedules. It is also called specific planning. Single use plan is short range. 

Components of Planning/Planning Techniques:

Planning consists of several individual plans or components of planning, which are usually bound together.

(i) Forecasting.

(ii) Objectives.

(iii) Policies.

(iv) Programmes.

(v) Strategies.

(vi) Schedules.

(vii) Procedures.

(viii) Rules, and

(ix) Budgets.

i. Forecasting:

Forecasting becomes an integral part of the planning process. It is a prediction of future events and conditions. It, therefore, includes both the assessment of the future and the provision for it. It helps to reduce the uncertainties that surround management, decision making.

ii. Objectives:

Objectives are the ends toward which activity is aimed— they are the results to be achieved. They represent not only the end point of planning but also the end toward which organising, staffing, leading and controlling are aimed.

Organisation can grow without any difficulty if it has well-defined objectives. These objectives should be clearly defined and communicated throughout the organisation. Such objectives must be realistic.

iii. Policies:

Koonte and O’Donnell defines “policies are general statements or undertakings which guide or channel thinking in decision-making of subordinates.” So, policies act as guides to thinking and action of subordinates in the organisations. It should be clearly prescribed and understandable by all.

iv. Programmes:

It refers to the course of action of work to be carried out in proper sequence for the purpose of achieving specific objectives.

v. Strategies:

Konnoz and Heinz Weihrich defined strategies as “a general programme of action and deployment of resources to attain comprehensive objectives” or ” the determination of the basic long-term objectives of an enterprise “and the adoption of courses of action and allocation of resources necessary to achieve these goals. It is specific type of plan for achieving organisational goals.

vi. Schedules:

Fixing a time sequence for every operation is known as schedules. Normally it forms part of programming a part of action plan.

vii. Procedures:

Procedures are plans that establish a required method of handling future activities. They are guides to action, rather than to thinking and they detail the exact manner in which certain activities must be accomplished. They are chronological sequences of required actions.

viii. Rules:

Rules spell out specific required actions or non-actions, following no direction. They are usually the simplest type of plan.

ix. Budgets:

A budget is a statement of expected results expressed in numerical term. It may be referred to as a numberised programme. A budget may be expressed either in financial terms or in terms of labour-hours, units of product, machine hours, or any other numerically measurable term. It helps the organisation to control the action by comparing budgetary and actual results.

Advantages of Planning:

1. Primacy of Planning:

Even though there are other managerial functions such as organising, staffing, directing and controlling which helps to achieve the organisational goals, planning precedes all other managerial functions. It establishes objectives necessary for all group effort.

2. Helping to Management:

Since the planning is a future course of action, mangers are able to define their objectives and get direction. Also it creates a unity of purpose.

3. Effective Utilisation of Resources:

Proper planning helps to proper and effective utilisation of resources. Resources are identified for optimum utility through planning. So waste or minimum waste of resources will not result and thereby idle time for workers and downtime for machines will be reduced. This will lead to result in minimum cost of operations.

4. Minimum Cost:

Planning helps to minimise cost by providing greater utilisation of the available resources. All kinds of wastage of men, materials, money and machines are prevented with the help of planning.

5. To help in Motivation:

All employees of the organisation can feel that we have taken this plan, if the plans are communicated to them. In this case the sense of belonging of employees increases and therefore they will be highly motivated.

6. To Offset Uncertainty and Change:

There may be continuous change in the environment and organisation has to work in accelerating change. This change is reflected in both tangible and intangible forms. Tangible changes are in the form of changes in technology, market forces, and government regulations.

Intangible changes reflect in changes in attitudes, values, cultures etc. In order to cope up with the requirements of such changes, organisation must role ahead for its future course of action, which is basically provided by planning process. Planning does not stop changes in the environment, but gears the organisation to take suitable actions so that it is successful in achieving its objectives.

7. Help in Coordination:

Proper planning is made by unifying all areas on departments of the organisation. It wills leads to coordinate and harmony among the departments is achieved.

8. Facilities Control:

Planning provides performance standards and standards for measuring the progress of the organisations. Therefore management can compare the actual performance with the standards. Manager can control action by looking at different if any deviation.

9. Facilitates Decision-making:

Planning provides a framework for decision-making. Since the planning provides for feedback, periodic evaluation, and indication for any deviation, corrective action can be taken which leads to better decision-making.

10. Encourage Innovation and Creativity:

It brings about rationality in managerial approach and improvement in executive thinking. D. F. Hussey said that, “A good planning process will provide avenues for individual participation will throw up more ideas about the company and its environment, will encourage an atmosphere of frankness and corporate self-criticism and will stimulate managers to achieve more.”

11. Improves Competitive Strength:

Since the operations are planned in advance, company can take its action concretely. It improves the competitive strength of the organisation.

Limitations of Planning:

1. Corporate Planning is not Integrated into the Total Management System:

The top management fails to identify and associate properly the formal planning with the central concept of the organisation’s mission.

2. There is a Lack of Understanding of the Different Steps of the Planning Process:

The management may not be knowledgeable or skilled in understanding all steps of the planning requirements.

3. Non-Availability of Correct Information and Data:

Planning is made by having information and data available. Generally correct information and data not available.

4. Management at Different Levels in the Organisation has not Properly Contributed to Planning Activities:

Generally all strategic planning are made and conducted at top management. So sometimes middle level and lower level of management, which are closer to the operation, may not understand all aspects of planning. This will affect their fullest contribution.

5. Costly or Uneconomical:

Planning is expensive. The cost of planning should not be in excess of its contribution and managerial judgement is necessary to balance the expenses of preparing the plans against the benefits derived from them.

6. The management is not always willing to cancel or modify your plans.

7. In starting formal planning, too much is attempted at once.

8. Resistance to change by organisational members.

9. Lack of contingency plans.