In this article we will discuss about planning as a function of management. Learn about:- 1. What is Planning? 2. Features of Planning 3. Purposes 4. Steps 5. Principles 6. Types 7. Features of a Good Plan 8. Relationship between Planning and Control 9. Importance 10. Advantages 11. Limitations 12. Barriers.
Contents for Planning as a Function of Management :
- What is Planning?
- Features of Planning
- Purposes of Planning
- Steps in Planning Process
- Principles of Planning
- Types of Plans
- Features of a Good Plan
- Relationship between Planning and Control
- Importance of Planning
- Advantages of Planning
- Limitations of Planning
- Barriers to Planning
Read this article to get the answers of:
- Why is planning an important function of management?
- What is planning according to management?
- What are the 4 basic management functions?
- What are the eight functions of management?
- What is planning as a function of management?
Planning as a Function of Management # 1. What is Planning?
Planning is the work the manager does to predetermine a course of action, that involves- (a) Establishing Purpose – the work managers do to discover a vision of the future; (b) Setting Goals – the work managers do to determine the end results to be accomplished; and (c) Creating Plans – the work of sequencing tasks to accomplish goals.
Thus planning is an activity where goals are set, environmental studies are made, planning premises are considered and a plan is chalked out. Thus plan is a predetermined course of action, which emerges as an outcome of planning process.
Different management scientists have defined the ‘planning’ differently. Some definitions are as broad as – “Planning is anticipating” – Earl Strong.
Some recognize it as a process, like – “Planning is the thinking process, the organized forecast, the vision based on fact and experience that is required for intelligent action.” – Alfred and Beaty.
Some view it in the form of outcomes of planning, like – “Management planning involves the development of forecasts, objectives, policies, programs, procedures, schedules, and budgets” – Louis A. Allen.
When an organization wants to reach a goal, it makes a plan to reach it. The plan is a future course of action. To decide this future course of action, the manager has to anticipate future and take into account the organization’s capability with regard to the resources required to implement the plan.
This plan should clearly lay out action sequences to be performed. After putting the plan into action, the management keeps a track of it and make adjustments in it as and when required under the given circumstances. Organizational plans generally take the shape of policies, procedures, budgets, programs, etc.
Essentially, planning has following characteristics:
1. Planning is the most basic of all managerial functions – Planning precedes all executory functions like organizing, directing, staffing, and controlling.
2. Planning preconceives an objective – Every plan specifies the objectives to be attained in future and steps necessary to reach them.
3. Planning is an intellectual activity- It involves vision and foresightedness to decide the things to be done in future.
4. Planning must involve the future – It bridges the gap between where we are and where we want to go.
5. Planning is all pervasive – It is required in every managerial function and at every level.
6. Planning is a continuous activity – It is never ending activity of a manager. Planning is always tentative and subject to revision and amendment, as new facts become known.
Planning as a Function of Management 2. Features of Planning:
Planning has a number of characteristics:
1. Planning is Goal Oriented:
All plans arise from objectives. Objectives provide the basic guidelines for planning activities. Planning has no meaning unless it contributes in some positive manner to the achievement of predetermined goals.
2. Planning is a Primary Function:
Planning is the foundation of management. It is a parent exercise in management process. It is a preface to business activities. According to Koontz, “Planning provides the basic foundation from which all future management functions arise”.
3. Planning is All Pervasive:
Planning is a function of all managers. It is needed and practiced at all managerial levels. Planning is inherent in everything a manager does.
4. Planning is a Mental Exercise:
Planning is a mental process involving imagination, foresight and sound judgment. Planning compels managers to abandon guesswork and wishful thinking. It makes them think in a logical and systematic manner.
5. Planning is a Continuous Process:
Planning is continuous. It is a never-ending activity. It is an ongoing process of adjustment to change. There is always need for a new plan to be drawn on the basis of new demands and changes in the circumstances.
6. Planning Involves Choice:
Planning essentially involves choice among various alternative courses of action. If there is one way of doing something, there is no need for planning. The need for planning arises only when alternatives are available.
7. Planning is Forward Looking:
Planning means looking ahead and preparing for the future. It means peeping into the future, analyzing it and preparing for it. Managers plan today with a view to flourish tomorrow. Without planning, business becomes random in nature and decisions would become meaningless, adhoc choices.
8. Planning is Flexible:
Planning is based on a forecast of future events. Since future is uncertain, plans should be reasonably flexible. When market conditions change, planners have to make necessary changes in the existing plans.
9. Planning is an Integrated Process:
Plans are structured in a logical way wherein every lower-level plan serves as a means to accomplish higher level plans. They are highly interdependent and mutually supportive.
10. Planning Includes Efficiency and Effectiveness Dimensions:
Plans aim at deploying resources economically and efficiently. They also try to accomplish what has been actually targeted. The effectiveness of plans is usually dependent on how much it can contribute to the predetermined objectives.
Planning as a Function of Management 3. Purposes of Planning:
Why do managers plan? – The answer to this question can be best given by another question – can managers afford not to plan? Planning is inevitable at every level. Even if a manager has to take work from 2 persons in a day, he will have to plan to allocate the work among them. What a manager may ignore is long term planning. But the long term planning is very important if an organization wants to survive and prosper.
Some purposes, which can be achieved by planning, are discussed below:
1. Planning focuses attention on objectives:
Planning directs explicit attention to objectives and priorities, and encourages individuals and organizations to focus on relevant results rather than on endless activities. The intended, explicit, announced plan sets a tone, focuses attention, and encourages action.
2. Planning establishes coordinated effort:
It gives direction to managers and non- managers alike. When employees know where the organization is going and what they must contribute to reach the objective, they can coordinate their activities, cooperate with each other, and work in teams. Without planning, departments could be working at cross-purposes and preventing the organization from moving efficiently towards its objectives.
3. Planning reduces uncertainty:
Planning force managers to look ahead, anticipate change, consider the impact of change, and develop appropriate responses. It also clarifies the consequences of actions managers might take in response to change.
4. Planning provides a means for organizations to cope with changes in their environment:
The accelerating pace of change in political, technological, economic, and other areas highlights the need for continuing attention to strategy reformulation.
5. Planning reduces overlapping and wasteful activities:
Planning beforehand is likely to pinpoint waste and redundancy. Furthermore, when means and ends are clear, efficiencies become obvious.
6. Planning establishes objectives or standards that are used in controlling:
If we are unsure of what we are trying to achieve, how can we determine whether or not we have achieved it? In planning, we develop the objectives. In the controlling function, we compare actual performance against the objectives, identify any significant deviations, and take the necessary corrective action. Without planning, there would be no way to control.
Comprehensive planning is an integrative activity that seeks to maximize the total effectiveness of an organization as a system in accordance with its goals.
Planning as a Function of Management 4. Basic Steps in Planning Process:
Whether the system is an organization, department, business, project, etc., the basic planning process typically includes similar nature of activities carried out in similar sequence.
Step 1- Identify Need for Planning:
First of all need for making plans should be identified clearly. The managers should be sensitive enough to judge which area need planning. For example- falling sales of the company may alarm the managers to review and plan its sales function.
Step 2- Establish a Goal or Set of Goals:
Next step is to decide what exactly the organisation or sub-unit wants or needs in order to accomplish organizational purpose. For example- the goal of the marketing unit may be to reach a particular quantum of turnover in the given time. Identifying priorities and being specific about them enable organizations to focus their resources effectively.
Step 3- Define the Present Situation:
How far is the organization or the subunit from its goals? What resources are available for reaching the goals? Only after the current state of affairs is analyzed can plans be drawn up to chart further progress. Open lines of communication within the organisation and between its sub-units provide the information—especially financial and statistical data—necessary for this third stage.
Step 4- Identify the Aids and Barriers to the Goals:
What factors in the internal and external environments can help the organization reach its goals? What factors might create problems? Planning requires an intimate understanding of present resources (human, material, and financial), core competencies, and actual obstacles with respect to the business unit, all of which describe the current condition.
A clear vision of the desired future state with respect to its impact on the organization’s ability to overcome potential obstacles, fulfil its mission, and serve its customers, needs to be obtained.
Step 5- Develop a Plan or Set of Actions for Reaching the Goal(s):
Each Goal must be broken down into an Action Plan which has four parts to it-
(1) The WHAT – This involves tasks- although goals clarify what is to be done in organization, each goal must be broken down into specific tasks that will help to accomplish the goal.
(2) The WHO – this involves delegating – the work a leader does to identify the capabilities of each member of the team and delegate tasks to them.
(3) The WHEN – this involves scheduling- the work of putting a time factor on our programme and inserting the calendar into the programme with dates and time durations.
(4) The WITH WHAT – this involves budgeting – the application of resources (personnel, time and equipment) to help achieve the goal.
Step 6- Monitor the Progress of Plan:
After the plan is set into motion, next task is to monitor its progress. Is it leading the organization in the same direction as was perceived while planning? If not, what could be the reason?, can any change make the things better?, if yes, the planning process again starts. Monitoring is a continuous process, and is required to be done at each stage of implementation of plans, and so is the planning process.
Note that different planners might have different names for the above activities and groups them differently. However, the nature of the activities and their general sequence remains the same.
Planning as a Function of Management 5. Principles of Planning:
There is no standard set of principles, which can ensure effective planning.
However, few principles, which apply to planning in almost all the circumstances, are discussed below:
1. Principle of Contribution to Objectives:
Planning is meant to achieve the objectives of the organization. Thus it should focus attention to objectives and direct all efforts and resources to their advancement.
2. Principle of Primacy of Planning:
There are different functions of management, but planning must hold the primacy and thus occupy first place and precedes all other functions of management.
3. Principle of Planning Premises:
Planning is always based on some premises which includes forecasts of future environment, current information of environment and organization, values and assumptions of planners and owners of organization.
4. Principle of Limiting Factors:
Planning must take the limiting factors (manpower, money, machines, materials and management) into account by concentrating on them when developing alternative plans, strategies, policies, procedures and standards.
5. Principle of Commitment:
An organization should plan in the future for a period of time sufficient to fulfil the commitments of the organization. This principle helps in determining the length of the planning period. It suggests that the time period covered by planning should be related to the commitments of the organization. If the commitments are defined in terms of long-term goals, the resources should be procured and deployed on the long-term basis.
6. Principle of Flexibility:
Flexibility in the plans is required to cope with the uncertainties of the environment. However, flexibility entails costs. Thus, degree of flexibility in a plan should be decided after weighing the costs and probable benefits of the given flexibility.
7. Principle of Navigational Change:
It is the duty of the navigator to check constantly whether his ship is following the right direction in the vast ocean to reach the destination as scheduled. The navigator changes the path of ship in case it is not going on the right path. In the same way, a manager should check his plans to ensure that these are progressing as required. He should change the direction of his plans if he faces unexpected events.
Planning as a Function of Management 6. Types of Plans:
As the plans are all pervasive, they are made at every level of organization with different purposes and perspectives. Accordingly they may take various shapes and stand differently in the hierarchy of importance.
The most popular ways to describe organizational plans are by their:
1. Coverage – Strategic, tactical, and operational,
2. Time frame – Short and long term,
3. Specificity – Specific versus directional,
4. Frequency of use – Single use and standing.
Note that these planning classifications aren’t independent. For instance, short-and long- term plans are closely related to strategic and operational ones. And single-use plans typically are strategic, long term, and directional.
1. Strategic, Tactical and Operational Plans:
a. Strategic Plans:
Strategic plans are designed to meet the broad objectives of the organization – to implement the mission that provides the unique reason for organization’s existence. They are set at the top managerial level, and are meant to guide the whole organization.
An organization’s strategic plan is the starting point for planning. The aim of strategic planning is to help a company select and organize its businesses in a way that would keep the company healthy in spite of unexpected upsets occurring in any of its specific businesses or product lines.
For example- in order to deal with uncertainties of raw material availability, a company’s strategic plan may purport to acquire its own facilities for generating raw material. Strategic plan serves as a guide to the development of sound sub plans to accomplish the organizational objectives.
b. Tactical Plans:
Top level managers set the strategies that an organization should focus to achieve organizational goals. Examples of strategies include set-up a plant to generate raw material for the organization’s manufacturing activities, explore North-East market, and likewise. Middle managers interpret these strategies and develop tactical plans for their departments that follow strategies in order to contribute to the organizational goals.
In order to develop tactical plans, middle management needs detail reports (financial, operational, market, external environment). Tactical plans have shorter time frames and narrower scopes than strategic plans. Tactical planning provides the specific ideas for implementing the strategic plan. It is the process of making detailed decisions about what to do, who will do it, and how to do it.
In short, tactical plans may be understood in following terms:
1. Tactical planning deals primarily with the implementation phase of the planning process
2. Tactical planning turns strategy into reality
3. Tactical planning usually has a 1-2 year time horizon
4. Tactical planning is usually tightly integrated with the annual budget process
c. Operational Plans:
The supervisor interprets the strategic and tactical management plans as they apply to his unit. This way, he makes operational plans to support tactical plans. These plans provide the details of how the strategic plans will be accomplished. Examples of planning by supervisors include scheduling the work of employees and identifying needs for staff and resources to meet future changes. Operating plans tend to be repetitive and inflexible over the short run. Change comes only when it is obvious that plans and specific action steps are not working.
There are two main type of operational plans – Single use plans which are developed to achieve specific purposes and dissolved when these have been accomplished; standing plans are standardized approaches for handling recurring and predictable situations.
Note that Tactical plans are based on the organization’s strategic plan. In turn, operational plans are based on the organization’s tactical plans. These are specific plans that are needed for each task or supportive activity comprising the whole. Strategic, tactical, and operational planning must be accompanied by controls.
Monitoring progress or providing for follow-up is intended to ensure that plans are carried out properly and on time. Adjustments may need to be made to accommodate changes in the external and/ or internal environment of the organization.
2. Short-Range and Long-Range Plans:
Time is an important factor in planning. George Terry says, “The time period covered by planning should preferably include sufficient time to fulfil the managerial commitments involved.”
Generally a short range planning (SRP) means a plan for one or two years and long range planning (LRP) means a plan for three to five years or more. Though this division may be considered as arbitrary, but it may have a general acceptability. This period of course, may vary according to the nature and size of business.
When a concern requires long gestation period, it is natural that the long range planning may cover a longer period than five years. For example- organizations, such as oil or mining companies, or airlines must make long range planning because of their particular purposes and objectives. A home video-rental store or a book store might concentrate on seasonal or annual goals.
However, whatever the period of planning, it should not be too rigid. It should rather be flexible to meet the unknown factors of the future. If a concern adopts both short-term and long-term planning, the short-term planning should fit in with long-term planning. It is important, for managers, to understand the roles of both long range and short range planning in overall planning scheme.
3. Specific and Directional Plans:
Specific plans are established to achieve a specific purpose and dissolves when the purpose is accomplished. For example- a manager who seeks to increase his firm’s sales by 20 per cent over a given twelve-month period might establish specific procedures, budget allocations, and schedules of activities to reach that objective. These represent specific plans.
Directional plans identify general guidelines. They provide focus but do not lock managers into specific objectives or courses of action. Instead of following a specific plan to cut costs by 4 per cent and increase revenues by 6 per cent in the next six months, a directional plan might shoot for improving corporate profits by 5 to 10 per cent every year.
Intuitively it seems right that specific plans would be preferable to directional or loosely guided plans, because they have clearly defined objectives. There is no ambiguity, no problem with misunderstandings. However, in certain circumstances, like in case of fast changing environment, directional plans provide the flexibility required to cope with the changing situations.
4. Single Use and Standing Plans:
A single-use plan is a one-time plan specifically designed to meet the needs of a unique situation and created in response to non-programmed decisions that managers make.
In contrast, standing plans are ongoing plans that provide guidance for activities repeatedly performed in the organization. Standing plans are created in response to programmed decisions that managers make and include the policies, rules, and procedures.
i. Single-Use Plans:
Single-use plans are detailed courses of action that probably will not be repeated in the same form in the future. For example- a firm planning to set up a new warehouse because it is expanding rapidly will need a specific single-use plan for that project, even though it has established a number of other warehouses in the past.
It will not be able to use an existing warehouse plan, because the projected warehouse presents unique requirements of location, construction costs, labour availability, zoning restrictions, and so forth. The major types of single-use plans are programs, projects, and budgets.
A program covers a relatively large set of activities. The program shows- (1) the major steps required to reach an objective, (2) the organization unit or member responsible for each step, and (3) the order and timing of each step. The program may be accompanied by a budget or a set of budgets for the activities required.
A program may be as large in scope as placing a person on the moon or as comparatively small as improving the reading level of fourth-grade students in a school district. Whatever its scope, it will specify many activities and allocations of resources within an overall scheme that may include other single-use plans as projects and budgets.
Projects are the smaller and separate portions of programs. Each project has limited scope and distinct directives concerning assignments and time. In the warehouse example, typical projects might include the preparation of layouts, a report on labour availability, and recommendations for transferring stock from existing facilities to the new installation. Each project will become the responsibility of designated personnel who will be given specific resources and deadlines.
Budgets are statements of financial resources set aside for specific activities in a given period of time. They are primarily devices to control an organization’s activities and so are important components of programs and projects. Budgets itemize income as well as expenditures and thus provide targets for such activities as sales, departmental expenses, or new investments.
Managers often use budget development as the process by which decisions are made to commit resources to various alternative courses of action. In this sense, budgets can be considered single-use plans in their own right.
A policy is a general statement designed to guide employees’ actions in recurring situations. It establishes broad limits, provides direction, but permits some initiative and discretion on the part of the supervisor. Thus, policies are guidelines. Some policies deal with very important matters, like those requiring strict sanitary conditions where food or drugs are produced or packaged. Others may be concerned with relatively minor issues, such as the way employees dress.
Policies are usually established formally and deliberately by top managers of the organization. Policies may also emerge informally and at lower levels in the organization from a seemingly consistent set of decisions on the same subject made over a period of time.
For example- if office space is repeatedly assigned on the basis of seniority, that may become organization policy. In recent years policy has also been set by factors in the external environment—such as government agencies that issue guidelines for the organization’s activities (such as requiring certain safety standards).
A procedure is a sequence of steps or operations describing how to carry out an activity. It is more specific than a policy and establishes a customary way of handling a recurring activity. Thus, less discretion on the part of the supervisor is permissible in its application. For example- the refund department of a large discount store may have a policy of “refunds made, with a smile, on all merchandise returned within seven days of purchase.”
The procedure for all clerks who handle merchandise returned under that policy might then be a series of steps like these- (1) Smile at customer. (2) Check receipt for purchase date. (3) Check condition of merchandise … and so on. Such detailed instructions guide the employees who perform these tasks and help insure a consistent approach to a specific situation.
In day to-day operation, the procedures help in the following manner:
1. Procedures bring uniformity in performing various actions because everyone has to follow same procedure for doing actions.
2. It helps in standardizing and streamlining day to day activities to maintain smooth functioning of the organization.
3. Procedures may also help in maintaining coordination, because every employee performs similar type of activity by using prescribed procedure for it.
4. Procedures also encourage delegation of authority to lower level manager, because procedure-based activities can easily be delegated to them.
A rule is an established guide for conduct. Rules include definite things to do and not to do. There are no exceptions to the rules. An example of a rule is “No Smoking.” Managers frequently use rules when they confront a well-structured problem because they are simple to follow and ensure consistency. For example- rules about lateness and absenteeism permit supervisors to make disciplinary decisions rapidly and with a relatively high degree of fairness.
Distinction between Policies and Procedures:
The terms ‘policies’ and ‘procedures’ themselves explain their scope.
However, following are some criteria to differentiate them:
1. Basis of Formulation:
Policies are formulated on the basis of objectives of organization. Procedures are determined on the basis of work to be carried out for achieving those objectives.
2. Level of Formulation:
Policies are generally formulated by top management. Procedures are laid down at the lower level of management.
3. Comparative Status:
In the hierarchy of plans, policies occupy higher place. Procedures occupy lower place as compared to policies.
4. Focus Area:
Policies deal with functional aspects of management. Procedures deal with operational or administrative aspect of management.
5. Detailing of Instructions:
Policies are general statements which provide guidance to managers in decision making. Procedures are regarded as a detailed guidelines for performing activities.
Policies are broad based providing a scope to the manager for using his skill and experience. Procedures are rigid and leave no scope for personal judgment.
7. Need of Skill in Application:
Policies encourage initiative of the managers, because they get opportunity for using their skill, experience and knowledge and personal judgment. Procedures do not help in developing initiative among the employees, because they do not leave scope for personal judgment.
Control-a process which ensures that actual performance is in conformity with planned performance, draws important link between planning and control. Planning frames organisational goals and objectives. For effective implementation of plans and achievement of these goals, organisation structure is designed, various official positions are staffed with people and training, motivation and leadership facilities are provided to them.
Once the implementation process starts, workers initiate the production activities. In doing so, they face problems which are solved by the supervisors or go unnoticed. The problems that go unnoticed may accumulate into major problems later on and endanger the entire planning process. This may mean-starting from the scratch.
All physical, human, financial and information resources which were used in framing the plans go waste, production schedules are disturbed, companies may lose markets, labour turnover rate may become very high, companies may, in fact, retrench the work force; the worst is, the company can go into liquidation.
To save enterprises from these problems, managers continuously watch the organisational activities to ensure that things planned are actually happening. There is constant follow up of planned activities to make things happen according to plans. “It means we must invest in developing a system for monitoring deviations from plans when they are occurring so that adjustments and corrective actions can be taken.”
Planning as a Function of Management 7. Features of a Good Plan:
A sound plan has the following features:
A good plan integrates short-term requirements of the firm with the long- term requirements. Plans (short-term and long-term) should be oriented towards the overall organisational goals.
2. Market Research:
Planners should conduct market research before they frame plans. “What potential customers say they are going to do and what they end up doing may be two different things?” Plans should forecast market requirements through a well conducted market research.
3. Economy/Financial constraints:
A plan which relies too heavily on financial budgets may turn out to be a failure if the revenues do not arise as expected. Once the budgetary balance is disturbed, subsequent operations may get affected as plan is a sequence of cause and effect relationships. If it becomes imperfect, it can lead to cumulative problems. Future costs and benefits should be carefully analysed while designing organisational plans.
A sound plan should co-ordinate working of all the functional areas. If functional plans (or departmental plans) are not synchronised with organisational plans, organisation will fail to achieve its goals.
Plans should be followed for a fairly long of time. Frequent modifications/ alterations in plans by higher authorities can make their implementation ineffective at lower levels.
Though consistent, plans should adjust (flexible) to environmental changes.
Best laid plans may turn out to be failures if they are not implemented effectively. Plans should be acceptable to those who frame them and also to those who implement them.
The acceptability of plans increases if subordinates participate in the planning process. Many organisations follow the principle of participation in planning. Managers invite ideas/suggestions from people of different departments at different levels and finalise the plans. The practice of participative planning promotes good ideas and creates personal obligation on subordinates to achieve the planned targets. It, however, allows managers to retain control over the planning activities.
9. Clear Objectives:
Plans should be oriented towards objectives. Clear, specific and attainable objectives result in sound and effective plans.
10. Based on Planning Premises:
Since plans achieve a goal in future, they should be based on accurate forecasts and predictions about future events. Planning premises provide a basis for making future oriented plans.
11. Effective Communication System:
Framing and implementing plans requires interaction of managers at all levels with people inside and outside the organisation. A sound plan is based on well-designed communication system present in the organisation.
Planning as a Function of Management 8. Relationship between Planning and Control:
Planning is the first managerial function of initiating action followed by organising and directing people and resources to get the organisational work done and controlling is the last function which ensures that actions have actually helped in the attainment of organisational goals. Planning starts the process of management and controlling completes that process.
Controlling function is directly related to planning; managers monitor the results to ensure achievement of targets laid in the plans. Control reveals deficiency in plans and leads to revision of plans. Controlling provides feedback to the plans by pointing exceptions or variations in the planned performance. It is largely the exceptional cases that are brought to the notice of managers so that future plans can be altered.
Control is not possible unless plans are made. Similarly, planning is not possible unless control system checks deviations in the performance. Planning and controlling are, therefore, inter-connected. While planning provides basis for controlling, controlling provides the basis for planning. Rest of the managerial functions-organising, staffing and directing are intermediate and performed according to plans.
Control function evaluates the present and takes actions to regulate the future. It prevents occurrence of undesirable actions in future. Control is, thus, both looking back and looking ahead. It reviews the past actions and takes corrective actions for failures. It avoids occurrence of undesirable events in future by taking lessons from the past. The events which have already taken place, however, cannot be corrected unless corrected at the feed forward or concurrent stages of control.
The relationship between planning and controlling can be concluded as follows:
1. Planning identifies actions and controlling ensures that actions are carried out.
2. Poor control system is followed by failure of plans and effective control system reinforces the plans.
3. Controlling helps in revising the plans or abandoning them altogether and making fresh plans.
4. Framing plans presumes existence of a well-designed control system and controlling function presumes existence of plans achievable within the constraints of human and non-human resources.
Planning as a Function of Management 9. Importance of Planning:
Planning is important for the organisation to survive and grow in the dynamic, changing environment.
It is important to plan because of the following reasons:
1. Achievement of Organisational Objectives:
Planning helps the organisation achieve its objectives. Planning provides the path for achievement of organisational goals with minimum waste of time, money and energy. It bridges the gap between where we are and where we want to go. It ensures optimum utilisation of time and money.
2. Fulfilment of Organisational Commitments:
Organisations have a long-term and short- term commitments towards the society depending on their nature. A defence organisation, for example, has long-run commitments while a retailer is more interested in short-term goals or responsibilities. These commitments can be fulfilled through planning.
3. Facilitates Decision-Making:
Decision-making is deciding what to do when managers face a problem-solving situation and adopting the best way of doing out of the various courses/ways of doing it.
It is “the process of choosing a course of action from two or more alternatives.”
Managers have to make decisions like – what to produce and how to produce, what are the organisational resources and how can they be effectively allocated over different functional areas, what are their primary goals — profit or social responsibility. Planning helps to decide a course of action that will solve the specific problem. Planning is the basis for making decisions – present and future.
4. Provides Stability to Organisations:
Organisations plan their business operations to ensure stability in the changing environment. Managers foresee uncertainties and prepare the organisations to face them when they occur.
5. Overall View of the Organisation/Coordination:
Organisation is a structure of relationships where authority and responsibility of each person are clearly defined.
Planning coordinates the functions performed by individual human beings and departments and unifies them into a single goal — the organisational goal. It also coordinates the organisation’s internal environment with its external environment; human, physical and financial resources and organisational activities at various levels.
6. Optimum Utilisation of Resources/Efficiency of Operations:
Organisations work with limited resources. Planning allocates resources over different objectives and functional areas (production, personnel, finance and marketing) in the order of priority. This results in optimum utilisation of scarce resources (men, material, money etc.) and their effective conversion into productive outputs. Efficiency promotes business success and avoids the chances of failure.
7. Development of Managers:
Planning involves imagination, thought and creativity by managers. While planning, managers develop their conceptual and analytical skills to coordinate organisational activities with the external environment.
8. Promotes Innovation/Creativity:
Planning involves forecasting. Managers foresee environmental opportunities, analyse the strengths of competitors and think of new and innovative ways to promote their products. Planning promotes new ideas, new products, new relationships and, thus, innovation and creativity.
9. Basis for Control:
Planning provides standards of performance and control ensures that the standards are achieved. Controlling involves measurement of performance, its comparison with standard performance, finding deviations and taking steps to remove the deviations to make better plans in future. Unless there are plans, there will be no control. Planning, thus, provides the basis for control.
10. Reduces Risk:
Risk is a situation where incomplete but moderately reliable information is available about future. Uncertainty is a situation where no information is available about future. Changes in government policies is a situation of uncertainty while competitors entering the market with better technology represents a situation of risk. Planning reduces risk through forecasting.
It predicts future and discounts it to the present and enables the organisation to exploit environmental opportunities and overcome threats. It enables the organisations to operate in the complex environment of rapid technological changes, international competition, changing interests of business stakeholders etc.
11. Morale Boost Up:
If organisational plans succeed and goals are achieved successfully, managers and employees feel a sense of achievement and they feel morally committed to concentrate on organisational activities. Successful planning, thus, promotes success of the organisation.
12. Facilitates Delegation:
Good and well-designed plans enable managers to concentrate on strategic issues and delegate routine/operating activities to lower level managers. It, thus, facilitates delegation.
Planning as a Function of Management 10. Advantages of Planning:
Now, after discussing the purposes, process of planning, and various types of plans, let us have a look at the advantages which can be derived from planning-
1. Planning helps to clarify objectives:
Planning focuses the attention of all people on the goals to be achieved. Such focus helps to give meaning and direction to activities, provide basis for determining effectiveness of activities, identify an individual’s efforts with corporate aims and coordinate with efforts of other individuals.
2. Planning enables organization to adapt to uncertainty and change:
We live in a world of uncertainty and rapid change. To continue doing things as if the conditions of the past will continue in future would be disastrous. Planning does not reduce the uncertainty of the future but it increases one’s readiness to meet it.
3. It enables choice:
By trying to become aware of the situation in the future, the planning process enables one to make a choice on the kind of position one would like to be in, instead of being caught unawares by an unanticipated future and forced into a position, which one does not like.
4. Planning gives competitive strength:
Study of what goes on in the environment is necessary for planning. In this process, the planner becomes aware of the market situation, customer expectations, new technology and products as well as of utilisation of resources. Planning suggests ways to produce more attractive outputs, thus becoming more competition helps to gain economical operations.
5. Planning enables resource allocation:
Resources are scarce. Operational departments will vie with each other to obtain available resources. A proper plan which relates objectives (to attain) with resource requirements helps judicious allocation.
6. Planning ensures economy:
It prevents wastage of men, money, machines, methods, materials, etc., by choosing the best course of action from many alternatives. Moreover, it secures consistency and joint efforts instead of individual piecemeal activity. It aims at replacing uneven flow of work by even flow of work. All these steps in planning leads automatically to economy.
7. It gives rise to efficient and coordinated efforts:
Individuals in an enterprise may differ in their outlook. But planning is done with an agreement upon certain basic factors and is designed to channellise decision-making towards unified objectives.
8. It helps in the performance of other functions:
It precedes the performance of all other functions of management like organizing, directing, staffing, and controlling.
9. It helps to facilitate control:
To control is to ensure that what is intended is achieved. Therefore, it is necessary to know beforehand what is intended. Planning clarifies intentions and thereby helps control.
11. Limitations to Planning:
Planning cannot be considered as all efficient in all circumstances.
It entails its own limitations:
1. Planning is an expensive and time consuming process:
Planning involves significant amount of money, time and also risk, without any assurance of the fulfilment of the organizational objectives.
2. Planning curbs the initiative of the manager:
Planning restricts the manager to make use of the most rational and risk free opportunities. It forces him to operate within the limits set by it.
3. Plans involve an element of uncertainty:
Plans are made to be implemented in future. The future environment is uncertain and is resistible to change. It can hardly be predicted accurately.
4. Planning beforehand is not always beneficial:
In case of the industries dealing in rapidly changing product, like industries producing fashionable article, working on a day to day basis is more economical than on plan basis.
5. Planning provides a false sense of security:
With the readymade plans the managers feel secure and certain in handling the affairs of the organization. In practice there may be events which occur suddenly for which there is no plan directive.
6. Planning delays action:
Planning is a lengthy process and the managers have to move from one stage to another systematically for preparing plan. The whole exercise takes a long time. This may give you adverse results specially when urgent action is needed.
7. Limitation of managers to plan:
In order to make plan, many intellectual activities including analysis, use of creativity, imagination and farsightedness are to be performed. But every manager may not necessarily possess these abilities, which put limitations on his part for preparing plans.
8. Planning cannot be viewed in isolation:
Planning by itself is not enough. Managers have to link up planning with other process, like organizing leadership communication, motivation, control and so on. For example budgets made as financial plans are useful only when organization strive to adhere the budgetary limit, and use the budgeted figures as standard for control.
However, these limitations do not undermine the need for planning. Planning is inevitable for organization success.
Planning as a Function of Management 12. Barriers to Planning:
Given the understanding that planning is basic managerial function, and can lead to efficient realization of organizational goals, we must understand that making effective plans is not easy and smooth process. Several barriers exist to effective goal setting and planning.
1. Inappropriate Goals:
Goal setting is the essential first step in planning. Managers who are unable to set meaningful goals will be unable to make meaningful plans. There may be several reasons why inappropriate goals may be set, like lack of organizational and environmental knowledge.
2. A Dynamic and Complex Environment:
Planning essentially requires forecasting. And forecasting needs assessment of future environment. A dynamic and complex environment makes this task very difficult and prone to errors.
3. Reluctance to Establish Goals:
There are a number of reasons why some managers hesitate – or fails entirely – to set goals for their organization or subunits.
Some of these are—
i. Unwillingness to give up alternative goals – At times we may be reluctant to make a firm commitment to one goal because it would require that other choices be foregone.
ii. Fear of failure – The fear of failure keeps some managers from taking necessary risks and establishing specific goals.
iii. Lack of information – A manager whose information network is underdeveloped or faulty would avoid to make new plans and like to stick to already established plans.
iv. Lack of confidence – If managers lack confidence in themselves or the organization, they will hesitate to establish challenging goals.
4. Resistance to Change:
At times there is a general reluctance in organization members to accept planning and plans because of the changes they bring.
There are three major reasons why organizational members may resist change:
i. Uncertainty about the causes and effects of change
ii. Unwillingness to give up existing benefits
iii. Awareness of weaknesses in the changes proposed
Thus, most people have some fear of the unknown, as well as – some interest in preserving the status quo if it has proved workable in the past. And, on some occasions, they quite accurately perceive important errors in the plan.
5. Other Constraints:
There may be many other constraints like, attitude of owner- managers towards planning, lack of consensus on planning issues because of communication gaps, managerial conflicts, lack of understanding the real perspective of the organization, and likewise.
Most of the barriers to effective planning can be done away with the conscious efforts.
Some of the methods used to overcome the planning barriers are discussed below:
1. Understanding the Organizational Perspective Clearly:
The purpose of an organization should be very clear and be communicated clearly to every member of the organization.
2. Understanding the Purposes and Process and Plans:
Provide more information to employees about plans and their probable consequences so that they will understand the need for change, the expected benefits, and what is required for effective implementation.
3. Setting Realistic Goals:
Fear of failure and lack of confidence are also reduced by setting realistic goals and achieving them. The individual’s immediate superior plays a key role in creating a climate in which difficult but attainable goals will be set. Providing training and guidance in ways to achieve such goals is one important step.
4. Develop a Good Information Network:
Sound information base helps in promoting effective planning.
Effective and well communicative systems of planning help in bringing consensus on planning issues and do away with the misconceptions.
Involve employees and other concerned groups, including stakeholders, in the planning process. One particularly useful technique for managing goal setting and planning is formal goal setting, a process of collaborative goal setting and planning.
The basic need to plan effectively is conscious and coordinated efforts towards it. The barriers, once identified can be tackled.