Planning is the primary function of management. Its purpose is to ensure optimum utilisation of human and economic resources in the business processes. It precedes all other activities of the business undertaking.
It is the process of charting out the path for attaining the ultimate purpose of business operations by outlining the sequence of events forecast with reasonable degree of certainty.
Planning in Management: Intro, Meaning, Concept and Other Details
- Introduction to Planning
- Meaning and Definition of Planning
- Concept of Planning
- Characteristics of Planning
- Steps Taken for Planning
- Planning is Looking Ahead and Control is Looking Backward
- Types of Planning
- Importance of Planning
- Limitations of Planning
- Suggestions for Planning
# 1. Introduction to Planning:
Planning is the primary function of management. Its purpose is to ensure optimum utilisation of human and economic resources in the business processes. It precedes all other activities of the business undertaking.
It is the process of charting out the path for attaining the ultimate purpose of business operations by outlining the sequence of events forecast with reasonable degree of certainty. It involves not only anticipating the consequences of decisions but also predicting events that may have effects on a business.
Thus planning is deciding in the present what to do in the future. It directs efforts and resources of an enterprise toward the common objectives. In the words’ of Drucker, “Planning function of management is the continuous process of making present entrepreneurial (risk-taking) decisions systematically and with the best possible knowledge of their futurity, organising systematically the efforts needed to carry out these decisions, and measuring the results of these decisions against the expectations through organised systematic feedback.”
Planning requires both creativity and analysis in defining business opportunities and constraints. Hence it is called the art of the possible. It is the process of guiding the business enterprise toward clearly specified objectives with the clearest possible view of the future. Deciding what is desired and determining the actions required are both involved in planning.
Hence it is known as the process of matching the resources with opportunities. Also, it is a future oriented activity. It specifies in detail what will be done, by whom, with what and when to achieve the objective of the undertaking. It should be noted that planning is not a “blue print” of future operations. It is basically a problem of choosing.
The essentials of planning lie in the provision of integrated decision-structure for an undertaking as a whole. It demands thinking of shaping the future of the undertaking instead of expecting the organisations to adapt to a future as shaped by directionless forces. It is in this sense that planning is the determination of desired results and the ways and means to achieve them.
# 2. Meaning and Definition of Planning:
Planning decides in advance as to what is to be done and how it is to be done.
When it is to be done and who is to do? Planning decides as to where to start and where to reach? Planning is an intellectual process. It includes thinking before acting. So it is essential for management.
Some important definitions of planning are as follows:
According to Theo Haimann, “Planning is deciding in advance what is to be done. When a manager plans, he projects a course of action for the future, attempting to achieve a consistent, co-ordinated structure of operations aimed at the desired results.”
According to George R. Terry, “It is the selecting and relating of facts and the making and using of assumption regarding the future, in the visualisation and formulation of proposed activities believed necessary to achieve desired results.”
According to Alford and Beatty, “Planning is the thinking process, the organised foresight, the vision based on fact and experience that is required for intelligent action.”
According to Louis A. Allen, Management planning involves the development of forecasts, objectives, policies, programmes, procedures, schedules and budgets.
According to Koontz and O’Donnell, “Planning is an intellectual process, the conscious determination of courses of action, the basing of decisions on purpose, facts and considered estimates.”
In conclusion we may define planning as “the thinking process, the organised foresight, the vision based on fact and experience that is required for intelligent action.” It is careful scheduling of efforts and investment, and the integrated mix of men, machines, money and effort to achieve an established objective by a given time in future.
Planning involves the following steps:
1. The determination of objectives of the enterprise.
2. The undertaking of research to understand the problems likely to be encountered in achieving these objectives.
3. The discovery of alternative solutions to such problems.
4. Choosing between different alternatives—making policy.
5. Execution in detail of the alternative programme of action.
# 3. Concept of Planning:
Leaders in every organisation perceive and understand the goals of the organisation and determine how to make them a reality. That is, they must determine the line of action to achieve the desired goals.
In a way planning seeks to answer multitude of the questions:
What should be done?
Why is action necessary?
Where shall it be done?
How shall it be done?
Who will do it?
What physical resources will be required?
Thus, planning is deliberate and conscious research used to formulate the design and orderly sequence of actions through which it is expected to help reach its objectives.
Planning chalks out a course of action for the enterprise to follow. Thus, it is a process whose result (the plan) must answer all questions that have been raised above. It means that planning involves anticipation of future course of events. It is a process of thinking before doing.
It leads to the determination of objectives and steps necessary to achieve them.
# 4. Characteristics of Planning:
For the nature or characteristics of features of planning the following points should be noted:
i. Primacy of Planning:
Planning precedes all other managerial functions. It is nothing but logical, because the functions of organising, staffing, directing and control are concerned with the accomplishment of the objectives of the business undertaking. Planning functions occupy a unique position of primacy because it is concerned with the establishment of the objectives necessary for all group efforts.
ii. Pervasiveness of Planning:
Managers at all levels of organisation perform the planning function. No doubt, the character and breadth of planning varies with the authority delegated to managers at different levels and with the nature of policies and plans outlined by their superiors. ‘One manager may do more planning or more important planning’ than another manager.
Similarly, planning by one manager may be more basic and applicable to a larger area of the business undertaking than that of another, this all will depend upon the authority delegated to him or the position in the organisation occupied by him. But planning is a function of every manager. All managers, right from the president to foremen perform the function of planning.
iii. Planning is Directed towards Efficiency:
A good plan is a course of action expected to give optimum return at the minimum costs. The efficiency of a plan is measured by the amount of its contribution to the purpose and objectives as against the costs and other unwanted effects involved in the formulation and operation of the plan.
This concept of efficiency takes into consideration not only the output and costs in terms of rupees, man-hours of units of production but also the overall individual and group satisfaction.
iv. Planning is an Intellectual Process:
Planning is essentially an intelligent synthesis of present knowledge and previous experience. Planner has to choose from among alternative courses of action the most suitable one to achieve an objective. For this purpose, the manager developing a plan has to depend on his ‘knowledge’ and ‘know-how’.
‘Knowledge’ here, refers to some basic body of principles, points of view, general methods of solving a problem, and other background information related to the solution of certain general classes of problems.
‘Know-how’ is the body of facts and skills which are acquired from practical experience in solving specific difficulties. Usually, it cannot be acquired from books.
A manager has to integrate his intelligence, knowledge, know-how and facts in developing a business plan.
v. Planning is Goal-Oriented:
The purpose of every plan and all derivative plans is to facilitate the accomplishment of the purpose and objectives of the business undertaking. Plans focus attention on objectives. They forecast which actions will lead to the ultimate objective. “Managerial planning seeks to achieve a consistent, coordinated structure of operations focused on desired end.”
vi. Planning is Futuristic:
Planning is primarily concerned with looking into future. It necessitates accurate forecasting of future situations and requirements in order to chalk out a rational path to tackle future situations. This involves taking into consideration correct and prospective resources of the business and make a systematic effort to look into future. Thus, planning can be termed as ‘forward looking’ in nature.
vii. Planning Involves Choice:
Planning involves selection of best alternatives. Good planning must be realistic and precise as far as the selection of the most appropriate course of action is concerned. Planning is a decision making activity which has evolved due to the existence of various alternatives available and the need to evaluate and select the most suitable alternative.
viii. Planning is a Flexible and a Continuous Process:
Planning is flexible, as it is based on future conditions which are always dynamic. Consequently, planning cannot be executed on the basis of a rigid framework. In fact, there should be enough scope for revaluation and review according to changes in conditions in order to make planning more effective.
Its importance is explained under the following heads:
Planning is a continuous activity, as execution of one plan will be followed by another plan being undertaken to meet the challenges of the dynamic business environment. The management cannot plan once for all. There is always a need for continuous revision of old plans and implementation of new ones.
# 5. Steps Taken for Planning:
i. Establishing Objectives:
The first step in planning is the statement of objectives to be achieved by the concern. It should be known to every member of the concern as to what are its purposes and objectives. Objectives indicate what basically is to be done. Where the preliminary stress is to be placed and what is to be accomplished by the network of policies, procedures, rules, strategies, budgets and programmes.
ii. Establishing Planning Premises:
It is to establish, obtain agreement to use and disseminate critical planning premises. There are forecast data of a factual nature, applicable basic policies and existing company plans. Premises then are planning assumptions, the future setting in which planning takes place in other words, the environment of plans.
iii. Determining Alternative Courses:
In planning it is to search for and examine alternative courses of action especially those not immediately clear. There is seldom a plan for which reasonable alternatives do not exist.
iv. Evaluating Alternative Courses:
Having sought out alternative courses and examined their strong and weak points the other step is to evaluate them by weighing the various factors in the light of premises and objectives.
v. Selection from the Alternatives:
Selecting the course of action, is the point at which plan is adopted … the real point of decision making. An analysis and evaluation of alternative courses will disclose that two or more courses are available, and the manager may decide to follow several courses rather than one best course.
vi. Formulation of Derivative Plans:
As soon as the best programme is decided upon, the next task is to work out its details, formulate the steps in full service to break it down for each section or department, for each product and component of a product and for each month, quarter, week ultimately, the manager will get the final plan of action in concrete terms.
vii. Effective Communication of Plans:
It is necessary that the plans are properly and effectively communicated to all the managers concerned.
Efficient management is always managed by objectives. Objectives are the ends towards which all management activities are directed. They constitute the purpose of the enterprise, and without them no intelligent planning can take place. An organisation can grow and change in an orderly and progressive manner only if well defined goals have been established to guide its progress.
Objectives may be short-term or long-term. In the short term an enterprise may concentrate more on satisfying customers with good products at cheap rate, keeping in view the long-term objective of maximum profit.
Policies are guides to action. They give a broad guide as to how objectives of an enterprise are to be achieved. While objectives provide the aim which a manager tries to attain, the policies provide the guidelines that will help him in attainment of aims. A policy can be defined in the following manner.
“A policy is a guiding decision by the management that guides the organisation to deal with a particular manner.”
An industrial policy is a code or general rule that states the established procedure to follow in a recurring situation. A particular policy may be of great importance in one situation, may be disregarded in another.
A policy should be:
1. Flexible in application’
2. Subject to change and improvement, and
3. Subject to enforcement to be effective.
Procedures prescribe the manner or method by which work is to be done. Procedures like the policies are also plans but procedures are more specific. They provide us the chronological order of acts to be performed. Policies always set an objective or the limits in area of action, while procedures fix a path toward the objective or through the area.
Once the procedure is established, it ensures an uniformly high level of work. If properly prepared, the procedure constitutes a useful outline for developing people. Since the procedure establishes a uniform method of doing work applicable to all departments, it can help to eliminate friction and disagreements between departments. Procedures make for closer co-ordination.
Budget is a plan relating to a period of time, expressed in numerical terms. Budget may be expressed in terms of money, time, materials of other units needed to perform work and accomplish specified results. Budgets are necessary for control but they cannot serve as sensible standards of control unless they reflect plans.
Strategies may be regarded as interpretative planning or plans made in the light of the plans of a competitor. If a manager develops plans without regard to what his competitors are doing, he may find that even sound projections will go astray.
Strategies are of two types:
(a) Competitive strategies which take into account the plans and programmes of the rivals in the market.
(b) Grand strategies which are designed to change the size and character of business over a period of time.
Programme is a sequence of activities in a proper orderly way. It is designed to use policies in practice and accomplish objectives. It provides an approach, systematically item wise to guide the action needed to achieve a predetermined objectives.
They must be closely integrated with objectives. They may be combined with budgets. Schedules are often combined with programmes to provide a chronological sequence of activities.
# 6. Planning is Looking Ahead and Control is Looking Backward:
Yes, it is true to say that planning is looking ahead and control is looking back.
To plan really means to look ahead in the future. It stands for determining the course of action to be pursued to achieve the desired goals. It implies an orderly approach to the task in hand. In the words of Koontz and O’Donnel: “In the absence of proper planning business decisions would become just random and ad hoc choices.”
Without planning if one goes, it is just like a pilot flying a plane without having in mind as to where he has to go. Planning further takes care of the future uncertainty. Good management is always one which is by objectives.
By planning, manager is focused on the formulation of the policies or objectives. This then compels him to decide in clear-cut terms to chalk out a course of action to be pursued for the accomplishment of the enterprise ‘objectives’. Planning rests on thinking before acting. So truly planning is looking ahead.
Further, control-as another managerial function—really means looking back as it stands for “measurement of accomplishment against the standards laid earlier in the plans”. Fundamentally, control is the activity that guides activity towards some pre-Determined goal. Thus, control means “comparing operation results with the plans and taking corrective action when results deviate from the plans”.
In the context of the control process a manager’s role is to make plans, make all the preparations for putting into effect, order actions, and then keep a watch on the way the things proceed. Deviation found anywhere should be corrected. In this sense, therefore, the entire control process is looking back.
# 7. Types of Planning:
Planning may be of different types.
According to the nature of planning, some of its important types may be discussed as below:
i. Financial or Non-Financial Planning:
Every plan has a monetary side. In fact, planning has no significance if proper attention is not given to the monetary resources of the concern. Financial plans relate to the monetary side of a concern.
They help a lot in bringing to light not only the financial position of a concern, but also the resources where from money can be borrowed. Plans relating to the physical resources of a concern may be termed as non-financial or non-cash plans. These are equally important for the smooth running of an enterprise.
ii. Formal and Informal Planning:
Mere thinking is informal planning. But when the plans are reduced to black and white, they become formal. Formal plans are more than just talk put on paper. For the success of an enterprise, it is advisable that the planning should be formal and not informal. Formal planning facilitates adequate control and pinpoints the weaknesses, if any.
iii. Specific or Routine Planning:
Any plan for a particular purpose is known as ‘specific planning’, but that which is mechanical may be termed as ‘routine planning.’ In routine planning, the methods adopted for accomplishing a particular object, and during a particular period, are the same without any major change. Methods are merely repeated under a planned programmed. Routing does not require any ingenuity or creativity on the part of the planners.
iv. Profit Planning:
The principal object of every business is to earn profit. Thus, specific efforts in this regard may relate to ‘profit planning’. Profit planning is generally based on forecast, and therefore, to get profit, certain steps must be taken, duties must be assigned and the future forecasted in such a way as to get the object fulfilled. Profit planning helps the management in attaining higher level of profit.
Under this plan, different activities are integrated and hence people do not feel that they are serving merely for earning profit. Like other plans, profit plans provide intermediate check points enabling the management to appraise the progress made towards pre-determined goals.
v. Short and Long-Range Planning:
The definition of long-range and short- range planning depends on the manager’s level in the organisational hierarchy, on the type of business, the kind of industry in which the firm is engaged, the production cycle, the quality of managerial practices and many other factors.
Ordinarily, short- range planning can be defined as planning which covers a period from six to twelve months. Long-range planning usually involves time interval of three to five years.
In recent years, however, there has been an increasing trend for many firms to plan for five, ten or even twenty years ahead. Thus, planning anywhere from one to five years is often considered planning for an intermediate period, whereas anything from five years upward is properly considered as long-range planning. It is necessary that long-range planning and short-range planning be integrated and co-ordinated.
# 8. Importance of Planning:
i. Planning Helps in Achieving Objectives:
Good and effective management is management by objectives. By focusing attention on organisational goals, planning assists the management to coordinate the resources of organisation more efficiently. It also enables the manager to chalk out in advance a “blue print” of sequence of action to be pursued for realization organisational goals and to avoid needless overlapping of activities.
ii. Planning Minimises Risk & Uncertainty:
By providing a rational procedure for making decisions and accurate forecasting, planning assists the management, and organisations in minimising risk and uncertainty arising out of future events.
Systematic planning helps to predict and deal with future contingencies, thus enabling the management to cope the challenges of a dynamic and ever changing environment. Constructive planning minimises the dangers and risks of future losses to be suffered on account of insufficient information and lack of direction and foresightedness.
iii. Planning Facilitates Control:
Planning involves setting of goals which become standard against which actual performance can be measured and evaluated. The function of controlling is to ensure that the activities conform to the plans. Thus, effective controlling is not possible without meaningful planning which serves as the basis to monitor, measure, evaluate and control achievement of organisational objectives.
iv. Planning Helps in Securing Effective Coordination:
Planning determines the course of activities of different units of organisation in such a way that minimum co-ordination between physical and human resources is achieved. When various departments in an organisation work in accordance with an overall plan, harmony and co-ordination is achieved. It can be said that if co-ordination is essence for management, planning is the base for it.
v. Planning Leads to Economy in Operation:
Planning is a mental exercise which involves selection of best possible course of action. On one hand it ensures optimum utilisation of scarce resources at minimum cost and on the other hand eliminates duplication and overlapping of efforts. By replacing confusion and disorder with co-operation and co-ordination planning helps in channelising the energies towards efficiency in operations.
vi Planning Facilitates Decision-Making:
A plan cannot be said to exist unless a decision relating to utilisation of resources, direction of future course of events and choosing the best alternative has not been made.
Decision-making which can be defined as the selection of a course of action from different available alternatives can be identified as core of planning. Planning facilitates the process of decision-making by allowing the managers the freedom to make choice in evaluation and selection of the best alternatives in relation to the set targets.
vii. Planning Promotes Creativity:
Management being an art, provides the managers the opportunity to suggest ways and means in achieving higher targets. Sound planning induces creative thinking and action amongst the employees to avail the available opportunities in such a way that novel ideas, methods and techniques emerge leading to growth and prosperity of the organisation.
viii. Planning Improves Morale and Motivation:
Planning makes a systematic arrangement for disposal of financial and non- financial benefits to the workers of employees. Thus, meeting their emotional and psychological needs. It also enhances their morale by creating a consistent work environment aimed at achievement of organisational goals.
# 9. Limitations of Planning:
The main limitations of planning are given below:
i. It has been thought as a time-consuming and expensive device. The framing of plans involves money, energy and also, risk without giving any guarantee as to the realisation of assured goals.
ii. Smaller business concerns which are short of capital and which expect quick results cannot afford to have a planning programme.
iii. It leads to possible results and not assured gains.
iv. It makes the entire organisational set-up rigid.
v. Forecasting methods, statistical data supplied are all inaccurate and the results of operations research cannot be applied to all cases that come under planning.
# 10. Suggestions for Planning:
To avoid the failure of planning, the following suggestions should be put forth:
i. Serial planning should be avoided, if possible.
ii. Don’t wait to start the second stage of planning until the first stage is finished.
iii. Try to have parallel planning with lots of cross-checking.
iv. All plans should move forward at the same time.