PLANNING

Business organisations make long-term, medium-term and short-term plans

depending upon the nature of their operations. Manufacturing units make more
of long-term plans while retailers engage more in short-term planning.

Planning involves forecasting, framing objectives of the firm, thinking of different

courses of action and deciding the best course of action to achieve the goals.
Planning, thus, involves decision making, that is, deciding a course of action for
framing and achieving objectives.

Koontz and Weihrich:

“Planning involves selecting missions and objectives and the actions to achieve
them; it requires decision-making, that is, choosing from alternative future course
of action. Plans, thus, provide a rational approach to achieving pre-selected
objectives.”

Features of Planning:
Planning is characterised by the following features:
1. Primary function of management:
Planning is the first function of management. All other functions follow planning.
If planning is wrong, organisation structures will be faulty, people will carry out
wrong plans, motivation and leadership policies will be ineffective and controls
will also aim to achieve faulty plans. This will result in huge losses for the
organisation.

2. Adaptive to environment:
Planning is a continuous process. It is done so that organisations can survive in the
changing environment. Managers incorporate changes in environment like
competitors’ policies, consumers’ tastes, economic policies, value system of the
society in their plans and planning is, thus, adaptive to environment.

3. Future oriented:
Planning is looking ahead. It fills the gap between where we are and where we
want to go. It prepares organisations to meet future challenges and opportunities.
Future being uncertain, managers adopt scientific methods of forecasting. They
anticipate future and incorporate changes in their activities to achieve
organisational goals effectively. Correct forecasting helps in making sound
business decisions.

4. Goal oriented:
Planning is done to achieve the desired goals. Planning is, thus, goal oriented. It
clearly lays down the goals and ways to achieve them.

5. Pervasive:
Planning is a pervasive function. It is done for all organisations – business and
non-business, profitable and non-profitable, small and big. In a business
organisation, it is done at each level; top, middle and low. The nature and scope
of planning, however, is different at different levels; top managers plan for the
organisation as a whole, middle level managers plan for their departments and
lower level managers plan for their operating units.

6. Intellectual process:
Planning is a complex process. Managers cannot plan unless they analyse the
past, present and future environment. It is difficult to predict future as it keeps
changing. Managers have to conceptually and analytically excel in making plans
that can be implemented. They should have judgement, intuition,
foresightedness, imagination etc. to make good plans. Planning, thus, cannot be
done in dark. It is an intellectual process.

7. Efficient:
Efficient means cost effective. Time and money are spent on planning to earn
gains in future. A trade off is maintained (comparison between cost and returns)
and managers ensure that expected gains are more than the current costs.
Efficiency means “the achievement of the ends with the least amount of
resources.”

8. Flexible:
Planning relates to future. Future being uncertain, plans will fail to achieve the
objectives if unexpected changes take place in future. Managers have to be quick
in changing their plans so that future changes do not fail the plans. Planning is,
thus, a flexible activity.
9. Planning and decision-making:
Planning involves decision making. Choosing goals out of multiple goals, deciding
about ways to achieve them out of a number of alternatives, deciding about
sources from where funds will be raised, deciding about optimum allocation of
resources over different goals and departments etc. are some of the choices that
managers make to run an organisation effectively. Planning continuously involves
decision-making. In fact, the process of decision-making starts much before the
process of planning.

.10. Feedback:

Planning is closely related to control. It specifies future actions and control

ensures those actions are carried out. Planning frames organisational goals and
control ensures those goals are achieved. Controlling function provides constant
feedback about the efficacy of plans. Deviations (if any) in actual performance
against planned performance helps in reviewing or abandoning plans to make
fresh plans.

Importance/Objectives of Planning:
Planning is important because it enables the organisation to survive and grow in
the dynamic, changing environment. Planning is the basis of distinction between
the successful and unsuccessful organisations. In the dynamic environment,
planning helps in scanning the environmental changes and forecasting the future.

It is important to plan because of the following reasons:

1. Achievement of organisational objectives:
Planning helps the organisation to 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.

2. Fulfillment of organisational commitments:

Organisations have long-term and short-term commitments towards 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 or goals of the organisation can be fulfilled
through planning.
3. It facilitates decision making:
Decision-making is deciding what to do when managers face a problem-solving
situation and adopting the best way out of the available 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 and many more. Planning helps to decide a course of action that
will solve the specific problem.

4. It provides stability to organisations:

Organisations that plan their operations are more stable than others. Managers
foresee risk and prepare the organisations to face them when they occur.
Planning precedes all other managerial functions and coordinates them for
providing stability to the organisation.

Planning before organising (what kind of organisation structure), planning before

staffing (what kind of people), planning before direction (what kind of motivation,
leadership and communication system) and planning before control (the
controlling techniques to achieve standards of performance) promotes group
effort and team work to give right direction to organisational activities.

5. Overall view of the organisation/coordination:

Organisation is a structure of relationships where authority and responsibility are
clearly defined. Planning coordinates the functions performed by individual
members and departments and unifies them into a single goal — the
organisational goal. It unifies inter-departmental activities so that all departments
work according to plans.

6. Optimum utilisation of resources / efficiency of operations:

Organisations work with limited resources. Planning allocates these resources
over different objectives and functional areas (production, personnel, finance and
marketing) in the order of priority. This results in optimum utilisation of scarce
organisational resources (men, material, money etc.) and their effective
conversion into productive outputs.
7. Development of managers:
Planning involves imagination, thought and creativity by managers. Managers
develop their conceptual and analytical skills to plan and coordinate
organisational activities with external environment.

8. Promotes innovation / creativity:

Planning involves forecasting. Managers foresee future, analyse the strengths of
their competitors and think of new and innovative ways of promoting their
products. Planning promotes new ideas, new products, new relationships and,
thus, promotes innovation and creativity.

9. Basis for control:

Planning frames standards of performance and control ensures achievement of
standards. Controlling involves measurement of actual performance, its
comparison with standard performance, finding deviations and taking steps to
remove the deviations to make better plans for future. Unless there are plans,
there will be no control. Planning is, thus, the basis for control.

10. Reduction of risk:

Risk is a situation where moderately reliable information is available about future
but it is incomplete. Uncertainty, on the other hand, is a situation where no
information is available about future.

Principles of Planning:
Principles provide the basis for sound planning. Koontz et al describe the
following principles for effective planning:
1. Principle of contribution to objectives:
Plans must be directed towards organisational objectives.

2. Principle of objectives:
Since objectives are the basis for planning, they should be clear, specific,
measurable and unambiguous. They should be understood and accepted by all
the organisational members.

3. Principle of primacy of planning:

Planning is pre-requisite to other managerial functions. It should be effectively
done so that other functions of management also contribute to the overall
organisational goals.

4. Principle of efficiency of plans:

Plans should be efficient in their contribution to objectives Le., returns must
exceed the costs.

5. Principle of planning premises:

Since planning is based on forecasts, clear planning premises lead to efficient
planning process. Planning premises are assumptions or forecasts about future on
which plans are based. Premises form the foundation of plans. Sound planning
premises help in making sound plans. They reduce uncertainty in achieving
planned targets. Premises or assumptions are based on the information that
managers generate by forecasting. Forecasting, thus, precedes planning premises
and premises precede planning.

6. Principle of strategy and policy framework:

Strategies and policies help to attain organisational objectives. Clear policies and
strategies lead to clear and effective plans.

7. Principle of limiting factor:

Limiting factor limits the capacity of the organisation to achieve the goals. While
selecting a course of action, managers narrow their search for alternatives and try
to overcome them goal, the best alternative course of action can be selected.”

8. Principle of commitment:
Plans should cover a time span long enough for managers to fulfill their
commitment to the decisions made by them.

9. Principle of flexibility:
Plans should be flexible to adjust to environmental changes.

10. Principle of navigational change:

This principle is closely related to the principle of flexibility. It reviews the plans
from time to time and reframes them if the need arises (according to future
changes and expectations.) as the navigator does when the ship is not going in the
right direction.

Limitations of Planning:
.Following are the limitations of planning:

1. Costly:
Planning is costly. It consumes lot of time and money to plan with no guarantee of
achieving planned targets. Time and cost are the limiting factors in making plans.
Elaborate planning requires considerable spending on time and money. The time
and cost have to be budgeted because both these have to be spent within limits.

Beyond a particular point, spending too much time and cost may not be
warranted as plans have to be put into action. If that point is not the optimum
point, the benefits may not be commensurate to the cost incurred in making the
plans. Thus, a proper trade off is required where time and cost incurred in making
the plans should justify the benefits expected to be earned out of planning.

2. Restricts creativity:
Plans provide a pre-determined course of action. Members may have to follow
them blindly even when they have better suggestions to offer. They do not
deviate from plans for the fear of criticism by superiors. Plans, thus, hamper the
ability of members to initiative steps as they are guided by pre-defined courses of
action.

3. Planning in advance is not always the right course of action:

It is easier to plan than to implement the plans. Actual realities or situations may
be different from the planned ones. In the context of observed realities, it may be
wise to depart from planned actions. Courses of action depend upon facts and
circumstances of each case and not on pre-determined paths.

4. Multiple goals:
If planning is done for too many goals, scarce organisational resources get thinly
spread over them. This affects effective attainment of goals.

5. Too much focus on future:

Planning is future-oriented. There is too much focus on future whether short-
term or long-term. Day to day activities are generally ignored. Planning must be
done every day, every moment and not periodically.

6. Delay in action:
Planning involves time. It delays action when managers face emergent situations.

7. False sense of security:

When plans are made, it gives a sense of security to organisational members that
targets will be fulfilled. It promotes complacency and slows down action. This may
be harmful for organisations.

8. Coordination with other managerial functions:

Planning precedes other managerial functions. Other functions are dependent
upon planning. A well designed organisation structure, suitable motivational plans
for rewarding good performance, sound control system have to be linked with
planning otherwise, planning will fail to achieve its results. It is not just enough to
plan. Plans have to be linked with other functions also.

9. Planning premises:
Premises are the assumptions about future on which plans are based. If premises
are not properly developed, plans based on these premises will be faulty.

10. Lack of resources:

Managers spend lot of financial, physical and human abilities on making plans. If
the organisation does not have sufficient resources that justify making of plans, it
limits the capacity of managers to make sound plans.

Barriers to Planning:
These reasons can broadly be classified into two categories:
1. Individual based barriers

2. Organisation based barriers

1. Individual-based Barriers:
These barriers relate to individuals who frame and implement the plans. Both at
the formulation level and implementation level, there may be barriers to planning
because people involved are either not committed to the planning process or

.2. Organisation-based Barriers:

Barriers at the organisational level are as follows:

1. Environmental factors:
Though plans are based on planning premises, yet unpredicted, external, non-
controllable predictions can fail even the best plans. The environment is changing
at such a fast pace that managers may have to frequently alter the plans or
reframe them. If it is not done, it becomes difficult for managers to make
effective plans.

2. Constraint on resources:
Planners may have ideas but not enough resources to put the ideas into action.
Insufficient resources can limit the capacity of organisations to make sound plans.
In case the organisation has made irreversible investment, that is, investment in
heavy fixed assets (land, building, fixtures etc.), and the managers want to switch
over to another investment because they feel that investment is not sound, it
may not be possible to liquidate that investment as it would result in huge
financial loss. Till the time such assets exist, planning based on such assets will not
bring the desired results.

3. Lack of information:
Managers must have access to complete information about market conditions to
make effective plans. A company plans to sell its products at 5 per unit. It may not
be able to do so if its competitors are selling at Rs. 13 per unit.

Complete information about the environment is, therefore, necessary for

effective planning. Managers are often constrained by lack of complete and
accurate information about the future. If future events do not occur as planned,
they will affect the plans.

4. Group dynamics:
Though group decision-making helps to make good plans, groups also obstruct
effective planning.
Principles of Planning:
1. Principle of contribution to objectives:
Plans must be directed towards organisational objectives.

2. Principle of objectives:
Since objectives are the basis for planning, they should be clear, specific,
measurable and unambiguous. They should be understood and accepted by all
the organisational members.

3. Principle of primacy of planning:

Planning is pre-requisite to other managerial functions. It should be effectively
done so that other functions of management also contribute to the overall
organisational goals.

4. Principle of efficiency of plans:

Plans should be efficient in their contribution to objectives i.e., returns must
exceed the costs.

5. Principle of planning premises:

Since planning is based on forecasts, clear planning premises lead to efficient
planning process. Planning premises are assumptions or forecasts about future on
which plans are based. Premises form the foundation of plans. Sound planning
premises help in making sound plans. They reduce uncertainty in achieving
planned targets. Premises or assumptions are based on the information that
managers generate by forecasting. Forecasting, thus, precedes planning premises
and premises precede planning.

6. Principle of strategy and policy framework:

Strategies and policies help to attain organisational objectives. Clear policies and
strategies lead to clear and effective plans.

7. Principle of limiting factor:

Limiting factor limits the capacity of the organisation to achieve the goals. While
selecting a course of action, managers narrow their search for alternatives and try
to overcome them. The principle of limiting factor states: “By recognising and
overcoming those factors that stand critically in the way of a goal, the best
alternative course of action can be selected.”
Plans commit the various resources in an organization to specific outcomes for
the fulfillment of future goals. Many different types of plans are adopted by
management to monitor and control organizational activities. Three such most
commonly used plans are hierarchical, frequency-of-use (repetitiveness) and
contingency plans.

Strategic Plans
Strategic plans define the framework of the organization’s vision and how the
organization intends to make its vision a reality.
 It is the determination of the long-term objectives of an enterprise, the
action plan to be adopted and the resources to be mobilized to achieve
these goals.
 Since it is planning the direction of the company’s progress, it is done by
the top management of an organization.
 It essentially focuses on planning for the coming years to take the
organization from where it stands today to where it intends to be.
 The strategic plan must be forward looking, effective and flexible, with a
focus on accommodating future growth.
 These plans provide the framework and direction for lower level planning.
 Tactical Plans
Tactical plans describe the tactics that the managers plan to adopt to achieve the
objectives set in the strategic plan.
 Tactical plans span a short time frame (usually less than 3 years) and are
usually developed by middle level managers.
 It details specific means or action plans to implement the strategic plan by
units within each division.
 Tactical plans entail detailing resource and work allocation among the
subunits within each division.
Operational plans are short-term (less than a year) plans developed to create
specific action steps that support the strategic and tactical plans.
 They are usually developed by the manager to fulfill his or her job
responsibilities.
 They are developed by supervisors, team leaders, and facilitators to
support tactical plans.
 They govern the day-to-day operations of an organization.
 Operational plans can be −
o Standing plans − Drawn to cover issues that managers face
repeatedly, e.g. policies, procedures, rules.
1. Advantages of Planning

Advantages of Planning
1. Planning facilitates management by objectives.
a. Planning begins with determination of objectives.
b. It highlights the purposes for which various activities are to be
undertaken.
c. In fact, it makes objectives more clear and specific.
d. Planning helps in focusing the attention of employees on the
objectives or goals of enterprise.
e. Without planning an organization has no guide.
f. Planning compels manager to prepare a Blue-print of the courses of
action to be followed for accomplishment of objectives.
2. Planning minimizes uncertainties.
a. Business is full of uncertainties.
b. There are risks of various types due to uncertainties.
c. Planning helps in reducing uncertainties of future as it involves
anticipation of future events.
d. Although future cannot be predicted with cent percent accuracy but
planning helps management to anticipate future and prepare for
risks by necessary provisions to meet unexpected turn of events.
e. Therefore with the help of planning, uncertainties can be forecasted
which helps in preparing standbys as a result, uncertainties are
minimized to a great extent.
3. Planning facilitates co-ordination.
a. Planning revolves around organizational goals.
b. All activities are directed towards common goals.
c. There is an integrated effort throughout the enterprise in various
departments and groups.
d. It avoids duplication of efforts. In other words, it leads to better co-
ordination.
e. It helps in finding out problems of work performance and aims at
rectifying the same.
4. Planning improves employee’s moral.
a. Planning creates an atmosphere of order and discipline in
organization.
b. Employees know in advance what is expected of them and therefore
conformity can be achieved easily.
c. This encourages employees to show their best and also earn reward
for the same.
d. Planning creates a healthy attitude towards work environment which
helps in boosting employees moral and efficiency.
5. Planning helps in achieving economies.
a. Effective planning secures economy since it leads to orderly
allocation ofresources to various operations.
b. It also facilitates optimum utilization of resources which brings
economy in operations.
c. It also avoids wastage of resources by selecting most appropriate use
that will contribute to the objective of enterpriseminimized.
6. Planning facilitates controlling.
 a. Planning facilitates existence of certain planned goals and standard
of performance.
b. It provides basis of controlling.
c. We cannot think of an effective system of controlling without
existence of well thought out plans.
d. Planning provides pre-determined goals against which actual
performance is compared.
e. In fact, planning and controlling are the two sides of a same coin. If
planning is root, controlling is the fruit.
7. Planning provides competitive edge.
a. Planning provides competitive edge to the enterprise over the others
which do not have effective planning. This is because of the fact that
planning may involve changing in work methods, quality, quantity
designs, extension of work, redefining of goals, etc.
b. With the help of forecasting not only the enterprise secures its future
but at the same time it is able to estimate the future motives of it’s
competitor which helps in facing future challenges.
c. Therefore, planning leads to best utilization of possible resources,
improves quality of production and thus the competitive strength of
the enterprise is improved.
8. Planning encourages innovations.
a. In the process of planning, managers have the opportunities of
suggesting ways and means of improving performance.
b. Planning is basically a decision making function which involves
creative thinking and imagination that ultimately leads to innovation
of methods and operations for growth and prosperity of the
enterprise.