What is Planning

Planning is the function of management that involves setting objectives and

determining a course of action for achieving those objectives.

Planning is done not only at the beginning of a venture. When a firm has to do any
move, especially one with major implications, they undergo planning.

Planning is preparing for what is going to happen, looking at all possible scenarios.

Types Of Planning
 Strategic planning - looks at the long-term issues of the organization, and
helps develop a plan for growth or change of business function.
 Operations planning - These are specific procedures and processes made by frontline or low-level
managers. Operational plans often involve specific events such as marketing campaigns, campus
recruitment, and others. Operational planning also involves the formulation of ongoing plans that define
specific operations of the organization. Ongoing plans can be in any of the following forms:
 Policy - a set of principles that guide managers in addressing a particular issue
 Rule - a regulation which describes and regulates the functions of an
organization
 Procedure - a step-by-step process in accomplishing a task or achieving an
objective.
 Tactical planning - is used to reach the goals set out by strategic and
operational planning. Tactical planning includes short-term objectives and tasks
designed to create specific results within a limited time span. Tactical plans often
include operational level plans, and make way for the development of
contingency level plans.
 Contingency-level planning - includes more detailed action items with
specified responses in case of unexpected events or emergencies, such as
natural disasters or extreme weather events that disrupt business operations.

Nature Of Planning
 Planning is goal oriented – Plans arise from objectives. Objectives provide
guidelines for planning.
 It is a primary function – Planning provides the basis foundation from which all
future management functions arise.
 It is persuasive – It is required at all levels of management. It is not an
exclusive function of any management level or department. Managers have to
plan for every change that occurs in an organization. However, the scope of
planning differs at all levels and among different department.
 It is mental activity – Planning is a mental process involving – imagination,
foresightedness and sound judgment. Plans are based on careful analysis of
internal and external factors influencing business activities. It is carried out in a
logical and systematic manner.
 It is a continuous process – It is an ongoing process of adapting the
organization with the changes in business environment. Since a business exist in
a dynamic environment it is necessary to continuously plan based on changing
business needs and situations.
  It involves choice – it is essentially a choice among various alternative course
of action. A manager has to select the best alternative after careful analysis and
evaluation.
 It is forward looking – Planning means looking ahead and preparing for the
future. It involves analysis of the future needs and requirements of the business
and preparing for it.
 It is flexible – Planning is based on future forecast of events and situations.
Since future is uncertain, plans are flexible enough to adapt with future change
of events.
 It is an integrated process – Plans are structured in a systematic and logical
sequence where each plan or step is highly inter-dependent and mutually
supportive.

Elements Of Planning
 Objectives – Objectives are goals established to guide the activities of the
enterprise.
 Policies – A policy is a basic statement that guides action and decision making.
It sets behavioral limits on managers.
 Procedures and Methods – A procedure is a well thought out course of action.
It prescribes the specific way to do a particular job. Methods are sub units of
procedure. They indicate the techniques to be used to make the procedure
effective.
 Rules – A rule specified necessary course of action in respect of a situation. It
prescribes restriction and a definite and rigid course of action.
 Strategy – It is a plan of action designed to achieve long term or overall aim.
 Programs – Programs are precise plans of action followed in proper sequence in
accordance with objectives, policies and procedures.
 Budgets – A budget is an estimate of men, money, material and machine
required for successful implementation of plans.
 Projects – A project is a particular job that needs to be done in connection with
the general program.

Planning Techniques and Tools

Planning requires managers to develop and propose alternative courses of action.
Several qualitative and quantitative tools are used to ensure the selection of the best
course of action.
There are three qualitative techniques that can be used in planning. These are as
follows:
1. Brainstorming - This is a common technique used by groups of planners in
selecting a common solution for a problem. It stimulates thinking and allows the
group to work together in generating ideas.
2. Nominal group technique - This is a highly structured method that allows
members to give their own inputs based on an agenda. The structured and
formal nature of this method restricts personal discussion among group members
and minimizes conflict during discussions.
3. Delphi technique - This is also a highly structured technique similar to the
nominal group technique. However, the difference lies in the means of
formulating courses of action.
This technique does not require a group meeting. Rather, the group leader
 distributes questionnaires to all group members to collect and assimilate their
ideas.

Apart from qualitative techniques, managers can also employ quantitative tools in
planning and decision-making. These are the following:

1. Decision tree - It is an excellent tool for weighing different alternatives. It

consists of a graph showing potential and alternative decision paths for the
proposed plan. This method is especially useful for decisions that involve a
succession of small decisions.
2. Payback method - Managers use this method in evaluating alternatives in
purchasing equipment, furniture, and fixtures.
Planning at Different Levels in the firm
The planning process requires that plans and strategies are formulated at different
levels of the firm. The company starts with a strategic plan that outlines the primary
goals and the strategies to be employed by each level.

Top-level Management Planning

The corporate strategy is usually conceptualized by the chief executive officer and other
members of the top management. A comprehensive and detailed plan should be
formulated since it will be the backbone of subsequent plans.
Middle-level Management Planning
A functional strategy determines a particular function or process and is formulated by
middle-level management officers. The one responsible for crafting a functional strategy
is usually the manager in charge of the department or area concerned.
Low-level Management Planning
An operational strategy is a narrower and more focused strategy formulated by low-
level managers or frontline supervisors. Operational planning requires the identification
of resources that can be utilized to achieve the outlined plans and goals.

Cognitive Baisis
This refers to the tendency to look at situations based on subjective standards or
perspectives. Cognitive biases often lead managers to make wrong, illogical conclusions
regarding certain situations and people. The following are examples of cognitive biases:
1. Escalating commitment - This type of error happens when a manager, despite
his or her knowledge of a project's failure, continues to acquire more resources
to pursue the project instead of abandoning it.
2. Prior hypothesis bias - This happens when a manager holds on to his or her
prior belief that a project will succeed even when evidence to the contrary has
been provided.
3. Representativeness - It is the tendency to make generalizations based on a
small sample or a single experience. This happens every time a new product
becomes popular and starts a trend.
4. Reasoning by analogy - It refers to the tendency to conclude that the results
of one situation can be repeated in a similar situation.
5. Illusion of control - It is a type of error that many top-level managers commit
when they become overconfident regarding their ability to solve problems. Using
their many years of experience and relying on their status in the industry, they
tend to underestimate the problems they encounter.
 6. Framing bias - This kind of bias correlates the outcome with how a problem or
decision is framed. In business, the wrong framing of a simple aspect of a
business can result in problems that will cost a company its profits.
7. Availability error - This error is committed by managers when they
immediately use available resources on a project that is expected to immediately
provide profit, rather than holding off and waiting for a later opportunity that will
generate even greater profit.
Contemporary Structured Decission-Making
Models
Aside from the traditional decision-making models mentioned, there are three
contemporary decision-making models that can be used by managers in planning. This
approach was developed by Charles Kepner and Benjamin Tregoe in the 1960s.
Following are the four basic steps in the Kepner-Tregoe Matrix Model:
1. Situation appraisal - In assessing the situation, the manager clarifies aspects
of the scenario and outlines possible causes.
2. Problem analysis - The root cause of the problem is identified. Also, the
manager analyzes how the cause brought about the problem.
3. Decision analysis - Various solutions and courses of action are identified and
evaluated by conducting risk analysis. The analysis ensures that all possible
consequences of all alternatives are identified.
4. Potential problem analysis - A possible final decision is determined and
carefully scrutinized. The pros and cons of implementing the chosen alternative
are identified.

Vroom-Yetton-Jago Decision Model

This model was originally developed by Victor Vroom and Philip Yetton in 1973, and
revised in 1988 in collaboration with Arthur Jago.This model identifies five leadership
styles based on the situation and the involvement required of members of the group in
the decision-making process.
1. Autocratic I (A1) - The leader is the sole decision-maker. Using all the
information available, the manager makes the decision for the firm.
2. Autocratic II (A2) - The manager gathers pertinent information from
members of the group but they do not know the purpose of such information.
There is still no involvement from the group members. The manager still decides
based on the information gathered.
3. Consultative I (C1) - This leadership style lets the group members know the
problem situation but the final decision still rests on the manager.
4. Consultative II (C2) - The manager discusses the situation with the group and
gathers suggestions from the group members. The manager makes the final
decision.
5. Group II (G2) - All the group members are responsible for coming up with the
final decision. The manager presents the problem and acts as the facilitator in
the process. He or she lets the group agree on the final selection of the
alternative.

Observe-Orient-Decide-Act (OODA) Loop Model

This model was brought about by the application of military tactics in business
situations.
The Observe-Orient-Decide-Act Loop was developed by US Air Force Colonel John Boyd
as a decision-making model for air combat.
The four steps involved in the decision-making cycle for this model are defined below:
 1. Observe - The manager should gather as much information as possible
regarding the business environment. At this stage, the manager conducts SWOT
and PEST analyses to gather information.
2. Orient - After scanning the environment, the manager should take a closer
look at the information gathered during the first stage.
3. Decide - The manager now decides and chooses the best possible alternative.
4. Act - Once an alternative is chosen, the manager puts the chosen plan into
action and supervises its implementation.

Decision making and the common types of

Decision Models
Rational or Logical Decision Model
This process involves a logical step-by-step analysis of several possible contributing
factors in making the decision.
Intuitive Decision Model
The second type of decision-making style is the intuitive decision model. Managers do
not use objective methods in decision making but instead use their "gut feeling" and
instincts.
Predisposed Decision Model
The third type is the predisposed decision model. The manager, once he or she decides
on a solution, will no longer look for other alternative solutions.