Chapter 4

PLANNING

Meaning
Planning is a process which involves 'thinking before doing'. It involves setting objectives
and deciding in advance, the course of action to be taken to achieve those objectives. It seeks
to bridge the gap between where we are and where we want to go. Therefore, planning means
setting objectives and targets and formulating an action plan to achieve them.

Importance of planning
1. Planning provides direction: By stating in advance how work is to be done, planning
acts as a guide for deciding what action should be taken and in which direction. If goals
are well defined, employees are aware of what the organisation has to do and what they
must do to achieve those goals.
2. Planning reduces the risks of uncertainty: Planning is an activity which enables a
manager to look ahead and anticipate changes. By deciding in advance, the tasks to be
performed, planning shows the way to deal with changes and uncertain events.
3. Planning reduces overlapping and wasteful activities: Planning serves as the basis of
coordinating the activities and efforts of different departments. Since planning ensures
clarity in thought and action, work is carried on smoothly without interruptions. Useless
and redundant activities are minimised or eliminated.
4. Planning promotes innovative ideas: A better planning system helps innovative and
creative thinking among managers because they may think of new ways of doing a task.
5. Planning facilitates decision making: Planning helps the manager to look into the future
and make a choice from amongst various alternative courses of action. It involves setting
targets and predicting future conditions, thus helping in taking rational decisions.
6. Planning establishes standards for controlling: Planning helps in setting objectives and
setting performance standards. Planning provides the goals or standards against which the
actual performance is measured. This comparison enables the managers to know whether
they have actually been able to attain the goals. If there is any deviation it can be
corrected.

Features of Planning
1. Planning focuses on achieving objectives: Specific goals are set out in the plans, along
with the activities to be undertaken to achieve the goals. Thus, planning is purposeful.
Therefore, it contributes to the achievement of predetermined organisational goals.
2. Planning is a primary function of management: Planning lays down the base for other
functions of management. All other managerial functions are performed within the
framework of the plans drawn. Thus, planning precedes other functions, making it a
primary function.
3. Planning is pervasive: Planning is required at all levels of management as well as in all
departments of the organisation. It is not an exclusive function of top management or of
any particular department.
4. Planning is continuous: Plans are prepared for a specific period of time, may be for a
month, a quarter, or a year. At the end of that period there is need for a new plan to be
drawn on the basis of new requirements and future conditions. Hence, planning is a
continuous process.
5. Planning is futuristic: Planning essentially involves looking ahead and preparing for the
future. Planning is therefore, regarded as a forward looking function based on forecasting.
6. Planning involves decision making: Planning involves choosing from various available
alternatives. Therefore, it involves thorough evaluation of alternatives to choose the most
appropriate one.
7. Planning is a mental exercise: Planning requires a mental exercise for assessing the
various business situations and taking appropriate decisions. These decisions require
higher level of intelligence, which is why planning is called an intellectual process.

Limitations of planning
1. Planning leads to rigidity: In an organisation, a well-defined plan is drawn up with
specific goals to be achieved within a specific time frame. These plans then decide the
future course of action and managers may not be in a position to change it. This kind of
rigidity in plans may create difficulty.
2. Planning may not work in a dynamic environment: The business environment is
dynamic. The environment consists of a number of dimensions, economic, political,
physical, legal and social. Planning cannot foresee all the possible changes in these
dimensions and thus, there may be obstacles to effective planning.
3. Planning reduces creativity: At an organisational level, planning is done by the top
management. Usually the rest of the members just implement these plans. Thus, much of
the initiative or creativity in them gets reduced.
4. Planning involves huge costs: When plans are drawn up, huge costs are involved in their
formulation. These may be in terms of time and money. The costs incurred sometimes
may not justify the benefits derived from the plans.
5. Planning is a time-consuming process: Sometimes plans to be drawn up take so much of
time that there is not much time left for their implementation. The delay may result in loss
of opportunities.
6. Planning does not guarantee success: Planning is a systematic way of deciding for future
but it does not guarantee any success. The future expectations on which plans may be
based may not occur, and things may change during the course of action.
However, despite its limitations, planning is not a useless exercise. It is a tool to be used with
caution. It provides a base for analysing future courses of action. But it is not a solution to all
problems.

Planning process
Planning process involves the setting up of business objectives and allocation of resources for
achieving them. The process is carried out as follows:
1. Setting Objectives: The first and foremost step is setting objectives. Every organisation
must have certain objectives. Objectives may be set for the entire organisation and each
department or unit within the organisation. Objectives specify what the organisation wants
to achieve. They should be stated clearly for all departments, units and employees.
2. Developing premises: Planning is concerned with the future, which is uncertain.
Therefore, the manager is required to make certain assumptions about the future. These
assumptions are called premises. They may be in the form of forecasts, existing plans or
any past information about policies.
3. Identifying alternative courses of action: There may be many ways to achieve the
objectives. All the alternative courses of action should be identified. These ideas must then
be thoroughly discussed amongst the members of the organisation.
4. Evaluating alternative courses: After listing the alternatives available, a manager has to
evaluate the pros and cons of different alternatives. The feasibility of different alternatives
should be assessed. Suitable alternatives have to be shortlisted for final decisions.
5. Selecting an alternative: This is the real point of decision making. The best plan has to be
selected. An ideal plan, of course, would be the most feasible, profitable and with least
negative consequences.
6. Implementing the plan
The plans selected are put into action. The plans are communicated by managers to all
employees. The employees are motivated to implement the plans in a desired way.
7. Follow-up action
To ensure whether plans are being implemented and activities are performed according to
schedule, is also part of the planning process. Monitoring the plans is equally important to
ensure that objectives are achieved. Any deviations found should be immediately corrected.

Types of Plans
A plan is a commitment to a particular course of action for achieving specific results. Various
plans may be classified as:

A. Based on Usage
1. Single-use Plan: A single-use plan is developed for a one-time event or project. Such
a course of action is not likely to be repeated in future, i.e., they are for non-recurring
situations. The duration of this plan may depend upon the type of the project. These
plans include budgets, programmes and projects.
2. Standing Plans: These plans are made to be used again and again. They are
formulated for problems which are recurring in nature and to guide managerial
decisions and actions. Such a plan greatly enhances efficiency in routine decision-
making. It is usually developed once but is modified from time to time to meet
business needs as required. Standing plans include policies, procedures, methods and
rules.

B. Based on Purpose
Based on what the plans seek to achieve, plans can be classified as Objectives, Strategy,
Policy, Procedure, Method, Rule, Programme, and Budget.
1. Objectives: Objectives are single use plans. They refer to the future position that the
management would like to reach. Objectives are very basic to the organisation. They
state what the firm would like to achieve, i.e., the end result of activities and all the
managerial activities are directed towards achieving these objectives. For example, an
organisation may have an objective of increasing sales by 10%
2. Strategy: A strategy is a comprehensive plan for accomplishing an organisation’s
objectives. It will include three dimensions: determining long term objectives,
adopting a particular course of action, and allocating resources necessary to achieve
the objectives. The strategies define the future direction of the organisational and
scope for long run. For example, major strategic decisions will include decisions like
whether the organisation will continue to be in the same line of business, or combine
new lines of activity with the existing business.
3. Policy: Policies are standing plans. They are a general response to a particular
problem or situation. They guide thinking or channelize energies towards a particular
direction. Policies provide a basis for interpreting strategies. For example, the
 company may have a recruitment policy or a pricing policy within which objectives
are set and decisions are made. Policies should be framed by the participation of
various levels of management.
4. Programmes: Programmes are single use plans. They are detailed statements which
outline the objectives, policies, procedures, etc., of a project, and the resources and
budget required to implement a course of action. Separate programmes are prepared
for achieving different tasks.
5. Procedure: Procedures are standing plans. They are routine steps on how to carry out
activities. They detail the exact manner in which any work is to be performed. They
are specified in a chronological order. Procedures give details and sequence of actions
to be taken for doing particular work.
6. Methods: Methods are standing plans. They provide the prescribed ways or manner
in which a task has to be performed, considering the objectives. It deals with every
step of a procedure and specifies how this step is to be performed. Selection of a
proper method saves time, money and effort and increases efficiency.
7. Rules: Rules are standing plans. They are specific statements that inform what is to
be done. They do not allow for any flexibility or discretion. It reflects a managerial
decision that a certain action must or must not be taken. For example, a rule such as
‘no smoking’ in the factory, will have to be followed and any violation may attract
penalty.
8. Budget: A budget is a single use plan. It is a statement of expected results expressed
in numerical terms. For example, a sales budget may forecast the sales of different
products in each area for a particular month. Since budget represents all items in
numbers, it becomes easier to compare actual figures with expected figures and take
corrective action if necessary.