Forecasting and Planning

Nature of Forecasting and Planning

Forecasting. This is a management function that

reduces areas of uncertainty that surround management
decision. Such decisions can be in sales, costing, profit,
manpower among others. Forecasting is aimed at
calculating or predicting what is likely going to happen in
the future. That is, the events or conditions are predicted
in advance. By so doing, forecasting gives management
the basis for expecting the desired outcome arising from
management decisions. Through forecasting, a manager
has alternatives. Out of the alternatives he selects the one
that can maximize his objective(s).

Planning. This is another management function

which is futuristic. It goes together with another
management function of forecasting. It involves deciding
in advance what to do, how to do it, when to do it and
who is to do it. Consequently, planning has to do with the
conscious choice of patterns of influence on the manager
in his attempt to make decisions. For planning to be
effective there must be the establishment of objective.
Planning defined as the design of a desired future and of
effective and efficient way of bringing it about.

Features of Planning
1. Planning involves design. Remember to design is to
create which is one of the skills of management. This
means that before any other management function
can take place, there must be first of all planning.
Consequently, planning precedes action in respect of
other management functions.
2. Planning attempts to bring necessary actions and fit
them together to something we want to make sense of
before it happens. This means that before we realize
an objective, there must be series of actions which
must be well fitted together in a logical sequence.
3. Planning is focused on the need to achieve stated and
well defined objectives, this means that the end-
product of planning is the realization of
organizational objectives.
4. Planning is also a conscious deliberate response to
the negative belief that unless something is done a
desired future state will not occur, and to the
optimistic belief that we can do things to improve our
chances of achieving the desired state.

Advantages of Planning
 1. Planning focuses on objectives. This is important so
as not commit the limited resources of the
organization into unprofitable actions.
2. It off sets uncertainties by making the manager to
develop some confidence which will enable him to
take decisions with some degree of certainty.
3. It minimizes waste before careful analysis would
have been made with respect to the critical activities
that need to be performed on other to realize the
objective or give solution to the problem. All
unwanted activities are isolated and thrown away.
4. Planning also ensures control through measurement
and feedback. This is important so as to avoid
unnecessary expenditure of resources.

Disadvantages of Planning
1. The effectiveness of planning depends on the quality
of data gathered and the assumptions made from
them. If the quality is poor and assumptions not
correct. They can adversely affect future of the
results.
2. Planning is expensive as it involves considerable
amount of time and money.
3. Planning delays action because it is only when the
plan is completed that the desired action can take
place.
Benefits of Planning
1. It helps identify opportunities for the organization
planning required an organization to look for
opportunities; to earn profit or provide a service that
otherwise may not exist. If opportunities are
identified steps can be taken to capitalize on the
essentials.
2. It helps identify possible problem; the analysis
involved in planning can reveal situation that could
threaten the organization. If such potentials hazards
are noticed or anticipated, steps can be taken to
minimize their impact.
3. If forces managers to set objectives; the planning
process demands that managers make decision about
what objective to pursue. Once these objectives are
set, employees have a clear idea of how their work
helps achieve the organization goals.
4. If forces managers to set standard, as part of the
planning process, managers must decide what
standards of performances are necessary to reach the
objectives. These standards convey to employees
what they must; they also help managers fulfil the
controlling function.
5. It coordinates organizational activity well-developed
plans for the whole organization and for each of its
 major components assist individuals in seeing how
their particular work fits in with the work of others.
This understanding can reduce wasted actions and
increase organizational efficiency.

Problems in Planning
1. Lack or support from top management; if top
management is nonchalant about planning, lower
level managers will conclude that planning is
unimportant.
2. Poor performance is a key element in planning. If
poor quality information is used as the basis for
plans, good plans cannot be developed.
3. Resistance to change; planning may result in decision
to change organizations practice. These changes can
cause resistance in people who have become
accustomed to certain ways of behaving.
4. Over or under commitment in plans; if managers
spend a lot of time and energy implementing plans
they may become emotionally attached to them. Once
 that happens they may be unable to articulate the
plan.
5. Managers are not involved in the planning process; If
objectives are simply imposed from above, lower-
level manager will lack motivation to achieve them.
6. Lack of competence in planning; Some managers
lack the experience, motivation or aptitude for
systematic planning. Deficiencies in experience and
motivation can be overcome, but the inability to plan
for an ineffective manager.

Planning at Different Levels in the Firm

Plans must be developed for all levels of management,

although other focus will differ at different levels of
management. Below are the planning activities of top
managers and low level managers which reveal four
principal differences.

Top Mangers Low-Level Managers

1. Develop organizational
objectives and the overall
plans to achieve them.
2. Spend a large proportion
of their time on the
Develop plans that will fit
the overall objectives set by
top management.
Spend a much smaller
preparation time on the
planning function.
3. The time frame for
planning activities is large
(about one year).
4. Focus on both internal
and external factors when
planning.
planning function.
The time frame for planning
activities is short (often
week to week)
Focus largely on internal
factors.