NATURE, SCOPE AND PROCESS OF

PLANNING
Planning is a critical managerial activity. It is the process of determining how the
organization can get where it wants to go. It is a primary function of management
because all other functions depend upon how the organization plans to achieve its
objectives.
Planning is a decision-making activity involving the process of ascertaining
objectives and deciding activities that are needed to attain these objectives. In
planning, managers assess the future, determine the goals of the organization and
develop the overall strategies to achieve these goals. The extent and complexity of
planning would depend upon the complexity and multiplicity of objectives. Consider,
for example, the planning undertaken by the Atlanta Committee for the Olympic
Games (ACOG) held in Atlanta, Georgia, in 1996. While the planning process
started more than five years before the due date of the games, consider the
challenging task faced by ACOG in 1993, as reported by Business Week.
‘With three years and three months left, facilities costing more than $500
million dollars including the Olympic Stadium—are still mere blueprints. Raising
the estimated $1.57 billion needed to stage the fourth summer Olympiad on US
soil will require big bucks from corporate sponsors, licensing agreements, tickets
and most important, broadcast rights’.
Similarly, staging the Asian Games in New Delhi in 1982 required extensive
planning that started for years before the games, in building the stadium, new
roadways, flyovers and a residential Asiad Village for participating athletes from
all over the world. Without proper and detailed planning, success for such colossal
events cannot be assured.
Planning is particularly important because of scarce resources and an
uncertain environment with a fierce competition for these resources. The basic
purpose of planning is to reduce the risk of uncertainties and to initiate a coordinated
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effort within the organization for the purpose of organizational success. It also
involves the process of preparing for change and the dynamics of the environment.
As such the planning function has three characteristics. First, planning is
anticipatory in nature. This means that a decision has to be made now as to what
to do and how to do it before it is actually done. Second, planning is a system of
decisions. It involves a process of making decisions that will define what is to be
achieved in the future and the formation of action plans for achievement of goals.
Third, planning is focussed on desired future results. It is a means of ensuring that
the important organizational objectives are accomplished as and when desired.
Importance of planning
While planning does not guarantee success in organizational objectives, there is
evidence that companies that engaged in formal planning, consistently performed
better than those with none or limited formal planning and improved their own
performance over a period of time. It is very rare for an organization to succeed
solely by luck or circumstances. Some of the reasons as to why planning is
considered a vital managerial function are as follows:
 Planning is essential in modern business: The growing complexity of
the modern business with rapid technological changes, dynamic changes in
consumer preferences and growing tough competition necessitates orderly
operations, not only in the current environment but also in the future
environment. Since planning takes a future outlook, it takes into account
possible future developments.
 Planning affects performance: A number of empirical studies provide
evidence of organizational success being a function of formal planning, the
success being measured by such factors as returns on investment, sales
volume, growth in earnings per share and so on. An investigation of thirtysix
firms in various industrial products like machinery, steel, oil, chemicals
and drugs revealed that companies that engaged in formal planning consistenly
performed better than those with no formal planning.
 Planning puts focus on objectives: The effectiveness of formal planning
is primarily based upon clarity and specificity of objectives. Objectives
provide a direction and all planning decisions are directed towards the
achievement of these objectives. Plans continuously reinforce the importance
of these objectives by focusing on them. This ensures maximum utility of
managerial time and efforts.
 Planning anticipates problems and uncertainties: A significant aspect
of any formal planning process is the collection of relevant information for
the purpose of forecasting the future as accurately as possible. This would
minimize the chances of making haphazard decisions. Since the future needs
of the organization are anticipated, the proper acquisition and allocation of
resources can be planned, thus minimizing wastage and ensuring optimal
utility of these resources.
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 Planning is necessary to facilitate control: Controlling involves the
continual analysis and measurement of actual operations against the
established standards. These standards are set in the light of objectives to
be achieved. Periodic reviews of operations can determine whether the
plans are being implemented correctly or not. Well-developed plans can
aid the process of control in two ways.
First, the planning process establishes a system of warning about possible
deviations from the expected performance. The deviations in production,
sales, profits and so on may come to light during periodic investigations and
hence remedial action can be taken before any harm is done.
Second, contribution of planning to the control process is that it provides
quantitative data that would make it easier to compare the actual performance
in quantitative terms, not only with the expectations of the organization but
also with the industry statistics or market forecasts.
 Planning helps in the process of decision-making: Since planning
specifies the actions and steps to be taken in order to accomplish
organizational objectives, it serves as a basis for decision-making about
future activities. It also helps managers to make routine decisions about
current activities because the objectives, plans, policies, schedules, and so
on are clearly laid down.