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MEANING OF PLANNING
Planning is an important managerial function and is the primary function of management. It involves
deciding in advance what is to be done, who is going to do it and how it is to be done. So it the process by
which goals are set and the means to achieve them are determined.
DEFINITION OF PLANNING
According to Killen, “Planning is the process of deciding in advance what is to be done, who is to do it,
how it is to be done and when it is to be done”.
NATURE OF PLANNING
Intellectual process: Planning is an intellectual process. It requires careful thought and analysis on the part of
the manager. Several factors have to be considered before plans are devised.
Continuous process: Planning is a continuous process. Right from the start of a firm till its end, planning is
required. The manager should constantly plan for the future.
Based on facts: Planning is based on facts. Planning is not based on guess work or vague assumptions. It is
based on relevant and reliable information.
Flexibility: Plans must be flexible. The reason is plans are laid for the future and future is uncertain. Plans have
to be flexible in order to suit changing conditions.
Forward looking: Planning involves looking ahead into the future. It is carried out to achieve objectives in the
future. Planning helps a firm to bridge the gap between the present and the future.
Goal oriented: Planning is focused on achievement of goals. It helps to achieve goals in an efficient and
effective manner.
Involves choice: Planning involves choice among alternative courses of action. The alternatives are evaluated
and the most suitable among them is chosen. Plans refer to decisions taken after evaluating alternatives.
Integrated process: The various divisions of an organization have plans of their own. These different plans are
inter related in nature. They have to be integrated to achieve the objectives of the organization.
IMPORTANCE OF PLANNING
TYPES OF PLANNING
Top level Plans: Plans which are formulated by general managers and directors are called top-level
plans. Under these plans, the objectives, budget, policies etc. for the whole organization are laid down.
These plans are mostly long term plans.
Middle-level Plans: Managerial hierarchy at the middle level includes the departmental managers. A
corporate has many departments like purchase department, sales department, finance department,
personnel department etc. The plans formulated by the departmental managers are called middle-level
plans.
Lower level Plans: These plans are prepared by the foreman or the supervisors. They take the existence
of the actual workplace and the problems connected with it. They are formulated for a short period of
time and called short term plans.
Long Term Plan: Long-term plan is the long-term process that business owners use to reach their
business mission and vision. It determines the path for business owners to reach their goals. It also
reinforces and makes corrections to the goals as the plan progresses.
Intermediate Plan: Intermediate planning covers 6 months to 2 years. It outlines how the strategic plan
will be pursued. In business, intermediate plans are most often used for campaigns.
Short-term Plan: Short-term plan involves pans for a few weeks or at most a year. It allocates resources
for the day-to-day business development and management within the strategic plan. Short-term plans
outline objectives necessary to meet intermediate plans and the strategic planning process.
Single Plan: These plans are connected with some special problems. These plans end the moment of the
problems to be solved. They are not used, once after their use. They are further re-created whenever
required.
Standing Plan: These plans are formulated once and they are repeatedly used. These plans continuously
guide the managers. That is why it is said that a standing plan is a standing guide to solving the
problems. These plans include mission, policies, objective, rules and strategy.
STEPS IN PLANNING
The first step is determining the goals or objectives for the entire organisation. Goals can be set to make
use of opportunities or to solve a problem.
Determination of goals or objectives
Evaluation of alternatives
Choice of an alternative
Periodic Review
Planning premises refers to the assumptions made about environmental factors. It comprises of two
components. They are (a) internal premises (b) External premises. Internal premises are assumptions made
about the internal environment factors such as suppliers, employees, etc. External premises are assumptions
made about the external environment factors such as legal environment, political environment, technological
environment, etc.
The third step is to decide the planning period. Operational planning focuses on the short term, while
strategic planning focuses on the long term.
Alternative courses of action should be identified. This would provide more flexibility to the
management in deciding a course of action.
The benefits and drawbacks of each alternative has to be analyzed. It should be verified whether the
organisation has the resources to carry out the alternative. Alternatives have to be evaluated taking into account
the objectives set.
Step 6: Choice of an alternative
The alternative which can help in efficient achievement of objectives should be chosen. Managers have
to be very careful in this step. If it is a wrong choice of the alternative, then it will lead to failure.
The plans developed for the various levels down the organization are called derivative plans. The plan
set for the organization has to be broken down into departmental plans, unit plans and individual plans.
Periodic reviews have to be conducted. This will help us to implement the required corrective action
when there is any deviation.
METHODS OF PLANNING
Mission or Purpose
Objectives
Goals
Strategies
Policies
Procedures
Rules
Budgets
MISSION
Mission states the purpose for the existence of an organization. It describes clearly why it exists? What it
wants to be? And whom it wants to serve? To be successful a mission should be translated into everyday
actions. A mission statement basically defines two things:
OBJECTIVES
Objectives are the ultimate goals towards which the activities of the organization are directed at.
Objectives are the end point of planning. They determine the organization structure, the kind of personnel to be
recruited, the control systems to be established, etc. Objectives have a hierarchy. Organizational objectives are
at the top, followed by departmental objectives, then objectives of each unit or section, then comes the
individual objectives.
GOALS
Goals are the targets or ends that a manager or organization wants to reach. They should be specific and
challenging. They should have a clear time frame and should be properly communicated to the people who are
responsible for achieving them.
STRATEGIES
The word strategy is derived from the Greek word ‘strategia’ which means the art of directing military
forces. Strategy is basically a well defined plan to defend or defeat rivals and achieve success. Strategies are
long term plans to stay ahead of the competition. They help a firm to gain competitive advantage.
POLICIES
Policies are guidelines which aid the achievement of organizational objectives. Policies should be
framed after conducting an analysis of the objectives of the organization. They should be in tune with the
organizational mission. There are different types of policies such as:
o Financial policies
o Marketing policies
o Quality policies
o Research policies
o Development policies
PROCEDURES
Procedures are guides to action. Procedures specify the sequence of steps or operations that need to be
performed in order to achieve a given objective. It helps to reduce errors and omissions and also helps to
improve the quality of work.
RULES
Rules are plans that specify what is to be done in a given situation. They are rigid in nature and do not
allow for judgment or discretion. Rules are essential for maintaining discipline in the organization. Deviating
from rules would result in penalty or punishment.
BUDGETS
A budget is a quantitative statement specifying the results to be achieved in a future time period. They
serve as standards with which actual performance can be compared. Budgets can be prepared for various areas
of a business. For e.g. Production budget, Sales budget, Cash budget, etc.
DECISION MAKING
Decision making means to select a course of action from two or more alternatives. It is done to achieve a
specific objective or to solve a specific problem. It is basically goal oriented.
According to George R. Terry, “Decision Making is the selection based on some criteria from two or
more possible alternatives”.
TYPES OF DECISIONS
To make a decision, you must first identify the problem you need to solve or the question you need to
answer. Clearly define your decision. If you misidentify the problem to solve, or if the problem you’ve chosen
is too broad, you’ll knock the decision train off the track before it even leaves the station. If you need to achieve
a specific goal from your decision, make it measurable and timely so you know for certain that you met the goal
at the end of the process.
Once you have identified your decision, it’s time to gather the information relevant to that choice. Do an
internal assessment, seeing where your organization has succeeded and failed in areas related to your decision.
Also, seek information from external sources, including studies, market research, and, in some cases, evaluation
from paid consultants.
3. Identify the alternatives
With relevant information now at your fingertips, identify possible solutions to your problem. There is
usually more than one option to consider when trying to meet a goal—for example, if your company is trying to
gain more engagement on social media, your alternatives could include paid social advertisements, a change in
your organic social media strategy, or a combination of the two.
Once you have identified multiple alternatives, weigh the evidence for or against said alternatives. See
what companies have done in the past to succeed in these areas, and take a good hard look at your own
organization’s wins and losses. Identify potential pitfalls for each of your alternatives, and weigh those against
the possible rewards. Depending on the decision, you might want to weigh evidence using a decision tree. The
example below shows a company trying to determine whether to perform market testing before a product
launch. The different branches record the probability of success and estimated payout so the company can see
which option will bring in more revenue.
Here is the part of the decision-making process where you, you know, make the decision. Hopefully,
you’ve identified and clarified what decision needs to be made, gathered all relevant information, and
developed and considered the potential paths to take. You are perfectly prepared to choose.
6. Take action
Once you’ve made your decision, act on it! Develop a plan to make your decision tangible and
achievable. So once the best alternative is chosen, all you have to do is implementation.
After a predetermined amount of time—which you defined in step one of the decision-making process—
take an honest look back at your decision. Did you solve the problem? Did you answer the question? Did you
meet your goals? If so, take note of what worked for future reference. If not, learn from your mistakes as you
begin the decision-making process again.