CH 4 - PLANNING

CH 4 – PLANNING
It means deciding in advance what to do & how to do it. It is one of the basic
managerial functions.
It involves setting of aims and objectives of the organization for a given time period
, formulating various courses of action to achieve them and then Selecting
and developing an appropriate course of action to achieve these
objectives.
Definition- Koontz and O‘Donnell “Planning is deciding in advance what to do, how
to do, when to do, and who to do it. Planning bridges the gap from where
we are to where we want to go. It makes it possible for things to occur
which would not otherwise happen”.
Steps in Planning Process
1. Setting Objectives:
The first and foremost step is setting objectives or goals. These are usually set by top
and middle level management.

– Objectives specify what the organization wants to achieve.

– Objectives can be set for the entire organisation & stated to each
department within the organisation very clearly, to determine how all
departments would contribute towards overall objectives.
-These must be implemented by all employees at all levels so that they
understand how their actions contribute to achieving objectives.
– E.g. Objective could be to increase sales by 20%, expansion of business by
opening 5 more branches etc.
• Developing Premises:
Plans are made on the basis of some assumptions about the future. These
assumptions, which provide the basis for planning, are called premises.
All managers involved in planning should be familiar with this because plans
are expected to operate & reach their destination subjected to these
assumptions. Assumptions are made in the form of forecasts.
They can be:
• Internal premises: Cost of products, capital, machinery, profitability etc.
• External premises: Changes in technology, interest rates, government
policies, population growth, competition, etc.
• Identifying Alternative Courses of Action:
Once objectives are set and assumptions are made, then the next step is to identify
all possible course of action to achieve the objectives.
After setting the objectives, managers make a list of alternatives through
which the organisation can achieve its objectives as there can be many ways
to achieve them & managers must know all of them.
E.g. Sales could be increased through any of the following ways:
• By enhancing advertising expenditure.
• By appointing salesmen for door-to-door sales.
• By offering discounts.
• By adding more product lines.
 CH 4 - PLANNING
• Evaluating Alternative Courses of Action
Positive & negative aspects of each & every proposal (course of action) need to be
evaluated to determine their feasibility and consequences in the light of
each objective to be achieved.
• Selecting the Best Alternative
It is the real point of decision-making. Best plan has to be adopted and implemented.
The ideal plan is most feasible, profitable and with least negative
consequences.
Most plans may not be subjected to mathematical analysis. In such cases,
subjectivity & manager‘s experience, judgement and intuition are important
to select the most viable alternative.
Sometimes a combination of plans may be selected instead of one best course.
6. Implementing the Plan
It is concerned with putting the plan into action.
– For implementing the plans, managers start organizing & assembling
resources for it. So, other managerial functions come into picture.
– E.g. If there is a plan to increase the production, then more labour, more
machinery will be required. This step would also involve organizing for more
labour and purchase of machinery.
7. Follow up Action
This involves monitoring the plans and ensuring that activities are performed
according to the schedule. Whenever there are deviations from plans,
immediate action has to be taken to bring implementation according to the
plan or make changes in the plan.
Features of planning
• Focuses on achieving objectives:
Planning gives importance to organisational goals. Specific goals are set out in the
plans along with the activities undertaken to achieve the goals . Thus,
planning is purposeful . Planning has no meaning unless it contributes to the
achievement of predetermined organizational goals .
• Primary function of management:
Planning is the base for all other functions of management. All other managerial
functions are performed with in the framework of plans drawn . Thus,
planning precedes other functions of management .
• Planning is pervasive:
It is required at every level of management as well as all departments in all the
organisations . It is not an exclusive function of top management . Planning
is what managers at all levels do .
• Top level of management undertakes planning for whole organisation.
• Middle level management does the departmental planning
• Lower level management does day to day operational planning.
 CH 4 - PLANNING
• Planning involves decision making:
If there is only one possible course of action, there is no need of planning because
there is no choice. The need for planning arises only when alternative are
available . Planning , thus invloves examinations and evaluation of each
alternative course of action and choosing the most appropriate one .
• Planning is futuristic:
Planning involves looking ahead and preparing for the future . The purpose of
planning is to meet future events effectively to the best advantage of an
organisation . Planning is therefore ,regarded as forward-looking function
based on forecasting. Through forecasting future events and condition are
anticipated and plans are drawn accordingly. For example , on the basis of
sales forecasting a business firm prepares its annual plan for production and
sales .
• Planning is continuous :
Plans are prepared for specific time period , may be for a month or a quarter, or a
year . At end of that period, new plans are drawn on the basis of new
requirements and future conditions . Hence planning is continuous process.
• Planning is mental exercise :
Planning requires application of mind involving foresight, intelligent imagination and
sound judgement . It is an intellectual activity of thinking rather than doing
work because planning determine the action to be taken. However it
requires logical and systematic thinking rather than guess work .
Importance of planning
Planning Provides Direction:
 Under the process of planning the objectives of the organisation are clearly stated
so that they act as a guide for deciding what action should be taken and in which
direction . Since the goals are well defined, the employees are aware of what the
organisation has to do and what they must do to achieve the goals.
 For example, suppose a company fixes a sales target under the process of
planning. Now all the departments, e.g., purchase, personnel, finance, etc., will
decide their objectives in view of the sales target.
 In this way, the attention of all the managers will get focused on the attainment of
their objectives. This will make the achievement of sales target a certainty. Thus,
in the absence of objectives an organisation gets disabled and the objectives are
laid down under planning.
Planning Reduces Risks of Uncertainty:
 Planning is always done for future and future is uncertain. With the help of
planning possible changes in future are anticipated and various activities are
planned in the best possible way. In this way, the risk of future uncertainties can
be minimised. It does not eliminate the problems but can predict them and
prevent the negative consequences.
 For example, in order to fix a sales target, a survey can be undertaken to find out
the number of new companies likely to enter the market. By keeping these facts in
mind and planning the future activities, the possible difficulties can be avoided.

Planning Promotes Innovative Ideas:

 CH 4 - PLANNING
 As planning is the first function of management , new ideas can take shape of
concrete plans. It is most challenging activity for the management as it guides all
future actions leading to growth and prosperity of the business.
 In this way, planning imparts a real power of thinking in the managers. It leads to
the birth of innovative and creative ideas.
 For example, a company wants to expand its business. This idea leads to the
beginning of the planning activity in the mind of the manager. He will think like
this:
 Should some other varieties of the existing products be manufactured?
 Should retail sales be undertaken along with the wholesales?
 Should some branch be opened somewhere else for the existing or old product?
 Should some new product be launched?
 In this way, many new ideas will emerge one after the other.
Planning Reduces Overlapping and Wasteful Activities:
 Planning serves as the basis of coordinating the activities and efforts of the
different divisions ,departments and individuals .It helps in avoiding confusion
misunderstanding.
 Since planning ensures clarity in thought and action , work is carried on smoothly
without interruptions & puts an end to overlapping and wasteful activities. It is
easier to detect inefficiencies and take corrective action to deal with them.
 For example, if it is decided that a particular amount of money will be required in
a particular month, the finance manager will arrange for it in time.
 In the absence of this information, the amount of money can be more or less than
the requirement in that particular month. Both these situations are undesirable.
In case, the money is less than the requirement, the work will not be completed
and in case it is more than the requirement, the amount will remain unused and
thus cause a loss of interest.
Planning Facilitates Decision Making
 Planning helps the manager to look into the future and make a choice from
amongst various alternative course of action . The manager has to evaluate the
positive and negative aspects of each alternative and select most feasible and
profitable plan , with least negative consequences . In this way, planning
facilitates decision making by making a choice from among the alternative course
of action.
Planning Establishes Standards for Controlling:
 Planning provides the goals or standards against which actual performance is
measured . A comparison of actual performance with the standards help
managers to identify the deviation and to take corrective action . Thus planning is
pre-requisite for controlling
 For example, a worker has to do 10 units of work in a day (it is a matter of
planning), but actually he completes 8 units. Thus there is a negative deviation of
2 units. For this, he is held responsible. (Measurement of actual work, knowledge
of deviation and holding the labourer responsible falls under controlling.) Thus, in
the absence of planning controlling is not possible.
Limitations Of Planning
 CH 4 - PLANNING
Planning leads to Rigidity:
 In an organisation , a well-defined plan is drawn up with specific goals to be
achieved with in a specfic time period . These plans then decide the future course
of action and managers may or may not be in a position to change it with the
change in circumstances.
 Since it is not possible to introduce desired changes according to the changed
situations, the organisation loses many chances of earning profits.
 Thus detailed planning may create a rigid framework in the organization.
Planning May Not Work in a Dynamic Environment:
• Planning is based on the anticipation of future happenings. Since future is
uncertain and dynamic, therefore, the future anticipations are not always true.
• The organization has to constantly adapt itself to change in business environment
by making changes in its plans. However , it become difficult to foresee accurately
future trends in environment If :
• Economic policies are modified (example change in tax rates , bank rates)
• Political condition in the country are not stable
• A natural calamity such as flood or earthquake occur .
• Generally, a longer period of planning makes it less effective. Therefore, it can be
said that planning does not work in dynamic environment.
• For example, a company anticipated that the government was thinking about
allowing the export of some particular product. With this hope the same company
started manufacturing that product. But the government did not allow the export
of this product. In this way, the wrong anticipation proved all planning wrong or
incorrect. It brought loss instead of profit.
Planning Reduces Creativity:
• In planning, work is to be done as per pre-determined plans as decided by the top
management. It is decided in advance what is to be done, how it is to be done and
who is going to do it. Middle and lower level managers are neither allowed to
deviate from the plans nor they can act on their own. It reduces their creativity
and initiative.
 Consequently, everybody works as they have been directed to do and as it has
been made clear in the plans.
 Therefore, it checks their incisiveness. It means that they do not think about
appropriate ways of discovering new alternatives. According to Terry, “Planning
strangulates the initiative of the employees and compels them to work in an
inflexible manner.”
Planning Involves Huge Costs:
 Planning is a small work but its process is really big. Planning becomes meaningful
only after traversing a long path. It takes a lot of time to cover this path.
 During this entire period the managers remain busy in collecting a lot of
information and analysing it. In this way, when so many people remain busy in the
same activity, the organisation is bound to face huge costs.
 The costs like expenses on boardroom meetings, seeking help of professional
experts, preliminary investigations sometimes may not justify the benefits derived
from the plans.
 CH 4 - PLANNING
Planning is a Time-consuming Process:
 Planning is a blessing in facing a definite situation but because of its long process
it cannot face sudden emergencies. Sudden emergencies can be in the form of
some unforeseen problem or some opportunity of profits and there has been no
planning for all these situations beforehand and which now requires immediate
decision.
 In such a situation, if the manager thinks of completing the planning process
before taking some decision, it may be possible that the situations may worsen or
the chance of earning profit may slip away. Detailed plans require scientific
calculations and analysis to ascertain facts and figures.
 Thus, planning is time consuming and it delays action.
Planning Does Not Guarantee Success:
 Sometimes the managers think that planning solves all their problems. Such
thinking makes them neglect their real work and the adverse effect of such an
attitude has to be faced by the organisation.
 In this way, planning offers the managers a false sense of security and makes
them careless. Hence, we can say that mere planning does not ensure success;
rather efforts have to be made for it.
TYPES OF PLAN
A Plan is a specific action proposed to help the organization achieve its objectives. It
is a document that outlines how goals are going to be met. The importance
of developing plans is evident from the fact that there may be more than
one means of reaching a particular goal.
Plans can be classified on the basis of (a) use and length of the planning period and
(b) what the plans seek to achieve
(a) Classification on the basis of use and length of the planning period
 SINGLE USE PLAN
A Single use plan in a business refers to plan developed for a one-time project or
event that has one specific objective. It applies to activities that do not
reoccur or repeat. It is specifically designed to achieve a particular goal.
Such plan is developed to meet the needs of a unique situation. The length
of a single use plan differs greatly depending on the project in question, as a
single event plan may only last one day while a single project may last one
week or months. For example, an outline for an advertising campaign. After
the campaign runs its course, the short-term plan will lose its relevance
except as a guide for creating future plans.
STANDING PLAN
 Standing plans are used over and over again because they focus on organizational
situations that occur repeatedly. They are usually made once and retain their
value over a period of years while undergoing revisions and updates. That is why
they are also called repeated use plans. For example, A businessman who plans to
establish a new business, drafts credit policy for the customers, and they can use
such plan to guide their efforts for subsequent years
 CH 4 - PLANNING

(b) Classification on the basis of what the plans seek to achieve:

1. OBJECTIVES: Objectives are defined as end points for the achievement of which an
organization goes on working. They are expressed in specific terms i.e., they
should be measurable in quantitative terms. They are usually set by the top
management. Examples are- increasing sales by 10%, Getting 20% return on
Investment etc. Objectives should be clear and achievable.
2. STRATEGY: Strategies refer to those comprehensive plans which an organization
prepares to face various situations, threats and opportunities taking
business environment into consideration. It includes three-dimensional
approach-
(a) Determining long term objectives
(b) Adopting a particular course of action
(c) Allocating resources necessary to achieve the objectives.
Examples: A company’s marketing strategy will include extent of the demand of the
product, selection of the medium of advertisement, selection of the channel
of distribution etc.
3. POLICY: Policies refers to the general guidelines which brings uniformity in
decision-making for achievement of organizational objectives. They provide
directions to the managers in the implementation of strategy. They are
flexible as they may be changed as per requirement. Policies are the general
response to a particular problem or situation.
Examples- Sales policy- selling goods on cash basis only, Recruitment policy-
reserving some post for women in the organization. Purchase Policy-
selection of vendors.
4. PROCEDURE: Procedures are those plans which determine the sequential steps to
carry out some work/activity in a chronological order. It details the exact
manner in which work is to be done. These steps are necessary to enforce a
policy. Procedures are guides to action for the insiders to follow.
Examples: Procedure adopted in the selection of employees, procedure for procuring
supplies before production, etc.
 CH 4 - PLANNING
5. RULE: Rules are specific statement that tell what is to be done and whatnot to be
done in a specified situation. They help in indicating which points are to be
kept in mind while performing task/work. Rules are rigid which ensure
discipline in the organization. Rules prescribes a penalty for violation. They
are simplest type of plans involving no change or compromise.
Example : ‘No smoking in the office premises, Reporting for work at a particular
time, leave sanction, etc.
6. METHOD: Methods are standardized ways or manners in which a particular task
has to be performed. It indicates one step of a procedure and specifies how
this step is to be performed. There may be many ways/method of
completing a task but that method/way must be selected by which work can
be done early at the minimum possible cost. Methods are flexible. Selection
of right method saves, time, money and efforts.
Example: various methods of training are adopted by an organization to train its
employees like apprenticeship training, vestibule training etc., methods of
inventory control.
7. BUDGET: A budget is a statement of expected result expressed in numerical terms
for a definite period of time in the future. It is a statement of expenses,
revenue, cash flow for a specified period. It is also a control device as it
provides numerical standard against which actual figures can be compared
and deviations can be identified.
Example- sales budget, cash budget, production budget, etc.
8. PROGRAMME: A programme is a single use plan containing detailed statements
about a project outlining its objectives, policies, procedures, rules, tasks,
physical and human resources required and the budget to implement any
course of action. It includes entire gamut of activities including the minutest
details within the broad policy framework.
Example- Construction of a shopping mall, opening a new department, etc.