PRINCIPLES AND PRACTICES OF MANAGEMENT

12 Planning: Concept and Process

EENA
1. Introduction
Planning is the basic function of management. Planning is done to achieve the objectives of the organisation. Without planning no
business can function smoothly. Whenever there is a goal to achieve, planning is required otherwise the activities will go haywire.
Plans are set within a timeframe and they set out how various resources of the organisation will work towards achieving the
objectives. Planning forms that part of management which lays down the objectives and various activities to be performed for the
attainment of these objectives. It helps in deciding in advance, What is to be done, How it is to be done, When it is to be done, and
By whom it is to be done? Answering all these things is called planning. It bridges the gap between where we are and where we
want to go. It can also be said that plans are related to creativity.
The other functions of management like organising, staffing, directing & controlling depends on planning. Without planning these
all are meaningless. Planning provides direction to all managerial functions.
Definitions of planning: Some important definitions of planning as given by various experts are:
According to M.E Harley,” Planning is deciding in advance what is to be done. It involves the selection of objectives, Policies,
Procedures and Programmes from among alternatives.”
According to Koontz and O’ Donnell,” Planning is deciding in advance what to do, how to do it, when to do it and who is to do
it.” Planning bridges the gap between where we are and where we want to go. It makes possible things to occur which would not
otherwise occur”.
2. Nature of Planning
The planning has following aspects:
Contribution to purpose: – Planning helps in the achievement of enterprise goals and objectives. Plans focus on purposes.
Planning identifies irrelevant actions and helps in determining actions which will lead toward the accomplishment of objectives
and thus reduces wastages as well. Planning focus on desired ends. Without plans, actions become merely random activity,
leading to chaos.
(a) Primacy of planning:- Planning is the first function of management. All other functions like organising, staffing, leading and
controlling follow planning. Without planning, other function of management cannot be completed. Apart from being the first
function, planning is required continuously for performance of every function of management for example, organisation structure
requires planning , so does staffing. Similarly, planning is needed in case of leading and controlling as well.
(b) Pervasive: Planning is not the job of high-level managers only but planning is a function of all managers. However, nature of
planning varies with the hierarchical levels. Higher level managers formulate strategic plans while lower level managers are
engaged in day to day planning within the framework of top level plans. Also, higher level managers spend more time in planning
as compared to the middle level or lower level managers. It is therefore, clear that all managers working in an enterprise are
involved in planning but the breath of planning vary with the level of authority.
(c) Planning considers limiting factors: – Planning should be realistic. Planning should be done keeping in mind the available
resources. Unrealistic plans can never achieve the desired result. If a manager ignores the limiting resources, planning is bound to
fail. For example, if the raw material is scarce in supply, then the raw material will be a limiting factor. Keeping in mind the
availability of raw material, production planning and sales target should be decided.
(d) Efficiency of plans: Plans must be efficient. Efficient plans contribute to purpose and objectives by offsetting the costs and
other unsought consequences. A plan can contribute to the attainment of objectives, but if it does so at too high or unnecessarily
high costs, it is not efficient. It should aim at eliminating all wastages. Efficiency implies the normal ratio of input to output.
3. Importance of planning
Planning function has four important goals: To offset uncertainty and changes, focus attention on objectives, gain economical
operation and to facilitate control. These have been discussed in detail below:
(a) To offset uncertainty and changes: – Planning is always made in respect to future. Future is uncertain. Planning assumes
more importance in wake of increasing size and complexities of business organizations. Business environment is constantly
changing, new techniques are being deployed. Buying behaviour of customers is changing. So in all these cases planning is
important to offset the risks of changes and uncertainty. Planning helps us to anticipate changes and plan actions accordingly.
(b) To focus attention on objectives: – Planning helps in defining the objectives of the organization clearly. Its directs all efforts
towards achievement of the specified goals. In this way planning contributes to the attainment of the objectives of the
organizations by eliminating unnecessary actions and focussing on the desired ends .
(c) Minimise cost – Planning minimizes costs because by emphasising on efficient operations. It clearly specifies what is required
to done and directs the efforts toward the attainment of the goals. It coordinates the efforts of the entire organisation by clearly
specifying the goals which eliminates wastages.
(d) To facilitate control:-Planning facilitates the function of controlling and therefore it is considered as the foundation of
control. Planning prescribes standards with respect to work, time and cost. By comparing the actual work performance with the
standards laid down, deviations are identified and in case the work performance is not as desired, the person concerned is held
responsible.
4. Principles of Planning
During the last few years many principles of planning have emerged which make planning more effective and also serve as a
guide to managers. Following principles of planning have special significance:-
(1) Principle of time: – Planning is done for the achievement of the objectives of the organization. According to this principle,
planning should be done for particular period of time. Plans should specify the time frame within which the task should be
accomplished otherwise the purpose of planning cannot be achieved.
(2) Principle of flexibility: – Plans relate to future. Planning should be flexible to incorporate necessary changes as and when
desired as plans are made by anticipating the possible future events. Estimates about future can undergo some changes
necessitating changes in the plans. Rigid plans make entire planning exercise ineffective.
(3) Principle of policy framework: Planning is effective only when the planners understand the basic policies which influence
determination of the plans of the organization. The clarity and soundness of the policies make planning strong and effective.
(4) Principle of Limiting Factor: –According to this principle, planning should be formulated keeping in mind the limiting
factors since feasible plans cannot be formulated without keeping in mind the available resources. The plans formulated by
ignoring the limiting factors are always unsuccessful.
(5) Principle of selection of the best alternative: – There can be many alternatives to complete any activity. All alternatives
should be deeply evaluated before selecting the best one because effective planning is the backbone for achieving the end results.
The best alternative will enable to achieve the objectives of the organization at the minimum cost and in the most effective
manner.
5. Factors that may make planning effective
It is important function of management and sufficient attention to it is necessary. The question that needs consideration is not
whether the plans should be made or not but how well or effective they should be made. Following factors helps to make planning
more effective.
(a) Giving more consideration to obtaining reliable facts: – Correct forecasting is the foundation of the successful planning.
The correctness or otherwise of the plan depends on the adequacy and truth of those facts on the basis of which forecast is made.
Hence, the planner must ensure the validity of the collected facts otherwise entire resources and efforts on planning exercise will
get wasted.
(b) Ensuring employees’ participation in planning: Plans should not be imposed. Rather, they should be formulated after
consulting all the persons concerned as far as possible. When plans are formulated with the participation and cooperation of all,
they will be more attached to them and make all efforts to implement them. Apart from this, even after the plans have been
implemented and there have been some suggestions from the persons concerned, they should be kept reserved, and as the
opportunity arises they should be made a part of the pre determined plans.
(c) Studying deeply the external environment: – All those factors which are beyond the control of the planners must be studied
deeply. External environment includes the policies of the government, political changes, competition, change in the consumers’
taste etc. Statements issued by government from time to time and political situations should be carefully studied. Market survey
should be conducted to know the taste of consumers.
(d) Adopting the regular training system: – The lack of adequate mental ability and resistance to changes in plans are the
problems which can be overcome by giving regular training to the employees. They should be made to learn about the importance
planning, and should be made aware of the art of planning, its implementation and adapting to changes as per the need of the hour.
(e) Making plans simple and practical: – Plans should be simple so that any individual with a general ability can easily
understand them. Apart from being simple, plans should be practical also. In other words, their objectives should not be so high
that they are not within the realm of being realised. Plans should be formulated keeping in view the available resources of the
organization.
6. Process of planning or Steps in planning

Figure 1: Planning Process or Steps in Planning

The planning process consists of the following steps:
(1) Being aware of opportunity:
Awareness of an opportunity is the real starting point for planning. It includes identifying all possible future opportunities and
then analysing them in the light of the organisation’s strengths & weaknesses. Awareness of the opportunity in terms of
organisational capabilities helps in setting realistic objectives. So, as a first step, planning requires realistic diagnosis of the
opportunity situation.
(2) Establishing objectives:
Opportunities provide the path for setting objectives. Objectives specify the end points of what is to be done, where the primary
emphasis is to be placed and what is to be accomplished by the network of strategies, policies ,procedures, rules, budgets and
programs. At first overall objectives of the organization are determined and based on that, the objectives of each department are
laid down. Objectives should be clear, definite and simple. The objectives should be communicated to everyone in the
organisation so that they fully contribute to the successful attainment of objectives.
(3) Considering the planning premises:
Planning premises is the boundary under which plans will operate. This boundary is determined by both anticipated internal and
external environment. These factors affect the practicality of planning and need to be forecasted. The accuracy with which these
factors are forecasted determines the success of planning.
(4) Identifying the alternative courses: –
There are many methods of doing a work. On the basis of objectives of the organisation and the boundaries identified alternative
courses of achieving the objectives are discovered. For example, if the objective is to expand the organisation, it can be done by
either expanding the existing business by adding a new product line eg. if a company is engaged in producing only men’s products
then it can start manufacturing women’s products or by purchasing or taking over any other business. Keeping in mind the
limiting factors all alternative courses of action should be identified. More the alternatives, better it is as firm has many choices
out of which best option could be explored.
There is other side of it as well. It is not as difficult to find out alternative courses as it is to reduce the list of alternative courses.
Limiting factor should be considering while finding out alternatives for example if finance is limiting factor then while identifying
alternatives availability of finance should be kept in mind.
(5) Comparing the alternatives in the light of goals sought: –
All those alternative courses which meet the expectations of the minimum preliminary criteria are selected for intensive study. It
will be seen as to what extent a particular alternative can help in the attainment of the objectives of the organisation. Every
alternative has merits and demerits. For example, one course may appear to be the more profitable but require a large cash outlay
and a slow payback, another may be less profitable but involve less risk still another may better suit the company in long-range
objectives. After comparing all alternatives, the best alternative is selected.
(6) Formulating Supportive plans:
To give practical shape to the main plan, many subsidiary plans are needed. These subsidiary plans or sub plans are not
independent plans but only a reflection of the main plan. For example, different plans for the purchase department, sales
department, finance department, personnel department etc are prepared in light of the objectives of the organisation.
(7) Implementing the plans:
After the main plan and the subsidiary plans are formulated, they remain to be implemented. Implementation should be done
carefully. Even the best plan will not achieve the objectives if badly implemented. For successful implementation plans should be
communicated to everyone in the organisation.
(8) Reviewing plans:
The process of planning does not end with the implementation of plans. It is of great importance that there is a constant review of
plans so as to ensure success in the uncertain future. The moment there appears to be changes in the internal and external
environment, plans should be moulded accordingly. In this way we can say planning is a continuously moving process.
7. Type of plans
Plans can be classified on the basis of time (long term and short term plans), on the basis of level (upper level, middle level and
lower level plans) and on the basis of repetitiveness (plans used only once and plans used many times). But main organizational
plans can be categorized as under:-

Those include plans that are used over and over again because they focus on organizational situations that occur repeatedly.
 1. Standing Plans: Standing plans are used over a long period of time , and can be altered as per the change in
circumstances.
(a) The policy: – Policy is a standing plan that furnishes broad guidelines for action which are consistent with reaching
organizational objectives. For e.g policy for employee interaction
(b) Procedures: – Procedures are standing plans that outline a series of related actions that must be taken to accomplish a
particular task. For ex. Procedures for internal reporting.
(c) Rules: – Rules designate specific required action. A rule indicates what an organization member should or should not do. For
ex. No smoking in the office or prescribing a dress code.
2. Single used plans: Single used plans are created to address short term challenges. They are narrow in scope as
compared to standing plans.
(a) Program: – Program is a single used plan encompassing a range of projects. e.g Budget, which is a statement that expresses
the expected results in numerical terms. It may be referred to as ‘a numberized program’.
(b) Project: A project is a single used plan having less scope than a programme. e.g an outline for an advertising campaign .
Why do plans fail?
If managers know why plan fail, they can take steps to eliminate the factors that cause failure and thereby increase the probability
that their plans will be successful. Plans fail when:-
(1) Corporate planning is not integrated into the management system.
(2) Lack of understanding of the different steps of planning process.
(3) Lack of participation of managers at different levels in the organization in planning activities.
(4) Lack of coordination of different departments in planning and vesting the Responsibility for planning to the planning
department only.
(5) Management expects that plans developed will be realized with little effort.
(6) Over ambitious planning. At the starting phase, too much is attempted at once.
(7) Faulty implementation of the plans.
(8) Lack of understanding of the plans which may be due to poor communication of the plans or because of failure to grasp the
overall planning process.
(9) Financial projections are confused with planning.
(10) Inadequate inputs are used for planning.
Summary :
 Planning is the process by which an individual or an organization decide upon the future course of action.
 The purpose of every plan and derivative plans is to facilitate the accomplishment of enterprise purpose and objectives
 Planning is the primary management function, but it is included in the other managerial functions.
 The efficiency of a plan is measured by the amount it contributes to purpose and objectives.
 There are many steps for developing any plan. They are:-
Being aware of opportunity
Establishing objectives
Considering the planning premises
Identifying the alternative courses
Comparing the alternatives in the light of goals sought Formulating Supportive plans
Implementing the plans
Reviewing plans
 Planning is a continuous process; it does not end. It goes on with every step.