CHAPTER THREE

PLANNING FUNCTION

 What is planning?

 Why and how do managers

plan?
 3.1 PLANNING: CONCEPTS
• Planning is deciding in advance what to do and how
to do. It is one of the basic managerial functions.
• Before doing something, the manager must formulate
an idea of how to work on a particular task.
• Thus, planning is closely connected with creativity
and innovation.
• But the manager would first have to set objectives,
only then will a manager know where he has to go.
• Planning seeks to bridge the gap between where we
are and where we want to go.
• Planning is what managers at all levels do.
• It requires taking decisions since it involves making
a choice from alternative courses of action.
• Planning, thus, involves setting objectives and developing
appropriate courses of action to achieve these objectives.
• Objectives provide direction for all managerial decisions
and actions.
• Planning provides a rational approach for achieving
predetermined objectives.
• Planning: keeping the objective in view and being in action
• All members, therefore, need to work towards achieving
organisational goals.
• These goals set the targets which need to be achieved and
against which actual performance is measured.
• Therefore, planning means setting objectives and targets
and formulating an action plan to achieve them.
• It is concerned with both ends and means i.e., What is to
be done and how it is to be done.
• Planning is the systematic process of • Planning is the fundamental management
establishing a need and then working out function, which involves deciding beforehand,
the best way to meet the need, within a what is to be done, when is it to be done, how it
strategic framework that enables you to is to be done and who is going to do it. It is an
identify priorities and determines your intellectual process which lays
down organisation’s objectives and develops
operational principles.
various courses of action, by which the
• Planning means thinking about the future so organisation can achieve those objectives. It
that you can do something about it now. chalks out exactly, how to attain a specific goal.
• Planning is that function of management in • Plan
which a conscious choice of patterns of • Is a pre-determined course of action.
influence is determined for decision-makers • It brings orderliness.

so that the many decisions will be • Avoids confusion.

• Gives better use of resources.
coordinated for some period of time & will
• Cuts waste. Plans are changed or modified but not
be directed towards the chosen broad goals.
abandoned.
• Planning is thus taken as the foundation for future activities.
• Planning is deciding in advance what is to be done; that is a
plan is a projected course of action.
• So, planning can be thought of as deciding on a future
course of action. It may also be treated as a process of
thinking before doing.
• Management has to plan for long-range and short-range
future direction by looking ahead into the future, by
estimating and evaluating the future behavior of the relevant
environment and by determining the enterprise’s own
desired role.
• Planning involves determining various types and volumes of
physical and other resources to be acquired from outside, to
allocate these resources in an efficient manner among
competing claims and to make arrangement for systematic
conversion of these resources into useful outputs.
• As it is clear from the above discussion, plans have two
basic components: goals and action statements.
• Goals: represent an end state — the targets and results that managers hope
to achieve.
• Action statements: represent the means by which an organization goes
ahead to attain its goals.
• Planning is a deliberate and conscious act by means of which managers
determine a course of action for pursuing a specific goal.
• Planning to a manager means thinking about what is to be done, who is
going to do it, and how and when he will do it.
• It also involves thinking about past events (retrospectively) and about
future opportunities and impending threats (prospectively).
• Planning enquirers about organizational strengths and weaknesses and
involves decision making about desired ways and means to achieve them.
 Issues In Formulation Of Plans
• Availability of resources/budget allocation
• Long term thinking
• Availability of competent man power
• Willingness of top management
• Willingness of employees
• Benefits to be gained (expected outcome)
• Challenges to be faced
• Competitors reactions
• Possibility of being copied by rival companies
• Cost of formulating the plan
• Being a paper/committee work
• Specifies objectives to be attained
• Budget allocation
• Awareness creation among many people
• Coordination among many people
• Focusing on actual job rather than on paper work
• Periodic review and evaluation and follow up
• Leadership being important
• Facilitates the means of attaining objectives
• Linking rewards with performances
 3.2 CHARACTERISTICS AND PROCESS OF PLANNING
• Example: Polaris company has plans of expansion. Their
objective is to increase their capacity so that they can
employ 800 more professionals. Their target time is six
months. The objective of the current year has also been
clearly stated which is to increase capacity by 1500-2000
more professionals. Since planning is the primary
function of management they have set their objectives
first. Thus, all businesses follow a set pattern of
planning. You will be able to find some similarities in the
features of planning and what you see in real life. Try
and identify them. The planning function of the
management has certain special features. These features
throw light on its nature and scope.
(i) Planning focuses on achieving objectives:
• Organisations are set up with a general purpose in
view.
• Specific goals are set out in the plans along with
the activities to be undertaken to achieve the goals.
• Thus, planning is purposeful.
• Planning has no meaning unless it contributes to
the achievement of predetermined organisational
goals.
(ii) planning is a primary function of management:
• Planning lays down the base for other functions of
management.
• All other managerial functions are performed within the
framework of the plans drawn.
• Thus, planning precedes other functions. This is also
referred to as the primacy of planning.
• The various functions of management are interrelated and
equally important. However, planning provides the basis of
all other functions.
(iii) Planning is pervasive:
• Planning is required at all levels of management as well as in all
departments of the organisation.
• It is not an exclusive function of top management nor of any
particular department. But the scope of planning differs at different
levels and among different departments.
• For example, the top management undertakes planning for the
organisation as a whole. Middle management does the
departmental planning. At the lowest level, day-to-day operational
(iv) Planning is continuous:
• plans are prepared for a specific period of time, may be for a
month, a quarter, or a year.
• At the end of that period there is need for a new plan to be
drawn on the basis of new requirements and future
conditions.
• Hence, planning is a continuous process. Continuity of
planning is related with the planning cycle. It means that a
plan is framed, it is implemented, and is followed by another
plan, and so on.
(v) Planning is futuristic:
• Planning essentially 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 a forward looking
function based on forecasting. Through forecasting, future
events and conditions are anticipated and plans are drawn
accordingly.
• Thus, for example, sales forecasting is the basis on which a
business firm prepares its annual plan for production and
(vi) planning involves decision making:
• Planning essentially involves choice from among various
alternatives and activities.
• If there is only one possible goal or a possible course of
action, there is no need for planning because there is no
choice. The need for planning arises only when alternatives
are available. In actual practice, planning presupposes the
existence of alternatives.
• Planning, thus, involves thorough examination and
evaluation of each alternative and choosing the most
appropriate one.
(vii) Planning is a mental exercise:
• Planning requires application of the mind involving
foresight, intelligent imagination and sound judgement.
• It is basically an intellectual activity of thinking rather than
doing, because planning determines the action to be taken.
• However, planning requires logical and systematic thinking
rather than guess work or wishful thinking. In other words,
thinking for planning must be orderly and based on the
(viii) Planning is designed for efficiency.
• Planning leads to accomplishment of objectives at the minimum possible cost.
• It avoids wastage of resources and ensures adequate and optimum utilization of
resources.
• A plan is worthless or useless if it does not value the cost incurred on it.
• Therefore planning must lead to saving of time, effort and money.
• Planning leads to proper utilization of men, money, materials, methods and machines.

(iv) Planning is flexible.

• Planning is done for the future.
• Since future is unpredictable, planning must provide enough room to cope with the
changes in customer’s demand, competition, govt. Policies etc.
• Under changed circumstances, the original plan of action must be revised and updated
to make it more practical.
 Planning Process
• Planning is not something which is Step 1. Environmental analysis and
made all once at a time. forecasting

• A person involved in planning pass • Awareness of environment, both internally

through number of steps to make and externally.
effective plans • It involves continual assessment of the
• The steps generally involved in planning environment to determine
 Strengths internally
are:  Weaknesses
 Environmental analysis and forecasting
• To be aware of,
 Establishing objectives
 Opportunities externally
 Determining alternative course of action
 Threats
 Evaluating the alternatives
 Select the best alternatives • Based on this analysis of internal and external
 Implementing the plan environment forecasting (predicting) of
 Controlling and evaluating the results different environmental factors such as
economics, technological, social, political etc,
Step-2. Establishing objectives
• Establish objectives for the enterprise and
then for each subordinate work unit.
• Objectives are established at all levels of
the structure, beginning at the top level and
running down to first line
Step 3. Determining alternative course of action
• Identifying alternative ways for reaching
objectives.
• When developing alternatives a manager
should try to create as many roads to each
objective as possible.
• In fact, in most cases the challenging is not
to find alternative ways but to decide which
ones are best.
• To decide on best ones it requires
Step 4. Evaluating the alternatives
• Evaluating each alternative to select the best
one to achieves objectives.
• In evaluating, managers should assess cost
(disadvantages) and benefits (advantages) of
all alternatives.
• The assessment may include both financial
and non financial considerations.
Step 5. Select the best alternatives
• After evaluating all possible alternatives,
managers will select alternative that remains
better than others.
• It may be an alternative with least
disadvantages and most advantages.
 Step 7. Controlling and evaluating the results
Step 6. Implementing the plan
• Once the plan is implemented it needs
• After the alternative course of action
monitoring.
selected, it is important to develop an
• Monitor the progress being made,
action plan to execute the plan.
• Evaluate the reports made based on results,
• In this step method for implementation
and
will be suggested.
• Make any necessary modifications, because
factors in environment are constantly
changing, plans must be modified to cope up
with changes.
 IMPORTANCE OF PLANNING
• After all why should we plan? These are numerous
questions to which we would like to find solutions.
Planning is certainly important as it tells us where to go,
it provides direction and reduces the risk of uncertainty
by preparing forecasts. The major benefits of planning
are given below:
(I) Planning provides directions:
• By stating in advance how work is to be done planning
provides direction for action.
• Planning ensures that the goals or objectives are clearly
stated so that they act as a guide for deciding what action
should be taken and in which direction.
• If goals are well defined, employees are aware of what
the organisation has to do and what they must do to
achieve those goals.
• Departments and individuals in the organisation are able
to work in coordination.
• If there was no planning, employees would be working in
different directions and the organisation would not be
(II) Planning reduces the risks of uncertainty:
• Planning is an activity which enables a manager to look ahead and
anticipate changes.
• By deciding in advance the tasks to be performed, planning shows
the way to deal with changes and uncertain events.
• Changes or events cannot be eliminated but they can be anticipated
and managerial responses to them can be developed.
(III) Planning reduces overlapping and wasteful
activities:
• Planning serves as the basis of coordinating the activities and efforts of
different divisions, departments and individuals.
• It helps in avoiding confusion and misunderstanding. Since planning
ensures clarity in thought and action, work is carried on smoothly
without interruptions.
• Useless and redundant activities are minimised or eliminated. It is
easier to detect inefficiencies and take corrective measures to deal with
them.
(IV) Planning promotes creativity and innovation:
• Since planning is the first function of management, new ideas can take
the shape of concrete plans.
•
V) Planning facilitates decision making:
• Planning helps the manager to look into the future and make a choice from amongst various alternative
courses of action.
• The manager has to evaluate each alternative and select the most viable proposition.
• Planning involves setting targets and predicting future conditions, thus helping in taking rational
decisions.

(VI) Planning establishes standards for controlling:

• Planning involves setting of goals. The entire managerial process is concerned with accomplishing
predetermined goals through planning, organising, staffing, directing and controlling.
• Planning provides the goals or standards against which actual performance is measured.
• By comparing actual performance with some standard, managers can know whether they have actually
been able to attain the goals. If there is any deviation it can be corrected.
• Therefore, we can say that planning is a prerequisite for controlling. If there were no goals and
standards, then finding deviations which are a part of controlling would not be possible.
• The nature of corrective action required depends upon the extent of deviations from the standard.
Therefore, planning provides the basis of control.
 Requirements Of A Good Plan Characteristics Of A Good
• An effective and sound plan should have the following features: Plan
(A) Clear objective: • A well developed plan should be:
• The purpose of plans and their components is to develop and facilitate the realization of
organizational objectives.  With clearly-worded objectives,
• The statement on objectives should be clear, concise, definite and accurate. It should not be colored
by bias resulting from emphasis on personal objectives. including desired results and methods
(B) Proper understanding: for evaluation.
• A good plan is one which is well understood by those who have to execute it. It must be based on  Be guided by policies and /or
sound assumptions and sound reasoning.
procedures affecting planned action.
(C) Flexible:
• The principle of flexibility states that management should be able to change an existing plan because  Indicate priorities.
of change in environment without undue extra cost or delay so that activities keep moving towards
the established goals.  Develop actions that are flexible and
• Thus, a good plan should be flexible to accommodate future uncertainties.
realistic in terms of available
(D) Stable: personnel, equipment, facilities and
• The principle of stability states that the basic feature of the plan should not be discarded or modified
because of changes in external factors such as population trends, technological developments, or time.
unemployment.
 Develop a logical sequence of
(E) Comprehensive:
• A plan is said to be comprehensive when it covers each and every aspect of business. It should
activities.
integrate the various administrative plans so that the whole organization operates at peak efficiency.
 Include the most practical methods for
(F) Economical: achieving each objective
 3.3 PLANNING: TYPES
Plans commit the various resources in an organization to specific outcomes for the
fulfillment of future goals. Many different types of plans are adopted by management
to monitor and control organizational activities.
Three such most commonly used plans are hierarchical, frequency-of-use
(repetitiveness) and contingency plans.
 I. STRATEGIC PLANS
• Strategic plans define the framework of the organization’s vision and how the organization
intends to make its vision a reality.
• It is the determination of the long-term objectives of an enterprise, the action plan to be
adopted and the resources to be mobilized to achieve these goals.
• Since it is planning the direction of the company’s progress, it is done by the top management
of an organization.
• It essentially focuses on planning for the coming years to take the organization from where it
stands today to where it intends to be.
• The strategic plan must be forward looking, effective and flexible, with a focus on
accommodating future growth.
• These plans provide the framework and direction for lower level planning.
• Incorporating both external information gathered by analyzing the company’s competitive
environment and the firms internal resources, managers determine the scope of the business to
achieve the organization long-term objectives.
• Strategic planning involves the analysis of various environmental factors and the competition.
 II. TACTICAL PLANS
• Tactical plans describe the tactics that the managers plan to adopt to achieve the objectives set in the
strategic plan.
• Tactical plans span a short time frame (usually less than 3 years) and are usually developed by
middle level managers.
• It details specific means or action plans to implement the strategic plan by units within each
division.
• Tactical plans entail detailing resource and work allocation among the subunits within each division.
• Tactical plans translate the strategic plans into specific goals for specific parts of the organizations.
• Instead of focusing on the entire corporation, tactical plans typically affect a single business within
an organization.
• Although tactical plans should complement the organizations overall strategic plan, they are often
somewhat independent of other tactical plans.
• Tactical plans are concerned with implementation of strategic plans by coordinating the work of
different departments in the organization.
• They try to integrate various organization units and ensure the commitment to strategic plans.
III. OPERATIONAL PLANS
• Operational plans are short-term (less than a year) plans developed to create specific action
steps that support the strategic and tactical plans.
• Operational plans translate the tactical plans into specific goals and actions for small units
of the organization.
• These plans are least complex than strategic and tactical plans, and rarely have a direct
effect on other plans outside of the department or unit for which the plan was developed.
• They are developed by supervisors, team leaders, and facilitators to support tactical plans.
• They govern the day-to-day operations of an organization.
• Operational plans can be;
• Standing plans − drawn to cover issues that managers face repeatedly, e.g. Policies, procedures, rules.
• Ongoing plans/Single use/Ad-hock/ − prepared for single or exceptional situations or problems and are
normally discarded or replaced after one use, e.g. Programs, projects, and budgets.
 The Organizational Levels At Which Plans Are Developed
Corporate level:
• Most corporation of even moderate size have a corporate headquarters. The heads of these groups are typically
part of the group of senior executives at the corporate headquarters. Executives at the corporate level in large
firms include both those in the head quarters and those heading up the large corporate groups such as finance,
human resources, marketing etc.
• These corporate-level executives primarily focus on the questions such as;
• What industries should we get into?
• What markets should the firm be in?
• In which business should the corporation invest money?
• What resources should be allocated to each business?

Business level:
• At this level managers focus on determining how they are going to compete effectively in market.
• At this level, managers attempt to address questions such as;
• Who are our direct competitors?
• What are their strengths and weaknesses?
• What are our strengths and weaknesses?
Functional levels:
• At this level managers focus on how they can facilitate the achievement of the competitive plan of the business.
• These managers are often the heads of departments such as finance, marketing, human resources or product
development.
• Depending on the business structure this can include managers responsible for business within a specific
geographic region or managers responsible for specific retail stores.
• Functional managers attempt to address questions such as:
• What activities does my unit need to perform well in order to meet customer expectations?,
• What information about competitors does my unit need in order to help the business compete effectively?
• The main focus of functional managers planning activities is on how they can support the business and
corporate plans. Functional level managers are responsible for recognizing and ensuring effective and efficient
operations.
o Types of plans: based on organizational levels/their scope/breadth
Strategic plans- corporate level; Tactical plans- business level; Operational plans- functional
plans.
Classification of plans based on repetitiveness
• On the basis of repetitiveness plans can be classified in to two: Classification of plans
 Single use plans
 Standing plans based on time dimension:
• Single use plans are those plans which have no more use after • Taking time in
objective is accomplished.
• Relatively for short period of time. Are non- recurring in nature. consideration a plan can be
• They include: programs , projects, and budgets. categorized in to three:
• Standing plans are type of plans which can be used again and again Long range plans
once they made.
• They remain useful for long period in dealing with repetitive Intermediate plans
situations . they include: -
 policies, Short range plans
 Procedure,
 Method and
 Rules
 (1)
Mission
Or Purposes,
(2) Objectives Or Goals,
(3) Strategies,
(4) Policies,
(5) Procedures,
(6) Rules,
(7) Programs, And
(8) Budgets

Hierarchy Of Plans
 Hierarchy of plans (cont..)

Plans can be classified as

(1) mission or purposes,
(2) objectives or goals,
(3) strategies,
(4) policies,
(5) procedures,
(6) rules,
(7) programs, and
(8) budgets
 Hierarchy of plans (cont..)
• The mission, or purpose, identifies the basic
purpose or function or tasks of an enterprise or
agency or any part of it
• Objectives, or goals, are the ends toward
which activity is aimed
• Strategy is the determination of the basic
long‑term objectives of an enterprise and the
adoption of courses of action and allocation of
resources necessary to achieve these goals
• Policies are general statements or
understandings that guide or channel thinking
in decision making
• Procedures are plans that establish a required
method of handling future activities
• Rules spell out specific required
actions or
Non actions, allowing no discretion
• Programs are a complex of goals,
policies, procedures, rules, task
assignments, steps to be taken,
resources to be employed, and other
elements necessary to carry out a
given course of action
• A budget is a statement of expected
results expressed in numerical terms
END OF PART
ONE
 3.4 REASONS FOR PLANNING
• Reasons why planning is essential for your
business:
To set a path and make sure you stick to it:
• A business plan will guide you to your
destination, by setting targets for managers,
testing the feasibility of the business idea and
make sure resources are employed at the right
time.
• Setting a plan involves clarifying your vision and
setting specific objectives, goals and operational
targets, which if met, will keep the company on
the right path.
• Such goals and operational plans, when correctly
aligned with your vision, will drive success.
• A good process will ensure that the whole
To uncover weaknesses and opportunities:
• Strategic planning forces the leaders to look at
creative ways of achieving goals. Planning the
business forces managers to look at alternatives,
rather than ploughing on regardless of the effect
on cost and profit. Out of the planning process
new opportunities will emerge that deliver more
profit.
• A plan will force you to think strategically and
in detail about your business and its current
resources (employees, cash, machinery, and
expertise), competitive market place and risks.
It is important you do benchmark against
competitors you respect. This is certain to
deliver insights that will improve your business.
To get backing and buy in from backers and
financiers:
• A good business plan will present the business in a
credible way and will be instrumental in convincing
investors and lending institutions to fund or even buy
your business. The right plan would unlock funds for
investment OR convince a buyer to pay top dollar so
you can get the reward you deserve.
To make sure you focus on the right things:
• Too often owners say they are too busy to plan…
• If you don’t plan where you want to go, don’t be
surprised if you end up somewhere else.
• Research shows that companies who have a business
plan are more likely to increase profit than those who
don’t.
• As it is often said… “to fail to plan is to plan to fail…”
• How do we plan then?
Get in the right mind-set:
• Business planning takes time, resources and expertise. Some
may say there are too many imponderables or unknown to
make a useful plan, or they don’t want to restrict themselves
to one particular plan, they might want to be flexible and
react to market conditions and a plan or budget would
restrict their thinking too much. A good business plan should
allow for uncertainty and risk, and should be easily adapted
to changing circumstances.
• You can even set up your business to be flexible – for
example – rent don’t buy….
Set aside time:
• The best way to get a quality analysis of your competitive
position is to set aside quality time. Time should be set aside
in one or two hourly chunks, where day to day issues are
delegated temporarily. Preferably this should be away from
the office to allow focus and clear thinking.
• A series of meetings that are well organised with a planned
agenda and the right staff can make this process painless,
maybe even fun.
Brainstorm strengths and weaknesses of the
company
• Looking in depth at the competitive advantage
held over other companies in the market, how
the prices compare and asking is the value
proposition offered to customers sufficiently
persuasive? If it is now.. How do you maintain
this position ?
• Taking time to address these fundamentals will
focus the business in the right way and set the
scene for planning further.
What will your business be famous for?
• Giving the best customer services or making
the best product or being the best value? Profit
is the result of good business – in what area
Create a financial model:
• A strategic plan can also be used to feed assumptions into a
financial model that sets expenditure against income and
calculates closing cash position and profit/loss at the end
of each period (usually monthly). The financial model will
calculate how much cash you are likely to need to finance
growing working capital, how much your objectives will
cost and when you can expect to achieve them.
• However, the model is worthless without quality thinking
as to how the business will succeed or grow. The results
are only a function of the assumptions made. The thinking
and planning about how to succeed and how to achieve the
objectives are critical.
Set financial targets:
• The vision should be converted into a financial target,
usually profit, with the required income (sales) calculated
to achieve that target when matched against costs.
Timelines should be set for tasks and outcomes, milestones
should be established and tracked against. Key people
should be identified and the plan should extend over 3-5
Get expert help:
• Business planning should be seen as an investment, devoting
upfront time and resources will reap benefits far in excess of the
initial cost. So if you lack the time or expertise, then seek help.
Often a few days’ work can make a huge impact on the next 3 –
5 years of a business. Even having a plan can have a huge impact
on the value placed on your business.
• Building a financial model is the easy bit. The real value is in
helping you think through how you can improve your business
and “win” in a competitive market.
• A good finance director will get to know the business, to
understand its cost drivers and market risks and be able to
present the model to a business owner, or bank, investors and
other stakeholders in a way that will make it accessible and
motivating and explain the key levers that drive your profit and
cash.
• This can add huge amounts to your annual profit and cash flow.
A well thought through plan will also encourage an investor to
pay a higher multiple of annual earnings to buy the business.
Better position
• Whenever you plan, you plan to succeed. Thus,
it is not a surprise that planning will eventually
lead you to have better success and achieve a
better position in the market, be it a brand or
a product. Any of your goals can have more
chances of success with proper planning.
Progress
• If you are planning to succeed, the plan will
include your progress as well as the best
pathway to achieve the goal. The management
of the organization always keeps goals for
itself which it wants to achieve. These goals,
and the subsequent planning, will always lead
to the progress of the organization. The
progress of the organization is the reason
that planning is important for the management.
Integrated approach
• Planning brings the organization together. The importance
of planning also lies in its holistic approach. Although you
might make plans for different departments within the same
organization, however all the departments together are
trying to achieve a desired objective. Unity will always lead
to success and hence, the integrated approach which
planning imparts to an organization is ultimately very
important.
Evaluation and control
• One of the best things about planning is that it can be done
in the board room. Thus, whenever you plan things, you
know what are the results expected. However, you always
keep a tab on the planning, so that you can at anytime refer
to the plan and find out whether you are on track or not. For
example – your plan is to increase the sales to 2000 units
this year. This means you need to sell 500 units a quarter.
However, if you are at 400 units, then you need to evaluate
the options to increase sale. At the same time, if the growth
is large and you are at 700 units, then you need
to boost manufacturing. Thus, the importance of planning is
Achieving desired results
• Planning is important, because through
progress, an integrated approach, flexibility,
and all of the other points mentioned above,
planning ultimately helps the organization
reach a desired, economically viable and
profitable objective. If the plan is
implemented correctly, the results will
always be desirable by the organization.
• The end of the implementation of one
marketing plan, is immediately followed by
the implementation of another marketing
plan, the process of which starts
immediately with a different objective in
mind. Thus, planning is important to an
organization because it gives a steady
growth and prepares the organization for a
desired future.
 3.5 Principles For Effective Planning
• Principle of contribution: the purpose of • Principle of coordinated planning: long and short-
planning is to ensure the effective and range plans should be coordinated with one another to
form an integrated plan, this is possible only when
efficient achievement of corporate objectives,
latter are derived from the former. i.e. Implementation
in-fact, the basic criteria for the formulation of one plan should contribute to all the other plans,
of plans are to achieve the ultimate objectives of this is possible only when all plans are consistent with
the company. one another and are viewed as parts of an integrated
corporate plan. Coordinate plans
• Principle of sound and consistent
• Principle of efficiency: cost of planning constitute
premising: premises are the assumptions
human, physical and financial resources for their
regarding the environmental forces like economic
formulation and implementation as well. Minimizing
and market conditions, social, political, legal the cost and achieving the efficient utilization of
and cultural aspects, competitors actions, etc. resources shall has to be the aim of the organization.
These are prevalent during the period of the Employee satisfaction and development, and social
standing of the organization are supposed to be
implementation of plans.
considered while calculating the cost and benefits of
• Principle of limiting factors: the limiting • Principle of timing: number of major and
factors are the lack of motivated employees,
shortage of trained personnel, shortage of capital minor plans of the organization should be
funds, government policy of price regulation, etc. arranged in a systematic manner. The plans
The company requires to monitor all these should be arranged in a time hierarchy,
factors and need to tackle the same in an efficient
initiation and completion of those plans
way so as to make a smooth way for the
achievement of its ultimate objectives. should be clearly determined.
• Principle of acceptance: plans should be • Principle of flexibility: plans are supposed
understood and accepted by the employees, since the to be flexible to favor the organization to
successful implementation of plans requires the cope-up with the unexpected environments. It is
willingness and cooperative efforts from them.
always required to keep in mind that future
Communication also plays a crucial role in
gaining the employee understanding and will be different in actuality. Hence
acceptance of the plans by removing their companies, therefore, require to prepare
doubts and misunderstanding about the plans contingency plans which may be put into
also their apprehensions and anxieties about
operation in response to the situations.
consequences of plans for achievement of their
• Principle of commitment: a commitment is required to carry-on the
business that is established. The planning shall has to be in such a way that
the product diversification should encompass the particular period during
which entire investment on that product is recovered.
• Principle of navigational change: since the environment is always not
the same as predicted, plans should be reviewed periodically. This may
require changes in strategies, objectives, policies and programmers of the
organization. The management should take all the necessary steps while
reviewing the plans so that they efficiently achieve the ultimate goals of
the organization
 Advantages of Planning
1.Planning facilitates management by 2.Planning minimizes uncertainties.
a. Business is full of uncertainties.
objectives.
b. There are risks of various types
a. Planning begins with determination of
due to uncertainties.
objectives. c. Planning helps in reducing
b. It highlights the purposes for which various uncertainties of future as it involves
activities are to be undertaken. anticipation of future events.
c. In fact, it makes objectives more clear and d. Although future cannot be
specific. predicted with percent accuracy but
d. Planning helps in focusing the attention of
planning helps management to
anticipate future and prepare for
employees on the objectives or goals of enterprise.
risks by necessary provisions to meet
e. Without planning an organization has no guide.
unexpected turn of events.
f. Planning compels manager to prepare a Blue- e. Therefore with the help of
print of the courses of action to be followed for planning, uncertainties can be
accomplishment of objectives. forecasted which helps in preparing
g. Therefore, planning brings order and rationality standbys as a result, uncertainties
3.Planning facilitates co-ordination. 4.Planning improves employee’s moral.
a. Planning revolves around a. Planning creates an atmosphere of
organizational goals. order and discipline in organization.
b. All activities are directed towards b. Employees know in advance what is
common goals. expected of them and therefore
c. There is an integrated effort conformity can be achieved easily.
throughout the enterprise in various c. This encourages employees to show
departments and groups. their best and also earn reward for the
d. It avoids duplication of efforts. In same.
other words, it leads to better co- d. Planning creates a healthy attitude
ordination. towards work environment which
e. It helps in finding out problems of helps in boosting employees moral and
work performance and aims at rectifying efficiency.
5.Planning helps in achieving economies.
a. Effective planning secures economy since it leads
to orderly allocation of resources to various
operations.
b. It also facilitates optimum utilization of resources
which brings economy in operations.
c. It also avoids wastage of resources by selecting
most appropriate use that will contribute to the
objective of enterprise. For example, raw materials
can be purchased in bulk and transportation cost can
be minimized. At the same time it ensures regular
supply for the production department, that is, overall
efficiency.
6.Planning facilitates controlling.
a. Planning facilitates existence of certain planned
goals and standard of performance.
b. It provides basis of controlling.
c. We cannot think of an effective system of
controlling without existence of well thought out
plans.
d. Planning provides pre-determined goals against
which actual performance is compared.
e. In fact, planning and controlling are the two
sides of a same coin. If planning is root,
controlling is the fruit
7.Planning provides competitive edge.
a. Planning provides competitive edge to the
enterprise over the others which do not have
effective planning. This is because of the fact that
planning may involve changing in work methods,
quality, quantity designs, extension of work,
redefining of goals, etc.
b. With the help of forecasting not only the
enterprise secures its future but at the same time it
is able to estimate the future motives of it’s
competitor which helps in facing future challenges.
c. Therefore, planning leads to best utilization of
possible resources, improves quality of production
and thus the competitive strength of the enterprise
8.Planning encourages innovations.
a. In the process of planning,
managers have the opportunities
of suggesting ways and means of
improving performance.
b. Planning is basically a decision
making function which involves
creative thinking and imagination
that ultimately leads to innovation
of methods and operations for
growth and prosperity of the
enterprise.
 3.6 Barriers To Effective Planning
(A) influence of external factors:
• the effectiveness of planning is sometimes limited because of the external social, political, economical and technological factors
which are beyond the control of the planners.
(B) non-availability of data:
• planning needs reliable facts and figures. Planning loses its value unless reliable information is available.

(C) people’s resistance:

• resistance to change hinders planning. Planners often feel frustrated in instituting new plans, because of the inability of people
to accept them.
(D) time and cost:
• collection of data and revision of plans involves considerable time, effort and money.

(E) inflexibility:
• formal planning efforts can lock an organization into specific goals to be achieved within specific timetables. When these
objectives were set, the assumption may have been made that the environment wouldn't change during the time period the
objectives cover. If that assumption is faulty, managers who follow a plan may have trouble. Rather than remaining flexible and
possibly scrapping the plan-managers who continue to do what is required to achieve the original objectives may not be able to
cope with the changed environment. Forcing a course of action when the environment is fluid can be a recipe for disaster.
barriers to effective planning

• Difficulty of accurate premising

• Problems of rapid change
• Internal inflexibilities
Policy & procedural inflexibility
Capital investment
• External inflexibility
Political climate
Trade unions
Technology changes
• Time & cost factors
• Failure of people in planning
 SELF ASSESSMENT QUESTIONS
1. Critically evaluate how success and failure in practice of basic management functions
affect the organization. Support with real local examples.

2. Analytically examine this statement “Management starts from planning and ends up with
controlling". Provide your own experiences in your work place .

3. Sometimes, planning fails to achieve the expected results. Mention causes of failure of
planning and suggest remedies to overcome failure factors.

4. "Managerial planning seeks to achieve a coordinated structure of operations". Comment.

5. "Without planning an enterprise would soon disintegrate, its actions would be as random
as leaves scampering before an autumn wind, and its employee as confused as ants in an
upturned ant hill". Comment
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E N D OF C H A