Planning PDF

PLANNING Need for planning: The need for planning in business arises because of a number of factors or reasons. Those factors or reasons are: 1. Growing complexities of modem business. 2. Rapid technological changes 3. Growing competition. 4. Rapid economic, social and politica...

PLANNING Need for planning: The need for planning in business arises because of a number of factors or reasons. Those factors or reasons are: 1. Growing complexities of modem business. 2. Rapid technological changes 3. Growing competition. 4. Rapid economic, social and political changes. 5. Fluctuations in demand for products. These forces of challenges can be met by management only through proper planning. Business activities without proper planning are likely to be ineffective, and may fail to achieve success. So, planning is a must for every business organization. In fact, the maxim in management is "First plan your work, and then work your plan". Definitions According to Hodge and Johnson "Planning is the determination in advance of a line of action in order to achieve better performance". In other words of Koontz and O'Donnell, "Planning is deciding in advance what to do, how to do, when to do it and who is 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 no otherwise happen”. According to R.N. Farmer and B.M. Richman, "Planning is essentially decision-making since it involves choosing from among alternatives". Nature and Characteristics of Planning 1. Primacy of planning or primary function:.Planning is a primary function. That is, it is a primary requisite to the managerial functions of organizing, staffing directing, motivating, coordinating, communicating and controlling. A manager must do planning before he can undertake the other managerial functions. 2. Goal-oriented or focus on objectives: Planning is goal-oriented. That is, planning is linked with certain goals or objectives. A plan starts with the setting of objectives; and then, develops policies, procedures, strategies, etc. to achieve the objectives. 3. Pervasiveness of planning: Planning pervades all levels of management. That is planning is done at all levels of.management. In other words, every manager, whether he is at the top, in the middle or at the bottom or organizational structure, plans. 4. Essentially a decision-making process: Planning is essentially a decision-making process, since it involves careful analysis of various alternative courses of action and choosing the best. 5. Integrated process: Planning is an integrated process. That is it facilitates and integrates all other functions of management. 6. Selective Process: Planning is a selective process. That is, it involves the selection of the best course of action after a careful analysis of the various alternative courses of action. 7. Flexible: Planning must be flexible. That is, generally, the process of pi3nning must be capable of being adapted to the changes in the environment. In fact, successful planning should be flexible. 8. Formation of premises: Planning requires the formation of premises (i.e., assumptions). It is only on the basis of premises or assumptions regarding the future (i.e., the future political, social and economic environments) that the plans will be ultimately formulated. 1/8  9. Directed towards efficiency: The main purpose of planning is to increase the efficiency of the enterprise. That means, planning is directed to wards efficiency. 10. Continuous Process: Planning is a continuous process. That is, the management has to keep itself engaged in planning at the times because ~f the uncertainties of the future. 11. Planning and control are inseparable: Planning, which is looking ahead, and control, which Is looking back, are inseparable. They are the Siamese twins of management. Unplanned action cannot be controlled, for control involves keeping activities in course by correcting deviations from plans. 12. Future Oriented: Planning is future-oriented. 1ts essence is looking ahead. It is undertaken to handle future events effective and achieve some objectives in the future. 13. Action oriented: Planning is action-oriented. That is, planning should be undertaken in the light of organizational preferences. The course of action determined must be realistic. That is it should be neither impossible nor too easy to achieve. 14. Inter-dependent process: Planning is an inter-dependent process. It requires the Co- operation of the various sections and sub-sections of the organization. 15. Involves participation: Planning involves the participation of all the managers as well as the subordinates. In the words of Koontz and O'Donnell, "Plans must be formulated in an atmosphere of close participation and high degree of concurrence". 16. A means, and not an end: Planning is riot an end. It is only a means to achieve an end. i.e., the accomplishment of the pre-determined objectives or goals of the organization. Importance and Advantages of Planning 1. Management by objectives: It facilitates management by objectives. That is, it makes the management formulate the objectives of the organisation in clear-cut terms and take the right course of action to realize the specific objectives. 2. Facilities unity of direction and co-ordination: Planning facilitates co-ordination. Through its we-defined objectives. well-publicised policies, programmes and procedures, planning facilitates the co-ordination of all the inter-connected activities and avoids duplication of activities and delays in the execution of activities 3. Reduces future uncertainties and charges: A business concern has to work in an environment Which is uncertain and ever-changing, Planning helps the concern in foreseeing the risks and uncertainties in the future and in advance in the best possible way and in preparing the plan on the basis of its decisions in the past and present. 4. Facilitates control: Planning facilitates control. Planning determines in advance the work to be done, the person responsible for doing it, the time to be taken to do the work and the costs to be incurred. This makes it easy to compare the actual performance with the planed performance. In case there are deviations. corrective actions are taken to remove the deviations. Thus planning facilitates control. 5. Focusses attention on organizational goals and facilitates management by objectives: An organisation has definite goals or objectives, and all the activities of the organization are directed towards the achievement of those objectives. 6. Improves adaptability: planning improves adaptability. That is, planning helps the organization in coping with the changing business environment. The anticipation of future events and changing conditions, implied in planning, prepares the organization to meet them effectively. 7. Improves competitive strength: Planning improves the competitive strength of the organization by anticipating technological changes and tastes and preferences of people for discovering new opportunities for expansion and. providing for changes in work methods, improvement in quality of products, etc. 2/8  8. Planning motivation: Planning improves motivation. Planning ensures the participation of managers in the determination of the goals, policies, programmes, etc. of the organization. This improves the motivation and morale of the managers. 9. Encourages innovation and creativity: Planning promotes or encourages innovation and creativity on the part of managers, in the sense that many new ideas come to the minds of managers during planning, which basically a deciding function of management. 10. Ensures efficient use off resources: Planning ensures efficient use of all resources at the disposal of the concern to achieve organizational objectives. In planning, management evaluates alternative courses of action on the basis of efficiency, and selects only that course of action which is considered most efficient. 11. Brings about economy in operation: Planning brings about economy in operation by determining the one best way of doing things. 12. Guides decision-making: The success of any organization depends to a great extent on the types of decision made at the various levels of the organization. Decision- making is the making of choice from the various available alternatives after evaluating each of them. 13. Facilitates management by exception: Planning facilitates management by exception. That is, planning ensures that top management is not involved in each and every activity, and intervenes only when things are not going as per planning. 14. Facilitates delegation: Planning facilitates delegation of authority. Not only managers but also their subordinates take part in planning. The involvement of subordinates in planning necessarily requires delegation of authority to them for getting the things done. Principles of Planning A number of fundamental principles have been devised over the year for guiding managers undertaking planning. Some of these principles are discussed as under, 1. Principle of contribution to objective: All types of plans are prepared to achieve the objectives of the organization. Both major and derivative plans are prepared to contribute to the objectives of the enterprise. Planning is used as a means to reach the goals. 2. Principles of primacy of Planning: This principle states that planning is the first or primary function of every manager, He has to plan first and then proceed to carry out other functions. Other managerial function are organized to reach the objectives se in planning. 3. Principle of Planning Premises: In order to make planning effective, some premises or presumptions have to be made on the basis of which planning has to be undertaken. Plans are, generally not properly structures. The reason being that planning premises are not properly developed. This principle lays emphasis on properly analyzing the situation which is going to occur in future. 4. Principle of Alternatives: Planning process involves developing of many alternatives and then selecting one which will help in achieving desired business goals. In the absence of various alternatives proper planning will be difficult. 5. Principle of Timing: Plans can contribute effectively to the attainment of business goals if they are property timed. Planning premises and policies are useless without proper timing. 3/8  6. Principle of Flexibility: This principle suggests flexibility in plans if some contingencies arise. The plans should be adjusted to incorporate new situations. The dangers of flexibility should be kept in mind. The changes may upset the earlier commitments. So the cost of changes should be compared to the benefits of flexibility. 7. Principle of Commitment: There should be a time frame for meeting the commitments made. This will ensure the achieving of targets in time. 8. Principle of Competitive Strategies: While formulating own. Plans a manager should keep in mind the plans of competitors. The plans should be framed by thinking of what the. competitors will do in similar situations. Limitations of Planning 1. Lack of Reliable Data: Planning is based on various facts and figures supplied to the planners. If the data on which decisions are base are not reliable then decisions base on such information will also be unreliable. 2. Time Consuming Process: Practical utility of planning is sometimes reduce? by the time factor. Planning is a time consuming process and actions on various operations may be delayed because proper planning has not yet been done. Under certain circumstances an urgent action is needed then one cannot wait for the planning process to complete. 3. Expensive: The planning process is very expensive. The gathering of information and testing of various courses of action involve greater amounts of money. Sometimes, expenses are so prohibitive that small concerns cannot afford to use planning 4. External factors may reduce Utility: Besides internal factors these are external factors too which adversely affect planning. These factors may be economic, social, political, technological or legal. The general national and international climate also acts as limitation on the planning process. 5. Sudden Emergencies: In case certain emergencies arise then the need of the hour is quick action and not advance planning. These situations may not be anticipated. In case emergencies are anticipated or they have regularity in occurrence then advance planning should be undertaken for emergencies too. 6. Resistance to Change: Most of the persons, generally, do not like any change. Their passive outlook to new ideas becomes a limitation to planning. McFarland writes, "The principal psychological barrier is that the future. The present is not only more certain than the future, it is also more desirable. Resistance to change is commonly experienced phenomenon in the business world. Planning often implies changes which the executive would like to ignore, hoping they would not materialize." Planning Process Planning process involves the setting up of business objectives and allocation of resources for achieving them. Planning determines the future course of action for utilizing various resources in a best possible way. It is a combination of information handling and decision making systems based on information inputs, outputs and a feedback loop. Steps in Planning Process 1. Recognising Need for Action: The first step in planning process is the awareness of business opportunity and the need for taking action. Present and future opportunities must be found so that planning may be undertaken for them. The trend of economic situation should also be visualized. Before venturing into new areas the pros and cons of 4/8  such projects should be evaluated. A beginning should be made only after going through a detailed analysis of the new opportunity. 2. Gathering Necessary Information: Before actual planning is initiated relevant facts and figures are collected. All information relating to operations of the business should be collected in detail. The type of customers to be dealt with, the circumstances under which goods are to be provided, value of products to the customers, etc. should be studied in detail. The facts and figures collected will help in framing realistic plans. 3. Laying Down Objectives: Objectives are the goals which the management tries to achieve. The objectives are the end products and all energies are diverted to achieve these goals. Goals are a thread which bind the whole company. Planning starts with the determination of objectives. 4. Determining Planning Premises: Planning is always for uncertain future. Though nothing may be certain in the coming period but still certain assumptions will have to be made for formulating plans. Forecasts are essential for planning even if all may not prove correct. A forecast means the assumption of future events. The behaviour of certain variables is forecasted for constituting planning premises. Forecasts will generally be made for the following: a. The expectation of demand for the products. b. The likely volume of production. c. The anticipation of costs and the likely prices at which products will be marked. d. The supply of labour, raw materials etc. 5. Examining Alternative Course of Action: The next step in planning will be choosing the best course of action. There are a number of ways of doing a thing. The planer should study all the alternatives and then a final selection should be made. Best results will be achieved only when best way of doing a work is selected. 6. Evaluation of Action Patterns: After choosing a course of action, the next step will be to make an evaluation of those courses of actions. Evaluation will involve the study of performance of various actions. Various factors will be weighed against each other. A course of action may be suitable but it may involve huge investments and the other may involve less amount but it may not be very profitable. 7. Determining secondary Plans: Once a main plan is formulated then a number of supportive plans are required. In fact secondary plans are meant for the Implementation of principal plan. For example, once production plan is decided then a number of plans for procurement of raw materials, purchase of plant and equipment, recruitment of personnel will be required. All secondary plans will be a part of the main plan. 8. Implementation of Plans: The last step in planning process is the implementation part. The planning should be put into action so that business objectives may be achieved. The implementation will require establishment of policies, procedures, standards and budgets. These tools will enable a better implementation of plans. Types of Plans 1. Standard or Repeated-Use Plans and Single Use Plans: Standing or repeated-use plans are plans which are to be used repeatedly (i.e., over and over again) over a long period of time for tackling frequently recurring problems and issues. They give ready-made answers to issues which occur again and again. Standing plans serve as guideline for managerial decision-making and actions. They make managerial decisions and actions easy and increase managerial efficiency, as they offer standard procedures for tackling similar and frequently recurring problems and issues. 5/8  Standing plans includes: (a) Objectives (b) Policies (c) Procedures (d) Methods (e) Rules (f) Strategies 2. Financial plans and Non-financial Plans: Financial plans or cash plans are plans which relate to the monetary or financial resources of the concern. They determine the sources from which finance can be secured and the amounts which can be allocated to various purposes. Non-financial plans or non cash plans are plans which relate the physical resources, and not to financial resources, and for the concern. It may be rioted that through financial plans are more important than non-financial plans. It is as Important as financial plans. 3. Formal Plans & Informal Plans: Formal plans are plans which are reduced to black and white (i.e., put on paper). In other words1 formal plans are plans which specify in writing the specific objectives to be achieved and the steps to be taken to achieve those objectives. Formal plans are systematic and rational. They are quite necessary for the successful running of a concern. Informal plans are mere thinking by some individuals of a concern. Of course, informal plans in future. Informal plans promote unhealthy tendencies like carelessness, ineffective employee performance, etc. informal plans are not (;'f much use for the smooth running of the enterprise. 4. Specific plans & Routine plans: Specific plans are plans for specified or particular purposes. Preparation of specific plans js a difficult task, because the methods to be de~eril1ined for specific purposes have to be specially planned and formulated. Routine plans ware plans which are routine or mechanical are called routine plans. Preparation of routine plans is not difficult. In the case of the routine plans, the methods determined for accomplishing the objectives of the organization will remain the same during a particular period without major changes 5. Administrative plans & Operative plans: Administrative plans are plans which determine the basis of action for the whole organization as well as for the various segments of the organization for a particular period. Administrative plans are done by the middle- level management, and they provide guidelines for operative plans. Operative plans are plans which are concerned with the actual execution of day-to-day operations of the concern. Operative plans are, generally, for a short period. They are prepared by the lower level of management who put the administrative plans into action. Operative or operating plans cover aspects, such as preparation of sales programme, planning of production activities, etc. 6/8  6. Short-range plans & Long-range plans: Short range plans are plans which, generally, cover a period of one year. Short range or short term plans are concerned with the determination of short term activities to accomplish long term objectives. As short term plans are intended to achieve long term objectives, short range plans have to be consistent with long range plans. Short range plans are more action-oriented, more detailed, specific and quantitative. Long range plans which cover a period of years or more. The length of the period varies from one concern to another depending upon the nature of the business, the risks and uncertainties, government control; etc. they care concerned with the formulation of long- term goals of enterprise and the determination of the ways and means of achieving those goals. 7. Strategic plans & Tactical plans: Strategic plans are plans designed to achieve the overall or general objectives of the organization. Strategic plans are done by the top level management. They are concerned with the enterprise, the formulation of policies and the determination of strategies to be adopted and other steps to be taken to accomplish those objectives. Tactical plans are plans which are concerned with the planning of detailed operations needed to achieve the organizational goals. Tactical plans are intended to meet any changes in internal organization and external environment. For instance, difficulty in procuring raw materials, changes in prices of products, unexpected moves by the competitors and other unforeseen situations are met with the help of tactical plans. Components of Planning 1. Objectives: In the words of Koontz and O'Donnell, "Management terminology, objectives are the end-point's of a management programme whether stated in general or specific terms". Characteristics of Objectives 1. Objectives are multiple in nature 2. Objectives have a hierarchy 3. Objectives form a network 4. Objectives are both long range and short range 5. Business objectives are verifiable 6. Business objectives may be specific or general 7. Objectives may be tangible or intangible 8. Objectives have priority 9. Objectives may clash with one other 2. Policies: In the words of George R, Terry, "Policy is a verbal, written or implied overall guide setting up boundaries that supply the general limits and directions in which the managerial action will take place". They are the guidelines or executive action at all levels of management. Differences between objectives and policies: a. Objectives are the end points of planning. That is, objectives can be regarded as the places which have to be approached through roads (i.e., policies). But policies are the 7/8  means. That is, policies are the broad ways or roads through which the places (i.e., the objectives) have to be reaches b. Objectives are basic to his existence and functioning of an organization. But policies are not basic to the existence and functioning of an organization. c. There is no room for discretion in the case of objectives on.the other hand, policies may leave some room for discretion on the part of those who are to be guided by them. d. Objectives are determined by the top management, where as policies are left to be determined, to some extent by the lower levels of management. e. Objectives may, sometimes, remain, only on paper. On the other hand, policies reflect the true intents of the organization. f. Objectives have to be achieved, while policies have to be observed. 3. Procedures: According to George R. Terry "a procedure is a series of related tasks that make up the chronological sequence and established way of performing the work to be established". 4. Methods: A method is a specified or prescribed process, or manner or the way in which a particular task or operation is to be performed. 5. Rules: Rules are a plan that lay down a required course of action with respect to a given situation. In other words, rules are established principles for carrying out the activities in a systematic manner. In short, they are the prescribed behaviour of the people in the organization. 6. Strategies: In the words of A.D. Chandler, "Strategy is the determination of the basic long-term goals and objectives of an enterprise and the adoption of courses of action and the allocation of resources to carry out these goals". 7. Programmes: Programmes are the concrete scheme of the action designed to implement the policies and realize the objectives. In other words, they are the action-steps necessary to achieve the objectives. In short: they are the specific and precise plan which lays down the operations to be carried out to accomplish a given task, with a specified ~)i of time. 8. Schedules: Schedules are the dates and timings fixed for completing the programmed activities. In short, schedules are the time-table for the work to be done. 9. Projects: A project is an individual part of a general programme. In other words, it is part of the job that is required to be done in connection with a genera programme. 10. Budgets: The institute of cost and management accountants, London, has defined a budge as "a financial and/or quantitative statement, prepared prior to a defined period of time, of the policy to be pursued during that period for the purpose of attaining a given objective", 8/8