What is the function of planning?

Planning is the first managerial function to be performed in the process of management. It is concerned with deciding in advance what is to be done, when, where, how and by whom it is to be done.

Thus, it is a pre-determined course of action to achieve a specified aim or goal.

Further, planning is the primary function of management. As a process it involves the conscious determination of future course of action in order to achieve the desired results.

Future is important in business. Though it cannot be predicted in exact term, yet it can be guessed to certain extent.

Instead of leaving them to chance, future events are made to happen in a certain recognised manner through planning.

Learn about:-

1. Introduction and Meaning of Planning 2. Definitions of Planning 3. Characteristics 4. Objectives 5. Is Planning a Necessity? 6. Six P’s 7. Principles

8. Effective Planning 9. Steps 10. Types 11. Premises. 12. Types of Plans 13. Importance 14. Advantages 15. Limitations.

Planning in Management: Introduction, Objectives, Steps, Types, Importance and Limitations

Planning – Introduction and Meaning 

Planning is the first managerial function to be performed in the process of management. It is concerned with deciding in advance what is to be done, when, where, how and by whom it is to be done. Thus, it is a pre-determined course of action to achieve a specified aim or goal.

Further, planning is the primary function of management. As a process it involves the conscious determination of future course of action in order to achieve the desired results. Future is important in business. Though it cannot be predicted in exact term, yet it can be guessed to certain extent. Instead of leaving them to chance, future events are made to happen in a certain recognised manner through planning.

Planning determines the time of action to achieve the pre-determined organisational goals. It is a deliberate and conscious research used to formulate the design and sequence of actions through which it is expected to help to reach its objectives. It is a process of thinking before doing. It determines objectives and steps necessary to achieve them.

According to George R. Terry, “Without the activities determined by planning there would be nothing to organise, no one to activate and no need to control.”

Planning involves choosing of one of the various alternatives available for accomplishing the desired result with the greatest economy and certainty through the process of looking ahead. It sketches a complete picture of things to happen in future in the enterprise. The proposed course of action is charted out in greater details with the help of complex chain of plans like policies, procedures, programmes and budgets focused on objectives of the enterprise.

In nutshell planning, if good and based on reliable information and complete, up-to-date and dependable data, then it pays rich dividends in the form of higher and quicker accomplishment of tasks set for.

Planning – Definitions of Planning by Different Writers

Planning is the continuous process of making present entrepreneurial decisions systematically and with best possible knowledge of their futurity, organising. Systematically the efforts needed to carry out these decisions and measuring the results of these decisions against the expectation through organised systematic feedback. Peter Drucker has encompassed the element of feedback that would ascertain the quality of decisions and the accuracy of planning.

The definitions of planning given by different writers are as follows:

(1) In the Words of Alfred and Beatty – “Planning is the thinking process, the organised foresight, the vision, based facts and experience that is required for intelligent action.”

(2) 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 from where we are, to where we want to go. It makes it possible for things to occur which would not otherwise happen.”

(3) R.N.Farmer and B.M.Richman regard that – “Planning is essentially decision making since it involves choosing amount alternatives.”

(4) According to George Terry – “Planning is the selecting and relating of facts and making and using of assumptions regarding the future in the visualization and formulation of proposed activities believed necessary to achieve the desired results.”

(5) 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.”

A careful analysis of the above definitions of planning reveals that:

a. Planning is concerned with future and its essence is looking ahead;

b. It involves thinking and analysis of information;

c. It involves pre-determined course of action;

d. It is concerned with the establishment of objectives to be attained in the future;

e. It is fundamentally a problem of choosing after a careful study of alternative courses;

f. It involves decision-making;

g. Its objective is to achieve better results;

h. It is a continuous and integrated process.

In every human activity, there is an element of planning. For instance, we find that the head of the family plans his expenditure, the house-wife plans her daily chores, the teacher plans his studies and the farmer plans his agricultural activities.

In the business field, the need for planning is all the more important because of various factors. Such as fluctuations in demand, growing competition, introduction of new products, scarcity of resources, changing technology, change of prices, government policy, etc., organisational activity without a plan is likely to be ineffective and will drift without achieving success. Hence, planning is a must for business organisation.

Planning – 11 Characteristics and Features

Planning is characterised by the following features:

Feature # 1. Primary Function of Management:

Planning is the first function of management. All other functions follow planning. If planning goes wrong, organisation structures would be faulty, people will carry out wrong plans, motivation and leadership policies will be ineffective and controls will also aim to achieve faulty plans. This will result in huge losses for the organisation and managers will have to re-plan their activities and spend lot of time, money and energy to avoid liquidation of business firms.

Feature # 2. Adaptive to Environment:

Planning is a continuous process. It helps organisations to survive in the ever-changing environment. Changes in environment like competitors’ policies, increasing competition, consumer tastes, economic policies, value system of the society have to be incorporated in the plans and planning is, thus, adaptive to environment. It takes care of both environmental threats and opportunities.

Feature # 3. Future Oriented:

Planning is looking ahead. It strengthens organisations to meet future challenges and opportunities. Future being uncertain, managers adopt scientific methods of forecasting. They anticipate future and incorporate changes in their activities to achieve organisational goals effectively.

Feature # 4. Goal Oriented:

Planning aims to achieve the desired goals. Planning is, thus, goal oriented. It clearly lays down the goals and ways to achieve those goals. It synthesises conflicting opinions of organisational members regarding what should be the goals and how should they be achieved.

Feature # 5. Pervasive:

Planning is a pervasive function. It is done for all organisations— business and non-business, profitable and non-profitable, small and big. In a business organisation, it is done at each level of the organisation; top, middle and low. Top level managers make long-term plans, middle level managers make departmental plans and lower level managers make operating plans.

Feature # 6. Intellectual Process:

Managers plan taking into consideration the firm’s past, present and future. Analysis of future is difficult as future is uncertain and keeps changing. Managers have to be conceptually and analytically excellent in making plans that can be implemented. They should have the judgment, intuition, foresightedness and imagination to make good plans. Planning, thus, cannot be done in dark. It is an intellectual process.

Feature # 7. Efficient:

Efficient means cost effective. Planning requires time and money to earn gains in future. A trade off should be maintained (comparison between cost and return) and managers should ensure that gains are more than the costs. Efficiency means “achievement of the ends with the least amount of resources”. It aims at best combination of resources (land, labour, capital, machines etc.) to achieve maximum output out of minimum inputs.

Feature # 8. Flexible:

Planning relates to future. Future being uncertain, plans will fail to achieve the objectives if unexpected changes take place in future. Managers have to be quick in changing the plans so that future changes do not fail the plans. Planning is, thus, a flexible activity.

Feature # 9. Planning and Decision-Making:

Planning involves decision-making. Choosing goals out of multiple goals, decided about ways to achieve them, deciding about sources from where funds will be raised, deciding about optimum allocation of resources over different goals and departments etc. are some of the innumerable choices that managers have to make. Planning continuously involves decision-making. In fact, the process of decision-­making starts much before the process of planning.

For example, manager wants to install a machinery. He has to make a number of choices like – whether to buy or hire; if buy, whether to raise money from outside or use retained earnings (internal source of finance); if outside sources, whether to issue shares or debentures; if shares, whether to issue equity shares or preference shares. Planning is, thus, a continuous process of decision-making.

Feature # 10. Feedback:

Planning is closely related to control. Planning specifies future actions and control ensures those actions are carried out. Planning frames organisational goals and control ensures those goals are achieved. Controlling function provides constant feedback to managers about the efficiency of plans. Deviations in actual performance against planned performance help in reviewing the plans or abandoning them altogether to make fresh plans.

Feature # 11. Limiting Factor:

Resources are limited. Planning is done keeping in mind the resource constraints. Goals are framed according to what resources are available with the company. Ignoring the limiting factor can result in framing over optimistic goals that may not be achieved.

Planning – 10 Important Objectives

The important objectives of planning are as follows:

(1) Planning Helps in Effective Forecasting:

The first and the most important objectives of planning is forecasting. Forecasting is the essence of planning. Planning is to prepare the plans for the organisation on the basis of forecasting. Therefore, planning helps in effective forecasting.

(2) Planning Provides Certainty in the Activities:

Planning decides the policies, defines the procedures and makes the rule for the activities of all the employees of the organisation. This helps in bringing certainty in the activities of the organisation.

(3) Planning Gives a Specific Direction to the Organisation:

Planning gives or issues the specific direction to all the activities of an organisation by preparing the outlines of these activities well in advance.

(4) It Establishes Co-Ordination in the Enterprise:

Planning has been considered as an important tool of co-ordination policies, objectives, procedures and programmes of an enterprise. Enterprise can be well organised in a co-ordinated way with the help of planning.

(5) It is Helpful in Creating a Healthy Competition:

Planning helps in creating a healthy competition among all the employees of the organisation and also among all the activities. It creates a healthy competition among the employees in their efforts towards the achievement of pre-determined objects of the organisation.

(6) It Provides Economy in the Management:

Planning establishes the co­ordination among all the activities of the organisation. It guides the management and all the employees of the organisation in their activities. It helps in maintaining effective control and discipline. It also helps in the comparison of actual results with the goal and targets. It checks all types of wastages and thus, brings an economy in management.

(7) It Can Forecast the Risk:

Planning helps in forecasting the risk that may appear in future. By forecasting the risks, the strategies may be designed to treat with them effectively and successfully.

(8) It Provides Important Information:

Planning provides to all the employees and all the outsiders dealing with an organisation all the important information regarding objectives, policies and programmes of the organisation.

(9) It is Helpful in Facing the Competition:

Planning helps in forecasting the competition which will have to be faced by the organisation. It also helps in deciding the strategy to face the competition successfully.

(10) It is Very Much Helpful in the Accomplishment of Budgets:

Planning helps the management in accomplishing the pre-determined budgets of the enterprise in a mannered way.

Planning – Is Planning a Necessity?

Eminent authors of management are of this opinion that to ensure proper utilisation of human and material resources and to achieve the objectives of the business planning is very essential. Without proper planning, the affairs of any enterprise are most likely to be haphazard. Less important task may be done ahead of more important ones or the same piece of work may be done by different individuals using different procedures or methods.

There may be unnecessary repetition of certain business operations leading to wastages of efforts and resources. As Billy E. Goetz has said that “without plans, action will become merely random activity, producing nothing but chaos.” Therefore, planning is must to achieve a consistent and co-ordinated structure of operations focused on desired objectives.

Henri Fayol in his book General and Industrial Management has explained the importance of planning as a management function. According to him, “The maxim, managing means looking ahead, gives some idea of the importance attached to planning in the business world, and it is true that if foresight is not the whole of management, at least it is an essential part of it. The plan of action is, at one and the same time, the result envisaged, the line of action to be followed, the stages to go through and the methods to use.”

George R. Terry-viewed “Planning as basic to the other managerial functions. Without the activities determined by planning, there would be nothing to organise, no one to actuate and no need to control.” This stresses the importance of planning in the management process. Thus, planning is a prerequisite to good management.

Further, planning provides a rational approach to pre-determined objectives as it requires a lot of systematic mental exercise on the part of the planners. Planning helps in selecting from among alternative future courses of action for the enterprise as a whole and for its every department. It lays down clearly what every segment of the enterprise should do to achieve the organisational objectives.

No organisation can achieve its objectives without proper planning because of certain obvious reasons. These reasons may be as follows – (i) Rapid social, economic and political changes; (ii) Growth of trade unionism; (iii) Recognition of social responsibilities; (iv) Growing complexities of modern era because of rapid technological changes and keen competition; (v) Lack of certain resources; (vi) Increasing government control over business; (vii) Uncertainties caused by Trade Cycles; (viii) Need for research and development activities.

These are the important challenges before the managers of modern era which can be dealt with effectively only through proper planning. Taking into consideration the significance of planning, management of every organisation should give due weightage to the planning function. Good planning is the foundation of efficient management. And a good manager must plan his work and activities with all possible care.

Planning – Six P’s Planning of Planning as Explained by Peter Drucker

Peter Drucker while emphasizing the various aspects of planning has explained that good planning systems need six P’s and they are as follows:

(1) Purpose:

An effective planning system requires a clear understanding of the organisation’s purpose. This purpose must be clear and elaborate. For Example- What are the reasons for the organisation’s existence? Is it to increase profit or to increase market shares or to generate more employment or to introduce more products? etc.

(2) Philosophy:

Philosophy incorporates the fundamental beliefs as to how the organisation’s purpose is to be achieved. For long-term survival and growth, a philosophy of ethical conduct must be adopted. For Example — Normally, the general motor’s dealer philosophy is based upon profitability through quality, service and ethical behaviour.

(3) Premise:

This involves the strengths and weaknesses of the organisation and its knowledge and assumptions about its environment. By forecasting and other methods, the management can make some conclusions about the environment trends and by knowing its own strengths and weaknesses it can deal with the changing environment in a more intelligent way.

(4) Policies:

Policies are general guidelines or constraints that aid in managerial thinking and action. In a typical organisation, there are production policies, financial policies, accounting policies, marketing policies, personal policies etc. These policies are more specific than the philosophy and form a basis for planning and necessary operational actions.

(5) Plans:

Plans represent specific objectives and action statements. Objectives are the goals to be met and the action statements are the mean to achieve these ends. These plans guide us step by step as to how to reach the objectives and also at what stage the progress is at a given time.

(6) Priorities:

A particular organisational goal must be given a particular priority. Limited resources of time, finance, materials etc., must be proportionately allotted to goals of priority. The priorities will determine an appropriate allocation of resources. Goal priorities would determine what is relatively more important. A goal of higher priority would receive more attention and more resources.

For Example — A research-oriented organisation will get different priorities and resources than a profit-oriented organisation.

Planning – Important Principles of Planning

The important principles of planning are as follows:

(1) Principle of Contribution to Objectives:

The first principle relates to the purpose of plans and their components which is to develop and facilitate the realization of organisational aims. Long-range plans should be inter-woven with medium-range plans which, in turn should be worked with short-range ones in order to accomplish the organisational objectives more effectively and economically.

(2) Principle of Pervasiveness of Planning:

Planning is found at all levels of management. Strategic planning or long-range planning is related to top management, while intermediate and short-range planning are the concern of middle and operative management respectively.

(3) Principle of Flexibility:

The principle of flexibility states that management should be able to change an existing plan because of changes in environment, without undue cost or delay, so that activities keep moving towards established goals. Therefore, an unexpected slump in demand for a product will require change in sales plan as well as production plan.

Changes in these plans can be introduced only when these possess the characteristic of flexibility. Adapting plans to suit future uncertain or changing environment is easier if flexibility is an important consideration while planning.

It is essential that both short-term and long-term plans need to have the element of flexibility. Flexibility is more important in long-range plans. Possibility of error or uncertainty is much higher in long-term plans than in short-term plans.

The management can have flexibility in planning only within limits. External and internal rigidities and pressures greatly limit flexibility in managerial planning. Thus, it can be said that “the existing pattern of personnel behaviour policy and procedure rigidities, union pressures, government policy and legal requirements are important, inflexibilities greatly restricting adaptability of plans to changing environment.”

(4) Principle of Limiting Factors:

It is very essential that planning must take the limiting factors, like manpower, money, machines, materials and management into account by concentrating on them. When developing alternative plans, strategies, policies, procedures and standards.

(5) Principle of Change:

Under this plan the manager should check on various events periodically and redraw the plans to maintain a course towards a desired goal. Further, he should check his plans to ensure that these are progressing as required. He should change the direction of his plans if he faces unexpected problems. It is better and useful if plans contain an element of flexibility. Here, the role of a manager in analogous to the role of the navigator of a ship to change its course if it is not going on the right path.

Planning – Steps to be Taken according to Experts in order to make Planning Effective

How can managers effectively plan when the external environment is contin­ually changing?

The following steps have to be taken according to experts in order to make planning effective:

Step 1. Climate:

Planning must not be left to chance. Additionally, conducive climate must be provided so that activities proceed smoothly and sys­tematically. Top managers should remove obstacles to planning, by establishing clear cut goals, realistic planning premises and offering required information and appropriate staff assistance at various levels.

Step 2. Top Management Support:

Planning must start at the top. It must receive attention of the top management continually. They must be willing to extend a helping hand, whenever required.

Step 3. Participation:

Plans are implemented by people. So, it is necessary to secure acceptance and commitment from them. One way to increase commitment is to solicit subordinates’ participation in the planning process. Planning comes alive when employees are involved in setting goals and determining the means to reach them.

Ten Commandments of a Good Plan:

According to management experts (L.F. Urwick, Koontz, and Stoner) a good plan:

a. Should have a clear objective

b. Should be simple and easy to understand

c. Should provide for proper analysis and clarification of actions

d. Should be flexible enough to move in sync with changing trends

e. Should have a balanced focus

f. Should be practicable and capable of delivering results

g. Should allow people especially those who look after its implementation, to participate actively and enthusiastically

h. Should provide for optimum use of resources

i. Should be sold to everyone and communicated well before its being implemented, and

j. Should allow integration of effort at every level smoothly.

Step 4. Communication:

Goals, premises and policies must be properly com­municated to people. People must know what they are supposed to do, when, how and where. The time limits must also be communicated in advance.

Step 5. Integration:

Different plans must be properly balanced and integrated. They must support each other and should not work at cross purposes. Every attempt should be made to ensure that the pay-offs of planning are more than the costs involved.

Step 6. Monitoring:

Plans must be subjected to regular appraisal and review, so as to take note of internal as well as external changes. Better to keep the plan flexible to the extent possible.

Planning – Steps Involved in the Planning Process

The process of planning consists of the following steps:

(i) Establishing Objectives:

The first step in the planning process is to identify the goals of the organisation. The internal as well as external conditions affecting the organisation must be thoroughly examined before setting objectives. The objectives so derived must clearly indicate what is to be achieved, where action should take place, who is to perform it, how it is to be undertaken and when it is to be accomplished. In other words, managers must provide clear guidelines for organisational efforts, so that activities can be kept on the right track.

(ii) Developing Premises:

After setting objectives, it is necessary to outline planning premises. Premises are assumptions about the environment in which plans are made and implemented. Thus, assumptions about the likely impact of important environmental factors such as market demand for goods, cost of raw materials, technology to be used, pop­ulation growth, government policy, etc. on the future plans are made. Plans should be formulated by the management, keeping the constraints imposed by internal as well as external conditions in mind.

(iii) Evaluating Alternatives and Selection:

After establishing the objectives and planning premises, the alternative courses of action have to be considered. The pros and cons as well as the consequences of each al­ternative course of action must be examined thoroughly before a choice is made.

(iv) Formulating Derivative Plans:

After selecting the best course of action, the management has to formulate the secondary plans to support the basic plan. The plans derived for various departments, units, activities, etc., in a detailed manner are known as ‘derivative plans’. For example, the basic production plan requires a number of things such as availability of plant and machinery, training of employees, provision of adequate finance, etc. To ensure the success of a basic plan, the derivative plans must indicate the time schedule and sequence of performing various tasks.

(v) Securing Cooperation and Participation:

The successful implementation of a plan depends, to a large extent, on the whole-hearted cooperation of the employees. In view of this, management should involve operations people in the planning activities.

(vi) Providing for Follow-Up:

Plans have to be reviewed continually to ensure their relevance and effectiveness. In the course of implementing plans, certain facts may come to light that were not even thought of earlier. In the light of these changed conditions, plans have to be revised. Without such a regular follow-up, plans may become out-of-date and useless. Moreover, such a step ensures the implementation plans along right lines.

Planning – Types of Planning in Management

1. Strategic Planning:

Strategic planning involves decisions about the organisation’s long term goals such as survival, growth etc. It involves setting long-term objectives (by top management) and deciding about the judicious deployment of resources to achieve those objectives.

Strategic planning, thus, is long-term in nature. It tends to be a top management responsibility. It requires looking outside the organisation for threats and opportunities. It also requires looking inside the organisation for finding out weaknesses and strengths.

It affects many parts of the organisation, as its decisions have enduring effects that are difficult to reverse. It tries to equip the organisation with capabilities needed to confront future uncertainties, by taking a holistic view of the entire organisation. Its focus is clearly on the ‘jungle, not the trees’. The main objective is to position the firm in an advantageous position in relation to the environment, keeping the firm’s own capabilities in mind.

Example – In business, it means how much money is going to be dedicated to a project, and by when you expect the project complete. In personal life, suppose you plan a wedding, it means deciding on the budget and the date.

2. Tactical Planning:

Tactical planning translates broad strategic goals and plans into specific goals and plans that are relevant to a definite portion of the organisation, such as a functional area like marketing or human resources. Tactical plans focus on a major actions a unit must take to fulfill a part of the strategic planning. They are often focused on 1-2 years in the future. This is the implementation of the strategic plan stage combining your available resources, look at obstacles, and review alternatives.

Example – In business, it means an analysis of resource combination, planning for obstacles, and general timetable. In personal life, for the wedding, it means, finding the place, developing a guest list, deciding on a menu and music.

3. Operational Planning:

Operational planning identifies the specific procedures and processes required at lower levels of the organisation. Frontline managers usually focus on routine tasks such as production runs, delivery schedules, and human resource needs etc. They typically focus on the short term, usually 12 months or less. These plans are the least complex of the three and rarely have a direct effect or oth­er plans outside of the department or unit for which the plan was developed.

Example- In business, it means engaging the team, develop and answer who, what, when, where, how management questions. In personal life, for the wedding, it means, choosing the band, finding the caterer, decide on flowers, etc. To be fully effective, the organisation’s strategic, tactical and operational plans must be aligned – that is, they must be consistent, mutually supportive and focused on meeting the common purpose and direction.

Planning – Planning Premises and Its Types

Planning premises are the assumptions about future upon which plans are based. Actions cannot be taken on the happening of events. The environmental events have to be forecast. Though future is not certain, assumptions about what is likely to happen in future affects the decisions made in the present.

The premises have to be rationally developed because if they occur as presumed, plans will be effective but if they do not occur as assumed, the money, time and energy spent on developing plans will be wasted and plans have to be modified. It is costly and time consuming to frame plans and, therefore, justified that they are based on carefully formulated assumptions about future.

Types of Planning Premises:

Planning premises or forecasts about future are of the following types:

1. Internal and External Premises:

Internal premises relate to factors internal to the enterprise. They relate or premises about internal policies and programmes, capital budgeting proposals, sales forecasts, personnel forecasts (skills and abilities of personnel) etc. These premises are largely known and controllable. External premises relate to factors that lie outside the organisation. They are the environmental factors (social, political, technological etc.) which affect the working of an organisation.

They relate to general business environment like monetary and fiscal policies, population growth, national income, political climate etc. They greatly affect planning process of the business organisations.

2. Controllable, Semi-Controllable and Non-Controllable Premises:

Controllable premises are within the control of a business enterprise, such as, men, money, materials, policies, procedures, programmes etc. Semi-controllable premises can be partially controlled by a business enterprise like, labour position in the market, pricing policy, marketing programmes etc. Non-controllable premises lie beyond the control of the business enterprise. Wars, natural calamities and external environmental factors are non- controllable premises.

All these premises affect business planning and have to be made carefully so that plans do not have to be revised frequently.

3. Tangible and Intangible Premises:

Tangible premises can be estimated in quantitative terms like, production units, cost per unit etc. Intangible premises cannot be quantified, for example, goodwill of the firm, employer-employee relationships, leadership qualities, motivational factors that get employees to work etc. These premises greatly affect the types of motivational and other plans to be designed by the organisation.

Planning – Types of Plan: Mission, Policies, Procedures, Rules, Programmes and Budgets

Different types of plans are developed by an organization, namely mission, strategies and policies, procedures, rules, programmes and budgets. They all refer to a future course of action. However, some are single-use plans while others are standing plans.

They are discussed below:

1. Mission or Purpose:

Mission is “a statement which defines the role that an organization plays in the society”. An organization’s mission includes its philosophy and basic purpose for which it exists. It establishes the values, beliefs, and guidelines that the organization holds in high esteem. Mission means, what is our business ? and what should it be ?

2. Policies:

Koontz and O’Donnel define policy as “a general statement of understanding which guides the thinking and action in decision-making. Policies provide the framework within which managers operate. Policies exist at all levels in the organization. It is a guideline for action. Policy is a one-time standing decision that helps the manager in making day-to-day decisions in their operational areas.

3. Procedures:

A series of related steps or tasks to be performed in a sequential way is known as procedure. Policy is subdivided in to various operations and termed as procedures. For example: A company’s policy may be to sell the obsolete products at a discount. The procedure may explain how to decide which product is obsolete and what percentage of discount is to be offered. Policies and procedures are closely interrelated.

4. Rules:

A rule is also a plan that suggests required action. A rule is a prescribed course of action that explicitly states what is to be done under a given set of circumstances. A rule requires that a definite action has to be taken in a particular way with respect to a situation. Some definiteness is associated with rules.

5. Programmes:

Programme is “a comprehensive plan that includes future use of different resources in an integrated pattern and establishes a sequence of required and time schedules for each in order to achieve stated objectives”. Thus, a programme includes objective, policies, procedures, methods, standards and budgets.

6. Budgets:

A budget is a quantitative expression of a plan. It is a statement for a given period of time in future expressed in financial or physical units. Organizational budgets vary in scope. Budgets facilitate the comparison of actual results with the planned ones by providing yardsticks for measuring performance.

Planning – Importance

1. Planning Focuses on the Future Direction, Values and Sense of Purpose:

Continuous planning by management shows precisely what the enterprise wants to achieve in a given period as well as how it intends to accomplish the ob­jectives formulated in advance. The organisation knows its present position and also where it wants to go. Basic ob­jectives indicate the direction of growth.

2. Planning Provides a Unifying Decision-Making Frame­work:

Every company has a number of functional depart­ments such as production, finance, marketing and personnel. Managers in these departments must develop their own func­tional strategy or departmental direction. Without an over­all corporate plan, there will be confusion and chaos.

With a clear, effective master plan, each department knows what it must do to contribute to the achievement of company goals. All the departments will work in unison to achieve common corporate goals. Thus planning improves the decision-making process in the organisation.

3. Planning Helps to Identify Potential Opportunities and Threats:

Peter Drucker has pointed out that planning cannot completely eliminate the risks and uncertainties of our deci­sions in long-term planning. But it can certainly help to identify the potential opportunities and threats and at least minimise the risks or uncertainties. An appraisal of environ­mental conditions that reveals opportunities and threats is a common step in the process of planning.

A plan is based on concrete and reliable information both about the internal and external environments and our sole aim is to secure a balance between our resources and our customer needs in order to offer maximum customer satisfaction. Objectives are set on the basis of inside/outside environmental forces re­vealing opportunities and threats.

4. Planning Provides Performance Standards:

A good plan specifies clearly the targets to be accomplished. For example, your company’s five-year plan may prescribe that rate of return on shareholders’ investment must double within five years from 15 per cent to 30 per cent per annum. The performance of the company is measured and controlled on the basis of such a specific performance standard.

5. Tuning with the Environment:

In general, organisa­tions that plan have been the winners as against the non- planners. Planning helps the managers to control the events rather than being controlled by them. A Manager can esta­blish through planning a profitable relationship with the environment and minimise risk and insecurity.

6. The need for Planning Arises from Constant Change:

A business enterprise lives in a dynamic and complex environ­ment. Economic, social, political and technological trends must be noted and their influence must be taken into ac­count in our plans and policies from time to time. An enter­prise and its environment are mutually interdependent interacting with each other continuously.

A business orga­nisation lives in the world of resources, opportunities and limits. It can survive and grow only when it continuously adapts and responds in time to changes in the environment. Change is the essence of life. If there is anything constant, it is change. We are living in a dynamic world.

Change also implies progress. Management, through comprehensive busi­ness planning, can anticipate, meet and adapt creatively to ever-changing environmental conditions and demands. Plan­ning aids the manager to assure the survival of the organisa­tion under keen competition and changing environment.

Planning – Advantages

1. Integrated, consistent and purposeful action is more easily achieved. All efforts are directed toward desired objec­tives or results. Unproductive work and waste of resources can be minimised. Managers can relate decisions to each other and to the goals of the enterprise.

2. Planning enables a company to remain competitive with other rivals in the industry. Progressive management can improve product or service, methods and facilities, well in time before it is forced to do so by the competition.

3. Through careful planning, crises can be anticipated, and mistakes or delays avoided. Trouble can be more often easily corrected in its earlier stages than after a crisis has developed.

By anticipating the future risk or uncertainty or impending crisis, planning helps the manager to be prepared to meet such contingencies. Forewarned is forearmed. Pre­vention is better than cure. Thus, management cannot be caught unawares of the possible troubles.

4. Planning can point out the need for future change and the enterprise can manage the change effectively. For instance, planning can reveal future uncertainties or changes in the economy and the management can be prepared to face the change with reasonable success. Management of change is based on planning.

5. Planning enables the systematic and thorough investi­gation of alternative methods or alternative solutions to a problem. Thus we can have sound decisions on selection of the best method or the best alternative to solve any business problem.

6. Plans are based on adequate information of the past and present as well as on the intelligent forecasting of the future. Hence, we have accurate and realistic plans of produc­tion, marketing, etc. Planning maximises the utilisation of available resources and ensures optimum productivity and profits.

7. Planning provides a sound basis for reasonable and effective control. The twin of planning is control. Planning and control go hand in hand. Under planning, we have deadlines for the starting and completion of a project.

We have also standards of performance reflected in our goals or targets. A budget is not only a plan but also an instrument of control. Thus, planning facilitates controlling. We have the planning- action-control-replanning cycle in practice. Planning provi­des the groundwork for laying down control standards.

8. We determine our goals, policies, procedures and. time- bound action programmes in advance and all activities are co-ordinated and directed along the pre-determined channels. Hence, there is no problem of confusion or chaos, no need to grope in the dark. We have an orderly and smooth journey to arrive at our destination.

9. The Systems approach to business planning and busi­ness management demands synthesis, better co-ordination and integration of all functional areas of business organisation and we have overall planning of the enterprise as a whole.

Planning enables management to relate the whole enterprise to its complex environment profitably. We can visualise the inter-relation of different departments as well as inter-rela­tions of the enterprise with all environmental forces.

10. Under keen competition and the fast-changing envi­ronmental forces, particularly in the branch of science and technology, business planning in a comprehensive manner alone can assure survival and growth or prosperity.

11. Planning facilitates effective delegation of authority to act, removes communication difficulties, provides proper machinery for co-ordination and integration of all functions.

Planning – Limitations (With Measures to Overcome the Limitations)

Though planning is a primary function of management and also facilities various other management functions and brings orderliness, stability and continuity in operation, it suffers from certain limitations.

They are:

(1) Limitations of Forecasts:

Planning is based on forecasts and if reliable information data are not available for making forecasts, planning is sure to lose much of its value. The longer period of forecasts, the lesser will be the accuracy of planning. So, a manager must keep in mind that planning will not enable him to predict the future with absolute accuracy nor will it prevent him absolutely from making mistakes.

(2) Rigidity and Inflexibility in Administration:

Planning implies strict adherence to pre-determined policies, procedures and programmes. This restricts, individual’s freedom initiative and desire for creativity. This difficulty can be overcome by making flexible plans so that sub-ordinates may be directed according to circumstances.

(3) It is Time Consuming and Expensive Process:

Planning is said to be a time consuming and expensive process and this may delay action in certain cases. But this is not to blame the plans. The main fault lies with the planners. It is true that it is an expensive process but its economics can be availed by making intensive use of the plans. Further to make plans realistic, it is necessary that sufficient time should be given to the planning process.

(4) It is a Costly Affair:

Planning is an expensive exercise as a lot of money has to be spent for preparing estimates, collecting information and facts for analysis etc. Therefore, planning should not be undertaken beyond a certain level. It should be taken at a level where it justifies its cost. Apart from direct cost involved, indirect cost such as paper work, quality, etc., may also put financial pressure on the organisation.

(5) Influence of External Factors:

The effectiveness of planning is sometimes limited because of external factors which are beyond the control of the planners. External stringencies are very difficult to predict. Sudden outbreak of war, government control, natural calamities and many other factors are beyond the control of the management. They make the successful execution plans very difficult.

(6) Psychological Factors:

Psychological factors also limit the scope of planning. Some people consider present more important than future because present is certain. Such persons are psychologically opposed to planning. But it should not be forgotten that dynamic managers always look ahead. Long-range well-being of the enterprise cannot be achieved unless proper planning is done for future.

(7) Resistance to Change:

Resistance to change is another factor which puts limits on planning. It is a commonly experienced phenomenon in the business world. Sometimes, planners themselves do not like change and on other occasions they do not think it desirable to bring change as it will create resistance on the part of the workers. This attitude makes the planning process ineffective.

From the various factors discussed above it can be said that the various limitations to planning arise on account of the unpredictability of human nature and conduct, uncertainty of political and economic factor, conflicts in organisation, insufficiency of information, inbuilt resistance to change, insufficiency of time and lasting unpredictability of future.

So, a manager will have to face many limitations to planning while exercising upon plans. If planning is to be useful and purposive it is highly imperative that a manager understands these limitations to planning. Further, if planning is used with due respect and adjustments to its limitations, it can certainly help the management in minimising uncertainties, risks and hazards.

Measures to Overcome the Limitations of Planning:

Following measures may be adopted to overcome the limitations of planning:

(1) The Clear-Cut Objectives Must be Indicated:

The existence of clear-cut objectives is essential for efficient planning. The objectives should not be only understandable but rational also. The overall objectives of the enterprise must be the guiding pillars for determining the objectives of various departments. This would help in having co-ordinated planning in the enterprise.

(2) Management Information System Should be Installed:

An efficient system of management information should be installed so that all relevant facts and figures are made available to the managers before they perform the planning function. Availability of right type of information will help in overcoming the problems of incomplete understanding of the objectives and resistance to change on the part of the sub-ordinates.

(3) Careful Premising:

The planning premises constitute a framework within which planning is done. They are the assumptions of what is likely to happen in future. Planning always requires some assumptions to be made regarding future happenings. In other words it is a pre-requisite to determine the future settings such as marketing, pricing, government policy, tax structure, business cycle, etc., before giving the final shape to the overall business plan. The planning premises should be set-up very carefully.

Due weightage be given to the relevant factors at the time of premising. It may be pointed out that the premises which may be of strategic significance to one enterprise may not be strategic of equal significance to another, because of size, nature of business, nature of market, etc.

(4) Dynamic Managers:

The persons concerned with the task of planning should be dynamic in outlook. They must take the required initiative to make business forecasts and develop planning premises. A manager should always keep in mind that planning is looking ahead and he is making plans for future which is highly uncertain.

(5) Availability of Resources:

Determination and evaluation of alternatives should be done in the light of resources available to the management. Alternatives are always present in any decision problem. But their relative plus and minus points are to be evaluated in the light of the resources available, The alternative which is chosen should not only be concerned with the objectives of the enterprise, but also capable of being accomplished with the help of the given resources.

(6) Flexibility:

It is very essential that some element of flexibility must be introduced in the planning process because modern business operates in an environment which keeps on changing. For achieving effective results, there should always be a scope to make necessary addition, deletion, or alteration in the plans as is demanded by the circumstances.

(7) Cost Benefit Analysis:

The planners must undertake cost benefit analysis to ensure that the benefits of planning are more than the costs involved in it. This necessarily calls for establishing measurable goals, clear insight to the alternative courses of action available, premising reasonably and formulation of derivative plans keeping in view the fact that environment is fast changing.