Planning

 

4. Planning

 

INTRODUCTION

 

Planning is deciding well in advance as to what to do and how to do. The concept with its importance and limitations (internal and external) is applied here with planning process. Different types of plans: single use (Budgets, Programmes) and standing plans (objectives, strategy, policies, procedures, methods and rules) have been discussed.

 

Chapter at a Glance

 

PLANNING

 

Planning is deciding in advance what to do and how to do. 'Planning thus, involves setting objectives and developing appropriate courses of action to achieve these objectives.

 

IMPORTANCE OF PLANNING

 

(i) Planning provides direction:

(a) Planning provides a clear sense of direction to the activities of the organization.

(b) The planning provides such direction:

·         By making the objectives clear and specific; and

·         By formulating the policies and programmes for achieving those objectives.

(c) Planning is directed towards the objectives of the business undertaking. It is planning which keeps the managers alive to the needs of future, to the need to check up periodically the progress made and make necessary improvements to accomplish the objectives.

(d) By stating in advance how work is to be done planning provides direction for action. Planning ensures that goals or objectives are clearly stated so that they act as a guide for deciding what action should be taken and in which direction.

(ii) Planning reduces the risk of uncertainty:

(a) Planning is an activity which enables a manager to look ahead and anticipate changes.

(b) By deciding in advance the tasks to be performed, planning shows the way to deal with changes and uncertain events.

(c) 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:

(a) Planning serves as the basis of coordinating the activities and efforts of different divisions, departments and individuals. It helps in avoiding confusion and misunderstanding.

(b) Since planning ensures clarity in thought and action, work is carried on smoothly without interruptions.

(c) 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 innovative ideas:

(a) Since planning is the first function of management, new ideas can take the shape of concrete plans.

(b) It is the most challenging activity for the management as it guides all future actions leading to growth and prosperity of the business.

(v) Planning facilitates decision-making:

(a) Planning helps the manager to look into the future and make a choice from amongst various alternative courses of action.

(b) The manager has to evaluate each alternative and select the most viable proposition.

(c) Planning involves setting targets and predicting future conditions, thus helping in taking rational decisions.

(vi) Planning establishes standards for controlling:

(a) Planning involves setting of goals. The entire managerial process is concerned with accomplishing predetermined goals through planning, organising, staffing, directing and controlling.

(b) Planning provides the standards against which actual performance is measured. In case of any deviation, the management can take corrective action.

(c) In the absence of plans, a manager will have no standards for controlling the actual performance. It means, controlling is not possible without planning. Therefore, planning provides basis of control.

 

 

FEATURES OF PLANNING

 

(i) Planning focuses on achieving objectives:

(a) Planning contributes to objectives in the sense that it involves the determination of the activities required to be undertaken to achieve objectives of organisation. Planning is the exercise of creative thinking in the solution of various problems.

(b) Planning has no meaning unless it contributes to the achievement of predetermined organizational goals.

(ii) Planning is a primary function of management:

(a) Planning is a primary function in the sense that it lays down the base for all other functions of management i.e., organising, staffing, directing and controlling.

(b) Planning proceeds other function, i.e., it is primacy of planning. It starts with objectives which are the basis of all these functions.

(iii) Planning is pervasive:

(a) Planning is a pervasive function in the sense that it is required—

·         At all levels of management (top, middle or lower). 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 planning is done by supervisors.

·         In all departments of an organisation (purchase; production, personnel, finance or research development),

·         In all types of organizations (small, large, economic, social, religious or political).

(iv) Planning is continuous:

(a) Plans are prepared for a specific period of time, may be for a month, a quarter, or a year.

(b) 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.

(c) 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:

(a) Planning is futuristic in the sense that it essentially involves looking ahead into the future and making provision to tackle future events and situations. Planning is intended to cope with future uncertainties and unknowns.

(b) 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.

(c) For example, sales forecasting is the basis on which a business firm prepares its annual plan for production and sales.

(vi) Planning involves decision-making:

(a) Planning essentially involves choice from among various alternatives and activities and choosing the best alternative.

(b) 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.

(vii) Planning is a mental exercise:

(a) Planning requires application of the mind involving foresight, intelligent imagination and sound judgment.

(b) It is basically an intellectual activity of thinking rather than doing, because planning determines the action to be taken.

(c) 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 analysis of facts and forecasts.

 

LIMITATIONS OF PLANNING

 

Internal Limitations: Internal limitations are mainly due to lack of expertise and experience on the part of the management, lack of resources and other human factors. Some important internal limitations have been discussed below:

(i) Planning leads to rigidity:

(a) Rigidity of planning mismatches the current performance with prevailing environment and thus, planning suffers from inflexibility in meeting its targets.

(b) Policies and programmes of the enterprise have to be established in course of the preparation of the plan. Once these are finalised it is difficult to change them. Secondly, commitments have to be made for long-term capital investment. This is done at the time of preparing the plan. Thus, capital investment is planned for future in terms of the forecasts made now.

(ii) Planning may not work in a dynamic environment:

(a) The business environment is dynamic, nothing is constant. The environment consists of a number of dimensions, economic, political, physical, legal and social dimensions.

(b) The organisation has to constantly adapt itself to changes. It becomes difficult to accurately assess future trends in the environment if economic policies are modified or political conditions in the country are not stable or there is a natural calamity.

(iii) Planning reduces creativity:

(a) Planning is an activity which is done by the top management. Usually the rest of the members just implement these plans.

(b) As a consequence, middle management and other decision makers are neither allowed to deviate from plans nor are they permitted to act on their own.

(c) Thus, much of the initiative or creativity inherent in them also gets lost or reduced. Most of the time, employees do not even attempt to formulate plans. They only carry out orders.

(d) Thus, planning, in a way, reduces creativity since people tend to think along the same lines as others. There is nothing new or innovative.

(iv) Planning involves huge costs:

(a) When plans are drawn up huge costs are involved in their formulation. These maybe in terms of time and money, for example, checking accuracy of facts may involve lot of time.                               

(b) Detailed plans require scientific calculations to ascertain facts and figures. The costs incurred sometimes may not justify the benefits derived from the plans.

(c) There are a number of incidental costs as well, like expenses on boardroom meetings, discussions with professional experts and preliminary investigations to find out the viability of the plan.

(v) Planning is a time-consuming process:

(a) Sometimes plans to be drawn up take so much of time that there is not much time left for their implementation i.e., practical utility of planning is sometimes reduced by the time factor.

(b) Planning is a time consuming process and actions on various operations may be delayed because proper planning has not yet been done. The delay may be loss of opportunities.

(c) When time is of essence then advance planning loses its utility.

(vi) Planning does not guarantee success:

(a) The success of an enterprise is possible only when plans are properly drawn up and implemented. Any plan needs to be translated into action or it becomes meaningless.

(b) Managers have a tendency to rely on previously tried and tested successful plans. It is not always true that just because a plan has worked before it will work again.

(c) Besides, there are so many other unknown factors to be considered. This kind of complacency and false sense of security may actually lead to failure instead of success.

 

External Limitations are the results of the external environment. Managers have little or no control over such limitations. Some external limitations have been described below:

(i) Natural calamities: Sometimes plans do not come up to the expectations because of natural calamities, such as flood, famine, earthquake etc. are beyond the control of managers and can cause failure of planning.

(ii) Political climate/Change in government policies:

(a) Political climate, sometimes, puts obstacles in the way of successful planning.

(b) Government policies play a significant role in influencing business activities. Managers have no control over these policies. For example, change in taxation policy, bank rate, industrial policy etc. may makes the plans ineffective.

(iii) Technological changes:

(a) Technological changes may also upset the plan. Such changes bring about improvements in technology and quality of products and may reduce the cost of production.

(b) The costlier and outdated products lose their market. The plan of an enterprise using old technology and producing old-styled products will face a setback.

(c) As such, managers should keep their knowledge updated and they should be conscious of the new technologies that are being developed in the field of their business activities.

(iv) Strategies of competitors:

(a) Sometimes the effective policies of the competitors make the plan ineffective.

(b) For example, introduction of an improved model of an existing product by the competitor may make our plans useless.

(v) Changes in fashion, tastes and preferences: Unexpected changes in the fashion, tastes and preferences of consumers may affect the sales forecast of a firm.

 

PLANNING PROCESS

(i) Setting organisational objectives:

(a) The first step in the planning process is the setting up of objectives as a whole as well as for each departments thereof.

(b) To ensure that goals are clearly defined and specified, it is necessary that planners anticipate the problems that are likely to arise in future.

(c) If the end result is clear it becomes easier to work towards the goal.

(ii) Developing Premises:

(a) Planning is concerned with the future which is uncertain. The manager is required to make certain assumptions about the future which are known as premises.

(b) Planning premises refer to certain assumptions about estimates and projections of the future behaviour of variables which are likely to affect the activities of the organisation. They are in nature of informed guesses of managers with respect to specific future trends.

(c) Assumptions are the base material upon which plans are to be drawn. The base material may be in the form of forecasts, existing plans or any past information about policies.

(iii) Identifying alternative courses of action:

(a) Once objectives are set, assumptions are made. Then the next step would be to act upon them.

(b) There may be many ways to act and achieve objectives. All the alternative courses of action should be identified.

(c) The course of action which may be taken could be either routine or innovative. An innovative course may be adopted by involving more people and sharing their ideas.

(iv) Evaluating alternative courses:

(a) Planning requires that each alternative course of action should be evaluated taking into facts about positive and negative aspects.

(b) All alternatives should be compared and evaluated with reference to cost, speed, risk, profit and enterprise's long term objectives.

(v) Selecting an alternative:                                      

(a) This is the real point of decision making. The best plan has to be adopted and implemented.

(b) The ideal plan, of course, would be the most feasible, profitable and with least negative consequences.

(c) Sometimes, a combination of plans may be selected instead of one best course. The manager will have to apply permutations and combinations and select the best possible course of action.

(vi) Implementing the plan:

(a) This step is concerned with putting the plan into action i.e., doing what is required.

(b) For example, if there is a plan to increase production than more labour, more machinery will be required. This step would also involve organising for labour and purchase of machinery.

(vii) Follow-up action:

(a) After implementation of the plan, the next step is to review the existing plans periodically to ensure their relevance and effectiveness.

(b) Once a plan is put into action as per schedule, its monitoring is equally important. In course of implementation, many adjustments may be required to achieve the given objectives.

 

TYPES OF PLANS (SINGLE-USE PLANS AND STANDING PLANS)

 

Standing Plans/Special/Multi-use Plans

(a) A standing plan is used for activities that occur regularly over a period of time.

(b) They are recurring in nature, i.e., likely to be repeated.

(c) These are developed for longer duration but are modified from time to time.

(d) Their objective is to ensure that internal operations of an organisation run smoothly.

(e) Standing plans have wide scope as they involve more than one department of business function.

(f) They are generally prepared by Top Level.

(g) These plans includes, Objectives, Strategy, Policies, Procedures, Methods and Rules.

 

(i) Objectives:

(a) An objective simply stated is what you would like to achieve, i.e., end results of activities.

(b) For example, an organisation may have an objective of increasing sales by 10% or earning a reasonable rate of return on investment, earn a 20% profit from business. They represent the end point of planning.

(c) Objectives need to be expressed in specific terms, i.e., they should be measurable in quantitative terms, in the form of a written statement of desired results to be achieved within a given time period.

(ii) Strategy:

(a) Strategy is a comprehensive plan for accomplishing an organizational objectives.

(b) This comprehensive plan will include three dimensions,

·         determining long-term objectives,

·         adopting a particular course of action, and

·         allocating resources necessary to achieve the objective.

(c) Whenever a strategy is formulated, the business environment needs to be taken into consideration. The changes in the economic, political, social, legal and technological environment will affect an organisations strategy.

(iii) Policies:

(a) Policies are general statements that guide thinking or channelise energies towards a particular direction.

(b) These are expressed in the form of a general statement. Policies, in general, are formulated at top management level.

(c) Policies serve as bridges between organizational purpose and performance. A policy centred thinking on the part of managers is considered as a healthy sign and hence is encouraged in organizations.

(d) For Example, Company may have Policy "To make payments more than fifty thousand by cheque".

·         Major company policies are for all to know i.e., customers, clients, competitors etc.

·         Minor company policies are applicable to insider and contain minute details of information vital to the employees of an organisation.

(iv) Procedure:

(a) The term 'Procedure' is defined as a set of chronologically arranged sequential steps determined in advance and standardised for initiating, carrying through and completing a certain routine and repetitive activity.

(b) A procedure specifies the tasks to be done sequentially for completing a piece of work. It lays down the process of doing routine and repetitive activity, for the guidance of those who are to carry out such activity.

(c) Examples of such activities include recruitment and selection of manpower, purchase of raw materials for the manufacturing department, passing vendors' bills for payment, settlement of workers' grievances, hiring manpower for the office, sanctioning earned leave and so on.

(v) Methods:

(a) Methods provide the prescribed ways or manner in which a task has to be performed considering the objective.

(b) Selection of proper method saves time, money and effort and increases efficiency.

(c) For imparting training to employees at various level from top management to supervisory, different methods can be adopted.

(d) For example, for higher level management orientation programmes, lectures and seminars can be organised whereas at the supervisory level, on the job training methods and work-oriented methods are appropriate.

(vi) Rules:   

(a) Rules are specific statements that inform what is to be done. They do not allow for any flexibility or discretion.

(b) They are generally formalised in writing and are impersonal in nature. They are meant for strict observance.

(c) For example, No Smoking is a rule in some work areas and other places. Similarly organisations formulate service rules and work rules on recruitment, promotion, leave, transfer, discipline, retirement and so on.

 

Single-use Plans/Ad-hoc Plans

·         A single use plan is developed for a onetime event or project.

·         These are non-recurring in nature, i.e. don't likely to be repeated.

·         The duration of such plans is short in duration and depends upon type of project. It may span of week, a month or can be of one day.

·         Their objective is to complete the given project or event.

·         Single use plans generally have narrow scope as they are formulated to fit the specific situation. They are generally prepared by middle and operational level.

·         These includes, Budgets, Programmes

(i) Programmes:

(a) Programmes are detailed statements about a project which outlines the objectives, policies, procedures, rules, tasks, human and physical resources required and the budget to implement any course of action.

(b) Programme is frequently supported by capital, revenue and expense budgets. Thus, programme is a complex structure of policies, procedures, methods, rules, budgets and other assignments.

(c) Programmes are a combination 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.

(ii) Budget:

(a) A budget is a statement of expected results expressed in numerical terms.

(b) It is a plan which quantifies future facts and figures.

(c) For example, a sales budget may forecast the sales of different products in each area for a particular month. A budget may also be prepared to show the number of workers required in the factory at peak production times.

 

Note: Single use-plans and standing plans are a part of operational planning process.

 

Words that Matter

1.            Planning: Planning is deciding in advance what to do and how to do. Planning, thus, involves setting objectives and developing appropriate courses of action to achieve these objectives.

2.            Standing plans: Standing plans are used for activities that occur regularly over a period of time. They are recurring in nature i.e. likely to be repeated.

3.            Objectives as a standing plan: An objective simply stated is what you would like to achieve i.e. end results of activities.

4.            Strategy as a standing plan: Strategy is a comprehensive plan for accomplishing organizational objectives.

 

5.            Policy as a standing plan: Policies are general statements that guide thinking or channelise energies towards a particular direction.

6.            Procedures as a standing plan: The term 'Procedure' is defined as a set of chronologically arranged sequential steps determined in advance and standardised for initiating, carrying through and completing a certain routine and repetitive activity.

7.            Methods as a standing plan: Methods provide the prescribed ways or manner in which a task has to be performed considering the objective.

8.            Rule as a standing plan: Rules are specific statements that inform what is to be done. They do not allow for any flexibility or discretion.

9.            Single-use plans: Single-use plan is developed for a onetime event or project. These are non-recurring in nature, i.e. don’t likely to be repeated.

10.          Programmes as a single use plans: Programmes are detailed statements about a project which outlines the objectives, policies, procedures, rules, tasks, human and physical resources required and the budget to implement any course of action.

11.          Budget as a single-use plans: A budget is a statement of expected results expressed in numerical terms. It is a plan which quantifies future facts and figures.