Planning means looking ahead and chalking out future courses of action to be followed. It is a preparatory step. It is a systematic activity which determines when, how and who is going to perform a specific job. Planning is a detailed programme regarding future courses of action.
It is rightly said “Well plan is half done”. Therefore planning takes into consideration available & prospective human and physical resources of the organization so as to get effective co-ordination, contribution & perfect adjustment. It is the basic management function which includes formulation of one or more detailed plans to achieve optimum balance of needs or demands with the available resources.
According to Urwick, “Planning is a mental predisposition to do things in orderly way, to think before acting and to act in the light of facts rather than guesses”. Planning is deciding best alternative among others to perform different managerial functions in order to achieve predetermined goals.
According to Koontz & O’Donell, “Planning is deciding in advance what to do, how to do and who is to do it. Planning bridges the gap between where we are to, where we want to go. It makes possible things to occur which would not otherwise occur”.
Steps in Planning Function
Planning function of management involves following steps:-
Establishment of objectives
- Planning requires a systematic approach.
- Planning starts with the setting of goals and objectives to be achieved.
- Objectives provide a rationale for undertaking various activities as well as indicate direction of efforts.
- Moreover objectives focus the attention of managers on the end results to be achieved.
- As a matter of fact, objectives provide nucleus to the planning process. Therefore, objectives should be stated in a clear, precise and unambiguous language. Otherwise the activities undertaken are bound to be ineffective.
- As far as possible, objectives should be stated in quantitative terms. For example, Number of men working, wages given, units produced, etc. But such an objective cannot be stated in quantitative terms like performance of quality control manager, effectiveness of personnel manager.
- Such goals should be specified in qualitative terms.
- Hence objectives should be practical, acceptable, workable and achievable.
2. Establishment of Planning Premises
- Planning premises are the assumptions about the lively shape of events in future.
- They serve as a basis of planning.
- Establishment of planning premises is concerned with determining where one tends to deviate from the actual plans and causes of such deviations.
- It is to find out what obstacles are there in the way of business during the course of operations.
- Establishment of planning premises is concerned to take such steps that avoids these obstacles to a great extent.
- Planning premises may be internal or external. Internal includes capital investment policy, management labour relations, philosophy of management, etc. Whereas external includes socio- economic, political and economical changes.
- Internal premises are controllable whereas external are non- controllable.
3. Choice of alternative course of action
- When forecast are available and premises are established, a number of alternative course of actions have to be considered.
- For this purpose, each and every alternative will be evaluated by weighing its pros and cons in the light of resources available and requirements of the organization.
- The merits, demerits as well as the consequences of each alternative must be examined before the choice is being made.
- After objective and scientific evaluation, the best alternative is chosen.
- The planners should take help of various quantitative techniques to judge the stability of an alternative.
4. Formulation of derivative plans
- Derivative plans are the sub plans or secondary plans which help in the achievement of main plan.
- Secondary plans will flow from the basic plan. These are meant to support and expediate the achievement of basic plans.
- These detail plans include policies, procedures, rules, programmes, budgets, schedules, etc. For example, if profit maximization is the main aim of the enterprise, derivative plans will include sales maximization, production maximization, and cost minimization.
- Derivative plans indicate time schedule and sequence of accomplishing various tasks.
5. Securing Co-operation
- After the plans have been determined, it is necessary rather advisable to take subordinates or those who have to implement these plans into confidence.
- The purposes behind taking them into confidence are:
- Subordinates may feel motivated since they are involved in decision making process.
- The organization may be able to get valuable suggestions and improvement in formulation as well as implementation of plans.
- Also the employees will be more interested in the execution of these plans.
6. Follow up/Appraisal of plans
- After choosing a particular course of action, it is put into action.
- After the selected plan is implemented, it is important to appraise its effectiveness.
- This is done on the basis of feedback or information received from departments or persons concerned.
- This enables the management to correct deviations or modify the plan.
- This step establishes a link between planning and controlling function.
- The follow up must go side by side the implementation of plans so that in the light of observations made, future plans can be made more realistic.
Benefits of Planning:
Planning is one of the crucial functions of management. It is basic to all other functions of management. There will not be proper organization and direction without proper planning. It states the goals and means of achieving them.
- Attention on Objectives:
Planning helps in clearly laying down objectives of the organization. The whole attention of management is given towards the achievement of those objectives. There can be priorities in objectives, important objectives to be taken up first and others to be followed after them.
- Minimizing Uncertainties:
Planning is always done for the future. Nobody can predict accurately what is going to happen. Business environments are always changing. Planning is an effort to foresee the future and plan the things in a best possible way. Planning certainly minimizes future uncertainties by basing its decisions on past experiences and present situations.
- Better Utilization of Resources:
Another advantage of planning is the better utilization of resources of the business. All the resources are first identified and then operations are planned. All resources are put to best possible uses.
- Economy in Operations:
The objectives are determined first and then best possible course of action is selected for achieving these objectives. The operations selected being better among possible alternatives, there is an economy in operations. The method of trial and error is avoided and resources are not wasted in making choices. The economy is possible in all departments whether production, sales, purchases, finances, etc.
- Better Co-ordination:
The objectives of the organization being common, all efforts are made to achieve these objectives by a concerted effort of all. The duplication in efforts is avoided. Planning will lead to better co-ordination in the organization which will ultimately lead to better results.
- Encourages Innovations and Creativity:
A better planning system should encourage managers to devise new ways of doing the things. It helps innovative and creative thinking among managers because they will think of many new things while planning. It is a process which will provide awareness for individual participation and will encourage an atmosphere of frankness which will help in achieving better results.
- Management by Exception Possible:
Management by exception means that management should not be involved in each and every activity. If the things are going well then there should be nothing to worry and management should intervene only when things are not going as per planning. Planning fixes objectives of the organization and all efforts should be made to achieve these objectives. Management should interfere only when things are not going well. By the introduction of management by exception, managers are given more time for planning the activities rather than wasting their time in directing day-to-day work.
- Facilitates Control:
Planning and control are inseparable. Planning helps in setting objectives and laying down performance standards. This will enable the management to cheek performance of subordinates. The deviations in performance can be rectified at the earliest by taking remedial measures.
- Facilitates Delegation:
Under planning process, delegation of powers is facilitated. The goals of different persons are fixed. They will be requiring requisite authority for getting the things clone. Delegation of authority is facilitated through planning process.
Limitations of Planning:
Despite of many advantages of planning, there may be some obstacles and limitations in this process. Planning is not a panacea for all the ills of the business. Planning will only help in minimizing uncertainties to a certain extent.
(a) Fundamental limitation i.e. the limitation of forecasting:
Under this category of the limitations of planning, only one limitation of planning is placed viz., the limitation of forecasting. This limitation of forecasting is considered as the fundamental (or basic) limitation; in as much as, no amount of planning is possible without involving some minimum element of forecasting; and till-do-date no hard and fast system of forecasting future events and conditions is able to develop.
As a result, the fate of planning depends on the accuracy of forecasting; which is still a matter of guess-work howsoever rational or scientific. In fact, some of the best laid down plans might collapse in the face of unprecedented changes taking place in future conditions only to the ill-luck of management.
This fundamental limitation of planning (based on forecasting) assumes paramount significance; in cases where the socio-economic environment is changing quite fast. Under such circumstances planning become a mere formality; just providing a psychological satisfaction to management of having done planning.
It is, in fact, this limitation of planning which, among other factors, might have induced scholars to come forward and recommends a situational (or contingency) approach to managing – ruling out any need for advance planning.
(b) Other limitations:
Some of the other important limitations of planning might be as follows:
(i) Egoistic planning:
Many-a-times, there is observed a tendency on the part of the so-called big bosses of an enterprise, to undertake planning of a type which would just add to their prestige or status in the organisation without, in any substantial manner, contributing to the enterprise’s goals.
Such egoistic planning, this way, becomes a great limitation of planning, as despite the expenditure of all efforts and resources incurred during the formulation process; such planning only raises false hopes of realization but producing no significant results.
(ii) Organisational inflexibilities:
In many enterprises, the rigid (or tight) rules, policies or procedures of the organisation might come in the way of the successful implementation of some progressive piece of plan. To ensure the success of a good number of plans, it is necessary that the management must frequently review its internal functioning process and modify the same in view of the current planning requirements. Many-a-times, a re-orientation of organisational functioning is not possible, due to technical, financial or certain other problems. Under such conditions of rigidity, planning is only a half-hearted success.
(iii) Wastage of resources:
Planning involves an expenditure of time, money, efforts and resources of the enterprise; during the stages of plan implementation and its execution. It is, in fact, a time-consuming, a money- consuming and a mind-consuming process.
One would not mind the expenditure of the above resources; if the plan is a success. However, whenever there is a plan-failure or only a limited success is generated by a plan; expenditure of precious organisational resources really pinches as it amounts to a sheer wastage.
(iv) Imparting a false sense of satisfaction:
Plans, quite often, impart a false sense of satisfaction to managers, subordinates and operators of an enterprise; who might think that the planned objectives and the planned courses of action are, perhaps, the ‘best’. They are reluctant to think in better terms. Many-a-times, people in the organisation behave like a fog in the well-unable to see beyond the horizons of planning. In fact, they never try to rise above the plans.
(v) External constraints:
Some of the external constraints like governmental regulations in certain business matters or the upper hand of labour unions over management on issues concerning workers and their economic interests might become a severe limitation of planning. Management, under the pressure of such constraints, might not be able to think freely and undertake ‘best conceived of planning for the enterprise.
(vi) Unreliable and inadequate background information:
Plans are as sound and fruitful as the data on which there are based. Sometimes, the data collected for the plan might not be very reliable. At some other times, background data for planning might be too inadequate to provide a complete base for plan formulation.
These limitations of data might be due to financial problems or the pressure of time or certain other causes; but there is no doubt that this unreliability or inadequacy of data is a great hindrance, in the way of successful planning.
(vii) Unsuitability in emergency situations:
Planning is a useful management efficiency device; but only in the normal course of functioning of the enterprise. Planning is not suitable in emergency situations as occasioned by war, civil disturbances or other unusual economic or social disorders; where ‘spot’ decisions are necessitated to take care of the environmental factors. Planning, as is too common to understand, takes its own time in setting objectives and selecting best alternatives; which renders itself wholly unsuitable for adoption in extra-ordinary business situations.