Concept

Planning is deciding in advance what to do and how to do. It is one of the basic managerial functions. Before
doing something, the manager must formulate an idea of how to work on a particular task. Thus, planning is
closely connected with creativity and innovation. But the manager would first have to set objectives, only
then will a manager know where he has to go. Planning seeks to bridge the gap between where we are and
where we want to go. Planning is what managers at all levels do. It requires taking decisions since it involves
making a choice from alternative courses of action.

Planning, thus, involves setting objectives and developing appropriate courses of action to achieve these
objectives. Objectives provide direction for all managerial decisions and actions. Planning provides a
rational approach for achieving predetermined objectives. All members, therefore, need to work towards
achieving organisational goals. These goals set the targets which need to be achieved and against which
actual performance is measured.
Therefore, planning means setting objectives and targets and formulating an action plan to achieve them. It is
concerned with both ends and means i.e., what is to be done and how it is to be done. The plan that is
developed has to have a given time frame but time is a limited resource. It needs to be utilised judiciously. If
time factor is not taken into consideration, conditions in the environment may change and all business plans
may go waste. Planning will be a futile exercise if it is not acted upon or implemented. Do you think from the
above we can formulate a comprehensive 93 definition of planning? One of the ways to do so would be to
define planning as setting objectives for a given time period, formulating various courses of action to achieve
them, and then selecting the best possible alternative from among the various courses of action available.
Importance of Planning-

1. Planning provides directions: By stating in advance how work is to be done planning provides direction
for action. Planning ens ures that the goals or objectives are clearly stated so that they act as a guide
for deciding what action should be taken and in which direction. If goals are well defined, employees
are aware of what the organisation has to do and what they must do to achieve those goals.
Departments and individuals in the organisation are able to work in coordination. If there was no
planning, employees would be working in different directions and the organisation would not be able to
achieve its desired goals.

2. Planning reduces the risks of uncertainty: Planning is an activity which enables a manager to look
ahead and anticipate changes. By deciding in advance the tasks to be performed, planning shows the
way to deal with changes and uncertain events. Changes or events cannot be eliminated but they can
be anticipated and managerial responses to them can be developed.

3. Planning reduces overlapping and wasteful activities: Planning serves as the basis of coordinating the
activities and efforts of different divisions, departments and individuals. It helps in avoiding confusion
and misunderstanding. Since planning ensures clarity in thought and action, work is carried on
smoothly without interruptions. Useless and redundant activities are minimised or eliminated. It is
easier to detect inefficiencies and take corrective measures to deal with them.
(iv) Planning promotes innovative ideas: Since planning is the first function of management,
new ideas can take the shape of concrete plans. 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: Planning helps the manager to look into the future
and make a choice from amongst various alternative courses of action. The manager has to
evaluate each alternative and select the most viable proposition. Planning involves setting
targets and predicting future conditions, thus helping in taking rational decisions.
(vi) Planning establishes standards for controlling: Planning involves setting of goals. The
entire managerial process is concerned with accomplishing predeter mined goals through
planning, organising, staffing, directing and controlling. Planning provides the goals or
standards against which actual performance is measured. By comparing actual
performance with some standard, managers can know whether they have actually been
able to attain the goals. If there is any deviation it can be corrected. Therefore, we can say
that planning is a prerequisite for controlling. If there were no goals and standards, then
finding deviations which are a part of controlling would not be possible. The nature of
corrective action required depends upon the extent of deviations from the standard.
Therefore, planning provides the basis of control.
Features of Planning-
1. Planning focuses on achieving objectives: Organisations are set up with a general
purpose in view. Specific goals are set out in the plans along with the activities to be
undertaken to achieve the goals. Thus, planning is purposeful. Planning has no meaning
unless it contributes to the achievement of predetermined organisational goals.
2. Planning is a primary function of management: Planning lays down the base for
other functions of management. All other managerial functions are performed within the
framework of the plans drawn. Thus, planning precedes other functions. This is also
referred to as the primacy of planning. The various functions of management are
interrelated and equally important. However, planning provides the basis of all other
functions.
3. Planning is pervasive: Planning is required at all levels of management as well as in all
departments of the organisation. It is not an exclusive function of top management nor
of any particular department. But the scope of planning differs at different levels and
among different departments. For example, the top management undertakes planning
for the organisation as a whole. Middle management does the departmental planning.
At the lowest level, day-to-day operational planning is done by supervisors.
4. Planning is continuous: Plans are prepared for a specific period of time, may be for a month, a quarter,
or a year. At the end of that period there is need for a new plan to be drawn on the basis of new
requirements and future conditions. Hence, planning is a continuous process. Continuity of planning is
related with the planning cycle. It means that a plan is framed, it is implemented, and is followed by
another plan, and so on.
5. Planning is futuristic: Planning essentially involves looking ahead and preparing for the future. The
purpose of planning is to meet future events effectively to the best advantage of an organisation. It
implies peeping into the future, analysing it and predicting it. Planning is, therefore, regarded as a forward-
looking function based on forecasting. Through forecasting, future events and conditions are anticipated
and plans are drawn accordingly. Thus, for example, sales forecasting is the basis on which a business
firm prepares its annual plan for production and sales.
6. Planning involves decision making: Planning essentially involves choice from among various
alternatives and activities. If there is only one possible goal or a possible course of action, there is no
need for planning because there is no choice. The need for planning arises only when alternatives are
available. In actual practice, planning presupposes the existence of alternatives. Planning, thus, involves
thorough examination and evaluation of each alternative and choosing the most appropriate one.
7. Planning is a mental exercise: Planning requires application of the mind involving foresight, intelligent
imagination and sound judgement. It is basically an intellectual activity of thinking rather than doing,
because planning determines the action to be taken. However, planning requires logical and systematic
thinking rather than guess work or wishful thinking.
Limitations-

1. Planning leads to rigidity: In an organisation, a well-defined plan is drawn up with specific goals to be
achieved within a specific time frame. These plans then decide the future course of action and managers
may not be in a position to change it. This kind of rigidity in plans may create difficulty. Managers need to be
given some flexibility to be able to cope with the changed circumstances. Following a pre-decided plan,
when circumstances have changed, may not turn out to be in the organisations interest.
2. Planning may not work in a dynamic environment: The business environment is dynamic, nothing is
constant. The environment consists of a number of dimensions, economic, political, physical, legal and
social dimensions. 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. Competition in the market can also
upset financial plans, sales targets may have to be revised and, accordingly, cash budgets also need to be
modified since they are based on sales figures. Planning cannot foresee everything and thus, there may be
obstacles to effective planning.
3. Planning reduces creativity: Planning is an activity which is done by the top management. Usually the
rest of the members just implements these plans. 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. 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. Thus, planning in a way reduces
creativity since people tend to think along the same lines as others. There is nothing new or innovative.
4. Planning involves huge costs: When plans are drawn up huge costs are involved in their
formulation. These may be in terms of time and money for example, checking accuracy of facts may
involve lot of time. Detailed plans require scientific calculations to ascertain facts and figures. The
costs incurred sometimes may not justify the benefits derived from the plans. 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.

5. Planning is a time-consuming process: Sometimes plans to be drawn up take so much of time that
there is not much time left for their implementation.

6. Planning does not guarantee success: 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. 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. Besides, there are so many
other unknown factors to be considered. This kind of complacency and false sense of security may act
ually lead to failure instead of success. However, despite its limitations, planning is not a useless
exercise. It is a tool to be used with caution. It provides a base for analysing future courses of action.
But, it is not a solution to all problems.
Planning Process Planning, as we all know is deciding in advance what to do and how
to do. It is a process of decision making. The steps in this process are,

(i) Setting Objectives: The first and foremost step is setting objectives. Every
organization must have certain objectives. Objectives may be set for the entire
organisation and each department or unit within the organisation. Objectives or goals
specify what the organisation wants to achieve. It could mean an increase in sales by
20% which could be objective of the entire organisation. How all departments would
contribute to the organisational goals is the plan that is to be drawn up. Objectives
should be stated clearly for all departments, units and employees. They give direction
to all departments. Departments/ units then need to set their own objectives within
the broad framework of the organisation’s philosophy. Objectives have to percolate
down to each unit and employees at all levels. At the same time, managers must
contribute ideas and participate in the objective setting process. They must also
understand how their actions contribute to achieving objectives. If the end result is
clear it becomes easier to work towards the goal.
(ii) Developing Premises: Planning is concerned with the future which is
uncertain and every planner is using conjecture about what might happen
in future. Therefore, the manager is required to make certain assumptions
about the future. These assumptions are called premises. 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. The premises or assumptions must be the
same for all and there should be total agreement on them. All managers
involved in planning should be familiar with and use the same
assumptions. For example, forecasting is important in developing
premises as it is a technique of gathering information. Forecasts can be
made about the demand for a particular product, policy change, interest
rates, prices of capital goods, tax rates etc. Accurate forecasts, therefore
become essential for successful plans.
(iii) Identifying alternative courses of action: Once objectives are set,
assumptions are made. Then the next step would be to act upon them.
There may be many ways to act and achieve objectives. All the alternative
courses of action should be identified. 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. If the project is
important, then more alternatives should be generated and thoroughly
discussed amongst the members of the organisation.
(iv) Evaluating alternative courses: The next step is to weigh the pros and
cons of each alternative. Each course will have many variables which have
to be weighed against each other. The positive and negative aspects of
each proposal need to be evaluated in the light of the objective to be
achieved. In financial plans, for example, the risk-return trade-off is very
common. The more risky the investment, the higher the returns it is likely
to give. To evaluate such proposals detailed calculations of earnings,
earnings per share, interest, taxes, dividends are made and decisions
taken. Accurate forecasts in conditions of certainty/uncertainty then
become vital assumptions for these proposals. Alternatives are evaluated
in the light of their feasibility and consequences.
(v) Selecting an alternative: This is the real point of decision
making. The best plan has to be adopted and implemented.
The ideal plan, of course, would be the most feasible,
profitable and with least negative consequences. Most plans
may not always be subjected to a mathematical analysis. In
such cases, subjectivity and the manager’s experience,
judgement and at times, intuition play an important part in
selecting the most viable alternative. 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: This is the step where other managerial
functions also come into the picture. The step is concerned with putting
the plan into action, i.e., doing what is required. For example, if there is a
plan to increase production then more labour, more machinery will be
required. This step would also involve organising for labour and
purchase of machinery.

vii) Follow-up action: To see whether plans are being implemented and
activities are performed according to schedule is also part of the
planning process. Monitoring the plans is equally important to ensure
that objectives are achieved.
 Types of Plans

Single-use Plan: A single-use plan is developed for a one-time event or

project. Such a course of action is not likely to be repeated in future, i.e.,
they are for non-recurring situations. The duration of this plan may depend
upon the type of the project. It may span a week or a month. A project may
sometimes be of only one day, such as, organising an event or a seminar
or conference. These plans include budgets, programmes and projects.
They consist of details, including the names of employees who are
responsible for doing the work and contributing to the single-use plan. For
example, a programme may consist of identifying steps, procedures
required for opening a new department to deal with other minor work.
Projects are similar to programmes but differ in scope and complexity. A
budget is a statement of expenses, revenue and income for a specified
period.
Standing Plan: A standing plan is used for activities that
occur regularly over a period of time. It is designed to
ensure that internal operations of an organisation run
smoothly. Such a plan greatly enhances efficiency in
routine decision-making. It is usually developed once
but is modified from time to time to meet business
needs as required. Standing plans include policies,
procedures, methods and rules.
Policies are general forms of standing plans that specifies the organisations response to
a certain situation like the admission policy of an educational institution. Procedures
describe steps to be followed in particular circumstances like the procedure for
reporting progress in production. Methods provide the manner in which a task has to be
performed. Rules are very clearly stated as to exactly what has to be done like reporting
for work at a particular time. Single-use and standing plans are part of the operational
planning process. There are other types of plans which usually are not classified as
singleuse or standing plans. A strategy, for example, is part of strategic planning or
management. It is a general plan prepared by top management outlining resource
allocation, priorities and takes into consideration the business environment and
competition. Objectives are usually set by the top management and serve as a guide for
overall planning. Each unit then formulates their own objectives keeping in view the
overall organisational goals. Based on what the plans seek to achieve, plans can be
classified as Objectives, Strategy, Policy, Procedure, Method, Rule, Programme, Budget.
Objectives The first step in planning is setting objectives. Objectives,
therefore, can be said to be the desired future position that the management
would like to reach. Objectives are very basic to the organisation and they are
defined as ends which the management seeks to achieve by its operations.
Therefore, an objective simply stated is what you would like to achieve, i.e., the
end result of activities. 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. All
other managerial activities are also directed towards achieving these
objectives. They are usually set by top management of the organisation and
focus on broad, general issues. They define the future state of affairs which the
organisation strives to realise. They serve as a guide for overall business
planning. Different departments or units in the organisation may have their
own objectives. 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.
Strategy A strategy provides the broad contours of an organisation’s business. It will
also refer to future decisions defining the organisations direction and scope in the long
run. Thus, we can say a strategy is a comprehensive plan for accomplishing an
organisation objectives. This comprehensive plan will include three dimensions, (i)
determining long term objectives, (ii) adopting a particular course of action, and (iii)
allocating resources necessary to achieve the objective. 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 organisation’s strategy. Strategies usually take the course of forming the
organisation’s identity in the business enviro- nment. Major strategic decisions will
include decisions like whether the organisation will continue to be in the same line of
business, or combine new lines of activity with the existing business or seek to acquire
a dominant position in the same market. For example, a company’s marketing strategy
has to address certain questions i.e., who are the customers? what is the demand for
the product? which channel of distribution to use? what is the pricing policy? and how
do we advertise the product. These and many more issues need to be resolved while
formulating a marketing strategy for any organisation.
Policy Policies are general statements that guide thinking or channelise energies towards a
particular direction. Policies provide a basis for interpreting strategy which is usually stated
in general terms. They are guides to managerial action and decisions in the implementation
of strategy. For example, the company may have a recruitment policy, pricing policy within
which objectives are set and decisions are made. If there is an established policy, it
becomes easier to resolve problems or issues. As such, a policy is the general response to a
particular problem or situation. There are policies for all levels and departments in the
organisation ranging from major company policies to minor policies. Major company
policies are for all to know i.e., customers, clients, competitors etc., whereas minor polices
are applicable to insiders and contain minute details of information vital to the employees of
an organisation. But there has to be some basis for divulging information to others. Policies
define the broad parameters within which a manager may function. The manager may use
his/her discretion to interpret and apply a policy. For example, the decisions taken under a
Purchase Policy would be in the nature of manufacturing or buying decisions. Should a
company make or buy its requirements of packages, transport services, printing of
stationery, water and power supply and other items? How should vendors be selected for
procuring supplies? How many suppliers should a company make purchases from? What is
the criteria for choosing suppliers.
Procedure Procedures are routine steps on how to carry out
activities. They detail the exact manner in which any work is to
be performed. They are specified in a chronological order. For
example, there may be a procedure for requisitioning supplies
before production. Procedures are specified steps to be
followed in particular circumstances. They are generally meant
for insiders to follow. The sequence of steps or actions to be
taken are generally to enforce a policy and to attain pre-
determined objectives. Policies and procedures are interlinked
with each other. Procedures are steps to be carried out within a
broad policy framework.
Method- Methods provide the prescribed ways or manner in which a task
has to be performed considering the objective. It deals with a task
comprising one step of a procedure and specifies how this step is to be
performed. The method may vary from task to task. Selection of proper
method saves time, money and effort and increases efficiency. For
imparting training to employees at various level from top management to
supervisory, different methods can be adopted. 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. Rule Rules are specific
statements that inform what is to be done. They do not allow for any
flexibility or discretion. It reflects a managerial decision that a certain
action must or must not be taken. They are usually the simplest type of
plans because there is no compromise or change unless a policy decision
is taken.
Programme- 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. Programmes will
include the entire gamut of activities as well as the
organisation’s policy and how it will contribute to the overall
business plan. The minutest details are worked out i.e.,
procedures, rules, budgets, within the broad policy framework.
Budget- A budget is a statement of expected results expressed in
numerical terms. It is a plan which quantifies future facts and figures.
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. Since budget represents all items in
numbers, it becomes easier to compare actual figures with expected
figures and take corrective action subsequently. Thus, a budget is
also a control device from which deviations can be taken care of. But
making a budget involves forecasting, therefore, it clearly comes
under planning. It is a fundamental planning instrument in many
organisations