Nature and Significance of

Planning
Unit - III
Introduction
• Planning is the most fundamental function of management.
• It precedes other functions. Without setting the goals to be
reached and the course of action to be followed, organizing,
staffing , directing and controlling cannot be effective.
• Planning provides the frame work within which coordinating
,motivating and controlling can be undertaken.
• Every individual and organization plans the line of action to
be followed in future.
• Action follows planning and there is nothing to do unless the
objectives and the ways of achieving them are decided.
• Planning is in fact a prerequisite to effective management.
Meaning of Planning
• Planning is the management function of anticipating
the future and the conscious determination of a future
course of action to achieve the desired results.
• A plan is a blue print of the course of action to be
followed in future.
• Planning involves forecasting because in order to plan
the future course of action, it is essential to anticipate the
future.
• While planning, a manager prepares a map of the future,
sets the goals to be achieved or the desirable results and
decides the activities required to accomplish those
results.
• Planning consists of both problem-solving and decision
making. It requires determination of objectives and the
ways of reaching them .
• According to Terry, “Planning is a method or technique
of looking ahead. It is a deliberate conscious search used
to formulate the design and orderly sequence of actions
through which it is expected to reach the objective”.
• In brief , “Planning is deciding in advance what to do,
how to do it , when to do it and who is to do it”.
• These definitions indicate that planning involves the
determination of objectives and results, the selection of the
best possible course of action to achieve the desired
results, the time sequence of activities and the resources
required to perform the activities.
Nature of Planning
The nature if planning can be visualized from the following features of
planning.
1.Planning is Goal –oriented
• Planning is not an end in itself. Rather , it is a means towards the
accomplishment of objectives.
• Planning has no meaning unless it contributes in some positive way to
the achievement of desired goals.
• All plans emanate for efficient planning. Thus ,planning is goal-
oriented.
2.Planning is a Primary Function
• Planning is the basis of the management process. All other functions of
management are designed to attain the goals set under planning.
• Planning provides the basis for efficient organizing, staffing, directing
and controlling.
• It precedes the execution of all other functions. Without planning there
is nothing to organize , no one to actuate and no need to control.
3.Planning is All-pervasive
• Planning is the function of each and every manager
irrespective of the level and area of his / her occupation.
It is the job of all managers in all types of organizations.
• Planning is an essential ingredient in management at all
executive levels. However, the scope , extent and the
nature of planning tend to decrease as we descend
towards the lower levels of management.
• Managers at the top level prepare long term plans for the
company as a whole , middle-level managers formulate
departmental and functional plans for medium-term.
• At the lowest level managers prepare operating and short
– term plans.
4. Planning is an Intellectual process
• Planning is a mental process involving imagination, foresight
and sound judgment.
• It is not guesswork or wishful thinking.
• It requires a mental disposition of thinking before doing and
acting in the light of facts, rather than guesses.
5.Plannig is a Continuous Process
• Planning is an on going and dynamic exercise. As the
assumptions and events on which plans are based on change ,
old plans have to be revised or new ones have to be prepared.
• As a manager carries out his functions, he continues to plan,
revising his old plans and choosing alternative plans as the
need arises.
6.Planning is Forward-looking
• All planning is done with an eye on future.
• Planning involves looking ahead and preparing for
the future. Therefore , forecasting is the essence of
planning.
• Forecasting involves assessing the uncertain future
and making provision for it.
• A plan is really a synthesis of various forecasts. No
plan can be prepared without knowledge of future
events.
• Planning is an attempt to see through the uncertain
future.
7.Planning Involves choice
• Planning is basically a problem of decision making or choosing
among alternative course of action.
• Planning presupposes the existence of alternatives. There is no need
for planning if there is only one way of doing something .
• Plans are decisions made after evaluation of alternative courses of
action.
8.Planning is an Integrating Process
•Planning does not just happen, it has to be initiated.
•Planning is a structured process and different plans constitute a
hierarchy.
•Different plans are interdependent and interrelated.
• Every lower level plan serves as a means towards the end of higher
plans. This is known as the ends means chain.
•Planning is a item bound concept and every plan has a definite time
horizon.
9.Planning is Directed Towards Efficiency
Planning has no relevance if it does not facilitate the
achievement of objectives economically and efficiently.
Need and Significance of Planning
1.Focuses Attention on Objectives and Results
Every organization exists to achieve certain objectives.
Planning concentrates attention on the dominant goals
of the organization. It forces the members of the
organization not to get lost in the maze of routine
activities and lose sight of the broad objectives for
which the organization was established.
2. Reduces Uncertainty and Risk
• Uncertainty and change are inevitable and planning cannot
eliminate them.
• But planning enables an organization to cope with
uncertainty and change.
• With the help of planning an enterprise can predict future
events and make due provision for them.
• Instead of leaving future events to chance, they can be made
to occur in a desired manner.
• Planning seeks to minimize risk while taking advantage of
opportunities.
• Planning helps to identify potential threats and opportunities.
• It also keeps management alert to the changing environment
of business.
3. Provides Sense of Direction
• Planning saves an organization from drifting and
avoids aimless activities.
• It directs human efforts into endeavours that
contribute to the accomplishment of goals.
• Planning makes work more meaningful and activities
more orderly.
• It bridges the gap between where we are and where
we want to go.
• Without planning action is likely to become random
activity , producing nothing but chaos.
4. Encourages Innovation and creativity
• Innovation and creativity are prerequisites to continuous
growth and steady prosperity of business.
• Planning is forward looking and it enables an enterprise
to cope with technological and other developments.
• Planning requires continuous monitoring of environment
for new ideas and developments. As a result the
enterprise becomes dynamic.
• Being anticipatory in nature , planning improves the
adaptability of an organization to the changing
environment.
5. Helps in Coordination
• Planning is the best stage for the integration of
diverse forces at work.
• Sound planning interrelates all the activities and
resources of an organization.
• It also helps to relate internal conditions and
processes to external events and forces.
• The activities and efforts of various departments and
divisions can be harmonized with the help of an
overall plan.
• Planning seeks to achieve a coordinated structure of
operations.
6.Guides Decision Making
• Planned targets serve as the criteria for the evaluation of
different alternatives so that the best course of action may
be chosen.
• By predicting future , planning helps in taking future –
oriented decisions.
• Sound plans prevent hasty judgment and haphazard action.
7.Provides a Basis for Decentralization
• Planning helps in the delegation of authority to lower
levels of management.
• Well established plans serve as guides to subordinates and
reduce the risk involved in delegation of authority.
• Planning also helps to improve the motivation and morale
of employees by providing targets of performance.
8.Provides Efficiency in Operations
• Planning facilities optimum utilization of available resources.
• It makes it possible for things to occur which would not
otherwise happen.
• It improves the competitive strength of an organization by
helping it to discover and exploit opportunities.
• As a rational solution to problems , planning results in the
use of most efficient methods of work.
• A good plan not only optimizes productivity but provides
satisfaction to those implementing it .
• Planned effort is always more efficient than unplanned
action. Thus , planning improves organizational
effectiveness.
9. Facilitates Control
• Planning provides the basis for control . Plans serve
as standards for the evaluation of performance.
• Sound planning enables management to control the
events rather than be controlled by them. It permits
control by exception.
• Control cannot be exercised without plans because
the function of control is to ensure that the activities
conform to the plans.
• Any attempt to control without plans is meaning less
as there are no gauges for performance.
Principles of Planning
Over the years a number of fundamental principles have been developed to
guide the efforts of managers in preparing effective plans. These principles
relate to the nature , purpose , process and structure of planning. A brief
description of planning principles is given below.
1.Principles of Contribution to Objectives
Every major and derivative plan should contribute positively
towards the accomplishment of enterprise objectives.
2.Principle of Efficiency of Plans
• The efficiency of a plan is measured by the amount it
contributes to objectives minus the costs and other undesirable
consequences involved in the formulation and operation of the
plan.
• This principle stresses upon economical use of individual effort
to achieve group goals.
3.Principle of Primacy of Planning
• This principle emphasizes that a manager can hardly
perform other managerial functions without a road map
of plans to guide him.
• Planning is the primary requisite of other management
functions because these functions are designed to support
the accomplishment of enterprise objectives.
4.Principle of Planning Premises
• Perhaps the main deficiency of planning arises from
poorly structured plans.
• A coordinated structure of plans can be developed only
when managers throughout the organization understand
and agree to utilize consistent planning premises.
5.Principle of Policy Frame work
• A consistent and effective frame work of enterprise plans
can be developed if the basic policies that guide thinking in
decisions are expressed clearly and are understood by
managers who prepare the plans.
• The decisions which lead to plans cannot be accurately
focused on enterprise objectives without a frame work of
policies.
6.Principle of Timing
When the plans are structured to provide an appropriately
timed, intermeshed network of derivative and supporting
programmes , the plans can contribute effectively towards the
attainment of enterprise objectives. Both premises and policies
are useless without proper timing.
7.Principle of Alternatives
In choosing from among alternatives, the best alternative will
be that which contributes most efficiently and effectively to
the accomplishment of a desired goal.
8.Principle of Limiting Factor
While choosing from among alternatives, the planner should
focus on those factors which are critical to the attainment of
the desired goals. This will help in selecting the most
favourable alternative.
9.Principle of Commitment
Logical planning should cover a time period necessary to
forecast the fulfillment of commitments involved in a
decision. This is necessary to make reasonably sure of
meeting commitments.
10.Principle of Flexibility
• The principle deals with the ability to change which is built
into plans.
• The risk of loss due to unexpected events can be reduced by
building flexibility into the plans.
• However the cost of flexibility should be weighed against
the dangers of future commitments made.
11.Principle of Navigational Change
• The manager should periodically check on events and
expectations and redraw plans to maintain a course toward
the desired goal.
• In less plans have in-built flexibility, navigational change is
difficult or costly.
• But in –built flexibility should not be an excuse for periodic
revision of plans , if circumstances so warrant.
12.Principle of Competitive Strategies
While formulating plans, a manager should take into account
the plans of rivals or competitors. The plans should be chosen
in the light of what a competitor will do in the same situation.
Classification of Planning
Managerial planning may be broadly classified into the following
categories:
1.Strategic Planning
• Strategic planning refers to the process of formulating a
unified, comprehensive and integrated plan relating to the
challenges of the environment.
• It involves appraising the external environment in relation
to the enterprise , identifying the strategies , to be adopted
in future to achieve the objectives.
• Strategic planning is long term in nature. It is comprehensive
concerned with the total enterprise. Strategic plans are
therefore, formulated mainly at the top level of management.
• It has mainly an external focus as it is designed to achieve the
organizational objectives in the face of environmental
opportunities and threats.
• Strategic planning offers the following advantages:
1.Strategic planning identifies the opportunities and threats
which the firm is likely to face in future.
2.It determines the future direction of a company.
3.It defines the manner in which the resources of the enterprise
are to be deployed.
4.It lays down a systematic and logical procedure for carrying
out the operations of the firm.
5.It provides a basis for the formulation of operational
plans.
6. It facilitates coordination between the different
divisions and departments of the enterprise.
2.Operational Planning
Operational planning or tactical planning is a short term
exercise designed to implement the strategies formulated
under strategic planning. It is based on strategic plans.
For example, the strategic plan of a company may be to
diversify into new lines of products. To carry out this
plan, the firm may prepare short –term plans regarding
the new product to be manufactured and sold.
From the viewpoint of time spent , planning may be long
term or short –term.
A long –term plan generally covers a time period of
five years or more.
A short –term plan is usually formulated for periods up
to one year. Plans formulated for periods exceeding one
year but less than five years may be described as
medium-term plans.
Steps in Planning Process
The various stages in the process of planning are as
follows:
1.Establishing Objectives
• Plans are the means to achieve certain ends or objectives.
Therefore, establishment of organizational objectives is
the first step in planning.
• The process of planning begin with the enunciation of
goals and objectives in clear cut and unambiguous terms.
• The objectives are set in the light of the opportunities
perceived by managers.
• Establishment of goals is also influenced by the values
and beliefs of executives.
2.Developing the Planning Premises
• Before plans are prepared, the assumptions and conditions
underlying them must be clearly defined. These assumptions
are called Planning premises and they can be identified
through accurate forecasting of likely future events.
• Assessment of environment helps to reveal opportunities and
constraints. Analysis of internal and external forces is
essential for sound planning. Planning premises are the
critical factors which lay down the boundary for planning.
Planning premises can be of three types:
1.Controllable Premises
Controllable premises are under the control of management,
e.g., policies , objectives and resources of the enterprise.
2. Semi-controllable premises
Semi-controllable premises are partially under the management control.
e.g., union management relations which are partially influenced by
industry practices and government policy.
3. Non-controllable premises
It refers to external forces like Government policy , political situation , etc
which are beyond the control of an individual enterprise.
3.Developing and Evaluating Alternatives
• After establishing the objectives and the planning premises, the
alternative plans are developed. Then the various alternatives are
compared and evaluated in terms of their merits and demerits.
• The objectives and environment of the organization should be kept in
view while appraising alternatives towards the achievement of
objectives.
• Cost risk and resources associated with different alternatives should also
be considered.
• Imagination and foresight are required to generate and evaluate policy
alternatives.
4.Choice of Course of Action
After evaluating the various alternatives, the most appropriate course
of action is chosen as the plan. This is the point of decision-making.
5.Preparing Operating Plans
• After the formulation of policies and strategies the derivative or
supporting plans are prepared. Several medium –range and short-
range plans are required to implement policies and strategies.
• These plans consist of procedures , programmes , schedules ,
budgets and rules. Such plans are required for the implementation
of basic plans.
• Operational plans reflect commitment as to methods, time ,money
etc. These plans are helpful in the implementation of long-range
plans.
• Along with the supporting plans, the sequence of activities is
determined to ensure continuity in operations.
6. Integration of Plans
• Different plans must be properly balanced so that
they support one another.
• Review and revision may be necessary before the
plan is put into operation.
• Moreover the various plans must be communicated
and explained to those responsible for putting them
into practice.
• Established plans should be reviewed periodically so
as to modify and change them whenever necessary.
Types of Plans ( Elements of Planning )
There are two types of plan
1.Standing or Multi-use Plans
• These are the recurring plans and they are used repeatedly in
situations of a similar nature.
• A standing plan is a standing guide to recurring problems and it is
used again and again.
• Objectives, policies , procedures, and rules are important standing
plans.
2.Single –use or ad hoc plans
• A single –use plan is used once and then it is discarded.
• It is designed to meet the demands of a specific situation and is
scrapped when the situation is over.
• Programme , budget , schedule project, etc are examples of single
–use plans.