PLANNING

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. 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.

NATURE AND CHARACTERISTICS OF PLANNING

The managerial function of planning has certain unique characteristics of its own, which distinguish it from the other managerial functions. It also shares a few characteristics with other managerial functions. All the characteristics together reflect the nature of the planning function. They are discussed as below:

i) Primacy of planning :

 Planning precedes all other managerial functions. The process of management begins with planning. Planning provides the basis for the subsequent functions of organising, staffing, directing and controlling, though all the functions are highly interrelated and are equally important. Planning is the prime function from which the other functions get the necessary base.

 ii) Planning as a process :

 Planning is a process involving a few stages or steps. It is a sub-process of the process of management. The planning process begins with identification of mission and goals of the organisation and ends with making arrangements for implementation of plans.

 iii) Pervasiveness of planning :

Planning is a pervasive function of managers at all levels of the managerial hierarchy, right from the chief executive down to the first line supervisor. However, the content and quality of the function differ from level to level. The time devoted to planning also differs. Typically, the chief executive and other top level managers concentrate on corporate-wide planning function. Their decisions on planning have far reaching effects on the organisation. Managers at middle and lower levels have more limited planning functions.

iv) Future orientation :

 Planning is invariably future-oriented. Henri Fayol defined planning as the process of looking ahead (thinking ahead) and making provision to tackle future events and situations. The concern for future makes sense to the extent that planning is intended to cope with uncertainties and unknowns which unfold themselves as one marches into the future. It is needless to state that planning cannot be anything other than futureoriented; one does not plan for the past and the present. Of course, while planning for the future, managers consider the relevant events and situations of the past and the present within and outside the organisation.

 v) Information base :

Planning is backed by information. Without information, planning exists in a vacuum. Information on the past trends, current conditions and future possibilities are essential for planning. Information is needed to diagnose planning issues and problems, to develop alternative courses of action, to evaluate them and to make final choice of plans.

vi) Rationality :

Planning is a rational managerial activity. It implies that planning is a purposeful and conscious managerial function. It is backed by adequate information, knowledge and understanding. Managers who are planners are somewhat objective and fair in their approach to planning. They have a reasonably clear idea of the planning issues and know how to tackle them. They make planning decisions with some awareness of their consequences.

 vii) Formal and informal nature :

 Planning has both formal and informal elements. Formal planning refers to a systematic and rigorous process of arriving at planning decisions through investigation and analysis of the various factors. Formal planning is more explicit, and open; responsibility for various aspects of planning is pinpointed among managers. Plans are put into writing and are communicated through the organisational channels of communication to the various managerial levels. Informal planning is done by managers through an intuitive process. Managers carry plans in their heads in the form of specific but flexible intentions and communicate them to others through word of mouth. Informal planning may also be viewed as a trial and error, fragmented, intermittent process as against a systematic step-by-step and logical process of formal planning.

 viii) Intellectual process :

 Planning is an intellectual process and requires certain conceptual skills. It requires abilities to think both in abstract and concrete terms, to visualise and look ahead into the future and to form ideas and images of future expectations and desires. Planning also calls for intellectual abilities to anticipate opportunities and threats in the environment, to diagnose problems, develop alternative courses of action, and analyse them for choosing the right course.

ix) Pragmatic, action-orientation :

Although planning is an intellectual thinking activity, it is primarily pragmatic and action-oriented. Planning precedes action and is often described as action laid out in advance. To think before acting and to decide before doing are part of the discipline and culture of planning. The focus is on action ability of plans, i.e., their quality of being implementable. Planning is also reality-oriented.

x) Planning as a form of decision making :

 Planning involves problem solving and decision making. It is a process of identification of issues and problems needing decisions, collection of relevant information, evaluation of alternative courses and choices of the most appropriate alternative. Decisions are made on organisational objectives, strategies, policies, programmes, procedures and other plans. They are all choices from alternatives. They also involve mobilisation, allocation and commitment of resources and efforts in specific ways.

xi) Planning premises :

 Planning is based on certain assumption and estimates about the future behaviours of events and situations in the environment. These are formally known as planning premises which are derived through the process of forecasting. Without such assumptions planning becomes an empty speculative exercise. Managers make promises or assumptions about the future events for purposes of planning, in order to have a sense of security and certainty in the midst of grave uncertainties and complexities of the environment.

xii) Dynamism :

Planning is a dynamic process. It is a process of making the organisation selectively move and change in tune with relevant changes in the external environment. It is a process of building flexibility and adaptability into the functioning of the organisation. It is a process of making continuous assessment and reassessment of the goals, resources, directions, opportunities and problems of the organisation and converting them to serve its needs.

 xiii) Levels of planning :

Planning is often divided into a few levels on the basis of their scope, significance and time span. On the basis of scope, there are two levels:

 (1) corporate planning covering the entire organisation, and

 (2) sub-corporate or functional planning carried on within the various functional units or divisions. On the basis of significance, we may divide planning into strategic planning and tactical or operational planning.

On the basis of time span, there are two levels:

(1) long-range planning covering periods of more than one year in general, and

 (2) short-range planning covering a period of one year or less.

 The division of planning into various levels facilitates analysis of the dimensions and critical elements of planning. Even so, planning is an integrated function. Thus, different levels of planning should be balanced and coordinated so that they support one another.

xiv) Types of plans :

 The process of planning produces several types of plans which may be viewed as a series or hierarchy of decisions and ‘action packages’. They include: objectives or goals, strategies, policies, programmes, budgets, schedules, procedures, methods, rules and so on. Some of the plans such as objectives and budgets serve as integral elements of the planning process while others such as policies, procedures, rules and methods serve as facilitating tools for smooth planning. All the plans are categorised into two broad groups:

(i) single use plans, and

 (ii) standing plans.

 Single use plans are those which are designed to meet specific, non-repetitive and unique situations, while standing plans are those which are fairly stable and are meant to handle a wide range of repetitive situations over a period of time.

IMPORTANCE OF PLANNING

 The importance of the planning function should have been clear after all that you have read about it till now. We may outline the importance of planning function as follows:

 i) Provides direction :

Planning provides a clear sense of direction to the activities of the organisation and to the job behaviour of managers and others. It strengthens their confidence in understanding where the organisation is heading and what for, how best to make the organisation move along the chosen path, and when should they take what measures to achieve the goals of the organisation.

ii) Provides opportunity to analyse alternative courses of action :

Another source of importance of planning is that it permits managers to examine and analyse alternative courses of action with a better understanding of their likely consequences. If managers have an enhanced awareness of the possible future effects of alternative courses of action, for making a decision or for taking any action, they will be able to exercise judgement and proceed cautiously to choose the most feasible and favourable course of action.

 iii) Reduces uncertainties :

Planning forces managers to shake off their inertia and insular outlook. It induces them to look beyond those noses, beyond today and tomorrow, and beyond immediate concerns. It encourages them to probe and cut through complexities and uncertainties of the environment and to gain control over the elements of change.

 iv) Minimises impulsive and arbitrary decisions :

Planning tends to minimise the incidence of impulsive and arbitrary decisions and adhoc actions. It obviates exclusive dependence on the mercies of luck and chance elements. It reduces the probability of major errors and failures in managerial actions. It injects a measure of discipline in managerial thinking and organisational action. It improves the capability of the organisation to assume calculated risks. It increases the freedom and flexibility of managers within welldefined limits.

v) King-pin function :

 As stated earlier, planning is a prime managerial function which provides the basis for the other managerial functions. The organisational structure of task and authority roles is built around organisational plans. The functions of motivation, supervision, leadership and communication are addressed to implementation of plans and achievement of organisational objectives. Managerial control is meaningless without managerial planning. Thus, planning is the king-pin function around which other functions are designed.

vi) Resource allocation :

 Planning is a means of judicious allocation of strategic and scarce resources of the organisation in the best possible manner for achieving strategic goals of the organisation. The strategic resources include: funds, highly competent executives, technological talent, good contacts with government, exclusive dealer network, and so on. If the organisation enjoys a distinct advantage in possession of such resources, a careful planning is essential to allocate them into those lines which would strengthen the overall competitive position of the organisation.

 vii) Resource use efficiency :

For an ongoing organisation, planning contributes towards a more efficient functioning of the various work units. There is better utilisation of the organisation’s existing assets, resources and capabilities. It prompts managers to close gaps, to plug loopholes, to rectify deficiencies, to reduce wastage and leakages of funds, materials, human efforts and skills so as to bring about an overall improvement in resource use efficiency.

viii) Adaptive responses :

 Planning tends to improve the ability of the organisation to effectively adapt and adjust its activities and directions in response to the changes taking place in the external environment. An adaptive behaviour on the part of the organisation is essential for its survival as an independent entity. For a business organisation, for example, adaptive behaviour is critical in technology, markets, products and so on.

 ix) Anticipative action :

While adaptation is a behaviour in reaction and response to some changes in the outside world, it is not enough in some situations. In recognition of this fact, planning stimulates management to act, to take bold initiatives, to anticipate crises and threats and to ward them off, to perceive and seize opportunities ahead of other competitors, and to gain a competitive lead over others. For the purpose, some enterprises establish environmental scanning mechanism as part of their planning systems. Thereby such enterprises are able to direct and control change, instead of being directed and controlled by the pervasive external forces of change.

 x) Integration :

Planning is an important process to bring about effective integration of the diverse decisions and activities of the managers not only at a point of time but also over a period of time. It is by reference to the framework provided by planning that managers make major decisions on organisational activities, in an internally consistent manner.

LIMITATIONS OF PLANNING

i) Based on certain assumptions :

Planning is based on certain assumptions or premises derived from forecasts about the likely behaviour or relevant future events and variables. If such assumptions or premises turn out to be wide off the mark, the very basis of plans get affected. Afterall, forecasting is not an exact science.

 ii) Incomplete information :

 The information needed for planning is often incomplete. It may not be available in time and its reliability tends to be doubtful. In several situations, managers are forced to make planning decisions on the basis of partial knowledge because of time lags and credibility gaps in information.

iii) Lack of control :

Managers have little knowledge and less control over several elements of external environment. There is often go way to bring external situations under the discipline of planning. Several external events tend to influence organisational activities and plans in random and perverse ways, as for example, natural calamities, sudden strikes, government policy changes, and so on.

 iv) Difficult to change with the changing environment :

Planning, under conditions of rapid changes in the external environment tends to be a tough job. Plans would become quickly outdated and irrelevant even before they are implemented. Though flexible plans would be of some help under such conditions, there are also limits on injecting flexibility into organisational plans.

 v) Fluid process :

Planning is essentially a fluid process in the sense that it is always in a state of flux. This is because of the march of the times and the subtle changes which characterise the future as it unfolds. Future is always a moving target. It is not easy to visualise an integrated and composite view of the past, present and future for planning purposes.

vi) Delay in action :

Since planning means thinking and deciding before doing things, it is likely to delay action. For one thing, thinking and deciding are somewhat slow intellectual exercises. Many managers may not have the time or taste for such exercises. For another, managers attach more importance to action and that too timely action wherein lies much activism and dynamism.

vii) Rigidity :

The plans produced through the planning process tend to introduce rigidity into the functioning of the organisation. Managers are likely to insist on strict compliance with pre-determined plans. This may sometimes mean foregoing new opportunities and better options. A faithful conformity with plans would stifle initiatives beyond the established ways and routines.

 viii) Plans might remain on paper :

At the other extreme, it is also likely that plans remain on paper as some sacred documents worthy to be respected and preserved are not followed or implemented. They may be far removed from realities such that managers regard them as “untouchables’. Alternatively, managers may be too busy in struggling with crises to find time for going along planned courses.

ix) Difficult to implement at unit level :

 It may be easy to formulate broad plans at the corporate level. Problems are likely to arise when managers try to prepare more detailed plans in physical and financial terms at functional and unit levels for purposes of implementations. The detailed plans, if and when prepared, may not reflect the intents of the broad plans in a consistent manner.

THE PROCESS OF PLANNING

i) Planning to plan :

Planning does not just occur on its own or with the issue of an order from the chief executive. It has to be properly and carefully decided upon and planned. The management of the organisation has to inject a culture of planning at all the levels of management by highlighting the imperatives and virtues of planning as also the philosophies and techniques embedded in it.

ii) Appraisal of internal situation :

In this step, top management in collaboration with other managers, have to make an analysis of the current state of affairs with the organisation; its existing plans, processes, activities, performance levels, achievements and problems.

iii) Appraisal of the external environment :

 Top management of the organisation is vitally concerned with the analysis of external environmental conditions for planning purposes. This facilitates them in understanding the elements and events in the world outside the organisation which affect its present and future functioning.

iv) Definition of key areas and issues for planning :

The appraisal of internal and external environmental conditions gives to the management an idea about what tentative planning the organisation needs. Managers have to ask themselves whether, in the light of external appraisal, the existing businesses, products, markets, processes and practices are relevant, and which aspects of them have to be retained, strengthened, refined and modified.

v) Development of alternative plans for evaluation and choice :

 In this stage, managers have to apply their creative and innovative skills to generate alternative plans, missions, objectives, strategies, policies and programmes, etc., on the basis of assessment of planning needs. They are generally of corporate-wide and long-range in character, ranging from 5 to 10 years ahead, depending on circumstances.

vi) Formulation of medium range and short-range plans :

The long-range set of organisational plans provide the basis for formulation of more specific medium range and short-range plans. Medium-range plans have a time span of more than one year but upto three years in general. Short-range plans have a duration of one year or less. Medium-range plans and shortrange plans are progressively more specific than long-range plans. Shortrange plans are also called operational plans and the process of formulating them is called ‘Operational Planning. Medium range plans and short-range plans are generally formulated in such functional management areas like manufacturing, marketing, purchase, personnel, finance, R&D and so on. They are further de-composed into more detailed sectional and unit plans valid for basic units of operations in the organisation.

vii) Arrangements for implementation of plans :

Effective implementation of plans and decisions is the crux of the planning process. Since plans are implemented by managers and others at various levels of the organisation, it is essential for top management to enlist their co-operation, participation and commitment for the purpose. Authority and accountability have to be pinpointed specifically among the various managers for implementation of plans, for acquiring and allocation of resources and tasks, for making day-to-day decisions and taking initiatives and for activating the communication system in the organisation.

FORECASTING AS AN ELEMENT OF PLANNING-

Planning is future-oriented, forecasting is a basic ingredient of the planning process. Forecasting provides vital clues to managers on what the future problems and prospects are likely to be for the organisation. By means of forecasting, managers generate information on several dimensions and aspects of the environment, i.e. economic, social, technological, and political. These are directly relevant to the functioning and fortunes of the organisation and which directly influence the planning and other decisions, initiatives and responses of managers.

Forecasting and Premising :

 For purposes of formulating plans, managers have to convert the appraisals, estimates and projections about the future events into certain meaningful assumptions, which are known as planning Premises. This conversion process is called Premising, which is an essential follow-up action after forecasting. Planning premises form the foundation of organisational plans. They are in the nature of informed guesses of managers with respect to specific future trends. A few examples of planning premises are given below :

a) The enterprise will maintain its competitive strength over the next four years.

 b) There will be revolutionary developments in TV technology during the next five years.

c) There will be future liberalisation in the economic and industrial policies of government with respect to big business enterprises.

Planning premises are categorised in various ways.

 External Premises relate to general economic and business conditions, social, political, technological and other trends.

Internal Premises are confined to the activities of the enterprise; for example, cash flow, cost of products and services, profitability and so on.

Tangible Premises are quantitative in nature, as sales volume of Rs. 50 crores.

 Intangible Premises are qualitative, as for instance the competence and character of managerial personnel in the organisation.

Controllable Premises are those which are manageable by the enterprises (example: advertising expenditure).

 Uncontrollable Premises relate to acts of god or man about which little can be done by the industrial enterprise (example: A big fire in the plant, government policies etc.)

TYPES OF PLANNING-

Some of the types of plans are:

 (i) Business Plans:

It is a formal statement of the following: – Largely enforced business goals – The reasons why they are believed attainable – The plan for reaching those goals It may also contain background information about the organization or the team attempting to reach those goals.

 (ii) Marketing Plans:

These are those business plans that keep changes in perception and branding as their primary goals.

(iii) Operational Plans:

These describe the goals of an internal organization, a working group or a department.

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.

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.

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.

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.

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.

Let us take an example of Cash Budget. The cash budget is a basic tool in the management of cash. It is a device to help the management to plan and control the use of cash. It is a statement showing the estimated cash inflows and cash outflows over a given period. Cash inflows would generally come from cash sales and the cash outflows would generally be the costs and expenses associated with the operations of the business. The net cash position is determined by the cash budget i.e., inflows minus  (–) outflows = surplus or deficiency.

 (iv)Project Plans:

 These describe the goals of a particular project. They may also provide for the projects place within the organization’s larger strategic goals.

(v) Strategic Plans:

 These are business plans that identify and target internal goals, but provide only general guidance on how those plans can be attained. In the context of business enterprises, strategic planning consists of formulation of strategies which are in the nature of critical and intelligent courses of action to gain upper hand over competitive and other complex external forces in the environment. It involves tentative chalking out of the major measures and moves necessary to perceive and exploit opportunities and to tackle threats and constraints, in the light of distinctive strengths and inevitable weaknesses of the enterprises.

Tactical Planning :

 Tactical Planning refers to the process of formulating more specific, functional, sub-plans to implement the strategies of the enterprise. Tactical Planning is more limited in its scope and consists of detailed decisions and actions initiated at lower managerial levels to exploit situations as and when they arise and to cope with local, operational problems. It is sub-corporate wide in nature. Tactical plans take the form of small, successive steps or moves taken in a concerted manner. Tactical decisions are concerned with what and how activities are to be carried out, what performance criteria are to be established, how scarce resources are to be utilised efficiently and so on.

Long-range Planning :

 The term long-range planning refers to the process of formulating the long-range objectives of an organisation and of determining the ways and means of achieving such objectives. The term long-range indicates the extent of future time horizon, the fairly long period of time which can be visualised and verbalised into tentative objectives by the organisation. The duration and limit of long-range differs from enterprise to enterprise and from situation to situation.

Short-range Planning :

 The term short-range planning refers to the process of formulating short-range objectives and of deciding on the courses of action or plans, to achieve them. Short-range planning is done for a time span of one year or less. In general, it is carried out within the framework of long-range planning, and for achieving long-range objectives, in a step-by-step manner. A short-range plan is an attempt to breakdown a long-range plan into compact and actionable programmes. Short-range planning is more action-oriented, more detailed, specific and quantitative.

PRINCIPLES OF PLANNING

1) Principle of top management interest :

 The chief executive of the organisation must show genuine interest in planning, submit himself to the discipline of planning and must inspire his team to do the same.

 2) Principle of long-range view :

 Every manager must plan decisions after a full analysis and understanding of their long-term future effects, and after considering all the available facts objectively.

3) Principle of contribution to objectives :

 Planning should be purposeful. It should directly contribute to the achievement of organisational objectives or desired ends.

4) Principle of primacy of planning :

 As stated earlier, planning holds the prime position in the process of management. It is logically regarded as the first function of managers from which all other functions flow.

 5) Principle of flexibility :

The principle suggests that flexibility in planning helps the organisation to cope with rapid and unforeseen changes in the external events. This can be achieved without abandoning the predetermined plans or without inviting adverse consequences even if drastic.

 6) Principle of navigational change :

 This principle is related to the principle of flexibility. It indicates that a regular process of monitoring the course of external events is to be combined with a review and revision of plans. This should be done in order to achieve desired goals just as a navigator negotiates his ship’s way by making changes in his route in response to behaviour of the water mass.

 7) Principle of commitment :

This principle helps in the determination of the planning period. Planning should cover a period of time necessary to fulfil the commitments involved in a decision. For example, if a student makes a decision to join a three years B.Com. Course, his planning period is three years.

8) Principle of the limiting factor :

 A limiting factor is one which stands in the way of achieving the desired objective. Managers should pay due attention to tackle those limiting factors which hinder the smooth progress in achievement of objectives.