PLANNING

Planning is a process of setting objectives by way of gathering information & analyzing it to forecast the future situations and select suitable course of action from available alternatives, following which the objectives can be achieved. It involves deciding in advance what to do, when to do, where to do, how to do and who is to do and how the results are to be evaluated.

The function of planning includes defining the objectives, policies & procedures, rules & regulations, strategies & budgeting. The purpose of planning is to minimize the risk and to make full advantage of situations that may arise in future. It bridges the gap from where we are and where we want to go. Good planning is flexible in nature as it can adjust to changes in business conditions. It covers both short-term and long-term periods.

Characteristics of Planning

·         Planning is Primary Function :- planning is the primary function of management, without planning nothing is defined in the organization i.e. what they wanted to achieve and do, what is the guidelines etc. according to Koontz planning provide the basic foundation from which all future management function arise.

·         Planning is Goal Oriented:- planning is process of defining and achieving the goals, there can’t be any planning without any goal in sight or any path to achieve that goal.

·         Planning is intellectual process:- planning is an intellectual process where thinking and analyzing of the available information is done by an individual or group to predict future and make a selection from the available alternative. Plans are drawn on a careful study of internal and external factors influencing business activities.

·         Planning is all pervasive:- planning is required at all levels of management, whether top, middle or lower levels of management all required to do planning, no activity is done without a plan behind it.

·         Planning is continuous process:- planning is a continuous activity, the objectives and steps are defined, they are implemented and changed according to requirements, once achieved newer objectives are defined and the process continues.

·         Planning integrates the different activities:- planning integrates all the activities of the organization to achieve the desired goals, planning may set different targets for each unit or departments but all the targets will be directed towards achievement of the set goals.

·         Planning effect efficiency and effectiveness:- planning is done to select a suitable course of action to reach out to goals, by doing the right things in right manner, plans are made to utilize the available resources to best of its use.

·         Planning involves alternatives and choices:- planning is required when there are availability of alternatives and power of making choices to select an alternative, in case there is no alternative which means only one path or objective is available then there is no requirement of planning.

·         Planning is future oriented:- planning is future oriented process, which means through planning we try to predict the future and prepare ourselves to perform better. The seeds sown today will show the result tomorrow.

·         Planning is flexible:- planning is future oriented and based on forecasting and prediction, hence when the actual situations turns out to be different than predicted then plans has to be changed accordingly, so plans are always flexible to an extent.

IMPORTANCE OF PLANNING

Planning is very important management function as it is the base on which the entire functioning of organization depends. The success and existence of the organization depends on the quality of planning. We can represent the importance of planning by highlighting following points.

·         Provides Direction:- planning provides the direction and sense of purpose for the organization, planning provides the broad targets to be achieved by the organization and also define the guidelines in terms of policy and procedure following which the organization try to achieve the set targets. Without planning organization will not know what they are doing, why they are doing any action.

·         Reduces risk of Uncertainty:- future is always full of uncertainties. A business organization has to function in these uncertainties. It can operate successfully if it is able to predict the uncertainties. Some of the uncertainties can be predicted by undertaking systematic forecasting. Thus, planning helps in foreseeing uncertainties which may be caused by changes in technology, federal rules, fashion and choice of customers.

·         Unifying framework to achieve the objective: - basic characteristic of planning is related to the organizational objectives. All the operations are planned to achieve the organizational objectives. Planning facilitates the achievement of objectives by focusing attention on them. It requires the clear definition of objectives so that the most appropriate alternative courses of action are chosen.

·         Coordination: - planning helps in setting better coordination among inter-departmental activity and clearly lay down the area of freedom in the development of various sub-plans. Various departments work in accordance with the overall plans of the organization. Thus, there is harmony in the organization, and duplication of efforts and conflict of jurisdiction are avoided.

·         Economy in Operation:- Planning ensures economical operations because of emphasis on efficiency. Since planning involves the selection of the best possible courses of action, it is implied that best results would be achieved at the least possible cost. Planning tries to eliminate unproductive effort & helps to optimize resource utilization and eliminate wastages.

·         Facilitation of Control:- planning ensure better control as when the activities are done on a planned manner then it is easy to evaluate them as we know what is predicted or standard and what is actual, hence planning provides parameters to know whether the actions are going accordingly or not. This helps in rectifying any deviations.

·         Encouragement to Innovation:- Planning helps innovative and creative thinking among the managers because many new ideas come to the mind of a manager when he is planning. It creates a forward-looking attitude among the managers.

·         Increase in Competitive Strength:- Effective planning gives a competitive edge to the enterprise over other enterprises that do not have planning or have ineffective planning. This is because planning may involve expansion of capacity, changes in work methods, changes in quality, anticipation of tastes and fashion of people and technological changes.

·         Improves morale: - planning helps in defining the goals and the steps to achieve them, which in turn helps in clearly defined what is expected from the employees and how he is going to achieve it, this helps in building positive morale in the employees.

LIMITATIONS OF PLANNING

Although the need and importance of planning activity in management is indispensible there are some limitations associated to planning function which can be defined as follows

·         Lack of Accurate Information. The reliability of a plan depends upon facts
and information on which it is based. So the planning will be successful only up to the degree of reliability of the information available, planning is sure to lose much of its relevance if the information is inaccurate and unreliable.

·    Lack of Accurate Forecasts. Planning is future oriented activity and its success depends on the accuracy of the forecasts or predictions made, these forecasts or predictions depends on the information and its analysis, which can not be completely reliable and accurate hence, will have certain degree of difference, sometimes the forecasting is done more on subjective interpretation of the information available.

·    Cost and time consuming complex Process:- Planning is a complex and expensive process, requiring time, money and managerial skills. The collection of information, evaluation of alternatives, selection etc may consume lot of managerial time and organizational resources.

·      Rigidities. Planning may result in internal inflexibilities and procedural
rigidities. As planning will decide the policy and procedure hence the managers will execute all their action guided by plans which will restrict flexibility of decision making and actions

·     Lack of Specific Goals. Qualitative objectives like social responsibility,
management development, quality of work life, etc. are often expressed in vague generalizations which defy proper evaluation. Once these objectives conflict with quantifiable ones, managers tend to ignore them totally. Planning cannot be effective unless goals are specific, clear and actionable.

·     Lack of Planning Skills. the plan depends upon the planner, without appropriate skills of analyzing information, prediction and formulating a suitable action the planning will not show desired results. Planning is an art and science hence capability of one person will be different form other in devising a suitable plan.

·     Resistance to Change- the planning is done usually by the top management and for its implementation we require support of the middle and lower level of management, the resistance expressed by the employees also limit the effectiveness of plan, as the lower level management perceives that the conditions and situation which they face is unknown to planners.

·     False sense of security:- planning also tend to create a false sense of security in the organization, as organization thinks that by following the plan in right perspective will yield the desired result this make them a bit more careless, and they ignore the changes in the market place resulting into problems.

·      External Factors:- planning is subjected to external factors which may alter the complete plan or make it a failure, and hence it is stated that planning is futile activity, to a certain extent the statement is true as because of following reasons

1_ the predictions or forecasts are made based only on the current information which is available, but it is not known that there is more inputs available or not secondly there is possibility that the entire information may change in no time.

2_planning consider looking in to future, but it is very difficult to predict the future with much accuracy, so the reliability of planning effort is open to uncertainty.

3­_ there is no way to predict many activities in future e.g. a fire or natural calamities, changes in the policies of government, emergence of new technology etc.

STAGES IN PLANNING PROCESS

Planning is an intellectual primary process of the organization and require considerable amount of managerial skills and time, secondly a good planning and implementing strategy is like wining the half battle in the world of business. Its very difficult to explain the planning process as it has contribution of both quantitative as well as qualitative analysis, following is a generic stages of planning given for you understanding.

Establishment of Objectives

The first step in planning is to identify and determine objectives. Objectives provide direction to various activities in the enterprise. Planning has no utility if it is not related to certain objectives, the objectives are defined after a thorough consideration of business environment, the establishment of objectives can, at times, be more important than the objectives themselves since their establishment will decide how the overall organization will move and act in a given framework.

Objectives clarify the tasks to be accomplished. Which means what is to be accomplished, what actions to be taken, who will perform when and where.

Environmental Scanning

This involves scanning the internal and external business environment under which the organization is trying to set and achieve their objectives. Environmental scanning helps to know the managers what kind of situation is prevailing at time of planning; the environmental scanning includes consideration of market forces, political, social and economical environment, technological environment, competitors, suppliers and distributors profile, human resource environment etc.

Developing Premises and Forecasting

This step involves outlining the planning premises, making assumptions concerning the behavior of internal and external factors mentioned in the second step. While planning it is essential to identify the assumptions on which the plans will be based. Assumptions denote the expected environment in the future and are known as 'planning premises'.

Forecasting is important in premising. It helps in making realistic assumptions about sales, costs, prices, products, technological developments, etc. in the future. The assumptions along with the future forecasts provide a basis for the plans. Since future environments are so complex and uncertain, the assumptions should be limited.

Review of Key Factors

This step involves the review of the key factors and their role in making the plan a success. It involves defining the limitations and strength of the organization. Reviewing the key areas like capacity, manpower, finance and demands etc to work out a better picture of the total situation. E.g. if the capacity planning is not as much as required then the planner can include outsourcing or proposal of increasing the plant and machinery to increase the capacity in his plan.

Development of Alternative Plans

It’s always better to determine the alternative courses of action as without alternatives, a planner is likely to be guided by his limited imagination. Generally, there are several alternatives for any problem. A manager should try to screen out the most viable alternative so that he has a small number of alternatives for final selection. This will help in the thorough analysis of the alternatives so developed. The manager should work out a number of alterative plans to achieve the target.

Evaluation of Alternative Plans

Once the alternatives plans are being devised and premises are clearly defined the next step is to evaluate each alternative under the light of objectives and premises to find out suitable plan of action, each alternative is attached with its own advantage, limitations and constraints, the manager has to evaluate the alternatives in terms of degree of achievement to desired objective, requirement of resources, time and money. Rate of return on investment the profitability etc. The planner should take the help of various quantitative techniques of Operations Research like probability theory, game theory, linear programming, etc. to make his choice more objective and rational.

Selection of Suitable Plan

The purpose of evaluating the alternative courses of action is to select the most suitable course of action which will achieve organizational objectives. Techniques of decision making are applied to choose a particular course of action. This may lead to the conclusion that no one course of action is optimum. So the management may decide to select two or more alternatives and combine them to have the most feasible plan. While selecting the plan, the following factors should be taken into account:

·         The plan should be logical and practical.

·         The plan should be flexible and capable of being modified.

·         The plan should be specific rather than general.

·         The plan should be acceptable to the operating personnel.

·         The resources required for the implementation of the plan should be made available.

Formulation of Derivative plans

Once the suitable course action is being selected, now the organization has to formulate the secondary or derivative plans which are going to support the primary plan, this include setting objectives for unit goals, departmental goals and individual goals etc.

Securing Cooperation and participation

The planning is complete failure if it is not accepted by the team, the employee’s participation and cooperation is very much required for making the plan successful. As Koonts stated plans have to be set in an atmosphere of close participation and a high degree of concurrence, hence the plans should be made with participation of employees and communicated to the team in effective manner.

Follow up

The planning should always have in build mechanism of review and follow up, so that the progress of plan should be reviewed at regular intervals of time to ensure it is following the proposed course of action.

Things a manager can do to make the plan more effective.

·                  Make the plan specific: - The plan should be specific i.e. the objectives should be defined in a discrete and measureable manner so that there is less chance of getting it misinterpreted.

·                  Integrated approach towards planning: - A plan is said to be complete
when it is comprehensive enough to cover all actions expected from the individuals
and sections of the undertaking as a whole. It is said to be an integrated one when
various administrative plans are so welded into one another that the whole
undertaking operates at the peak of its efficiency in a synergic way.

·                  A plan should be logical. The more facts it is based on, the better it is. If
facts are not available, reasonable assumptions may be made about the future.

·                  A plan should be flexible. No plan is infallible nor can it cover all possible
contingencies. Conditions under which a plan will be most effective change as do
the variables and factors on which the plan is formulated. Therefore, it is essential
to introduce some flexibility in every plan.

·                  A plan should be capable of being controlled. Effective planning of business
activities depends upon the ability to foresee with utmost accuracy the nature and
requirements of future events relating to industry in general and the business
undertaking in particular. Therefore, the plan must distinguish between controllable
and uncontrollable future environment for better administrative control.

·                  Strengthening Information System. An efficient system of managing information should be installed so that all relevant facts and figures are made available to the managers before they perform the planning function. Availability of right type of information will help in overcoming the problems of incomplete understanding of the objectives and resistance to change on the part of the subordinates.

·                  Improving Planning Premises. Planning always requires some assumptions to be made regarding future events. In other words, it is a pre-requisite to determine future settings such as marketing, environment, Government policy, tax structure, business cycle, etc. before giving the final shape to the overall business plan. The planning premises should be set up very carefully. Due weightage should be given to the relevant factors at the time of premising. It may be pointed out that the premises which may be of strategic significance to one enterprise may not be of equal significance to another, because of size, nature of business, nature of market, etc.

·                  Developing Accurate Forecasts. Steps should be taken to strengthen forecasting system. First of all, adequate information should be secured for effective forecasts. Secondly, forecasting techniques should be understood and used properly. Moreover, the forecasts should be reviewed from time to time.

·                  Introducing Flexibility. Some element of flexibility must be introduced in the planning process because modern business operates in an environment which keeps on changing. For achieving effective results, there should always be a scope to make necessary addition, deletion, or alteration in the plans as is demanded by the circumstances.

·                  Forward Approach. The persons concerned with the task of planning should be dynamic in outlook. They must take the required initiative to make business forecasts and develop planning premises. A manager should always keep in mind that planning is looking ahead and he is making plans for future which is highly uncertain.

·                  Reducing Resistance. Plans are to be implemented by people. So it is necessary to secure acceptance and commitment from them. One way to increase commitment to solicit subordinates participation in the planning process. Planning process should not be a one way traffic; the traditional directive approach must be substituted by participative approach.

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 CLASSIFICATION OF PLANS

We can classify the different kinds of plans depending upon different parameters like duration of plan, utility and level of management etc.

·         Long Range Planning (LRP) and Short Range Planning (SRP)

 Depending on the range of planning we can classify planning as long range planning and short range planning, long range planning is usually comprise of planning for the period of five years or more, where as short range planning comprise of few months to an year or so. Long range planning is done by the top management involves defining the broader objectives of the organization by way of vision and mission, the long range planning also define the strategic plan and the policy and procedure of the company which will be the guiding force in all functioning of the organization, long range planning is based on the long term perspective of the environmental changes under which the business will run. Long range planning is flexible but the fundamental policy and objective remains fixed.

Although long range planning is full of uncertainties and the forecasting is limited but it is very important as this defines the fundamentals of the organization on which all the changes and flexibility will be done.

Short Range Planning is done usually up to an year and involves defining specific targets which the company will pursue in achieving the broader objectives of the company, short range planning is more detailed and discrete and targets the implementation of company’s strategies in efficient manner, short range planning include production planning and control, sales targets, departmental targets, budgeting for operations etc.

·         Classifications according to Use

Plans may be classified according to how general or specific they are. Single-use plans are predetermined courses of action developed for unique, recurring situations. By contrast, standing plans are predetermined courses of action developed for repetitive situations. A budget, for example, is a single-use plan. It becomes obsolete whenever the time period for which it was prepared expires. Rules, policies and procedures, on the other hand, are standing plans. They continuously govern the operations of a company until they are modified or eliminated.

·         Planning according to levels of management

We can also classify the planning according to level of management

Top-level or Strategic Planning:- strategic planning is done to define the broader long term planning, strategic planning is done to define what the company wants to achieve, who are their customers and what promise they are going to fulfill in the market place, done by the top management also determines the plan of action through which they will like to achieve the targets. Strategic planning is primarily concerned with solving long-term problems associated with environmental influences. Strategic planning tries to fill the gap between the market condition and business readiness to fulfill customer requirement and achieve organizational goals through best possible manner.

Middle-level or Execution Planning. This planning is done by the head of operations to execute the company strategy in the operational level. Short to medium range of planning done to achieve specific targets given by the top management by implementing strategy of the company in action, it includes targets like cost cutting and value increasing by value engineering, production planning to increase the output, sales promotion to decrease inventories etc.

Lower-level or Tactical Planning. Tactical planning is done by lower level of management who is directly related with the primary function of the business, such planning is done for the operational area like a plant or assembly line where actual the work of the organization is being done, usually deals with day to day problems and helps in achieving specific targets which are for short term. Tactical planning require immediate action and as it has a very short cycle e.g. if the machine break down the supervisor will have to get it repaired immediately otherwise the output of the day will suffer, similarly if few workers are absent them plant manager has to arrange some other alternative so that production is not hampered, such planning is devised on the floor itself the functional plan and the strategic plan remains only guiding force in these decisions, many of the tactical planning also define the routine decisions but for any new problems the manager in charge will devise the action himself only.

·         Formal and informal planning

Planning which is done in a recorded manner by manager is known as formal planning which is usually the long term and medium term planning, formal planning defines the basis of all functioning of the organization, where as informal planning is done by mangers of lower rung on day to day basis and is less documented, e.g. defining the policies and procedures of the organization is formal planning where as manager excusing a worker or reprimanding him or deducting his salary for coming late is a part of informal planning.

•          Corporate Planning & Business Unit Planning

Corporate planning is broader planning which defines the objective of the business conglomerates. Corporate planning is valid for diversified large business which has presence in many sectors and or involved in varied business activities like primary business and investing also. Corporate planning defines the vision and mission for the entire organization e.g. ITC’s Corporate planning is for the entire ITC company which may be entirely different from the planning for FMCG or Tobacco business.

Business unit planning is defining the objectives, vision and mission for the business units under a corporation, although the business unit planning may be entirely different from corporate planning but it will only be in alignment of the corporate planning. e.g. a company may have a corporate objective of increasing the profit but for its new business its mission might be to increase the sales volume and not earning profits.

An understanding of the basic components of planning process

•   Objectives

Objectives are the goals, aims or basic purpose, that organization wishes to achieve over varying periods of time. Objectives are the ends towards which all organizational activities are aimed. Objectives provide unity of direction to all the functions of the organization. Planning has no utility unless it is related to certain pre-determined objectives.

•   Policies

Policies are the statement which acts as guiding principles to govern action usually of routine and repetitive nature. Policies define the framework which guides thinking and action of the organizational members. According to Sherwin Douglas, "Policy is simply a statement of an organization’s intention to act in certain ways when specific types of circumstances arise. It represents a general decision, pre-determined and expressed as a principle or rule, establishing a normal pattern of conduct or dealing with given types of business events, usually recurrent".

A policy helps a person in the organization to deal with a particular situation. Policy defines the factors and constraints under which a decision can be made and assures that decision will be consistent with the overall business objectives.

• Procedures

A procedure is the defined series of related tasks or activities that has to be followed in a chronological sequence by which the work will be performed. It denotes a list of systematic steps for handling events that occur regularly. A procedure guides action and decide what will be the outcome. Procedures involve planned sequence of operations for handling recurring business transactions uniformly and consistently. Every organization may follow different steps for performance appraisal or sanctioning of leave etc.

Procedures define how the day to day activities in the organization will be carried out, which helps in bringing uniformity and order in operation thereby eliminating chaos or confusion in the organization.

A streamlined system of procedures helps to expedite and accelerate pace of work without duplication and waste of efforts and resources. It will lubricate the channels of information, and thus, help the management in timely decision making. Even the information flow can be defined within procedures so that management gets information continuously in vital areas like sales performance, cash flow, inventory position and so on.

•   Methods

Methods are sub-units of a procedure; they show clearly steps involved in a procedure. Methods indicate the technique to be employed to make the procedure effective. The primary focus is on finding out the best way of doing a piece of work. For example, in a manufacturing concern, product sampling may be a method used as one part of a quality control procedure.

A method is the manual or mechanical means by which each operation is performed. It means an established manner of doing an operation. Thus, a method is more limited in scope than a procedure because it deals with a task that is only one step of a procedure. For instance, in the procedure for processing the order, there are methods for acknowledging the incoming order, checking the credit status of the customer, preparing the sales invoice and distributing the copies of the invoice.

•   Rules

Rules are the statement defining what is expected and the outcomes or decision that has to be taken in case there is non conformities of the requirements, simplest and the most specific type of standing plans, used for guiding what may or may not be done. Rules are more rigid and demand a specific action e.g. if rules doesn’t allow a worker to take a leave without prior approval or information and allow a disciplinary action of deducting wages for the day then any supervisor while dealing with such case will deduct the wages for the day if any worker take an unauthorized leave.

• Programmes

A programme is a single-use plan which is developed for a new and non-repetitive activity. It defines the steps in proper sequence that will be taken for the purpose of achieving a specific objective. A programme comprise of objectives, policies, procedures, rules, budgets, etc. programmes are devised to achieve an objective and require some special non routine initiative, e.g. a company decide to diversify its business from cement industry to retail or real estate business, under such condition company will develop its diversification program and define the objectives, policies etc

•   Projects

A project is a specific plan to achieve a discrete and well defined cluster of activities which will help achieving the general objectives of the company. E.g. a company setting up another production plant is a project which will help the company in achieving the general objective to be the largest cement company of the area in terms of volume. Projects are separate from normal operations because of its special significance. Usually the task of executing a project is put under the charge of a project manager. The project manager formulates plans, programmes and policies which are necessary to execute the project. He designs various budgets and authorizes expenditure on various items. However, he draws personnel and specialized assistance from the functional departments of the organization like finance, marketing, engineering, etc.

•    Budgets

A budget is a statement of expected outcomes expressed in numerical terms like cash outflow, increase in productivity etc budget helps in envisaging the resource requirement and the expected outcomes of the activities. Act as a tool of managerial control to regulate the resource allocation and evaluate the results.