PLANNING

MEANING OF PLANNING
Planning is deciding in the present, what is to be done in future. It involves anticipation of future course
of events and deciding the best course of action. Thus, it is basically a process of 'thinking before doing'.
It bridges the gap between where we are and where we want to go.
Planning refers to the process of 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.
FEATURES / NATURE/ CHARACTERISTICS OF PLANNING
Focuses on Achieving The purpose of planning is to develop and facilitate accomplishment of
Objectives (Purposeful organisation objectives.
Activity)
Primary Function of planning precedes other functions of management
Management (Primacy of By setting up objectives in advance, planning directs all other managerial
planning) functions towards their attainment
Pervasive Planning is required at all levels
In all departments of the organization
In every type of organization social or economic
Continuous It means that a plan is framed, it is implemented and is followed by another plan
and so on.
Due to ever changing environment, planning becomes a continuous responsibility
of management
Futuristic (Forward Planning aims at thinking about future, analyse it and predict it for doing action
Looking Function) in present.
Planning is based on forecasting
Involves Decision- Planning involves proper and careful analysis of various alternatives and
Making selecting the best possible alternative from various courses of action.
Mental Exercise Planning requires application of mind involving foresight, intelligent imagination
(intellectual activity) and sound judgment. . Planning requires logical and systematic thinking instead
of guess work

SIGNIFICANCE / IMPORTANCE OF PLANNING

Provides Directions By clearly stating the objectives in advance, act as a guide for deciding the future
course of action and directs all Departments and individuals in the organisation to
be able to work in coordination.
Reduces the risks of Planning enables a manager to look ahead and anticipate changes and prepare for
Uncertainty the risks by making necessary provisions.
The uncertainties cannot be eliminated, but they can be anticipated and
managerial responses for them can be developed.
Reduces Overlapping Planning coordinates the efforts of different divisions, departments and
and Wasteful Activities individuals. Planning ensures clarity in thought and action and work is carried on
smoothly without interruptions.
Promotes Innovative While planning, many new ideas arise and it results into creative, innovative and
Ideas foresighted attitude among the managers. Such new ideas can take the shape of
concrete plans.
Facilitates Decision- Planning helps the manager to look into the future and make a choice from
Making amongst various alternative courses of action. The manager has to evaluate each
alternative and select the best one.
Establishes Standards Controlling involves comparison of actual performance with the pre-determined
for Controlling standards. Planning provides the standards against which the actual performance
is evaluated and remedial measures can be taken to improve the results.

LIMITATIONS OF PLANNING
Planning leads to plans are drawn up with specific goals to be achieved within a specific time
Rigidity frame and are required to be strictly followed.
Planning may not work The business environment is dynamic. The organisation has to constantly adapt
in a Dynamic itself to changes. Planning does not provide positive results when such changes
Environment are not accurately forecasted.
Planning Reduces Planning is an activity which is done by the top management and rest of the
Creativity members has to strictly follow these plans.
Middle management and other decision makers are neither allowed to deviate
from plans nor are they permitted to act on their own.
As a result, they do not get opportunity to show their skills and it limits their
initiative and creativity.
Planning involves Huge Planning is an expensive process as lot of money is spent on gathering and
Costs analysing information and evaluation of various alternatives.
costs like expenses on boardroom meetings, discussions with professional experts
Planning is a Time- Planning is a time-consuming process as lot of time is needed for collection,
Consuming analysis and interpretation of data. At times, formulation of plans take so much of
time that there is not much time left for their implementation
Planning does not Managers have a tendency to rely on previously tried and tested successful plans.
Guarantee Success However, it is not necessary that a plan, which has worked before, will work
again in the changed and competitive environment.

STEPS IN PLANNING PROCESS

Setting Objectives • Objectives determine 'where to reach'. If the end result is clear, it becomes
easier to work towards the goal.
• Objectives should be stated clearly for all departments, units and
employees
• For example, objective of an organisation could mean an increase in sales
by 20%.
Developing Premises • Every manager has to make certain assumptions about the future. These
assumptions are called premises.
• 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.
Identifying alternative • For every plan, there are a number of options. All the alternative courses
courses of action of action should be identified.
For example, if the objective of a company is growth of business, then company
has various possible alternatives, like expansion in same product line,
diversifying in new areas, joint venture and so on.
Evaluating alternative • Each course will have many variables which needs to be weighed against
courses each other.
• The positive and negative points of each alternative are thoroughly
examined in the light of the objective to be achieved
For example: All alternatives should be compared and evaluated in the light of
feasibility, cost, consequences
Selecting an alternative • The alternative to be selected should be the most feasible, profitable and
with least negative consequences.
• This is the real point of decision-making.
Implement the plan This step is concerned with transforming the plan into action by activating other
managerial functions. Plans are of no use until these are put in action.
Follow-up action After implementation of plan, the last step is to periodically review the existing
plans, to ensure their relevance and effectiveness. The plans must be constantly
monitored and in case of any deficiency, they should be modified or adjusted.

TYPES OF PLANS

Basis Standing Plans Single Use Plans

1. Meaning Standing plans refer to plans, which can Single use plans refer to plans formulated to
be used again and again whenever a meet the requirements of a particular
particular situation arises. situation and to accomplish specific
objectives.
2. Objectives Standing plans are developed for Single use plans are developed for activities
activities, which are of recurring nature. which are not likely to be repeated in future.

3. Period These plans are formulated for a long These plans are generally formulated for a
period. short period.
4. Stability Standing plans are relatively stable as Single use plans have less stability as they
they are used over and over again. discarded when the specific situation or
project is over.
5. Scope Standing plans have a wide scope as Single use plans generally have a narrow
they involve more than one department scope as they are formulated to fit the
of business function. specific situation.
6. Example Procedure for processing an order or Cash Budget to show expected inflow and
recruitment of employees. outflow of cash for a specific period in
advance.
 TYPES OF PLANS
OBJECTIVE 1. The ends which the management seeks to achieve within a given time period
2. Objectives should be expressed in specific terms, i.e., they should be
measurable in quantitative terms
The objective of a mobile company can be to increase the mobile users by 10% in 2
years
STRATEGY Strategy is a comprehensive plan made in response to changes in the business
environment to achieve organisational objectives.
Strategy provides the broad contours of an organisation's business.
• The three dimensions of strategy are:
(i) Determining long-term objectives.
(ii) Adopting a particular course of action.
(iii) Allocating resources necessary to achieve the objective.
Example: Pepsi and Coca Cola are competitors in the soft drink market. If Pepsi
reduces the price of its products in the market, then counter-plan of Coca-Cola, to
maintain its market share may be considered as strategy.
POLICY 1. Policies are general statements that guide thinking or channelise energy towards
a particular direction.
2. They are guides to managerial action and decisions in the implementation of
strategy.
3. They define the broad parameters within which a manager may use his
discretion to apply the policy.
Example: Policy of a company may be not to employ any person who is less than 18
years of age.
PROCEDURE 1. A procedure is a chronological sequence of various steps to be taken in order to
perform an activity in an efficient manner.
2. Policies and procedures are related to each other as procedures are steps to be
carried out within a broad policy framework.
Example: An enterprise may have different procedures, like procedure for processing
an order, recruitment of employees, collection of payments
METHOD 1. A method is a prescribed process in which a particular operation or an activity
is performed.
2. Methods specify the manner in which each segment of a task can be performed
efficiently and effectively
Example: Business can select any method for valuation of its stock.
BUDGET 1. Budget is the statement of expected result expressed in numerical terms over a
specific period of time.
2. They also serve as a control device and yardstick for measuring actual
performance.
Example: Budgets used in an organisation are: Sales Budget, Production Budget, Cash
Budget, Revenue and Expense Budget
RULE 1. Rules reflect a managerial decision that a certain action must or must not be
taken. Employees are expected to comply with the rules while performing an
activity.
2. Rules are rigid and demand strict compliance. They do not allow for any
flexibility or discretion.
 3. Their violation is generally associated with some sort of disciplinary action.
PROGRAM 1. A programme is a combination of objectives, policies, procedures, rules, tasks
and other elements, which are designed to get a systematic working in the
organisation.
2. Programme can be of different types, like production programme, training
programme, sales promotion programme, etc.
Example: A company may have programme with respect to 'Construction of new
Factory Premises'.

Difference between Policies and Objectives

Basis Policies Objectives
1. Purpose Policies aim to determine how the Objectives aim to determine what is to
work is to be done. be done.
2. Period Policies do not have a time Organisation may have short and long-
dimension. term objectives.
3. Need Although they are needed to achieve Objectives are basic and critical for the
objectives, but an organisation can existence of an organisation.
exist without them.
4. Formulation They are formulated by the managers They are generally determined by the
of all levels. top level.
5. Source They are derived from objectives. They are derived from goals.
Difference between Policies and Strategy
Basis Policies Strategy
1. Purpose Policy aims to deal with repetitive Strategy aims to counter unforeseen
issues. problems or environmental threats.
2. Validity Policies remain valid for the Strategies are single use plans and
situations or problems which are designed to suit specific situations.
recurring in nature.
3. Role of Policy may not be formulated on the It is formulated after considering
Competitors move of competitors. activities of the competitors.
4. Hierarchy Policies, which are supportive in Strategies are considered to be superior
of plans nature, occupy lower place in and occupy higher place.
hierarchy of plans.
Difference between Policies and Procedures
Basis Policies Procedures
1. Need Policy is needed for Procedure is needed for the
achieving objectives. implementation of policy.
2. Scope for Discretion Policies are flexible and Procedures are more rigid and
managers have discretion there is little scope for
within prescribed limits. discretion to be used by
managers.
 3. Expression Policy is expressed as general Procedure is expressed in
statement. specific terms.
4. Area of application Policies have broad areas of Procedures have limited area of
application. application.
Difference Between Procedures and Methods
Basis Procedures Methods
1.Scope Procedure has a wide scope as it lays Methods have limited scope as
down sequence of all activities to be they are confined to one step of
completed. procedure.
2. Flexibility Procedures are more rigid as Methods are flexible statements.
compared to methods.
3. Purpose Procedure aims to develop steps for Method aims to standardise the
completing an activity. way of completing a task.
Difference between Procedures and Rules
Basis Procedures Rules
1. Nature They indicate broad guidelines Rules strictly define the guidelines
within which management can and there is no scope for discretion.
exercise little discretion.
2. Flexibility Procedures are more flexible as Rules are rigid statements.
compared to rules.
3. Effect of There is no specific penalty for The guilty has to face penalty in case
violation violation of procedure. of violation.
4. Example Procedure established for selection Rule of 'No Smoking' in the
of employees by a company. organisation.
Difference Between Policies and Rules
Basis Policies Rules
1. Nature Policy is a general statement. Rule is the most specific statement.
2. Purpose Policy aims to guide in Rules aim to guide to human
decisionmaking. behaviour.
3. Flexibility Policies are generally flexible. Rules are rigid and there is no scope
for deviations.
4. Effect of There is no penalty specified for The guilty has to face penalty in case
violation violation of policies. of violation.
5. Example Company may have Policy "To make Rule of "No Smoking" in the
payments more than one lakh by company.
cheque".
Difference between Rules and Methods
Basis Rules Methods
1. Purpose Rules are designed to achieve Methods are designed to achieve
order and discipline. efficiency and economy.
2. Effect Of The guilty has to face penalty in There is no penalty specified for
violation case of violation. violation of methods.
3. Flexibility Rules are rigid and there is no Methods are flexible statements.
scope for deviations.
4. Application Rules are applied to human beings Methods relate to manual and
to make them behave in a mechanical ways of doing a task.
particular manner.