MODULE 9: MANAGERIAL FUNCTIONS:

PLANNING

Learning Objectives
• Understanding of planning its nature, features and importance.
• Knowledge of planning process and stages involved in it

I. Planning
Planning is said to be the first and foremost functions of Management
The role played by planning is very vital in today’s competitive scenario
Planning is decision making
Planning is thinking in advance what to do, when to do, how to do, where to do and it is
to be done by whom
All levels of management play a vital role in contributing to the successful
implementation of Planning process
Planning is the management function anticipating the future and conscious determination
of a future course of action to achieve the desired results.
Planning consists of both problems-solving and decision making.
In simple words, planning is deciding in advance what action to take, how and when to
take a particular action, and who are the people to be involved in it. It involves anticipating
the future and consciously choosing the future course of action.

According to Peter Drucker,

“Planning is a continuous process of making present entrepreneurial decisions (risk

taking) systematically and with best possible knowledge of their futurity, organizing
systematically the efforts needed to carry out these decisions and measuring the result of
those decisions against the expectations through an organized systematic feedback.”

In the words of George R. Terry,

“Planning is the selecting and relating of facts and the making and using of
assumptions regarding the future in the visualization and formulation of proposed activities
believed necessary to achieve desired results.”
 II. Major Components (OR) Parts of Planning:

Initial (or basic) planning: This is concerned with the determination of the objectives

Subsequent (or route) planning: which is concerned with best alternative course of
action.

Final (or operational) planning: wherein, the planner wound analyze the technical,
Financial, Personnel and other aspects involved in implementing the pre-selected course
of planning

III. Features reflect basic Nature of Planning:

1. Planning is intellectual process:
• Planning is mental process involving imagination, foresight and sound judgment
• It requires a mental disposition of thinking before doing and acting in the light of facts,
rather than guesses.
2. Planning is a primary function:
• 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.
3. Planning is reference in future:
• In fact, it is matter of common sense to understand that all planning is done for future:
and in the context of future conditions.
• While planning, the planner has to do a forecasting of the relevant economic, social,
political and technological condition, within frame work of which the plan will have to
operate.
• Forecasting is the heart of planning.
4. Planning is goal-oriented:
• Planning has no meaning unless it unless it contributes in some positive way to the
achievement of desired goals. All plans emanate from objectives.
• The goals may be implicit or explicit but well-defined goals are essential for efficient
planning.
5. Planning is a continuous process:
• Planning is an ongoing and dynamic exercise.
• As the assumptions and events on which plans are based change, old plans have to be
revised or new ones have to be prepared.
 6. Planning involves choice:
• Planning is basically a problem of decision-making or choosing among alternative
course of action
• Planning or decisions made after evaluation of alternative course of action
7. Planning is all pervasive:
• Planning is the function of each and every manager irrespective of the level and the area
of his/her operation.
• Planning is an essential ingredient in management at all executive levels
• Managers at the top level prepare long term plan for the company as whole, middle level
managers formulate departmental and functional plans for medium term. At the lowest
level, managers prepare operating and short-term plans.
8. Planning is both-long-range and short-range:
• Long-range planning usually covers a period ranging from 3 to 5 or 7 years. While plans
for a period of up to 1 year (or even two years) are regarded as short range plans.
9. Planning is actionable:
• An ideal requirement of planning is that is must be actionable.
• A plan is not just a ‘paper-plan’ which either is not capable of implementation or is never
put into practice, for any reasons what so ever.
10. Planning is flexible:
• A plan is capable of modification, revision or re-adjustment, future; when some of those
future environmental factors change on which the plan is based.
11. Planning is an integrated system:
• Various departmental plans, the plans of superiors and subordinates and the long-range
and short-range plans all must be harmonized and fitted into an integrated structure of
planning

IV. IMPORTANCE OF PLANNING:

1. Planning offsets future uncertainty and change:
A business concern has to work in an environment which is uncertain and ever-changing.
Planning helps the manager in carving out the future course of action and this brings a
higher degree of certainty.
2. It tackles increasing complexity in modern business:
To run a modern business undertaking there is need for large no. of people with different
specialization and complex machines.
3. It helps in co-ordination:
Planning is the best stage for the integration of diverse forces at work.
Sound planning inter-relates all the activities and resources of an organization.
The activities and efforts of various departments and division can be harmonized with the
help of an overall planning.
4. Encourage innovation and creativity:
Innovation and creativity are pre-requisites for 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.
5. It facilitates unity of action:
Under planning, policies, procedure and programmes are pre-determined and every
decision and action should within the frame work of pre-determined policies and
procedures.
6. It helps in avoiding business failure:
As planning involves the selection of vest objectives, unity of action, co-ordination of
activities, economy in operation and offsetting of futures uncertainty and change, there is
a great possibility of avoiding business failures.
7. Guides Decision-making:
Planned targets serve as the criteria for the evaluating of different alternatives so that the
best course of action may be chosen.
By predicting future, planning helps in taking future-oriented decisions.
In the absence of plans there is no sound basis for making future-oriented decisions.
8. Improves competitive strength:
The enterprises which adopt planning will have a competitive edge over other enterprises
which do not have planning.
Planning enables the enterprise to discovers new opportunities and thereby shape its own
future.
9. Facilitates control:
Planning provides the basis for control.
Plans serve as standards for the evolution of performance.
Sound planning enables management to control the events rather than be controlled by
them.
V. STEPS IN PLANNING (OR PROCESS OR HOW TO MAKE A PLAN):
Plans are made in all types of enterprises-business and non-business.
Plans are made at all levels of management-from highest to lowest.
1. Being watchful:
It could be referred to as a pre-step in planning or a desirable pre-condition for making a
successful plan
The management must, accordingly, initiate the planning process at the most opportune
moments expecting gains through the adage ‘well-begun is half done’.
2. Awareness of opportunities and problems:
The first step in planning is the awareness of the un-exploited business opportunities or
the problem to be provided for in future.
3. Collecting and analyzing information:
The next step is to gather adequate information and date relating to the planning to be
made and analyze it to find out the cause-effect relationship between the various factors.
4. Setting objectives:
Analysis and interpretation of data facilitate in determining the enterprise objectives.
Objectives must be specific and clear and should indicate the end result of planning
activity.
5. Determining planning premises and constraints:
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.
Three types of planning premises:
Controllable premises: These are under the control of management (ex: policies,
objectives and resources of the enterprises)
Semi controllable premises: These are partially under the management control (ex:
Trade Union)
Non-controllable premises: It refers to the external forces: (ex: Govt. Policy, political
situation, etc.)
6. Finding out the alternative course of action:
After establishing the objectives and the planning premises, the alternative plans are
developed.
For every plan there are a number of alternative and hence, all possible alternatives to
work out a plan for achieving the desired objectives should be found out for their
evaluation.
 Cost, risk and resources associated with different alternatives should also be considered.
Imagination and foresight are required to generate and evaluated policy alternatives.
7. Evaluation of alternatives and selection:
A critical evaluation of alternatives involves going into the plus and minus points of each
alternative: and to find out the net worth of each alternative-in terms of its contribution to
the objectives of the plan.
It is to evaluate all possible alternatives with reference to cost, speed, quality, etc., and
select the best course of action.

8. Selection of the ‘best’ alternatives:

The management while selecting the best alternative might base decision on one or more
of the following bases:
A) Experience: The management might base its final selection of the best alternative, on
its experience. In fact, experienced manager knows what types of alternatives he adopted in
the past; and with what implications and consequences.
B) Experimentation: In terms, of experiments with the ‘best’ alternative: and analyses
the outcome of the experiment, before finalizing the decision.
9. Formulation of derivative plans:
A major plan, usually calls for a number of derivative plans; plans derived from the main
plan. Derivative plans might also be called- supporting or minor or secondary plans.
A plan e.g., relating to the installation of a new plant for manufacturing a new product
might call for the following derivative plans:-
i. A plan for ‘design’ and manufacturing of the new product.
ii. Plans for the repairs and maintenance of the plant.
iii. A plan for the repairs and maintenance of the plant.
iv. A plan for advertising the product to be produced by the plant, etc.
10. Implementation of the plan:
The step which gives a finishing touch to the planning process, is concerned with the
implementation of the plan, which implies ‘putting the plan into action’.
11. Follow-up action:
Though the planning process comes to a close with the implementation of the plan; yet a
desirable step, which yet remains to be taken, relates to the follow-up action on the
implementation of the plan.
‘Follow-up action’ implies watching the consequences (both good and bad) – economic,
social psychological etc.
VI. PLANNING LEVELS

STRATEGIC PLANS
Objective
Long-range plans
Policies

ADMINISTRATIVE PLANS
Organization
Motivation
Managerial control

OPERATIONAL PLANS
Rules
Method
Procedure

Top level management:

It is concerned with the strategic of courses of action, programme, policies,
procedures, and standards that will determine the procurement, use and
disposition of these resources.
Middle level management:
Examples: Research and Development, Marketing, Manufacturing, finance, etc.,
Lower level management:
Example: plans for finished goods inventories to meet current market demands,
plans to accelerate research projects which are behind schedule.

VII. TYPES OF PLANNING:

I. Strategic Plans and Operational Plans:
• Strategic plans that apply to the entire organization. They establish the organization’s
overall goals and seek to position the organization in terms of its environment. They are
long term and directional.
• “Strategy is the complex plan for bringing the organization from a given posture to a
desired position in a future period of time.”
• Plans that specify the details of how the overall goals are to be achieved. Operational
plans tend to cover short time periods and are specific.
Characteristics of strategic and operational plans
Feature Strategic Operational
Time horizon 5 years or more Under 1 year
Purpose Adapt to external environment Implement internal goals
based on internal strengths.

Activity controlled Total institutional performance Internal tasks and operations

Decision range Relatively enduring Short term

Organizational Top management Middle and lower management

level involved
Predictability uncertain Highly certain

II. Long-term and short-term Plans:

• With the environment being so dynamic and uncertain, distinction between long-term and
short-term has become too difficult.
• Plans with a time frame of over three years are called long-term plans and plans with a
time frame of one year or less are classified as short-term plans.
Characteristics of Long-term and short-term Plans
Feature Long range planning Short range planning
Time factor 3 years or more Up to one year
Deals with Mission, long term goals and Current operations of an
strategies organization
Organizational linkage with Linkage with various parts of an
Primary focus
external factors organization
Impact
Demands changes in the Operates within the existing
structures, resources allocation structure and resources
Uncertainty It goes too far into the future, The time horizon is limited and
the risk and uncertainty level is the risk associated with
high. uncertainty level is low
Prepared by
Top management Lower level management

III. Tactical or Coordinative (intermediate) planning

• These plans help support the implementation of strategic plans.
• Tactical plans essentially indicate the actions that major departments and sub-units
should take to execute a strategic plan.
• Such plans are more concerned more with actually getting things done than with
deciding what to do. They are thus essential for the success of strategic plans.
 • Tactical plans are developed by middle-level managers, who may consult lower-level
managers before finalizing the plan and communicating it to top-level management.
Compared to strategic plans, tactical plans cover a shorter time frame (usually 1 to 3
years).
• A middle-level manager acting as a tactical planner deals with much less uncertainty
and risk than the strategic planner.
• The information that he requires is also less and most of it can be derived from internal
sources.
IV. Formal and Informal planning
• A formal plan is a well documented plan. it is a written record of what the organization
intends to do within a time frame. The record is made after a careful evaluation of all
relevant factors that have a bearing on organizational functioning.
• Informal planning does not offer a written record. it is carried out without any direction.
Managerial thoughts which do not find expression on paper are informal plans.
V. Proactive and Reactive planning
• Proactive planning is a way of thinking about managing the future risks and challenges. It
tries to take care of all future contingencies and changes.
• Proactive planning makes managers alert and sensitive to all such changes. They are
forced to be dynamic, active and creative.
• In reactive planning, the organization merely reacts to external events. the organization is
left to the vagaries of environmental forces.
VI. Specific Plans: Plans that are clearly defined and leave no room for interpretation. For
example: the plan to increase the productivity by 10% in one-year period.
VII. Directional Plan: These plans are flexible plans that set out general guidelines. When
uncertainty is high and flexibility is required to respond to the unexpected changes such plans are
essential. For example, the plan is to increase the productivity b by 6% to 10% over a period of
one year.
VIII. Single-use Plan: This is a one-time plan specifically designed to meet the needs and
challenges of a unique and specific situation.
IX. Standing Plans: These are ongoing plans that provide direction for activities performed
repeatedly
Standing plans Single use plans
Mission Programmes
Objectives Projects
Policies Schedules
Strategies Budgets
Methods Standards
Procedure
Rules
Reference:

1. L.M. Prasad, Principles & Practice of Management, Sultan Chand & Sons, 1999, ISBN:
81-7014-024-2

2. B.S. Moshal, Management Theory and Practice, Galgotia Publishing Company, 1998,
ISBN: 81-85989-26-5

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An auto company C Ltd. is facing a problem of declining market share due to increased
competition from other new and existing players in the market. Its competitors are introducing
lower priced models for mass consumers who are price sensitive. For quality conscious
consumers, the company is introducing new models with added features and new technological
advancements.

Questions
1. Prepare a model business plan for C Ltd. to meet the existing challenge. You need not be
very specific about quantitative parameters. You may specify which type of plan you are
preparing.
2. Identify the limitations of such plans.
3. How will you seek to remove these limitations?

ACTIVITY

Short Answer Type

1. What are the main points in the definition of planning?
2. How does planning provide direction?
3. Do you think planning can work in a changing environment?
4. If planning involves working out details for the future, why does it not ensure success?
5. Why are rules considered to be plans?
6. What kind of strategic decisions are taken by business organisations.