CH.8 Planning Flashcards
Meaning of planning
A plan is a course of action to be taken in the future.
It is a predecided course of action.
Planning is the process of deciding in advance the objectives to be achieved during a given time period, formulating alternative courses of action to achieve them and selecting the best course of action.
For example, a trader decides to increase his sales.
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Planning definition
According to Koontz and O’Donnell, “Planning is deciding in advance what to do, how to do it, when to do it and who is to do it. Planning bridges the gap from where we are to where we want to go. It makes it possible for things to occur which would not otherwise happen”.
Features of planning
- Planning is goal-oriented - Planning seeks to achieve certain objectives and all plans are linked with the goals of the organisation. Planning will become a useless exercise if it does not contribute in some positive way to the accomplishment of desired objectives.
- Planning is future-oriented - Planning is essentially looking ahead and preparing for the future. It is based on the proverb “look before you leap”. Planning seeks to manage future events to the best advantage of the organisation.
- Planning is an intellectual process - Planning is a mental exercise involving creative thinking and imagination. A manager can prepare sound plans only when he has sound judgement, foresight and vision.
- Planning is a primary function - Planning serves as the basis for all other functions of management. It precedes organising, staffing, directing and controlling. All these functions are performed within the framework of plans.
- Planning is pervasive - Planning is required in all types of organisations and at all levels of management. Every department prepares plans. However the scope of planning may differ from one level to another.
- Planning is a continuous process - Planning is an ongoing process. Plans are formulated on the basis of forecasts. When assumptions about the future do not come true, the original plan must be revised in the light of changing conditions. Thus, planning is a never-ending cycle.
- Planning involves choice - Planning is essentially the process of choosing from among alternative courses of action. If there is only one possible alternative, there is no need for planning as there is no choice.
- Planning aims at efficiency - Plans are prepared to achieve the objectives in the best way. Sound planning leads to accomplishment of desired objectives at the minimum possible cost. It helps in optimisation of resources.
Importance of planning
Sound planning offers the following advantages:
- Focuses attention on objectives - Planning makes the goals clear and specific. This is because the objectives or goals to be achieved are decided before plans are drawn. Planning focuses managerial attention on the purposes for which various activities are to be undertaken.
- Makes activities meaningful - When goals are clearly defined actions become meaningful. Managers and employees know how their activities relate to the goals of the organisation. They understand the importance of their activities and relationship between different activities.
- Brings order in place of chaos - Planning helps the organisation to keep on the right path. Planning ensures clarity in thought and action. It avoids aimless and ad hoc actions.
- Reduces risks of uncertainty - Business enterprises operate in an uncertain environment and face several types of risks. Planning enables these enterprises to predict future events and prepare to face unexpected events.
- Promotes innovation and creativity - Sound planning encourages creative thinking. Managers get the opportunity to develop new ideas in creating new products and services. This leads to growth and expansion of the business.
- Facilitates decision-making - Decision-making involves searching for various alternative courses of action, evaluating them and selecting the best course of action. Under planning, targets are laid down and they help managers select the best alternative course of action.
- Bridges the gap between present and future - Planning bridges the gap between where we are and where we want to go.
Diagram
Limitations of planning
1.Costly process - Planning is an expensive process. Money, time and effort have to be spend in forecasting, collection of information, evaluation of alternatives etc.
Planning should be economical.
- Time-consuming - Considerable time is required for collection, analysis and interpretation of information for planning. Therefore, planning is not practicable during emergencies and crises when on-the-spot decisions are necessary. Planning may cause delay in decisions and actions,
- Rigidity - Once plans are formulated, people tend to strictly adhere to them irrespective of changes in the environment. Employees become more concerned with observing the programmes and procedures rather than achieving the goals. They are reluctant to deviate from plans due to fear of criticism.
- Lack of accuracy - Planning is based on forecasts which are estimates about the future. When the forecasts are inaccurate, plans become misleading. The degree of inaccuracy increase as the plan period increases.
- False sense of security - Detailed planning may create a feeling among employees that everything has been taken care of. They may consider work as per plans as fully satisfactory.
Steps in the process of planning
Diagram
- Setting objectives - Plans are prepared to achieve objectives or goals. Therefore, the first step in planning is to define and describe clearly the objectives of the organisation as a whole and of each of its inf=dividual department. Moreover, objectives provide guidelines for many decisions relating to allocation of resources, scheduling of work, nature of actions etc. Objectives point to the end results of planning.
- Developing the planning premises - Once the objectives to be achieved are set, the next step involves establishing the premises or assumptions about the future. Planning premises provide the environment or boundaries within which plans will be executed. Certain assumptions about the conditions expected to prevent in the future are derived from the forecasts.
Planning premises may be of the following kinds:
(a) Tangible and intangible - Assumptions which can be expressed in quantitative terms are called tangible premises, eg. units of production, capital investment, time available etc. On the other hand, intangible premises like employee morale, goodwill of the enterprise etc. cannot be expressed in quantitative terms.
(b) Internal and external premises - Assumptions about the internal working of the enterprise are known as internal premises Eg. capital, machines, personnel etc. On the other hand, factors outside the enterprise are called external premises Eg. changes in technology
(c) Controllable and uncontrollable premises - Policies and programmes of the organisation which can be fully regulated by the management are controllable premises. Uncontrollable premises are the external factors like trade cycles, political changes etc. which are beyond the control of the management.
Factors which are partly under the control of the management eg. price policy, sales area etc. are called semi-controllable premises.
- Identifying alternative courses of action - Once the objectives and planning premises are established, it becomes necessary to discover the various courses of action which may be used to achieve the established objectives. In order to identify all possible alternatives, it is necessary to collect and analyses all the relevant information. Information may be collected from primary and secondary sources.
- Evaluating alternatives and choosing the best alternative - The various alternatives are evaluated and compared in terms of their expected costs and benefits. The alternative courses of action should be judged in terms of common factors such as the risk involved, expected return, planning premises etc. After objective and scientific evaluation of different alternatives, the best alternative is selected.
- Formulating derivative plans - After the basic plan is decided, the next logical step is to develop detailed plans for its implementation. These detailed or derivative plans refer to the policies, procedures, rules, programmes, schedules, budgets etc.
- Securing cooperation - Successful implementation of plans requires the understanding and whole-hearted cooperation of all the members of the organisation. Therefore, plans must be communicated and explained in detail to the employees so that they have an understanding of what is proposed to be done and why.
- Follow-up actions - Existing plans are reviewed at periodic intervals to ensure their relevance and effectiveness. After implementation of plans certain facts may become known that were not even thought of earlier.
Types of plans
Managers prepare and use various types of plans. Some plans are repeatedly in similar situations. Such plans are known as standing plans or repeat-use plans. Objectives policies, procedures and rules are examples of standing plans. On the other hand, other types of plans are called single-use plans because after every use these plans have to be reformulated.
Hierarchy of plans diagram
Types of plans - objectives
Every organisation is established to achieve certain goals. These are called objectives. Objectives can be described as the aims which an organisation wants to achieve over different time periods. The planning process begins after establishing the objectives of the company. Objectives may be long-term or short-term.
Diagram
