Table of Contents
What is Planning?
- Planning means deciding in advance what to do and how to do it.
- It is the first function of management.
- It basically bridges the gap between where we are and where we want to go.
- Planning involves setting objectives and targets and formulating an action plan to achieve them.
- Real life example:- Let’s say your goal is to buy 2 litre of milk. It may sound like a simple task, but if you break it down, there are many small tasks involved in this process: obtain keys, obtain wallet, start car, drive to store, find and obtain milk, purchase milk, & drive back to home etc.now for this task you have to make plan which may include:
- From which store you are gonna buy milk
- Which route you choose to reach the store on which there is least traffic so that you can go & come back as early as possible. Etc.
Features of Planning:
The planning function of the management has certain special features. These features throw light on its nature and scope.
- Planning focuses on achieving objectives:-
- Organizations are set up with a general purpose in view which is to make profit but Specific goals are also set out in the form of plans along with the activities to be undertaken to achieve the goals. Thus, planning is purposeful.
- Planning has no meaning unless it contributes to the achievement of predetermined organizational goals.
For example: if an organization has the objective of manufacturing 2000 mobile phones in 1 month and in one month only 1600 mobile phones are manufactured, then changes are to be made in the plan to achieve the final objective.
2. Planning is a primary function of management:-
- Planning provides the basis for all other function of management.
- It is also referred as “primacy of planning”.
- Planning proceeds other function i.e. the efficiency of all other function depends upon the planning process performance because objectives are set up in planning and other functions depend on the objectives only.
For example:- in an organizing function, managers assign authority & responsibility to the employees depending upon the objectives of the company. Similarly, in staffing, the employees are appointed and the number & type of employees again depends upon the objectives of the company. So planning always remains the number 1 function of management as compared to other functions.
3. Planning is pervasive:-
- Planning is required in all organizations at all levels of management as well as in all departments of the organization.
- However , the scope of planning differs at different levels and among different departments.
- For example:-
- Top level management plans for the whole organization.
- Middle level managers prepares plans for their own departments.
- At a lower level – supervisor prepares plans for the day-to-day operations.
4. Planning is continuous:-
- Plans are prepared for a specific period of time say for a period of a month, a quarter, or a year. At the end of that period there is need for a new plan to be drawn on the basis of new requirements and future conditions. Hence, planning is a continuous process.
- In simple words –
- Planning is not a one time process.
- It is required to be performed continuously by the organization.
5. Planning is futuristic:-
- Planning involves looking ahead and preparing for the future.
- The purpose of planning is to meet future events effectively & efficiently.
- It implies peeping into the future, analysing it and predicting it.
- Planning helps in forcasting things & Through forecasting, future events and conditions are anticipated and plans are drawn accordingly.
for example, on the basis of sales forecasting a business prepares its future annual plan for production and sales.
6. Planning involves decision making:-
- Planning involves choosing the best alternative among various available choices.
- If there is only one alternative to do the task, there is no need for planning because there is no choice. The need for planning arises only when alternatives are available.
- In simple words – planning involves thorough examination and evaluation of each alternative and choosing the best one available.
7. Planning is a mental exercise:-
- Planning requires application of mind and sound judgement.
- It is basically an activity of thinking rather than doing because planning determines the action to be taken.
- However, here thinking means logical and systematic thinking not that wishful thinking or guess work.
- In simple words – planning is a mental exercise as it involves systematic thinking based on the analysis of facts and forecasts.
Importance of Planning:
All types of businesses dream to be successful. They want that their sales & profit to increase. However, dreams can only be achieved if business managers do planning i.e. think in advance what to do & how to do it.
The below-discussed points highlight the importance of the planning function of management:-
1. Planning provides directions:- By stating in advance how work is to be done planning provides direction for action.
Planning helps in defining goals & If goals are well defined, employees are aware of what the organization has to do and what they must do to achieve those goals. Departments and employees in the organization are able to work in coordination.
But If there was no planning, employees would be working in different directions and the organization would not be able to achieve its desired goals.
2. Planning reduces the risks of uncertainty:- As we know that business operates in an uncertain environment. Planning enables a manager to look ahead & predict changes and uncertain events which may happen in the future so that management may take appropriate actions to deal with that situations. Thus, planning helps to reduce the risk of uncertainty.
NOTE:- planning can only minimize the impact of changes/uncertainty but cannot fully eliminate it.
3. Planning facilitates decision making:- Planning helps the manager to look into the future and make a choice amongst various available alternatives. The manager has to evaluate the positive & negative aspects of each alternative and select the best alternative. Planning involves setting targets and predicting future conditions, thus helping in making logical decisions.
4. Planning reduces overlapping and wasteful activities:- the organizational plans are made keeping in mind the requirements of all the departments & the departmental plans are derived from the main organizational plan. As a result, there will be coordination in the activities of different departments of the organization which ultimately reduces the overlapping of work and wasteful activities.
5. Planning promotes innovative ideas:- As we know planning is thinking in advance about what to do and how to do it. Before doing something, the managers have to make a plan of how to work on a particular task. Therefore, there is a scope of finding better ideas & better methods to reach the objectives of the business enterprise. Thus, planning makes managers innovative & creative.
6. Planning establishes standards for controlling:- controlling means comparing the actual performance with the planned one. planning provides the standards against which actual performance is measured and the comparison of actual performance with the standards helps the managers to identify the deviations & to take corrective actions. Thus, planning is the basis for controlling.
Limitations of Planning:
Though planning is an important tool of management, yet it doesn’t provide a solution to every problem. Unforeseen events and changes (like covid-19), rise in costs & prices, environmental changes, government intervention, etc. all affect the business plans due to which plans needs to be modified.
Limitations of planning are majorly classified into two categories:
- Internal limitation of planning ( within business)
- External limitation of planning (outside business)
- Internal limitation of planning:-
Sometimes planning might fail in spite of the best efforts of management due to the following points of limitations discussed below:
I. Planning leads to rigidity:- As we know that plans are made on the basis of what is our main organizational goals, so once plans are made, they will decide the future course of action, and the manager may not be in a position to change them but following pre-decided plan when circumstances are changed may not bring positive results for the organization. This kind of rigidity in plans may create difficulty and may turn out to be against the organization’s interest.
For example:- In 2014 when every other company like Samsung, Micromax, etc are choosing and giving Android operating system in their mobiles, NOKIA remains rigid on its plan of giving windows operating system in their LUMIA mobiles which later is proved to be against their organization interest and Nokia loses its 95% market share in the Indian market.
II. Planning may not work in a dynamic environment:- As we know that Business environment is uncertain. The organization has to constantly adapt itself to the changes in a business environment. However, it is not always possible to accurately predict the future trends in the environment.
For example:- there may be a new competitor of ourselves in the market due to which our financial plans get upset which resultant in revising our sales target.
Similarly, there may be a change in economic policy, change in fashion & trend, etc. A manager cannot predict all these changes accurately if many such changes take place in the business environment due to which managers’ planning may fail.
III. Planning reduces creativity:- Planning is majorly done by top-level management. Middle & lower-level management are neither allowed to deviate from plans nor are they permitted to act according to their will. They just carry out orders of their supervisors. Thus much of their initiative & creativity present in them gets lost or reduced which resultant in people tend to start thinking along the same lines as others. So actually there is nothing new or innovative.
For example:- a worker is given a target of producing 100 units of pen/day. Due to his habit of doing things differently, he came up with an idea which not only reduces the cost per unit but also increases the no. of pens that can be manufactured earlier. I.e.120 pens/day. But the supervisor instead of appreciating him ordered him to complete the work as per the method decided earlier by the top management.
IV. Planning involves huge costs:- When plans are drawn up huge costs are involved in their formulation. These may be in terms of time and money
for example:- checking the accuracy of facts may involve a lot of time & cost because professional experts are hired to carry on this process.
If the cost incurred is greater than the benefit which we are getting after successful plan implementation then it has an adverse effect on the financial position of the enterprise.
V. Planning is a time-consuming process:- Planning requires the collection of information, its analysis, and interpretation. These activities may take a considerable amount of time. Sometimes plans to be drawn take up so much time that there is not much time left for their implementation and if the plans drawn are not going to be implemented at the right time in the business then not only the time but also the resources involved in their making like money may go waste.
VI. Planning does not guarantee success:-
The success of an enterprise is only possible when plans are drawn up properly and implemented. Planning is meaningless unless it is translated into actions.
Generally, Managers have a tendency to rely on previously tried and tested successful plans. However, It is not always true that just because a plan gets succeeded before, it will succeed again.
VII. Lack of accuracy:- In planning, we are always thinking in advance & planning is concerned with the future only and the future is always uncertain. Planning is done on the basis of many future predictions but these predictions are not 100% accurate and if these predictions do not hold true in the present or future conditions then the whole planning may fail.
For example:- if plans are made by predicting that there will be 5 % inflation in this whole year but in future conditions, the inflation rate becomes 15% then the whole plan may fail or a lot of adjustments will be required to be made.
2. External limitation of planning:-
I. Natural calamities such as floods, earthquakes, famine, etc. are beyond the control of humans & may cause the failure of planning.
II. Technological changes such as new technology came into the market which gives more production in the same time in less cost.
III. Changes in government policies such as industrial policy, taxation policy, demonetization, bank rate of interest, etc. upset the planning.
IV. Strategies of competitor – for example; when a competitor introduces an improved model of an existing product, demand & sales of our business product may decline.
V. Change in fashion, tastes, and preferences of customers may affect the sales forecasts of our business.
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