Chapter 4: Planning

PLANNING MEANING

1. Planning is deciding in advance what to do and how to do it. It is one of the basic managerial functions. Planning is the process of thinking before doing. Planning try to bridge the gap between where we are and where we want to go.

BENEFITS OF PLANNING.

1. Provides directions
   • Act as a guide for deciding what action should be taken and when
   • Without planning, employees would be working in different directions.
2. Reduces the risks of uncertainty
   • Planning predicts advantages and disadvantages in future events and suggests suitable action.
   • Strength, Weakness, Opportunities and Threats are examine to determine the most suitable action
3. Innovative ideas
   • Since planning is the first function of management, managers use new ways and means to achieve required goals
   • Managers use foresight, logical thinking and creativity to achieve goals
4. Maintain standards for controlling
   • Provides standards against which actual performance is measured.
   • Controlling  makes the planning a base and compares actual performance with standards
5. Enhances decision making
   • Make a choice from various alternatives.
   • The manager evaluates each alternative and selects the most suitable alternative
6. Reduces wasteful activities

• Clearly defined the activities and efforts of different divisions, departments and individuals.
• Avoids confusion and misunderstanding to carry the work smoothly.

“Though planning is an important tool of management, yet it is not a remedy for all types of problems”. Do you agree with this statement? Give any five reasons in support of your answer.

LIMITATIONS OF PLANNING

1. Time-consuming process:
   • Sometimes top-level management consumes a lot of time in formulating the plans, as a result of which very less time is left for them to implement these plans.
2. Involves huge costs:
   • Huge cost is involved in the formation of plans.
   • This cost is in terms of money and time. For example, a lot of time is involved in scientific calculations to ascertain facts and figures and to check the accuracy of facts while formulating a plan.
   • Likewise, a lot of money was spent on boardroom meetings, discussions with experts and preliminary investigation to find out the effectiveness of the plans.
   • Moreover sometimes are cost incurred in formulating plans is higher than the benefits received from these plans.
3. May not work in a dynamic (changing) environment:
   • The various forces of the business environment like social, political, technological and legal keep on changing and the organization has to adapt themselves to these changes.
   • Thus, it becomes very difficult to forecast when there is a change in government policies, natural calamity, political instability in the country, etc.
4. Inflexibility
   • Usually in an organization planning function is performed by the top management and the rest of the members are required to implement these plans.
   • As a result, middle management and other members are neither allowed to deviate from plans nor granted authority to act on their own.
   • Hence most of their initiative and creativity in them gets reduced.
5. Does not guarantee success:
   • An organization is successful when the plans are effectively drawn and implemented.
   • Managers are in the habit of depending on previously tried and tested successful plans, but this practice sometimes does not work and may lead to failure instead of success.

PLANNING PROCESS

1. Setting Objectives:
   • End  goals  for which  organization works
   • Should be well defined, specific, quantitative, and realistic.
   • Maximum people must  participate in the objective of the setting process
2. Developing Premises:
   • Consists of forecasting future conditions likely to have an influence on goals like demand for good cost of raw materials, state of technology, govt. Policies etc.
   • Known as planning premises.
3. Identifying alternative courses of action:
   • Many ways to act and achieve objectives and alternative courses of action should be identified.
   • Action can adapt by involving more people and sharing their ideas.

                        Sales can be increased by either reducing the price, improving quality, or more promotions.

4. Evaluating alternative courses:
   • The positive and negative aspects of each proposal need to be evaluated according to the need of the organization

                        Example: - Reducing price will affect revenue

5. Choosing an alternative:
   • • Best plan has to be adopted and implemented.
     • Would be the most possible, profitable and with the least negative consequences.
     • Understanding customer needs can be a better option.
6. Implement the plan:
   • Concerned with putting the plan into action
   • For example, to increase sales then more advertisement and sales promotional methods are required
7. Follow-up action:
   • To see whether plans are being implemented and activities are performed according to schedule.
   • Once a plan is implemented it requires continuous monitoring

TYPES OF PLANS

Single-Use Plan & Standing Plan

Single-use plan

• Single-use plans apply to activities that do not recur or repeat.
• Such Plan is developed to meet the needs of a unique situation.
• The length of a single-use plan differs greatly depending on the project in question, as a single event plan may only last one day while a single project may last weeks or months.
• Includes:-  - Budget , Programs

Standing plans – known as repeat use plans

• Are used over and over again because they focus on organizational situations that occur repeatedly.
• Usually made once and retain their value over years
• That is why they are also called repeated use plans.
• Includes:-  Policies, Procedures, Methods And Rules

Differences between standing and single-use plans

 Objectives:

• Objectives are the ends towards which the physical & human energies of the enterprise are channelized.
• All individuals, groups, and depts. are integrated, coordinated and directed to achieve this end.
• Objectives can be major, minor, collateral. They are set by the top-level management.

Strategy:

• Strategy is a comprehensive plan for accomplishing an organization‘s objectives.
• This comprehensive plan will include (3 dimensions):

1. Determining long term objectives
2. Adopting a particular course of action
3. Allocating resources necessary to achieve objectives

Policy:

• Organization general response to a particular problem/ situation.
• These are general statements/ understandings, which guide thinking & decision-making. A policy is an Organization's intention to act in certain ways when specific types of circumstances arise.
• Policies define the boundaries within which decisions can be made and they direct decisions towards the accomplishment of objectives.

Features

• The general response to a particular problem: guide managers in view of the repeated appearance of similar problems/situations
• Basis for objectives: Policies provide the routes to objectives.
• Provide guidelines for thinking/ action.
• Discretionary: provide scope for executive judgment.
• Top management‘s intention: generally formulated by top management. For operational purposes, managers at all levels also formulate their own policies

Examples: Recruitment policy, Pricing policy (for the elite segment); We don‘t sell on the credit's a policy of the sales dept.

PROCEDURE:

• A procedure is a series of related tasks that make up the chronological sequence & the established way of performing work to be accomplished.
• It gives a series of actions directed towards a goal.
• It specifies tasks to be performed /done sequentially for completing a piece of work

Features:

• Defines steps of doing different jobs/methods in routine. So it saves time.
• Helps to improve efficiency by providing standards and the best manner of doing work.
• Cuts across all dept. lines (e.g. execution of a sales order concerns sales, finance, production depts.)
• Help in the implementation of policies

Examples

Admission procedure, the Selection procedure for employees, Passport/Visa, Procedure for placing an order.

METHOD:

A method is a type of management plan that specifies the detailed and the best manner of performing a particular step, comprised in a procedure.

Features:

• Methods are formalized/-standardized ways of doing routine jobs
• These are standard ways of doing jobs, though there is no penalty for violation of methods
• These are defined to increase efficiency
• They are usually manual/ mechanical ways to perform an operation

Examples

• Depreciation methods: Straight line method, written down value method
• Methods of stocktaking: LIFO, FIFO, Training methods (e.g. orientation programs, lectures, etc.)

RULE:

• A rule requires that a specific action be taken for a situation.
• Rules are prescriptive directives to people in the org. and elsewhere to do or not to do things, to behave or not to behave in particular ways.

Features

• Rules indicate limits of acceptable behavior to the members of the org.
• They help to improve efficiency
• Help in maintaining discipline in the org.

Examples

•No smoking, No admission without permission

BUDGET:

A budget is a plan which states the expected results of a given future period in numerical terms. It may be expressed in time, money, or physical units.

Features:

• Presents the objectives of the enterprise in financial/Quantitative terms.
• Helps in financial control: provides standards by which actual performance can be measured.
• Coordinates activities of various depts. of a big enterprise by adjusting the departmental budgets into the master plan.

Since budgets specify measurable goals to be achieved within a specific period (usually one year), they inject a sense of clarity in directing and performing the activities of the org.

Examples -

Cash budget determines cash inflows and outflows, so that management knows how much cash it

should hold at all points of time for various purposes.

PROGRAMME:

• It is a comprehensive plan designed to implement the policies and accomplish objectives.
• It is a combination of goals, policies, task assignments, resource flows, etc.
• It is a concrete or well-designed scheme designed to accomplish a specific objective.
• It spells out the steps to be taken, resources to be used and the time taken to complete the task.
• It also indicates who should do what and how?

Features -

• Single-use abut comprehensive
• Action-based
• Result oriented
• Designed to ensure smooth and efficient functioning of the organization
• Great risk of failure due to changes in the environment

Example –

• Launching a new product.
• Training program.
• Advertising program.
• Expansion program.