CHAPTER4

PLANNING
Meaning of Planning
Planning can be defined as “thinking in advance what
is to be done, when it is to be done, how it is to be
done and by whom it should be done”. Planning
bridges the gap between where we are standing today
and where we want to reach.

Deciding in advance:-
➢
What is to be done
➢
When it is to be done
➢
How it is to be done
➢
Whom it should be
Meaning of Planning
Planning requires anticipating the future and
consciously deciding what to do,when to do and who
to do it. Planning involves setting objectives and
deciding in advance the appropriate course of action
to achieve these objectives.

Planning bridges
the gap between
where we are
standing today and
where we want to
reach.
Features of Planning
1.Planning focus on achieving objectives
2.Planning is a primary function of management
3.Planning is pervasive
4.Planning is continuous
5.Planning is futuristic (Forward-looking)
6.Planning is a mental exercise
Features of Planning
1.Planning focus on achieving objectives
Planning seeks to achieve certain objectives and all plans are
linked to with the goals of the organization. Planning starts
with the determination of objectives .
The first and foremost step in
planning is setting objectives.
Objectives are the end-results
which manager’s wish to
achieve.
Examples:
1.An organization may have an
objective of increasing sales
by 10%
2.Reduction in quality rejects
from existing 5% to 2%.
Features of Planning
2.Planning is a primary function of management
Planning is the primary or first function to be performed by
every manager. No other function can be executed by
the manager without performing planning function
because objectives are set up in planning and other
functions depend on the objectives of the company.

Objectives of an organisation
fixed in planning function.
Objective gives direction and
it is the base for all other
courses of action. So
planning should be the first
managerial function.
Features of Planning
3.Planning is pervasive
Planning is required at all levels of management. However,the
scope of planning differ from one level to another. For
example, the top management undertakes planning for the
organisation as a whole. Middle management does the
departmental planning. At the lowest level, day-to-day
operational planning is done by supervisors.

Planning is pervasive and

required at all levels of
management
Features of Planning
4.Planning is continuous
Planning is a never ending or continuous process. Plans are
prepared for a specific period of time, may be for 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.
Example-If the plan is made during boom period and during its
execution there is depression period then planners have to
make changes according to the conditions prevailing.
As conditions change,plans
have to be revised and new
ones are introduced.it has
been rightly said that it is a
bad plan which admits no
modification.
Features of Planning
5.Planning is futuristic (Forward-looking)
Planning is a futuristic function. Planning is never done for the
past. Planning is thinking in advance what is to be done, when
it is to be done, where it is to be done, and who is to be done.
In other words, planning relates to future.

Planning is
never
done for
the past,it
is always
for the
future
Features of Planning
6.Planning is a mental exercise
Planning is a mental exercise involving creative thinking and
imagination. Planning is not guesswork but involves logical
and systematic thinking.

Planning involves
conscious
determination of
various courses of
action on the basis of
goals,facts and
considered estimates
Importance/Advantages of Planning
1.Planning provides directions
2.Planning reduces the risks of uncertainty
3.Planning reduces overlapping and wasteful
activities
4.Planning promotes innovative ideas
5.Planning facilitates decision making
6.Planning establishes standards for controlling
7.Planning improves efficiency
Importance/Advantages of Planning
1.Planning provides directions
Planning is concerned with predetermined course of action. By
stating in advance how work is to be done planning provides
direction for action. Due to planning, employees know in
advance in which direction they have to work.

If there were no planning,

employees would be
working in different
directions and organization
would not be able to
achieve its desired goal.
Importance/Advantages of Planning
2.Planning reduces the risks of uncertainty
Business organizations have to face many uncertainties and
unexpected situations every day. Planning enables these
enterprises to future events and prepare to
predict
unexpected events. Thus,
faceplanning helps to reduce risk and
uncertainty.

With the help of planning,

manager can predict the
future identify potential
dangers and take steps to
overcome them.
Importance/Advantages of Planning
3.Planning reduces overlapping and wasteful
activities
Planning serves as the basis of coordinating the
activities and
efforts of different divisions, departments and individuals. It
helps in avoiding confusion and misunderstanding. Since
planning ensures clarity in thought and action, work is carried
on smoothly without interruptions.

Through planning useless

and redundant activities
can be minimised or
eliminated.
Importance/Advantages of Planning
4.Planning promotes innovative ideas
Planning requires high thinking and it is an intellectual
process. So, there is a great scope of finding better ideas,
better methods and procedures to perform a particular job.

Planning is thinking in advance

and it makes the managers
innovative and creative
Importance/Advantages of Planning
5.Planning facilitates decision making
Planning involves setting targets and predicting
future conditions, thus helping in taking rational decisions.

Planning helps the

managers to take correct
decisions. Planning
involves studying and
evaluating of each
alternative and help to
choose the most
appropriate one
Importance/Advantages of Planning
6.Planning establishes standards for controlling
Through planning management decides the standard
of performance. With the help of these standards,
comparison can be made with the actual. If
there is adifference,proper steps can be
taken to correct it. Therefore, we can say that
planning is a prerequisite for controlling.

Planning provides the basis of

control. In planning function
management decides
standards and in controlling
managers compare the actuals
with standards.
Importance/Advantages of Planning
7.Planning improves efficiency
Planning results in systematic and smooth functioning of the
company because planning is concerned with the
predetermined course of action. All the systematic working
leads to economic and efficient operations.

Predetermination of action
and systematic working
leads to economic and
efficient operations
Limitations of planning
1.Planning leads to rigidity
2.Planning may not work in a
dynamic environment
3.Planning reduces creativity
4.Planning involves huge costs
5.Planning is a time-consuming process
6.Planning does not guarantee success
Limitations of planning
1.Planning leads to rigidity
Once a well-defined plan is drawn, managers may not be able
to change it. The business environment change rapidly but
mangers is committed to execute the predefined plan. It may
not bring positive result to the business

Business environments
change rapidly but mangers
may not be in a position to
change the predetermined
plan according to the
changes happened in the
environment.
Limitations of planning
2.Planning may not work in a dynamic
environment
Planning may not work in a dynamic environment. Under the
conditions of rapid changes, the plans become outdated and
irrelevant even before they are implemented. Since, planning
cannot foresee everything, and there may be obstacles to
effective planning.

Planning is based on certain assumptions about future,these

assumptions may change before plans are actually
implemented. Plans may fail if the changes are very frequent.
Limitations of planning
3.Planning reduces creativity
Planning is an activity which is done by the top management.
Usually the rest of the members are blind followers of the
plan. Thus, much of the initiative or creativity inherent in them
gets lost or reduced.

Most of the planning

activities are undertaken
by the top
management.
So planning reduces
creativity on the part of
employees
Limitations of planning
4.Planning involves huge costs
Planning is an expensive process. Collection, analysis, and
evaluation of the different information, facts and alternatives
involve a lot of expenses. Sometimes, costs incurred may not
justify the benefits derived from the plans.

Planning process is very

expensive. Small and
medium size concerns
cannot afford these.
Limitations of planning
5.Planning is a time-consuming process
Planning process is a time consuming process because it take
long time to evaluate the alternatives and select the best one.
Lot of time is needed to develop planning premises. Whenever
there is a need for prompt and immediate decision then we
have to avoid planning.

Planning is not practicable

during emergencies and
crises when quick decisions
are necessary
Limitations of planning
6.Planning does not guarantee success
The success of an enterprise is possible only when plans are
properly drawn up and implemented. Managers have a
tendency to rely on previously tried and tested successful
plans. But, It is not always true that a plan which has worked
before, will work effectively again.

Planning only provides a

base for analysing future.
It is not a solution for
future course of action
Planning process
1.Setting Objectives
2.Developing premises
3.Listing the various alternatives for achieving the
Objectives
4.Evaluating alternative courses of action
5.Selecting an alternative
6.Implementing the plan
7.Follow-up
Planning process
1.Setting Objectives
The first and foremost step is setting objectives. Objectives
are the end-results which manager’s wish to achieve. They
must be specific and clear. Every organisation must have
certain objectives. Objectives may be set for the entire
organisation and for each department or unit within the
organisation. They give direction to all departments. If the end
result is clear it becomes easier to work towards the goal.

Example-An objective of increasing

sales by 20% in the next quarter
Planning process
2.Developing premises
Premises refer to making assumptions regarding future.
Premises are the base on which plans are made. Forecast is
the technique of gathering information. Common forecast are
made to find out the demand for a product, change in
government policy, tax rate, competition etc.

Assumptions about the

future environment of
a business are known
as planning premises.
Example:Forecast are made
to find out demand for a
product,change in
government policy etc.
Planning process
3.Listing the various alternatives for achieving the
objectives
Once objectives are set and assumptions are made, then the
next step is to identify all possible alternative courses of action
to achieve the objectives.
For example: In order to
achieve the
organizational objective
of ‘increasing profits’,
the
alternatives ways may
be:
-Increasing selling price
-Purchasing new
technology machines
-Increase the efficiency of
workers by giving proper
training
Planning process
4.Evaluating alternative courses of action
In this stage, management will evaluate the merits and
demerits of various alternatives in the light of various
objectives of the business and planning premises.
Planning process
5.Selecting an alternative
After analysing the merits and demerits, the most appropriate
alternative is selected. This is the real point of decision making.
The best plan is to be adopted and implemented.
Example: Selecting ’Purchasing new technology machine’ as
the best solution for increasing profits.
Planning process
6.Implementing the plan
Implementing the plan means putting the plan into action so as
to achieve the objective of the business i.e. doing what is
required.
Example, if there is a plan to increase production then more
labour, more machinery will be required. This step would also
involve organising for labour and purchase of machinery.
Planning process
7.Follow-up
Planning is a continuous process so manager’s job does not
get over simply putting the plan into action. To see whether
plans are being implemented and activities are performed
according to schedule is also part of the planning process.
During follow up many adjustments are made in the plan.
Monitoring the plans is equally important to ensure that
objectives are achieved.
Types of plans
Based on the use and length of the planning period,
plans can be classified into standing plans and
single –use plan
Types of Plan
1.Standing Plan
A standing plan is used for activities that occur regularly over
a period of time. It is usually developed once but is modified
from time to time to meet business needs as required.
Standing plans include policies, procedures, methods and
rules.

2.Single-use Plan
A single-use plan is developed for a one-time event or project.
Such a course of action is not likely to be repeated in future,
i.e., they are for non-recurring situations. The duration of this
plan may depend upon the type of the project. It may extent
for a week or a month. A project may sometimes be of only
one day, such as, organising an event or a seminar or
conference.
Types of Standing Plans
1.Objectives
Objectives or Goals are the ends towards which every activity
is aimed. Objectives describe what is to be done. Objectives
are prerequisite for planning. Objectives are expressed in
quantitative or measurable terms. Objectives are result
oriented not activity oriented. It is normally formed by top
management.
Examples:
1.An organization may have an objective of increasing sales
by 10%
2.An organization may have an objective of increasing
its profit by 10%
Types of Standing Plans
2.Strategy
Strategy can be defined as the combination of all the decisions
taken and actions performed by the business to accomplish
the business goals. It is a comprehensive (complete) plan for
includes various steps for accomplishing organisation’s
objectives. A business objective without a strategy is just a
dream.

Example: Objective is to increase company’s profit by 10%.To

achieve this objective, company can adopt strategies like
create and launch new products or models, introduce new
distribution channels like online sale, select new
advertisement media like internet marketing etc.
Types of Standing Plans
3.Policy
Policy is a general guideline which brings uniformity
in decision making for achievement of predetermined
Policies
objectives. boundaries within which decisions can be
define made.
Example:
Sales Policy (Selling product only on cash basis or
only wholesale)
Policy of giving admission to students securing more than 90%
Types of Standing Plans
4.Procedure
Procedure is a series of steps, taken together, to achieve a
desired result. They are specified in a chronological order. It is
a particular way of doing a job.They prescribe the exact
manner in which the work is to be performed. Procedure is
necessary to speed up the performance. Procedures are rigid;
there is no possibility for deviation.

Example-Methods of selecting employees, placement of

order, Procedure for selection of employees, procedure of
giving contracts to an outside agency.
Types of Standing Plans
5.Methods
Methods is a systematic way of doing routine or repetitive jobs.
It deals with a task comprising one step of a procedure and
specifies how this step is to be performed. Selection of proper
method saves time, money and effort and increases efficiency.

Example: Methods of valuation of stock,methods

of production,follow straight line methods of depreciation
Types of Standing Plans
6.Rules
Rules are specific statements of what should or should not be
done in specific situations. They do not allow any deviations.
Rules are made for the purpose of creating discipline in the
organization.
Example:No smoking, No admission without permission,Using
mobile phone during office hours is prohibited
Types of single use plans
1.Programmes
Programmes are detailed statements about a project
.Programme may be taken as a combination of
rules, tasks, human and physical resources
policies,
procedures,
required ,budgets etc. The same programme may not be
used for achieving other goals.
Example:Programmes for construction of shopping
mall,programmes for opening a new department in our business
Types of single use plans
2.Budget
Budget is a recorded plan of action expressed in quantitative
terms. It may be expressed in time, money or physical units. It
is an instrument of both planning and controlling. Budget
preparation involves forecasting, therefore, it comes under
planning. Budget is a control device because budget helps to
compare actual figures with budgeted figure and take
corrective action if necessary.
Example-Cash budget, sales budget