PLANNING – Concepts, Process, Features And Limitations

Concept of Planning
Planning is define as the process of:
Page | 1  setting objectives for a given time period,
 formulating various courses of action to achieve them and then
 selecting the best possible alternative from among the various courses of action
available.
Planning is concerned with both ends and means i.e., what is to be done and how it is
to be done. This is the essence of planning. But before doing something, the
manager must formulate an idea of how to work on a particular task. Thus, planning is
closely connected with creativity and innovation.

The plan that is developed must have a given time frame. If time factor is not taken into
consideration, conditions in the environment may change and the plan may go waste.
Thus, planning is a futile exercise if it is not implemented on time.
Steps In Planning Process

1. Setting objectives: The first and foremost step is setting objectives. Objectives
may be set for the entire organization and each department or unit within the
organization. Objectives or goals specify what the organization wants to achieve.
Objectives should be stated clearly.
2.Developing Premises: Planning premises are the assumptions made about the
future on the basis of which the plans are drawn. (Assumptions are made in the form
of forecasts about the demand for the product etc. Planning premesis are base
material upon which plans are to be drawn.

3.Identifying alternative courses of action which may be used to achieve the set
objectives.
4.Evaluating alternative courses of action: The next step is to weigh the pros
and cons of each alternative. The positive and negative aspects (i.e., feasibility and
consequences) of each proposal are evaluated.

For example, in financial plans, the risk-return trade-off is very common. The more
risky the investment, the higher the returns it is likely to give. To evaluate such
proposals detailed calculations of earnings, earnings per share, interest, taxes,
dividends are made and decisions taken.

5. Selecting the best alternative which involves scrutinizing the feasibility and
consequences of each alternative before a choice is made.

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 This is the real point of decision-making. The best plan would be the most feasible,
profitable and with least negative consequences. Sometimes, a combination of plans
may be selected instead of one best course. The manager will have to apply
permutations and combinations and select the best possible course of action
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6. Implementing the plan: It means putting the plan into action.
This is the step where other managerial functions also come into the picture. This step
would also involve organsing for labour and purchase of machinery

7.Follow up action which involves seeing that activities are performed according to
plans. Monitoring the plans is equally important to ensure that objectives are achieved.

Features of Planning
1.Planning focuses on achieving objectives as specific goals are set out in the
plans along with activities to be undertaken to achieve the goals. (Thus, planning is
purposeful.)
2.Planning is futuristic as it involves looking ahead and preparing for the future
(based on forecasting which involves
anticipating future events and drawing plans accordingly).
3.Planning involves decision making as it involves evaluation of each alternative
course of action and choosing the most appropriate one.
4.Planning is a mental exercise. Planning is an intellectual activity of thinking rather
than doing, because planning determines the action to be taken. (Planning requires
logical and systematic thinking, application of mind involving foresight, intelligent
imagination and sound judgement.)
5.Planning is the primary function of management as it lays down the basis for all
other functions of management
All other managerial functions are performed within the framework of the plans drawn.
Thus, planning precedes other functions. This is also referred to as the ‘primacy of
planning’
6.Planning is pervasive as it is required in all organisations, at all levels and in all
departments.

Planning is not an exclusive function of top management. Planning is what managers at

all levels and in all departments do.  Top management undertakes planning for the
whole organisation.  Middle management does the departmental planning.  At the
lowest level, day-to-day operational planning is done by supervisors.
7..Planning is continuous because a plan is framed and implemented for a specific
period of time and is followed by another plan and so on.

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 DR
Importance of Planning SODI

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1.Provides direction: Planning provides directions by deciding in advance what action
should be taken.
Objectives/goals defined in a plan act as a guide for action of managers and
employees. Departments and individuals are able to work in coordination.
 If there was no planning, employees would be working in different directions and the
organisation would not be able to achieve its desired goals.
2.Reduces the risks of uncertainty: Planning reduces the risks of uncertainty by
anticipating changes and developing managerial responses to them.
Planning cannot eliminate changes/uncertainties but can predict them and prepare
contingency plans to deal with them.
3.Reduces overlapping and wasteful activities: Planning reduces overlapping and
wasteful activities by coordinating the activities of different divisions, departments and
individuals.
4.Promotes innovative ideas: Planning promotes innovative ideas requiring
application of mind and foresight.
It is the most challenging activity for the management as it guides all future actions
leading to growth and prosperity of the business
5.Facilitates decision making: Planning facilitates decision making by making a
choice from among the alternative courses of action.
6.Establishes standards for controlling: Planning establishes standards against
which actual performance

Limitations of Planning
1.Planning leads to rigidity once a well defined plan is drawn manager is not in a
position to change it with the change circumstances.
2. Planning may not work in a dynamic environment as the environment in
which a business operates keeps on changing and planning may not foresee
everything.
3. Planning reduces creativity as middle management and other decision makers
are neither allowed to deviate from plans nor are they permitted to act on their own.
(Thus, their initiative or creativity gets lost or reduced. Planning in a way reduces
creativity since people tend to think on the same lines as others.)

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 4.Huge costs are involved in formulating the plans (e.g. expenses on boardroom
meetings, discussions with professional experts, etc.) and sometimes costs incurred
may not justify the benefit derived from the plan.
4.Planning is a time consuming process as checking accuracy of facts may involve
Page | 4 lot of time and sometimes not much time is left for its implementation.

6.Planning does not guarantee success as managers have a tendency to rely on

previously tried and tested successful plans which may create a false sense of security
and lead to failure
The success of an enterprise is possible only when plans are properly drawn up and
implemented. Planning is meaningless unless it is translated into action.
Types Of Plans
Single-use plan is developed for a one-time event or project, not repeated in future,
e.g. budgets, programmes..
A Standing plan is used for activities that occur regularly over a period of time, e.g.
policies, procedures, methods and rules. It enhances efficiency in routine decision-
making.
1.Objectives are the end points which are numerically expressed that a
management seeks to achieve with in a given period of time. Eg increase in sale by
10% in next quarter.
2.Strategy: A strategy provides broad contours of an organsiation’s business and
refers to future decisions defining the organisation’s direction and scope in the long run.
Example: Marketing strategy of an organization which channel of distribution to use?
what is the pricing policy? and how to advertise the product?
A strategy is a comprehensive plan for accomplishing an organisation’s objectives
taking competition and business environment into consideration. It includes three
dimensions: (i) determining long-term objectives of the enterprise, (ii) adopting a
particular course of action, and allocating resources necessary to achieve the
objectives.
3..Rule: A rule is a statement that specifies what is to be done or not to be done. It is
a guide to behaviour. A rule does not allow for any flexibility or discretion and
prescribes a penalty for violation. Example: No smoking in office.
Rules are usually the simplest type of plans because there is no compromise or
change unless a policy decision is taken.

4.Method: Method is the prescribed way or manner in which a task has to be

performed taking into consideration the objective of the organisation. It deals with a
task comprising of one step of a procedure and specifies how this step is to be
performed. Selection of right method saves time, money and effort and increases
efficiency. Example: For imparting training to higher level managers orientation

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 programmes, lectures and seminars can be organised whereas on the job methods
are appropriate at the lower level.
5. Policy: Policy is a general guideline that guides thinking or channelises energies
towards a particular direction. It defines the broad parameters within which a
Page | 5 manager may function. It brings uniformity in decision making and action for
interpretation of strategy. Example: Recruitment Policy, Purchase Policy, etc.
6. Procedure: It consists of sequence of routine steps performed in a
chronological order to carry out activities within a broad policy framework. It details
the exact manner in which any work is to be performed. Example: Procedure for
reporting progress in production.
7. Budget: A budget is a statement of expected results for a given future period
expressed in numerical terms. Examples: Sales budget, Cash budget, etc.
A budget is a statement of expenses, revenue and income for a specified period. A
budget is also a control device from which deviations can be taken care of. But making
a budget involves forecasting, therefore, it is a fundamental planning instrument.
8.Programme is a detailed statement about a project which outlines the objectives,
policies, procedures, rules, resources required and the budget to implement any
course of action. Examples: Construction of a shopping mall, opening a new
department, etc.
Programmes will include the entire gamut of activities as well as the organisation’s
policy and how it will contribute to the overall business plan. The minutest details are
worked out i.e., procedures, rules, budgets, within the broad policy framework.

ACRONYMS
Process of Planning
SP-ICS-F
S – Setting Objectives
P – developing Premises
I – Identify alternate course of action
C – Evaluating alternative courses
S – Selecting an alternative
D – Formulation of derivative plans
I – Implementation of plan
F – Follow up action

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 Features of Planning
DCP of MP
D – decision Making
Page | 6 C – Continuous Process
P – Pervasive
O – Objective achievement
F – Futuristic
M – Mental Exercise
P – Primary Function

Importance – DRSODI
D – it provides direction
R – Reduce the risk of uncertainity
S – Establishes standard of controlling
O – Reduces overlapping
D – Decision Making
I – Promotes Innovative Ideas

Limitations
NCR DTC
N – No guarantee of success
C – Involves huge cost
R – It creates rigidity
D – Does not work in dynamic environment
T – Time consuming Process
C – Reduces Creativity

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