1.

Definition and Meaning of Planning

2. Nature and Characteristics of Planning
3. Importance
4. Elements
5. Steps
6. Principles.

Definition and Meaning of Planning:

Planning is a major and primary function of management. No organisation can operate properly
without planning. Planning is a preparatory step for action. It means systematized pre-thinking for
determining a course of action to achieve some desired result.
Planning is essentially a process of deciding in advance what is to be done, when and where it is
to be done, and how it is to be done, and by whom. To plan is to look ahead and chalk out the
future course of operations of an enterprise.
Through planning, the manager fixes the objectives of the organisation as a whole and, in the light
of this, the goals of its various departments. Then he proceeds to prepare a kind of ‘blueprint’
mapping out the ways of attaining these objectives.
Therefore, planning may be defined as follows:
Planning is the process by which the managers of an organisation set objectives, make an overall
assessment of the future, and chart the courses of action with a view to achieving the organisational
goals.
From this definition it follows that the planning process involves:
The determination of appropriate goals and objectives,
The specification of the actions needed to reach the established objectives; and
The optimum period of time for achieving them.

Since planning is concerned with the identification of alternatives and selection of the most
favourable alternative, it may rightly be described as “the most basic tool of management
functions.” Thus planning is a process of deciding the business targets and charting out a rational
path of attaining those targets.
Some important definitions of planning, given by the eminent authors are stated below:
According to Koontz and O’Donnell, planning is “an intellectual process, the conscious
determination of courses of action, the basing of decisions on purpose, facts and considered
estimates.”
George Terry writes:
“By means of planning management members try to look ahead, anticipate eventualities, prepare
for contingencies, map out activities and provide an orderly sequence for achieving the objective.”
Henry Fayol views: “The plan of action is, at one and the same time, the result envisaged, the line
of action to be followed, the stages to go through, and methods to use.”
Planning and Decision Making:
Planning decides the future course of action and involves choosing it from alternatives. From this
point of view, decision-making and planning move together and one depends on the other. Truly
speaking, planning as a whole with its component parts is the outcome of decision-making.
So decision-making has a pervasive influence upon planning and it is a part of the planning
process. Thus, decision--making and planning have intimate relation with each other. But,
decision-making has a wider connotation than planning. By this we mean to say that the application
of decision-making is extended beyond the horizon of planning and, in any business, almost every
position is a decisional centre. Decision-making is required not only in planning, it is also
necessary in other areas of management functions such as organising, direction, co-ordination, and
control.
Mention may be made here of varied operating orders and instructions which are outside of
planning, but are subject to decision- making. Again, there are many managerial functions like
motivating the employees, disapproving their work or discharging them form service which call
for decision-making, but these functions cannot be included within planning from the point of view
of analytical study of different management processes.
Nature and Characteristics of Planning:
Planning is concerned with the establishment of objectives of an enterprise and finding out the
way of realisation of those objectives. However, without setting the objectives there is nothing to
organise, direct or control. Therefore, every organisation is required to specify what it wants to
achieve. Planning is basically related with this aspect.
The nature and characteristics of planning may be stated as follows:
Intellectual Process: Planning is an intellectual and rational process. Planning is a mental exercise
involving imagination, foresight and sound judgement. It requires a mental disposition of thinking
before’ acting in the light of facts rather than guess. The quality of planning depends upon the
abilities of the managers who are required to collect all relevant facts, analyse and interpret them
in a correct way.
How far into the future a manager can see and with how much clarity he will depend on his
intellectual calibre, are chalked out through planning process. In thinking of objectives, alternative
courses of action and, above all, in making decision for choosing certain alternatives, the planner
goes through an intellectual process.
Goal-orientation: All planning is linked up with certain goals and objectives. It follows, therefore,
that every plan must contribute in some positive way to the accomplishment of group objectives.
Planning has no meaning without being related to goals and objectives. It must bridge the gap
between where we are and where we want to go at the minimum cost.
Primary Function: Planning is said to be the most basic and primary function of management. It
occupies first place and precedes all other functions of management which are designed to attain
the goals set under planning. This is so because the manager decides upon the policies, procedures,
programmes, projects, etc. before proceeding with the work. The other functions of management—
organising, direction, co-ordination and control—can be performed only after the manager has
formulated the necessary planning.
Pervasiveness: Planning pervades all managerial activities. It is the job of all managers in all types
of organisation. It is undertaken at all segments and levels of the organisation—from the general
manager to the foreman. Whatever be the nature of activity, management starts with planning. The
character and breadth of planning will, of course, vary from one job to another—depending on the
level of management.
Uniformity: There may be separate plans prepared in different levels in the organisation, but all
the sub-plans must be united with the general plan so as to make up a comprehensive plan for
operation at a time. So, uniformity must be there in all levels of planning to match the general plan.
Continuity: To keep the enterprise as a going concern without any break, it is essential that
planning must be a continuous process. So, the first plan must follow the second plan and the
second plan the third and so on in never-ending series in quick succession.
Flexibility: Plans should not be made rigid. It should be as flexible as possible to accommodate
all possible changes in the enterprise with a view to coping with the changing conditions in the
market. In fact, planning is a dynamic activity.
Simplicity: The language of the work schedule or programme in the planning should be simple so
that each and every part of it may easily be understood by the employees at different levels,
specially at the lower level.
Precision: Precision is the soul of planning. This gives the planning exact, definite, and accurate
meaning in its scope and content. Any mistake or error in planning is sure to upset other functions
of management and, thus, precision is of utmost importance in every kind of planning.
Feasibility: Planning is neither poetry nor philosophy. It is based on facts and experience, and
thereby realistic in nature. It represents a programme which is possible to execute with more or
less existing resources.
Choice among Alternative Courses: Planning involves selection of suitable course of action from
several alternatives. If there is only one way of doing something there is no need of planning.
Planning has to find out several alternatives, estimate the feasibility and profitability of the
different alternatives, and to choose the best one out of them.
Efficiency: Planning is directed towards efficiency. A plan is a course of action that shows promise
of optimizing return at the minimum expense of inputs. In planning, the manager evaluates the
alternatives on the basis of efficiency. A good plan should not only attain optimum relationship
between output and input but should also bring the greatest satisfaction to those who are
responsible for its implementation.
Inter-dependence: The different departments may formulate different plans and programmes for
their integration in the overall planning. But sectional plans cannot but be inter-dependent. For
example, production planning depends upon sales planning—and vice versa.
Again, planning for purchase of raw materials, employment of labour, etc. cannot be an isolated
act apart from sales planning and production planning. Planning is a structured process and
different plans constitute a hierarchy. Different plans are inter-dependent and inter-related. Every
lower-level plan serves as a means towards the end of higher plans.
Forecasting: Above all, no planning can proceed without forecasting—which means assessing the
future and making provision for it. Planning is the synthesis of various forecasts—short-term or
long-term, special or otherwise. They all merge into a single programme and act as a guide for the
whole concern.
Importance of Planning:
Planning is the key to success of an organisation. In fact, most of the company’s achievements can
be attributed to careful planning. Planning is a function of every manager at every level in an
enterprise. Every manager is required to plan first for systematic and orderly performance of his
assigned duties.
It is within the planning function that goals are determined, decision-making takes place, forecasts
are made and strategies are initiated. Thus, planning has assumed great importance in all types of
organisation—business or non-business, private or public sector, small or large.
As a managerial function, planning is important for the following reasons:
Providing Basis of Decision:
The first and most important reason for planning lies in the fact that it provides a basis on which
decisions are made. It is an immense need for the managers of an enterprise to fix up their minds
as to what they want to accomplish and then plan the use of time, resources, and efforts towards
the achievement of their objectives.
Focusing Attention on Objectives:
Planning concentrates attention on the objectives of an enterprise. The first function of planning is
to spell out its objectives. The objectives are defined in more concrete, precise and meaningful
terms. As a result of such attention, it becomes possible for the planners to determine the policies,
procedures, programmes and the rules for an orderly advance towards the ultimate goals desired
to be achieved.
Minimising Uncertainty and Risk:
The future is uncertain. Planning helps the managers in taking care of future uncertainties and thus
minimizes business risk. It anticipates future events and sets the course of action to control these
events to one’s advantage. With the help of planning, an enterprise can predict future events and
make due provision for them. This, no doubt, eliminates or reduces the possibility or jumping into
uncertainties.

Adapting with Changes:

Business planning has become imperative due to the fact that an enterprise operates in a changing
and dynamic environment. The aspects of this changing environment include changes in
technology, government policies, the nature of competition, social norms and attitudes etc. As the
planning proceeds step by step, it foresees the changes likely to come and accordingly prepares its
programme by necessary adjustments and adaptation.

Securing Economy: Planning focuses on efficiency and economy in operation. A plan is a course
of action that can take the organisation to its objectives at the minimum cost. Planning prevents
wastage of resources by choosing the best course of action from many alternatives. It aims at
smooth flow of work. All these steps in planning lead automatically to economy.
Helping in Co-ordination: Planning leads to achieve a coordinated structure of operations. It
provides a unifying framework. Sound planning inter-relates all the activities and resources of an
organisation. Well-considered overall plans harmonies inter-departmental activities. Thus, various
departments work in accordance with the overall plan, and co-ordination is achieved.
Making Control Effective: The managerial function of controlling is concerned with a
comparison between the planned performance and the actual performance of the subordinates and
departments of the organisation. Thus, control is exercised in the context of planning action as the
standards against which actual results are to be compared are set up through planning. So planning
provides the basis for control. Thus, planning and control are inseparable.
Increasing Organisational Effectiveness: Planning ensures organisational effectiveness in
several ways. It states the objectives of the organization in the context of given resources; provides
for proper utilisation of resources to the best advantage, gives necessary competitive strength for
continuous growth and steady progress by foreseeing what the competitors are likely to do and
evolving its strategies accordingly.
The process of planning generates the purposeful and orderly setting up of activities to be carried
on. It defines the boundaries within which the business should operate. This enables the
businessman to concentrate upon those matters which are actually relevant and vital to business
success.
Elements of Planning:

Planning as a managerial process consists of the following elements or components:

Objectives: The important task of planning is to determine the objectives of the enterprise.
Objectives are the goals towards which all managerial activities are aimed at. All planning work
must spell out in clear terms the objectives to be realised from the proposed business activities.
When planning action is taken, these objectives are made more concrete and meaningful. For
example, if the organisational objective is profit earning, planning activity will specify how much
profit is to be earned looking into all facilitating and constraining factors.
Forecasting: It is the analysis and interpretation of future in relation to the activities and working
of an enterprise. Business forecasting refers to analysing the statistical data and other economic,
political and market information for the purpose of reducing the risks involved in making business
decisions and long range plans. Forecasting provides a logical basis for anticipating the shape of
the future business transactions and their requirements as to man and material.
Policies: Planning also requires laying down of policies for the easy realisation of the -objectives
of business. Policies are statements or principles that guide and direct different managers at various
levels in making decisions. Policies provide the necessary basis for executive operation. They set
forth overall boundaries within which the decision-makers are expected to operate while making
decisions. Policies act as guidelines for taking administrative decisions.
In a big enterprise, various policies are formulated for guiding and directing the subordinates in
different areas of management. They may be production policy, sales policy, financial policy,
personnel policy etc. But these different policies are co-ordinated and integrated in such a way that
they ensure easy realisation of the ultimate objectives of business. Policies should be consistent
and must not be changed frequently.
Procedures: The manner in which each work has to be done is indicated by the procedures laid
down. Procedures outline a series of tasks for a specified course of action. There may be some
confusion between policies and procedures. Policies provide guidelines to thinking and action, but
procedures are definite and specific steps to thinking and action. For example, the policy may be
the recruitment of personnel from all parts of the country; but procedures may be to advertise and
invite applications, to take interviews and offer appointment to the selected personnel.
Thus, procedures mean definite steps in a chronological sequence within the area chalked out by
the policies. In other words, procedures are the methods by means of which policies are enforced.
Different procedures are adopted in different areas of business activities. There may be production
procedure, sales procedure, purchase procedure, personnel procedure etc.
Production procedure involves manufacturing and assembling of parts; sales procedure relates to
advertising, offering quotations, securing and execution of orders; purchase procedure indicates
inviting tenders, selecting quotations, placing orders, storing the goods in go-down and supplying
them against requisition to different departments and personnel procedure is the recruitment,
selection and placement of workers to different jobs.
Programmes: Programmes are precise plans of action followed in proper sequence in accordance
with the objectives, policies and procedures. Programmes, thus, lead to a concrete course of inter-
related actions for the accomplishment of a purpose. Thus, a company may have a programme for
the establishment of schools, colleges and hospitals near about its premises along with its
expanding business activities.
Programmes must be closely integrated with the objectives. Programming involves dividing into
steps the activities necessary to achieve the objectives, determining the sequence between different
steps, fixing up performance responsibility for each step, determining the requirements of
resources, time, finance etc. and assigning definite duties to each part.
Budgets: Budget means an estimate of men, money, materials and equipment in numerical terms
required for implementation of plans and programmes. Thus, planning and budgeting are inter-
linked. Budget indicates the size of the programme and involves income and outgo, input and
output. It also serves as a very important control device by measuring the performance in relation
to the set goals. There may be several departmental budgets which are again integrated into the
master budget.
Projects: A project is a single-use plan which is a part of a general programme. It is part of the job
that needs to be done in connection with the general programme. So a single step in a programme
is set up as a project. Generally, in planning a project, a special task force is also envisaged.
It is a scheme for investing resources which can be analysed and appraised reasonably and
independently. A project involves basically the investment of funds, the benefits from which can
be accrued in future. Examples of such investment may be outlays on land, building, machinery,
research and development, etc. depending upon the situation.
Strategies: Strategies are the devices formulated and adopted from the competitive standpoint as
well as from the point of view of the employees, customers, suppliers and government. Strategies
thus may be internal and external. Whether internal or external, the success of the plans demands
that it should be strategy-oriented.
The best strategy of planning from the competitive standpoint is to be fully informed somehow
about the planning ‘secrets’ of the competitors and to prepare its own plan accordingly. Strategies
act as reserve forces to overcome resistances and reactions according to circumstances. They are
applied as and when required.
Steps in Planning:
A plan is essentially today’s design for tomorrow’s action and an outline of the steps to be taken
in future. A good plan must be simple, balanced and flexible, and make utmost use of the existing
resources. It must be based on clearly defined objectives.

For preparation of such a plan, a definite process involving the following steps has to be followed:
Perception of the Opportunities: The manager must first identify the opportunity that calls for
planning and action. This is very important for the planning process because it leads to formulation
of plans by providing clue as to whether opportunities exist for taking up particular plans.
Perception of opportunities includes a preliminary look at possible opportunities and the ability to
see them clearly and completely, an understanding of why the organisation wants to solve the
uncertainties and a vision what it expects to gain. This provides an opportunity to set the objectives
in real sense.
Establishment of the Objectives: The next step in the planning process lies in the setting up of
objectives to be achieved by the enterprise in the clearest possible terms keeping in view its
strength and limitation. Objectives specify the results expected in measurable terms and indicate
the end points of what is to be done; where the primary emphasis is to be placed, and what is to be
accomplished by various types of plans. Enterprises start with a general objective.
From this are developed subordinate goals that contribute to the attainment of the general
objective. These, in turn, are supported by the specific objectives for the departments. In this
process a hierarchy of objectives is created. The plans at each level of the organisation are made
for the attainment of the appropriate objectives in the hierarchy. This hierarchy can be built up by
coordinating the plans of different departments.
Building the Planning Premises: After determination of the organisational goals, it is necessary
to establish planning premises, that is, the conditions under which planning activities will be
undertaken. This involves collection of facts and figures necessary for planning the future course
of the enterprise. ‘Planning Premises’ are planning assumptions relating to the expected
environmental and internal conditions.
So, planning premises are of two types—external and internal. External premises include total
factors in the environment like social, political, technological, competitors’ plans and actions,
government policies, etc. Internal factors include the organisation’s policies, resources of various
types, and the ability of the organisation to withstand the environmental pressure. The plans are
formulated in the light of both external and internal factors.
Identifying the Alternatives: The next step in planning process is to search for various alternative
courses of action based on the organisational objectives and planning premises. A particular
objective can be achieved through various actions. For example, if an organisation has set its
objective to grow further, it can be achieved in several ways like expanding the field of business
or product line, joining with other organisations, or taking over another organisation, and so on.
Within each category, there may be several alternatives.
Since all alternatives cannot be considered for further analysis, it is necessary for the planner to
reduce in preliminary examination the number of alternatives that do not meet the minimum
preliminary criteria. Preliminary criteria can be defined in several ways— minimum investment
required, matching with the present business of the organisation, control by the government, etc.
Evaluation of the Alternatives: Various alternative courses that are considered feasible in terms
of preliminary criteria have to be taken for detailed evaluation. Alternative courses of action can
be evaluated against the criteria of cost, risks, benefit and organisational facilities. The strong and
weak points of every alternative should be analysed carefully.
Since there are so many complex variables connected with each goal and each possible plan, the
process of comparative evaluation is extremely difficult. For example, one alternative may be the
most profitable but requires heavy investment; another may be less profitable but also involves
less risk.
Moreover, there is no certainty about the outcome of any alternative course because it is related
with future which is not certain. Ultimately, the choice will depend upon what is determined as the
most critical factor from the point of view of the objectives of the enterprise.
Choice of the Course of Action: After the evaluation of various alternatives, the most appropriate
one is selected as the plan. Sometimes evaluation shows that more than one alternative are equally
good. In such a case, the manager may choose more than one alternative at the same time. There
is another reason for choosing more than one alternative. Alternative course of action may be
required to be undertaken in future in changed situations. So, the planner must also be ready with
alternative—normally known as contingency plan— that can help coping up with the changed
situation.
Formulation of Supporting or Derivative Plans: After the best alternative is decided upon, the
next step is to derive various plans for different departments or sections of the organisation to
support the main plan. In an organisation, there can be various derivative plans like planning for
buying raw materials and equipment, developing new product, recruiting and training the
personnel, etc.
These derivative plans are formulated out of the main plan and so they support it. The break-down
of the master plan into departmental and sectional plans provides a realistic picture of the actions
to be taken in future.
Establishing the Sequence of Activities: After formulating the basic and derivative plans, the
sequence of activities is determined so that the plans are put into action. Based on the plans at
various levels, it can be decided who will do what and at what time. Budgets for various periods
can be prepared to make plans more concrete for implementation.
Securing Participation: Plans must be communicated in greater details to the subordinates to
increase their understanding of the proposed action and for enlisting their co-operations in the
execution of plans. It will, thus, add to the quality of planning through the knowledge of additional
facts, new visions and revealing situations.
Providing for Future Evaluation: For ensuring that the selected plans are proceeding with the
right lines, it is of paramount importance to devise a system of continuous evaluation and appraisal
of the plan. It will help in detecting the shortcomings and pitfalls of the plans and taking remedial
actions well in time. All the steps in the process of planning must be linked and co-ordinated with
each other. For successful implementation of a plan, it must be communicated to all levels of the
organisation.
Basic Principles of Planning:
Planning requires scientific thinking and it should spell out in clear terms the definition of the
purpose, analyse the problem and make a careful and diligent search for all the facts bearing upon
it. The task of planning will be well-accomplished if some fundamental principles are followed in
the process.

The important principles may be stated as follows:

Principle of Commitment: This means that certain resources must be committed or pledged for
the purpose of planning. Planning is not an easy task. So, necessary help is to be taken from experts.
The enterprise must be ready to exhaust the available resources for the achievement of a plan.
Principle of the Limiting Factor: A plan involves varied factors of different importance. This
principle implies that more emphasis has to be put on that factor which is scarce or limited in
supply or extremely costly. This will help in selecting the most favourable alternative.
Principle of Reflective Thinking: Planning, being an intellectual activity is based on rational
considerations. These involve reflective thinking which signifies problem-solving thought
process—a process by which past experiences are superimposed on the facts of the present
situation and possible future trends. None can be a planner
whose mind is not active, who does not possess any deliberate power and whose sense of
judgement is not strong.
Principle of Flexibility: Though a plan is prepared after reflective thinking, this does not mean
that no departure can be made in the course of its operation. The plan should be so prepared that
there is sufficient scope for changing it from time to time. Changes must necessarily be effected
in the plan for taking into account new developments that may take place in the course of the
operation of the plan.
Principle of Contribution to Enterprise Objectives: A major plan is prepared and it is supported
by many derivative plans. But all plans must contribute in a positive way towards the achievement
of the enterprise objectives.
Principle of Efficiency: A plan should be made efficient to attain the objectives of the enterprise
at the minimum cost and least effort. It must also achieve better results with the minimum of
unexpected happenings. Therefore, it is to be seen that what is expected is likely to be achieved.
Principle of Planning Premises: A plan is prepared against some foundations or backgrounds
known as ‘Planning Premises’. There must be complete agreement among the managers in respect
of planning premises over which the structure of plan is to be framed.
Principle of Timing and Sequence of Operations: Timing and sequence of operations determine
the starting and finishing time for each piece of work according to some definite schedule and give
practical and concrete shape and form to work performance.
Principle of Securing Participation: To secure participation of the employees with whole-hearted
co-operation in execution of the plan, it is necessary that the plan must be communicated and
explained to them for their full understanding. This understanding provides the basis for additional
knowledge about new facts and matters to the employees. This is needed for improvement in the
quality of planning. It also ensures an obligation of the personnel of the enterprise to execute the
plan by individual and joint participation.
Principle of Pervasiveness: Though major planning function is entrusted to the top management,
it is not restricted to the top level only. It is a function of every manager at every level in the
organisation.
Principle of Strategic Planning: Strategic planning is essential where there is competition. It is
prepared in the light of what the competitors are intending to do. Planners must take into account
the strategies of the rival organisations, otherwise the planning projection may land them in
trouble.
Principle of Innovation: A good system of planning should be responsive to the opportunities for
innovation. Innovation consists in creating something new for increasing satisfaction of the
consumers. This may also be stated as an important strategy of business. Innovation is a necessity
for its sustaining growth in this dynamic world. Innovation is achieved through research and
development and planning is required to provide such scope.
Principle of Follow-up: In the course of execution of a plan, certain obstacles may crop up in
midway and planning may require revision, alteration or correction. This is why there must be a
follow-up system in the planning process itself. This allows timely changes in the planning and
makes it more effective.
However, to plan any kind of work, the following facts demand utmost attention:
The nature, quality and quantity of work to be done, the best way of doing it, the time available
for its accomplishment, how to do it, when it is to be done and who are to do it.
Adequate knowledge about the capacity of the force available through observations and
experiments and from established standards.
The priority to be given in succession for the accomplishment of different tasks through careful
analysis.