PLANNING FUNCTION
seeks to gather information on both internal and external states which
Planning is the process of setting goals and objectives and determining the best
means of achieving them.
Planning is an advance activity (i.e., it involves forecasting/anticipating the future) in
order to put in place, the right course(s) of action to enable an organization properly
align with its environment. It is a decision-making process, hence involves choosing
from among alternatives.
A plan is a predetermined course of action for the realization of an organization’s
purpose. It is a framework that details what needs to be done or the action that
should be taken to achieve the organization’s goals.
Planning process/Steps
1. Being aware of opportunity: Identification of potential opportunities in the
firm’s environment.
2. Setting goals/objectives: determination of the desired future achievements.
3. Developing premises: coming up with assumptions about the future through
forecasting.
4. Generating alternatives: identifying all available options to assist the firm
achieve its goals.
5. Analyzing alternatives: evaluating each alternative by identifying the pros and
cons.
6. Selecting alternative: choosing the best alternative for implementation.
7. Formulating supporting plans: coming up with the secondary plans needed to
implement the main plan.
8. Implementation and Review: putting the plan into action and monitoring its
effectiveness.
Importance of planning
a) Provides direction: It charts a clear road map on where the organization is
headed by defining its mission and vision.
b) Provides focus: it sets priorities by identifying the activities the firm should
engage in which avoids distractions.
c) Reduces uncertainty: through forecasting, the organization is able to
prepare for the future which reduces the threat of environmental surprises.
d) Promotes creativity and innovation: managers can think outside the box
when generating alternatives to craft the most unique strategies.
e) Provides information for decision making: during planning the organization
guides managers to make decisions.
f) Coordination: Ensures that organization activities are harmonized in one
direction by synchronizing strategic, tactical and operational plans.
g) Facilities control: plans become a standard/benchmark against which actual
results can be assessed to determine any variances/deviation and facilitate
corrective action.
h) Optimal resource utilization: enhances efficiency and effectiveness in
allocation and utilization of resources.
Types of plans
Plans are classified on several basis bases:
I. Basis of time
Defined by the duration/period covered by the plan. They include:
i.Long term plans: Are plans that cover a long term i.e., one year and beyond.
They are limited by uncertainty in future conditions.
Are formulated by top level management and are aimed at ensuring the
achievement of strategic goals (overall goals of an organization). They form the
basis for formulating medium term plans.
ii.Medium term plans: Those that cover a medium timeframe such as monthly,
quarterly, semi-annually or annual timeframes. They are formulated by middle
level management and are aimed at achieving tactical goals
(departmental/functional goals).
iii.Short term plans: Those that cover a very short timeframe i.e., daily work
activities. They are formulated by the low-level management and are aimed at
achieving operational goals.
II. Basis of level
Are defined by the scope of activities covered by the plan.
iv. Strategic/corporate plans: Those that relate to the entire organization, and are
aimed at defining the overall aim of the organization. They are of a long
timeframe
v. Tactical plans: They relate to departments/functional areas and are aimed at
achieving efficiency and effectiveness in functional activities. They are of a
middle timeframe.
 vi. Operational plans: Related to sections and individuals and they are concerned Communicate the goals
with the execution of day-to-day activities. They are of a short timeframe.
Review to establish if they are being met
III. Basis of use
vii. Standing/multi-use plans: Plans used over successive periods of time without b) Policies: general statements or principles that guide and establish
the need to be reviewed or changed e.g., policies, procedures, rules and work parameters for making decisions. They provide a broad guideline for
methods. managers to follow when dealing with important areas of decision making.
They are general statements that explain how a manager should attempt to
viii. Single use plans: Plans used once and then discarded, since they relate to a handle routine management responsibilities.
very specific period of time e.g., budgets, programs, work schedules, etc.
c) Procedures: routine steps on how to carry out activities to accomplish a
IV. Other types of plans particular task. They give detailed guidelines for the exact manner in which
ix. Contingency plan: A plan designed to help an organization respond any work is to be performed. They are specified in a chronological and
effectively to a significant future incident, event or situation that may or may sequential order to be followed in particular circumstances.
not happen.
Differences between policies & procedures
Contingency planning is a proactive process of creating a strategy to help the Policies Procedures
firm prepare for any scenario that can affect the business regardless of the General statements that guide thinking Routine steps to carry out activities in
likelihood of its occurrence. and channel energy toward a particular an organization.
direction.
x. Specific plans: plans that are clearly stated and which have no room for They are needed for achieving They are needed for implementing
implementation. Such plans have specific stated objectives and do not objectives. policies.
contain ambiguity. They are flexible, and managers have They are rigid, and managers have
discretion as per the organizational relatively less discretion.
xi. Directional plans (Apr 2022 Q. 5b): flexible plans that set out general limit.
guidelines. They provide focus but don’t lock managers into specific goals or They are expressed as general They are expressed in specific terms.
courses of action. They are preferable in a dynamic environment where statements.
management must be flexible in order to respond to unexpected changes. The area of application is broad. The area of application is limited.
Policies are stable. Procedures can be changed in the
ELEMENTS/COMPONENTS OF PLANNING short-run.
a) Goals and Objectives: the desired future position an organization an Policies are basis for procedures. Procedures follow the policies.
organization intends to attain or reach. They represent the end result
towards which effort is directed, hence are also referred to as targets. Qualities of a good policy
• Should be clear, simple and easy to understand.
STEPS IN GOAL SETTING
• Should be precise and brief.
• Should be stable i.e., should not be changed frequently.
Review the organization mission i.e., the purpose for existence
• Should be realistic.
Evaluate available resources • Should be flexible i.e., adaptable to changes.
• Should be acceptable by members
Establish the goals • Should be compliant with laws and regulations.
 d) Work Methods: prescribed processes in which a particular task or activity is formulate action plans and implement them while measuring their performance
performed. They provide standardized steps to perform a task and they /results.
help to avoid confusion and ambiguity.
According to the theory, having a say in goal setting and formulation of action plans
e) Rules: A rule is an explicit statement that tells an employee what he or she encourages participation and commitment among employees as well as aligns
can and cannot do. It is a prescribed guide for conducting an action. They objectives across the organization.
are the simplest form of plans and do not allow for any flexibility or
discretion. MBO PROCESS/STEPS
I. Defining overall organization’s goals
f) Programs: These are the concrete type of plans prepared with a definite
objective to accomplish a certain specific activity. Program is a mixture of 2. Defining specific goals
procedures, policies, rules, assigned works, and elements necessary for
operating the group activity smoothly. 3. Formulation of action plans

g) Budgets: Plans that express expected results in numerical terms. 4. Implementation and maintenance

APPROACHES TO PLANNING 5. Periodic performance review

There are two main approaches to planning:
a. Strategic planning
b. Management by objectives (MBO)
a. Strategic planning
A systematic process of envisioning a desired future and translating this vision into
broadly defined goals/objectives and then putting in place the appropriate
strategies to achieve them.
It is the process of defining an organization’s long-term strategy, and making
decisions on allocating resources to pursue this strategy in order to accomplish
goals and objectives.
b. Management by objectives (MBO)
It is a management model that aims to improve the performance of an organization
by clearly defining objectives that are agreed to by both management and
employees.
It is a collaborative and participative approach to planning where all organizational
members at every level are actively involved in the planning process. Employees and
superiors come together to identify common goals, set the goals to be achieved,
6. Final evaluation and feedback
1. Defining overall organization goals: Entails setting the entire organization’s goals
by the top management in collaboration with functional managers.
2. Defining specific goals: Entails setting departmental, section and individual goals.
3. Formulation of action plans: The determination of the means, approaches, courses
of action needed to achieve the goals.
4. Implementation and maintenance: The employees actualize the plans while
exercising self-discipline and discretion on the best way to go about it.
5. Periodic performance review: A continuous review undertaken during
implementation to assess the results been achieved, establish any challenges and
devise solutions or change the approach if necessary.
6. Final evaluation and feedback: An evaluation conducted at the end of the planning
period by way of joint sessions to establish the extent to which the goals for the
current period have been achieved. The goals and plans for the next period are also
discussed at this point.
Merits/Advantages of MBO
1. Helps in setting clear goals hence a better understanding of expectations.
2. Improves employee’s motivation and commitment to goals which enhances
productivity
3. Facilitates understanding of employee training needs which guides the
development of appropriate training programs.
 4. Promotes efficient allocation of resources due to clear understanding of
demands for each activity.
5. It forms a basis for managers to review employee performance
6. Improves communications between managers and their subordinates
7. Promotes creativity and innovation
8. Enhances coordination and intergroup communication

Demerits/Drawbacks of MBO
1. Difficulties in setting goals due to lack of skills
2. The process is costly due to the need to train employees and more resources
are required to implement MBO programs.
3. It consumes a lot of time due to the need to set goals through consultation
at every level.
4. Increases paperwork due to the need for training manuals, instruction
booklets and performance reports.
5. Places emphasis on short-term goals at the expense of long-term goals which
are equally important.
6. Requires high level of interpersonal skills amongst employees and managers
which might not be there.

Barriers to planning
1. Resource limitation: adequate resources are needed to plan well but such
resources are always limited
2. Lack of skills: managers inability to use good forecasting models which
makes it hard to accurately predict the future
3. Dynamic and complex environment: uncertainty in future conditions may
make it hard to develop stable plans
4. Inferior information: Facts that are out‐of‐date, of poor quality, or of
insufficient quantity.
5. Lack of commitment: managers may choose to do little or nothing to help
in the planning process.
6. Poor organizational culture: a weak culture that does not support
cooperation and commitment to plans.
7. Resistance to Change: fear of the unknown.
8. Political/personal interest: individuals may be tempted to develop plans to
suit their own interest as opposed to larger organization interest.

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