PLANNING

MEANING
The management functions as discussed earlier are planning, organizing, staffing, direction and
controlling. These functions are essential to achieve organizational objectives. If objectives are
not set then there is nothing to organize, direct and control. An organization has to specify what
it has to achieve. Planning is related with this aspect. Every person whether in business or not
has framed a number of plans during his life. The plan period may be short or long. One of the
characteristic of human being is that he plans. Planning is the first and foremost function of
management.
According to Koontz and O’Donnel “Planning is deciding in advance what to do,
how to do it, when to do it and who is to do it. It bridges the gap from where we are
and to where we want to go. It is in essence the exercise of foresight”.
According to M.S. Hardly “Planning is deciding in advance what is to be done. It
involves the selection of objectives, policies, procedures and programmes from
among alternatives.
Heying and Massie define “Planning is that function of the manager in which he
decides in advance what he will do. It is a decision making process of a special
kind. It is an intellectual process in which creative mind and imagination are
essential”.
Planning is an attempt to anticipate the future in order to achieve better performance. Plans
derive the following benefits:
According to Koontz and O'Donnell, "Planning is essentially decision-making since it involves
choosing from among alternatives." According to George Terry, "Planning is the selecting and
relating of facts and making and using of assumptions regarding the future in the visualisation
and formulation of proposed activities believed necessary to achieve the desired results."
A careful analysis of the above definitions of planning reveals that:
- Planning is concerned with future and its essence is looking ahead;
- it involves thinking and analysis of information;
- it involves a predetermined course of action;
- it is concerned with the establishment of objectives to be attained in the future;
- it is fundamentally a problem of choosing after a careful study of alternative courses;
- it involves decision-making;
- its objectives is to achieve better results;
- it is a continuous and integrated process.
Nature or Characteristics of Planning
The following are the important characteristics of planning:
1. Focus on objectives. A plan starts with the setting of objectives and then makes efforts to
realise them by developing policies, procedures, strategies, etc.
2. It is an intellectual process. According to Koontz and O'Donnell, planning is an
intellectual process involving mental exercise, foreseeing future developments, making forecasts
and the determination of the best course of action.
3. Planning is a selective process. It involves the selection of the best one after making a
careful analysis of various alternative courses of action. It is concerned with decision-making
relating to (a) what is to be done, (b) how it is to be done, (c) when it is to be done, and (d) by
whom it is to be done.
4. Planning is pervasive. Planning is a pervasive activity covering all the levels of
enterprise. While top management is concerned with strategical planning, the middle
management and the lower management are concerned with administrative planning and
operational planning respectively.
5. Planning is an integrated process. Planning involves not only the determination of
objectives but also the formulation of sound policies, programmes, procedures and strategies for
the accomplishment of these objectives. It is the first of the managerial functions and facilitates
other managerial functions like organising, staffing, directing and controlling.
 6. Planning is directed towards efficiency. To increase the efficiency of the enterprise is
the main purpose of planning. The guiding principles of a good plan is the maximum output and
profit at the minimum cost. Terry has aptly stated that "planning is the foundation of the most
successful action of an enterprise."
7. Planning is flexible. The process of planning should be adaptable to the changes take
place in the environment. Koontz and O'Donnell emphasise that "effective planning requires
continual checking on events and forecasts and the redrawing of plans to maintain a course
towards a designed goal."
8. First function in the process of management. Planning is the beginning of the
process of management. A manager must plan before he can possibly organise, staff, direct or
control. Because planning sets all other functions into action, it can be seen as the most basic
function of the management. Without planning, other functions become meaningless activity,
producing nothing, but chaos.
9. It is a decision-making process. Decision-making is an integral part of planning. It is
defined as the process of choosing among alternatives. Obviously, decision-making will occur at
many points in the planning process. For example, in planning for their organisation, the
managers first decide which goals to pursue: shall we manufacture all parts internally or buy
some parts from outside?
10. It is a continuous process. Planning is a continuous process. Koontz and Donnell
rightly observe that like a navigator constantly checking where his ship is going in the vast
ocean, a manager should constantly watch the progress of his plans. He must constantly
monitor the conditions, both within and outside the organisation, to determine if changes are
required in his plans.
The process of planning may be classified into different categories on the
following basis:
(i) Nature of Planning:
a. Formal planning.
b. Informal planning.
(ii) Duration of planning:
a. Short term planning.
b. Long term planning.
(iii) Levels of Management:

Operational Planning
“Operational plans are about how things need to happen,” motivational leadership speaker
Mack Story said at LinkedIn. “Guidelines of how to accomplish the mission are set.”
This type of planning typically describes the day-to-day running of the company. Operational
plans are often described as single use plans or ongoing plans. Single use plans are created for
events and activities with a single occurrence (such as a single marketing campaign). Ongoing
plans include policies for approaching problems, rules for specific regulations and procedures
for a step-by-step process for accomplishing particular objectives.
Strategic Planning
“Strategic plans are all about why things need to happen,” Story said. “It’s big picture, long-term
thinking. It starts at the highest level with defining a mission and casting a vision.”
Strategic planning includes a high-level overview of the entire business. It’s the foundational
basis of the organization and will dictate long-term decisions. The scope of strategic planning
can be anywhere from the next two years to the next 10 years. Important components of a
strategic plan are vision, mission and values.
Tactical Planning
“Tactical plans are about what is going to happen,” Story said. “Basically at the tactical level,
there are many focused, specific, and short-term plans, where the actual work is being done,
that support the high-level strategic plans.”
Tactical planning supports strategic planning. It includes tactics that the organization plans to
use to achieve what’s outlined in the strategic plan. Often, the scope is less than one year and
breaks down the strategic plan into actionable chunks. Tactical planning is different from
operational planning in that tactical plans ask specific questions about what needs to happen to
accomplish a strategic goal; operational plans ask how the organization will generally do
something to accomplish the company’s mission.
Contingency Planning
Contingency plans are made when something unexpected happens or when something needs to
be changed. Business experts sometimes refer to these plans as a special type of planning.
Contingency planning can be helpful in circumstances that call for a change. Although managers
should anticipate changes when engaged in any of the primary types of planning, contingency
planning is essential in moments when changes can’t be foreseen. As the business world
becomes more complicated, contingency planning becomes more important to engage in and
understand.

(iv) Use:
a. Standing plans
b. Single-use plans.

Hierarchy of Plans

Purpose or Mission:
The mission or purpose identifies the basic function or task of an enterprise. Every organization
has or should have a purpose so that its working becomes meaningful. The purpose or mission
is assigned to every organization by the society. The purpose of a business is to produce and
distribute goods or services, the purpose of public works department is to construct and
maintain roads, the purpose of courts is to interpret and apply laws and so on. The purpose is a
standing plan in a business organization which defines its basic purpose in the light of which
other actions are designed.
An organization’s purpose consists of a long term vision of what it seeks to do and the reasons
why it exists. The organization’s mission indicates exactly what activities the organization
intends to engage in now and in future.
The basic questions to be answered by an organization are:
 What business we are in?
 What wall our business be?
 Who are our customers?
 What are our values and beliefs?
 What will be our utility to the society? and so on

Objectives:
Objectives or goals are the ends towards which every activity is aimed-they are the results to be
achieved. Objectives are a prerequisite for planning. No planning is possible without setting up
of objectives. While enterprise objectives are the basic plan of the firm, a department may also
have its own objectives. Though departmental objectives will contribute to the attainment of
enterprise objectives but the two sets of goals may entirely be different. For example, the
objective of the enterprise may be to earn a certain amount of profit, while selling its products.
Enterprise objectives influence the management philosophy and practice. Objectives have
greater influence on the working of an organization. All other types of plans such as policies,
strategies, procedures, rules, budgets etc. assist in the attainment of stated enterprise objectives
in an economical and efficient manner. Objectives are related to the future and are an essential
part of the planning process.
Policies:
Policies are general statements or understandings which provide guidance in decision-making
to various managers. These are standing plans providing guidance to management in the
conduct of managerial operations. Policies define boundaries within which decisions can be
made and decisions are directed towards the achievement of objectives. Policies also help in
deciding issues before they become problems and making it unnecessary to analyze the same
situation every time it comes up. Managers can delegate authority within the given parameters
and can still retain control over what their subordinates do. In the words of Koontz and
Weihrich. “Policy is a means of encouraging discretion and initiative, but within limits.”

Strategies:
The word ‘strategy’ has long been used in the content of military action plans. It was used to
state the grand plans made in the light of what it is believed an adversely might or might not do.
Managers now use strategies in the broader areas of business operations. A strategy is a
comprehensive and integrated plan designed to assure that business objectives are
accomplished. The long term objectives of the enterprise are determined and requisite resources
are allocated and deployed to achieve the desired results. The purpose of strategies is to
determine a picture of the kind of enterprise that is envisaged. Strategies do not attempt to
outline the programmes for achieving objectives but they furnish a framework for guiding
thinking and action.
Procedures:
Procedures are details of action or the guidelines for the achievement of business objectives.
Procedures give details of how things are to be done. No room is left for judgment. These should
help in implementation of policies. Procedures also determine the policy of responsibility and
accountability. According to Terry, “A procedure is a series of related tasks that make up the
chronological sequence and the established way of performing the work to be accomplished.”
Procedures should be distinguished from policies. A procedure is a guide to action whereas a
policy is a guide to thinking. Policies are guidelines for taking decisions and procedures consist
of various methods to accomplish each phase of work. Policies offer scope for interpretation in
order to see that they fit in a particular situation whereas procedures are tailor-made and do not
offer any scope for interpretation.
A procedure is explained with the help of taking the case of purchasing raw
materials for a concern:
(i) Every department needing raw materials will send a purchase requisition to the purchase
department giving quantity specifications, type and quality materials required.
(ii) The purchase department will consolidate the requirements of various departments. A
combined order is prepared and sent to the suppliers. The purchase department maintains the
list of suppliers and regularly collects quotations from them. The copy of the purchase order is
also sent to the receiving and inspecting department.
(iii) The receiving department compares the goods received with the order placed. Any
discrepancy in quantity, quality, etc. is reported to the purchase department.
If the goods are proper and according to the order then a report about it is submitted to the
purchase department.
(iv) After receiving a satisfactory report from receiving and inspecting department, purchase
department forwards the bill to accounting department for payment.
(v) Accounting department checks the bill and then makes the payment to the supplier.
Whenever a material purchase is needed then the same procedure is followed. Different tasks
require different procedures and they are followed in the same way.
Advantages of Procedures:
1. Basis of Control:
Procedures give a detail of sequences to be followed for completing a task. It can be seen
whether the work is proceeding according to the plan or not. Procedures are used as a control
mechanism because any discrepancy in completing the work can be determined at once.
2. Consistency:
Procedures help to ensure consistency and uniformity of performance. Once the procedures are
established, they can be similarly used again and again.
3. Standardization:
The standardization of procedures reduces the need for decision-making in similar situation.
Wherever a task is to be performed, the same procedure will be followed for doing it. This
increases efficiency in doing a work.
4. Co-ordination:
Procedures establish a sequence to be followed for each work. This helps in coordinating the
activities of different departments or sections because same procedures will be followed by all of
them.
Limitations:
1. Rigidity:
Rigidity is followed in following procedures. They are continuously used over and over again.
This discourages initiative and discoveries.
2. Constant Review:
The same procedures cannot be followed for long terms. The changing situations necessitate the
review of procedures. To keep them effective they should be constantly updated. They should be
suitably adjusted to suit the present situation.
Rules:
A rule is a plan that lays down a required course of action with regard to a situation. A rule is in
the nature of a decision made by management regarding what is to be done and what is not to
be done in a particular situation. A rule is definite and rigid and allows no deviation or
discretion to the subordinates. Like procedures, rules do not prescribe a chronological sequence
of steps to be taken to achieve a given objective. A rule may or may not be a part of the
procedure. A rule such as ‘No smoking in the factory’ will not form a part of the procedure. On
the other, a rule to make payment within 21 days will be the part of a procedure.
“Rules prescribe the limits of acceptable behaviour of the members of the organization. Rules
will enable managers to predict the behaviour of their subordinates, how will they act in a given
situation. Rules channel the behaviour of workers in a desired direction. Workers sometimes
resent rules for stifling their actions. The problem does not lie with the rules, but the manner in
which they are put to the workers. Management should try to frame only those rules which are
necessary and those too should also be explained properly to the employees.
Programmes:
A programme is a sequence of activities designed to implement policies and accomplish
objectives. It is devised to meet a particular situation. Programme may be taken as a
combination of policies, procedures, rules, budgets, task assignments, etc. developed for the
specific purpose of carrying out a particular course of action. Separate programmes are
prepared for accomplishing different tasks. The same programme may not be used for achieving
other goals. It is a single use plan laid down for new and non-repetitive activities.
In the words of Koontz and O’Donnell, “Programmes are complexes of goals, policies,
procedures, rules, task assignment, steps to be taken, resources to be employed and other
elements necessary to carry out a given course of action.” To quote George Terry, “A programme
can be defined as a comprehensive plan that includes future use of different resources in an
integrated pattern and establishes a sequence of required actions and time schedules for each in
order to achieve the standard objectives.”
Budgets:
A budget is the monetary or/and quantitative expression of business plans and policies to be
pursued in the future period of time. The term budgeting is used for preparing budgets and
other procedures for planning, co-ordination and control of business enterprise.
According to Institute of Cost and Works Accountants, London, “A budget is a financial
statement and /or quantitative statement prepared prior to a defined period of time, of the
policy to be pursued during that period for the purpose of attaining a given objective.” In the
words of George R. Terry, “A budget is an estimate of future needs, arranged according to an
orderly bases, covering some or all of the activities of an enterprise for a definite period of time.”
In the words of Crown and Howard a budget has been defined as, “A pre-determined statement
of management policy during a given period which provides a standard for comparison with the
results actually achieved.”

Steps in Planning
Planning is the basic function of management. Its preparation is directly influenced by the
characteristics of the enterprise and the conditions which affect its operation. In its preparation
the following steps are required to be taken.

1. Being Aware of Opportunities

Although its precedes actual planning and it therefore not strictly a part of the planning process,
an awareness of opportunity in external environment as well as within the organization is the
real starting point of planning. All managers should takes a primary look at possible future
opportunities and see them clearly and completely, know where they stand in light of their
strength and weaknesses.
2. Establishing objectives
The second step in planning is to establish objectives for entire enterprise and then the each
subordinate work unit. This has to be done for a long term or a short term too. Objectives
specifies the expected results and indicate the end point of what is to be done, where the
primary emphasis is to be placed, and what is to be accomplished by the network of strategies,
policies, procedures, rules, budgets and programs
3. Developing Premises
The third logical step in planning is to establish, circulate and obtain agreement to utilize
critical planning premises such as forecasts, applicable basic policies and existing company
plans. Forecasting plays an important role in premising. By means of forecasting, organizations
try to answer various questions about future expectations and action statements. There are two
types of forecasts. One type involves predicting the consequence of a planned course of action.
This type helps managers understand what an organization might expect to achieve as a result
of a planned course of action.
The second type of forecast helps managers to make predictions about environmental events
likely to affect an organization’s movement towards achieving its objectives.

4. Determining alternative courses

The fourth step in planning is to search for and examine alternative courses of action, especially
those not immediately apparent. There is seldom a plan for which reasonable alternative do not
exist and quit often an alternative that is not obvious proves to be best. Finding alternative is
not the problem normally. Reducing the number of alternatives in order to analyze and find out
the best one is the problem. There is a limit to the number of alternatives that can be examined
thoroughly, even with mathematical techniques and computer. At this, a manager usually draws
upon research, experimentation, and experience to identify and develop a number of possible
courses of action.
5. Evaluation of alternative courses
After seeking out alternative courses and examining their strong and weak points, the next step
is to be evaluating the alternatives by weighing them in light of premises and goals. One course
may appear to be most profitable, but it may require a large cash outlay and slow playback;
another may look less profitable but may involve less risk; still another may suit company’s long
term objectives. Evaluating alternatives also includes determining the costs and expected effects
of each.
One course may appear to be the most profitable but it may require a large cash involvement
with a slow payback. Another course may look less profitable but that may be less risky. Still,
another course may better serve the long-range objectives of the company. Evaluation can be
difficult because of uncertainty about the future, various intangible factors and inaccurate
premises behind plans. Several techniques can be used by managers at this step. In fact, it is at
this step in the planning process that operations research and mathematical as well as
computing techniques can be primarily applied.

6. Select a Course
This is a point at which the plan is adopted – the real point of decision making. Occasionally an
analysis and evaluation of alternative courses will disclose that two or more are advisable, and
the manager will decide to follow several courses rather that the one best course.

7. Formulating Derivative Plans

When a decision is made, planning is seldom complete without derivate plans Derivative plans
are almost invariably require supporting the basic plan. It is clear, therefore, that derivative
plans are essentially required to support the basic or general plan. Usually, there are two kinds
of derivative or supportive plans. The first one involves changes in existing supportive plans.
These are derivative plans that have been in use, but now need modification to support a new
plan. “The second kind of subsidiary plan involves the creation of a new supportive plan.
If, for example, an organization converted a plant from a traditional assembly line to one using a
fully automated, computer-integrated manufacturing system, managers would need a new
support plan for training employees to use the new equipment. They would need another new
supportive plan for maintaining the new equipment.

8. Numerating Plans by Budgeting

After decision are made and plans are set, the final step in giving them meaning as was
indicated in discussion of types of plans, is to numerate them by converting them into budgets.
Budgets are sometimes called enumerated programs which are most commonly expressed in
terms of money. But they may also be expressed as hours worked, as units sold, or in any other
measurable unit. An enterprise usually has overall budgets representing the sum total of income
and expenses, with .consequent profit or surplus. Each department of the enterprise or
organization can have its own budgets, commonly of expenses and capital expenditures, which
make up the overall budget.

Meaning of Planning Premises

Planning premises are the basic assumptions about the environment.
These assumptions are essential to make plans more realistic and operational. Planning
premises provide a framework. All plans are made within this framework. There are many
environmental factors, which influence the plan. Assumptions are made about these factors.
These assumptions are called premises.

Types of Planning Premises

Different types of planning premises are depicted in the picture (figure) below.
Types of Planning Premises are briefly explained as follows:-

1. Internal and External Premises

Internal Premises come from the business itself. It includes skills of the
workers, capital investment policies, philosophy of management, sales forecasts, etc.
External Premises come from the external environment. That is, economic, social, political,
cultural and technological environment. External premises cannot be controlled by the
business.

2. Controllable, Semi-controllable and Uncontrollable Premises

Controllable Premises are those which are fully controlled by the management. They include
factors like materials, machines and money.
Semi-controllable Premises are partly controllable. They include marketing strategy.
Uncontrollable Premises are those over which the management has absolutely no control.
They include weather conditions, consumers' behaviour, government policy, natural calamities,
wars, etc.

3. Tangible and Intangible Premises

Tangible Premises can be measured in quantitative terms. They include units of production
and sale, money, time, hours of work, etc.
Intangible Premises cannot be measured in quantitative terms. They include goodwill of the
business, employee's morale, employee's attitude and public relations.

4. Constant and Variable Premises

Constant Premises do not change. They remain the same, even if there is a change in the
course of action. They include men, money and machines.
Variable Premises are subject to change. They change according to the course of action. They
include union-management relations.