Introduction, Meaning, Importance,

Features and Limitations of Planning

Just like management is a never-ending activity, so is planning. In fact

business planning, it is one of the primary ​functions of management​. It
sets up the stage for all further functions of management like
organizing, ​directing​ etc. Let us understand the concept of planning.

Planning

We already know what planning is, it is the deciding of what is to be

done in advance. It is the groundwork for all future plans of the
organization​. Planning bridges the gap between where the
organization currently find itself and where it wishes to be.

So in essence ​business​ planning comprises of setting objectives for the

organization and developing a plan of action to achieve these
objectives. Once the objectives are set, the managers and ​workers​ can
have a clear vision of what to work towards.

Managers are a very important part of the function of business

planning. Planning requires innovation, creativity and multi-tasking
from the managers. And planning is a function that managers of all
levels must perform, i.e upper, middle and lower ​management​.

Browse more Topics under Planning

● Planning Process
● Types of Plan

Importance of Business Planning

Planning is an important function of management, it tells the manager

where the organization should be headed. It also helps the
organization reduce uncertainty. Let us take a look at some important
functions of planning.

1] Planning provides a sense of Direction

Planning means coming up with a predetermined action plan for the

organization. It actually states in advance what and how the work is to
be done. This helps provide the workers and the managers with a
sense of ​direction​, a guidance in a way. Without planning their actions
would be uncoordinated and unorganized.

2] Planning reduces Uncertainty

Planning not only sets objectives but also anticipates any future
changes in the industry or the organization. So it allows the managers
to prepare for these changes, and allow them to deal with the
uncertainties. Planning takes into consideration past events and trends
and prepares the managers to deal with any uncertain events.

3] Planning reduces Wastefulness

The detailed plans made keep in mind the needs of all the
departments. This ensures that all the departments are on the same
page about the plan and that all their activities are coordinated. There
is clarity in thought which leads to clarity in action. All work is
carried out without interruptions or waste of time or ​resources​,

4] Planning invokes Innovation

Planning actually involves a lot of innovation on the part of the

managers​. Being the first function of management it is a very difficult
activity. It encourages the manager to broaden their horizons and
forces them to think differently. So the managers have to be creative,
perceptive and innovative.

5] Makes Decision=Making Easier

In business planning the goals of the organization have been set, an
action plan developed and even predictions have been made for future
events. This makes it easier for all managers across all levels to make
decisions with some ease. The decision-making process also becomes
faster.

6] Establishes Standards

Once the business planning is done, the managers now have set goals
and standards. This provides the manager’s standards against which
they can measure actual performances. This will help the organization
measure if the goals have been met or not. So planning is a
prerequisite to controlling.

Limitations of Planning
While business planning is important and a requisite for every
organization, it does have some limitations. Let us take a look at some
limitations of business planning.

1] Rigidity

Once the planning function is complete and the action plan is set, then
the manager tends to only follow the plan. The manager may not be in
a position to change the plan according to circumstances. Or the
manager may be unwilling to change the plan. This sort of rigidity is
not ideal for an organization.

2] Not ideal in Dynamic Conditions

In an economic environment rarely anything is stagnant or static.

Economic, political, environmental, legal conditions keep changing. In
such a dynamic environment it becomes challenging to predict future
changes. And if a manager cannot forecast accurately, the plan may
fail.

3] Planning can also reduce creativity

While making a plan takes creativity after that managers blindly

follow the plan. They do not change the plan according to the dynamic
nature of the business. Sometimes they do not even make the
appropriate suggestions to upper management. The work becomes
routine.

4] Planning is Expensive

Planning is a cost-consuming process. Since it is an intellectual and

creative process, specialized professionals must be hired for the job.
Also, it involves a lot of research and facts collection and number
crunching. At certain times the cost of the planning process can
outweigh its benefits.

5] Not Completely Accurate

When planning we have to forecast the future and predict certain

upcoming events in the organization and the industry. So, of course,
there cannot be hundred per cent certainty in such cases. So it can be
said that business planning lacks accuracy

Solved Question for You

Q: Which of the following can be referred to planning?

a. Departmentation
b. Government policy
c. Forecasting
 d. All of the above

Ans: The correct option is C. Planning is forecasting as it is deciding

what to do in advance. Planning is futuristic as it never relates to the
past. So planning bridges the gap between where the company is and
where it wishes to go.

Planning Process

Planning is the first primary​ function of management​ that precedes all

other ​functions​. The planning function involves the decision of what
to do and how it is to be done? So managers focus a lot of their
attention on planning and the ​planning process​. Let us take a look at
the eight important steps of the planning process.

Planning Process

The planning function of management is one of the most crucial ones.

It involves setting the goals of the company and then managing the
resources​ to achieve such goals. As you can imagine it is a systematic
process involving eight well thought out steps. Let us take a look at
the planning process.
1] Recognizing Need for Action

An important part of the planning process is to be aware of the

business opportunities​ in the firm’s external ​environment​ as well as
within the firm. Once such opportunities get recognized the managers
can recognize the actions that need to be taken to realize them. A
realistic look must be taken at the prospect of these new opportunities
and ​SWOT analysis​ should be done.

Say for example the ​government​ plans on promoting cottage ​industries

in semi-urban areas. A firm can look to explore this opportunity.

What are the Types of Plan?

2] Setting Objectives

This is the second and perhaps the most important step of the planning
process. Here we establish the objectives for the whole ​organization
and also individual ​departments​. Organizational objectives provide a
general direction, objectives of departments will be more planned and
detailed.

Objectives can be long term and short term as well. They indicate the
end result the company wishes to achieve. So objectives will percolate
down from the managers and will also guide and push the ​employees
in the correct direction.

Importance, Features, and Limitation of Planning here in detail.​

3] Developing Premises

Planning is always done keeping the future in mind, however, the

future is always uncertain. So in the ​function of management​ certain
assumptions will have to be made. These ​assumptions​ are the
premises. Such assumptions are made in the form of forecasts,
existing plans, past policies, etc.
These planning premises are also of two types – internal and external.
External assumptions deal with factors such as political environment,
social environment​, the ​advancement of technology​, competition,
government policies​, etc. Internal assumptions deal with policies,
availability of resources,​ quality of management​, etc.

These assumptions being made should be uniform across the

organization. All managers should be aware of these premises and
should agree with them.

4] Identifying Alternatives

The fourth step of the planning process is to identify the alternatives

available to the managers. There is no one way to achieve the
objectives of the firm, there is a multitude of choices. All of these
alternative courses should be identified. There must be options
available to the manager.

Maybe he chooses an innovative alternative hoping for more efficient

results. If he does not want to experiment he will stick to the more
routine course of action. The problem with this step is not finding the
alternatives but narrowing them down to a reasonable amount of
choices so all of them can be thoroughly evaluated.

5] Examining Alternate Course of Action

The next step of the planning process is to evaluate and closely

examine each of the alternative plans. Every option will go through an
examination where all there pros and cons will be weighed. The
alternative plans need to be evaluated in light of the organizational
objectives.

For example, if it is a financial plan. Then it that case its​ risk-return

evaluation will be done. Detailed calculation and analysis are done to
ensure that the plan is capable of achieving the objectives in the best
and most efficient manner possible.

6] Selecting the Alternative

Finally, we reach the​ decision making​ stage of the planning process.

Now the best and most feasible plan will be chosen to be
implemented. The ideal plan is the most profitable one with the least
amount of negative consequences and is also adaptable to dynamic
situations.
The choice is obviously based on scientific analysis and mathematical
equations. But a managers intuition and experience should also play a
big part in this decision. Sometimes a few different aspects of
different plans are combined to come up with the one ideal plan.

7] Formulating Supporting Plan

Once you have chosen the plan to be implemented, managers will

have to come up with one or more supporting plans. These secondary
plans help with the implementation of the main plan. For example
plans to hire more people, train personnel, expand the office etc are
supporting plans for the main plan of launching a new product. So all
these secondary plans are in fact part of the main plan.

8] Implementation of the Plan

And finally, we come to the last step of the planning process,

implementation of the plan. This is when all the other​ functions of
management​ come into play and the plan is put into action to achieve
the objectives of the organization. The tools required for such
implementation involve the types of plans- procedures, policies,
budgets, rules, standards etc.

Solved Question for You

Q: _______ involves scientific analysis of the decision process

a. Linear Programming
b. Risk Analysis
c. Operations Research
d. None of the above

Ans: The correct option is C. Operation research is the application of

scientific and mathematical methods to study and analyse problems
involving complex systems. It is a powerful tool for decision making.

Types of Plan

Planning​ is one of the most important and the first function of

management​. It is an activity that managers of all levels have to
perform. So according to the level of management, the type of plan
will differ. Let us see the different types of plan in management.

Types of Plan

Planning is a pervasive function of management, it is extensive in its

scope. So all managers across all levels participate in planning.
However, the plans made by the top level ​manager​ will differ from the
ones that lower managers make.

Plans also differ from what they seek to achieve and what ​methods
will be used to achieve them. So let us look at the types of plans that
managers deal with.

Browse more Topics under Planning

● Introduction, Meaning, Importance, Features & Limitations of
Planning
● Planning Process

Objectives

This is the first step in planning the action plan of the organization.
Objectives are the basics of every ​company​ and the desired
objective/result that the company plans on achieving, so they are the
endpoint of every planning activity.

For example one of the objectives of an organization could be to

increase sales by 20%. So the manager will plan all activities of the
organization​ with this end objective in mind. While framing the
objectives of the organization some points should be kept in mind.

● Objectives should be framed for a single activity in mind.

● They should be result oriented. The objective must not frame
any actions
● Objectives should not be vague, they should be quantitative and
measurable.
● They should not be unrealistic. Objectives must be achievable.

Explore more topics under Planning

Planning
● Planning Process
● Introduction, Meaning, Importance, Features, and Limitations
of Planning
Strategy

This obviously is the next type of plan, the next step that follows
objectives. A strategy is a complete and all-inclusive plan for
achieving said objectives. A strategy is a plan that has three specific
dimensions

i. Establishing long-term objectives

ii. Selecting a specific course of action
iii.allocating the necessary ​resources​ needed for the plan

Forming strategy is generally reserved for the top level of

management. It actually defines all future decisions and the
company’s long-term scope and general ​direction​.

Policy

Policies are generic ​statements​, which are basically a guide to

channelize energies towards a particular strategy. It is an
organization’s general way of understanding, interpreting and
implementing strategies. Like for example, most companies have a
return policy or recruitment policy or pricing policy etc.

Policies are made across all levels of management, from major

policies at the top-most level to minor policies. The managers need to
form policies to help the employees navigate a situation with
predetermined decisions. They also help employees to make decisions
in unexpected situations.

Procedure

Procedures are the next types of plan. They are a stepwise guide for
the routine to carry out the activities. These stepwise sequences are to
be followed by all the employees so the activities can be fulfilled in an
organized manner.

The procedures are described in a chronological order. So when the

employees follow the instructions in the order and completely, the
success of the activity is pretty much guaranteed.

Take for example the procedure of admission of a student in a college.

The procedure starts with filling out an application form. It will be
followed by a collection of documents and sorting the applications
accordingly.

Rules

Rules are very specific statements that define an action or non-action.

Also, rules allow for no flexibility at all, they are final. All employees
of the organization must compulsorily follow and implement the rules.
Not following rules can have severe consequences.

Rules create an environment of discipline in the organization. They

guide the actions and the behaviour of all the employees of the
organization. The rule of “no smoking” is one such example.

Program

Programmes are an in-depth statement that outlines a company’s

policies, rules, objectives, procedures etc. These programmes are
important in the implementation of all types of plan. They create a link
between the company’s objectives, procedures and rules.

Primary programmes are made at the top level of management. To

support the primary program all managers will make other programs
at the middle and lower levels of management.

Methods

Methods prescribe the ways in which in which specific tasks of a

procedure must be performed. Also, methods are very specific and
detailed instructions on how the employees must perform every task
of the planned procedure. So managers form methods to formalize
routine jobs.

Methods are very important types of plan for an organization. They

help in the following ways

● give clear instructions to the employees, removes any

confusion
● Ensures uniformity in the actions of the employees
● Standardizes the routine jobs
● Acts as an overall guide for the employees and the managers

Budget

A budget is a statement of expected results the managers expect from

the company. Budgets are also a quantitative statement, so they are
expressed in numerical terms. A budget quantifies the forecast or
future of the organization.

There are many types of budgets that managers make. There is the
obvious financial budget, that forecasts the profit of the company.
Then there are operational budgets generally prepared by lower-level
managers. Cash budgets monitor the cash inflows and outflows of the
company.

Solved Question for You

Q: Controlling is regarded as the mental processes resulting in the

selection of action among alternative scenarios. True or False?

Ans: The statement is False. The activity that chooses the best option
among alternative scenarios is known as decision making.