Planning in Management: Definitions, Importance, Characteristics, Process

What is Planning?

Planning is the primary function of management that involves formulating a future course of action for accomplishing a specific purpose. Planning enables managers to decide what task to do, how to do the task, when to do the task and by whom the task has to be done.

To be more precise planning lays a foundation for establishing a mission statement, defining organisational goals and determining resources needed to achieve organisational goals. On the other hand, in a narrow sense, planning is the tactic to complete a specific task.

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Definitions of Planning

By going through the definitions of planning we will be able to understand its concept therefore some definitions are as follows:

Planning is the continuous process of making present entrepreneurial decisions systematically and with best possible knowledge their futurity, organising systematically the ef- forts needed to carry out these decisions and measuring the results of these decisions against the expectation through organised systematic feedback.

Peter Drucker

Planning is deciding in advance what to do, how to do and who is to do it. Planning bridges the gap between where we are, where we want to go. It makes possible things to occur, which would not otherwise occur.

Koontz and O’Donnell

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Importance of Planning in Management

The importance of planning in management is explained in the following points:

1. Forms Goals
2. Remains as a Continuous Process
3. Gives Direction
4. Tackles Uncertainty
5. Minimises Duplication and Wasteful Activities
6. Supports and Promotes Innovative Ideas
7. Facilitates Decision Making
8. Sets Standards for Controlling Function
9. Facilitates Coordination

Forms Goals

Planning is a goal-oriented process that helps in determining what each individual in an organisation has to achieve at the end and executing work accordingly. In addition, the planning function enhances the efficiency of other managerial functions.

Remains as a Continuous Process

Planning in any organisation is a never-ending function. This is because every organisation operates in a dynamic business environment which is subject to frequent changes. As new changes become known, revisions and amendments are made to plans.

Gives Direction

Planning channelises the efforts of people in an organisation in the best possible manner to attain the desired results. For example, during the planning process, plans are laid for each department of the organisation, which helps people at all levels to know exactly what work they have to perform so that organisational goals can be achieved without any hindrances.

Tackles Uncertainty

Planning is helpful in making predictions with the available amount of information. This helps organisations/businesses tackle an uncertain future. Planning assists in finding a better way to achieve goals by anticipating a future risk or chances of occurrence of future risks.

Minimises Duplication and Wasteful Activities

As mentioned earlier, planning helps individuals at all levels to know what they exactly need to do. This helps in preventing the duplication of work, authority, responsibility, etc. As a result, wastage of resources and efforts is minimised.

Supports and Promotes Innovative Ideas

Nowadays, organisations operate in an environment of cut-throat competition. Customers always demand something new or unique. If an organisation fails to fulfil customers’ demands, customers can easily switch to competitors.

Planning enables managers to think out of the box, generate new ideas and provide something unique to customers with less cost and more efficiency, thereby satisfying customers.

Facilitates Decision Making

Planning as a guide plays an important role in making efficient and accurate decisions. For instance, the production department of an organisation needs to choose between two vendors who supply raw materials at the same cost and of the same quality level.

However, the two vendors differ in delivery time. In this case, the decision of choosing the vendor will be made as per the planned number of days.

Sets Standards for Controlling Function

Planning and controlling are inter-related functions of management. Planning sets goals for the organisation and controlling ensures their accomplishment within the decided time period. In addition, controlling direct the course of planning by highlighting the areas where planning is required.

Facilitates Coordination

The planning function helps management in aligning department-wise activities of the organisation. The plans made by one department are understood and supported by another department.

Overall planning that is done by top management facilitates departments to coordinate and plan accordingly to achieve organisational goals.

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Characteristics of Planning

The characteristics of the planning function are explained as follows:

1. Continuous Process
2. Intellectual Process
3. Futuristic Approach
4. Flexible process
5. Primary Function of Management
6. Assists Decision Making
7. Goal-oriented Approach
8. Pervasive

Continuous Process

Planning is done for a specific period of time and plans are reformed at the end of that specific period as per the new requirements and changing conditions. Planning goes on, till the existence of an organisation, as issues and problems keep cropping up, and plans are needed to tackle the problems effectively.

Intellectual Process

Planning requires creative thinking to visualise the future situation and frame plans accordingly. It is the outcome of managers’ thinking process based on their experience and knowledge.

Futuristic Approach

Planning is conducted to achieve future organisational goals while efficiently utilising organisational re- sources. This is done by predicting future situations and making forecasts.

Flexible process

Planning involves a flexible approach. Since the future is uncertain and unpredictable, changes in the business environment take place in the form of competition, government policies, customer demand, etc. Thus, there is always room for flexibility in planning to incorporate future changes.

Primary Function of Management

Planning is done prior to all other functions of management, i.e., organising, staffing, directing, controlling, coordinating, reporting and budgeting. It is the first, foremost and base managerial function of any organisation. The effectiveness of a management’s plan determines the competence of the management’s activity for the planned time period.

Assists Decision Making

Planning comprises decision making because it is an activity of making choices from the available alternatives for performing tasks. Hence, planning comprehends decision making as its indispensable part.

Goal-oriented Approach

Planning emphasises defining the aims, objectives and goals of the organisation. It also involves the identification of alternative courses of action to decide on a suitable action plan, which should be undertaken for the attainment of goals.

Pervasive

Planning is regarded as pervasive because it is present in all the segments of an organisation. It is required at all levels of management. The scope of planning differs at different levels of management and departments.

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Process of Planning

The process of planning involves a number of steps in chronological order which are given below:

1. Setting Organisational Objectives
2. Examining Business Environment
3. Assessing Available Alternatives and Selecting the Most Appropriate Alternative
4. Formulating secondary plans
5. Ensuring cooperation and participation
6. Following up

Setting Organisational Objectives

The planning process begins with the first step of establishing organisational objectives. It involves identifying organisational goals to be achieved by examining internal and external business conditions. For this, the answers to be given for the following questions:

• What is to be achieved?
  
  
• What actions are to be taken?
  
  
• Who is to perform it?
  
  
• How is it to be undertaken?
  
  
• What should be the time frame?

Examining Business Environment

The next step in the planning process is to examine internal and external factors that influence the business environment.

The internal factors include strengths and weaknesses (for example, the efficiency of available resources) of the organisation, while external factors involve threats and opportunities (for example, overall economic and industrial environment and competitive position of the organisation).

Assessing Available Alternatives and Selecting the Most Appropriate Alternative

The next step in the planning process is to evaluate all available alternatives and then select the best alternative. Generally, an alternative is evaluated against risks associated, costs involved, upcoming benefits, etc.

Formulating secondary plans

The successful accomplishment of organisational objectives is confirmed by formulating secondary or alternative plans. These plans are derived for various activities, units, departments, etc., and indicate a sequence in which various tasks are to be performed and the time schedule for per- forming those tasks.

Ensuring cooperation and participation

In this step, employees at middle and lower levels of management are encouraged to participate in the successful accomplishment of organisational goals. Suggestions were given by operating personnel to help the management rectify shortcomings in plans and set things right at the start of the planning process and at the time of its implementation.

Following up

The last step in the planning process is to provide the scope of follow-up for determining the value of plans made and implemented. This step involves a continuous review of plans for ensuring their relevance and effectiveness.

Reviewing plans on a continuous basis helps the organisation develop sound plans for the future and avoid mistakes that took place while implementing the previous plans.

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Limitations of Planning

In spite of several advantages, the planning function also has certain limitations. We have here listed the key limitations of planning:

1. Time-consuming
2. Expensive
3. Gap Between Targets and Results
4. Resistance Towards Change
5. Paperwork
6. Reason of Frustration
7. Problem of Over-target

Time-consuming

Planning turns out to be a time-consuming activity as it requires data collection, data analysis, forecasting, etc., for selecting the best future course of action.

Expensive

Planning requires expertise and the collection of authentic data, which incurs a lot of costs for the organisation. For instance, companies like IBM need to do a lot of planning prior to starting any new venture. For this, such companies also spend a lot on research and pay highly to experts to get their advice.

Gap Between Targets and Results

Planning is done by top-level management and implemented by middle and lower-level management. This creates a gap between the plan set and actual results achieved as different employees may have different perceptions of accomplishing plans.

Resistance Towards Change

Planning often requires changes due to the dynamic business environment. However, as a natural human tendency, employees are always reluctant to accept changes and may not provide their full cooperation.

Paperwork

Planning involves paperwork as plans cannot be finalised in one go. The plans are reworked again and again and after getting a final plan, subordinates give the copies of the plan to the top-level management in the form of a report or a proposal to get the plans finalised for implementation.

Reason of Frustration

Sometimes, planned targets are not achieved by managers and employees irrespective of their best efforts. Such failures frustrate them and cause a low level of motivation in them.

Problem of Over-target

Planning sometimes makes the top-level management fix targets that are unachievable and causes problems of over-expectation from employees.

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Types of Plans

Plans bind individuals, resources, departments and organisations to achieve specific goals in the future. Plans help design organisational goals effectively which fits into the hierarchy from top to lower level of management. In an organisation, there are different types of plans made.

Some important types of plans are explained as follows:

• Strategic plans
• Tactical plans
• Operational plans
• Contingency plans

Strategic plans

Strategic plans are a framework for an organisation. These plans contain the mission of an organisation and outline goals to be achieved. Strategic plans aim to turn the vision of an organisation into reality. Thus, strategic plans are long-term and forward-looking in nature and accommodate future growth and expansion of an organisation. These plans are generally developed by top management and are implemented by middle and lower management.

For instance, Varun works as a top-level manager for Dino’s PizzaSizz. As a top-level manager, he has to make use of strategic planning to ensure that the long-term goals of the organisation are attained. Varun in consultation with other top-level managers developed strategic plans for achieving growth, increasing productivity and profitability and boosting return on investments, as all these are parts of the desired future of the pizzeria.

Varun and other top-level managers developed organisational objectives through strategic plans so that middle- and lower-level managers can create compatible plans aligned with those objectives. Varun also involved other level personnels because strategic plans require multilevel involvement.

Tactical plans

Tactical plans are developed by middle-level management for a span of generally less than three years. These plans contain instructions for lower-level management on what should be done, how should be done and by whom should be done. In addition, tactical plans define tactics which managers adopt for achieving objectives mentioned in the strategic plan. Tactical plans also provide information on resources to be employed and work distribution among the sublevels within each department.

For instance, when Mira, the middle-level manager at Dino’s PizzaSizz, learns about Varun’s strategic plan for improving productivity, Mira im- mediately began to think about possible tactical plans. Tactical planning for Mira included things like testing a new process in making pizzas in a shorter amount of time or perhaps looking into purchasing a better oven that can speed up cooking pizza or even exploring ways to better map out the delivery routes and drivers.

As a tactical planner, Mira required to form a set of calculated actions that takes a shorter amount of time and is narrower in scope than the strategic plan but still help to bring the organisation closer to its long-term goal.

Operational plans

An operational plan is developed by the supervisors, team leaders and facilitators for supporting tactical plans. It governs the day-to-day operations of an organisation/business. Operational plans can be of two types, namely single use plans (for example, budget) and ongoing plans.

For instance, Ravi, the frontline manager at Dino’s PizzaSizz, has the responsibility of operational planning. Scheduling employees each week, creating a monthly budget, developing a promotional advertisement for the quarter to increase the sales of a certain product or outlining an employee’s performance goals for the year and doing an assessment, ordering and stocking inventory are the operation plans Ravi need to make and get executed.

A continuing or ongoing plan is the one which is made once and its value is retained over a period of years. The plan undergoes periodic revisions and updates. Following are examples of on-going plans:

• Policy: A policy is a broad guideline followed by managers to deal with the important aspects and areas of decision making. Policies are referred to as those general statements which explain how managers should handle their routine management responsibilities.
  
  For example, a typical human resources policy of an organisation addresses the matters related to the hiring of employees, terminations of non-performing employees, performance appraisals as an important culture, pay increases and discipline of employees.
  
  
  
• Procedure: A procedure is a standard set of directions that provides stepwise instructions of carrying out activities or tasks for achieving and attaining the organisational objectives. For example, typically, organisations have procedures/processes to purchase supplies and equipment.
  
  The procedure of purchasing supplies and equipment generally starts with a supervisor who completes the purchase requisition. After that, the requisition is then sent for approval to the next level of management. As the requisition gets approved, it is forwarded to the purchasing department.
  
  The amount of the purchase requisition is considered by the purchasing department either to place an order or to secure quotations bids from several vendors before placing the order.
  
  
  
• Rule: A rule is a statement that explicitly guides employees for what they can and cannot do. Rules promote the safety of employees by placing the ‘do’ and ‘don’t’ statements. It also directs for the uniform treatment and the behaviour of employees in an organisation/business. For example, the rules of absenteeism and unpunctuality allow supervisors to make discipline related to fair decisions quickly.

Contingency plans

A successful organisation depends upon the fact that how intelligently, flexibly and constantly its management chases, adapts and masters the changing conditions. A strong management entails to ‘keep all options open’ approach at all times. This is where contingency planning comes into the organisation.

In contingency planning, an alternate plan is identified, analysed and implemented so that in case the original plan proves insufficient, the backup is ready to be used. The factors which are beyond managers’ control are kept in mind and the alternative future scenarios are prepared carefully.

When unanticipated problems and events occur, managers may need to change their plans. It is best to anticipate the changes during the planning process as things don’t always go as expected. Management should develop alternatives to the existing plan and keep them ready for use when unexpected circumstances occur.

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