Unit 3

PLANNING

Introduction/Concept of Planning

Planning is the primary function of management. It is called primary function because it affects
all the other functions of management. Planning is the basis for other managerial functions –
organizing, directing and controlling the organization. It is, thus, the process of setting goals,
establishing a course of action, implementing the action plans, and attaining the goals.

Effective planning includes the total organizational activities. Without planning, managers do not
know how to organize activities, people, and resources effectively. In the absence of planning,
they do not even have the direction, sense of purpose, and activity plans. This ultimately affects
the organization and its future existence.

A good plan should give a clear picture of all these activities very precisely and objectively.
Plans are based on facts and information. From the analysis of information, the manager
visualizes and formulates the schedule of activities and allocates the resources needed for
reaching goals and objectives Thus, a plan serves as the foundation for all organizational
activities.

A plan would include ways to accomplish the goals, a timetable for the planned action, and a
cost projection. The basic questions, which have to be answered in developing a plan, are:
 Why a particular action is necessary? (The plan must be goal-directed)
 What is to be done? (Different stages of the activity, their detailed analysis, and
sequential arrangements)
 When will it be done? (Laying down starting and finishing time)
 Where will it be done? (The place where the activities will be undertaken)
 Who will do it? (Fixing responsibilities)
 How will it be done? (The process or techniques to be employed in getting things done)

Definition of Planning

• Planning is the selecting information and making assumptions regarding the future to
formulate activities necessary to achieve organizational objectives (Terry, as cited in
Singh, 2006).
• Planning is setting an organization’s goals and deciding how best to achieve them. –
Ricky W. Griffin
• Planning is the process by which managers define goals and take necessary steps to
ensure that these goals are achieved. – Richard Steers

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Features of a Good Plan

Urwick has suggested the followings as the characteristics of a good plan.

1. It is based on clearly defined objectives, which are formulated with the help of accurate
and dependable information.
2. It is simple to understand.
3. It establishes standards of performance and a system of measuring the achievements.
4. It is flexible enough to accommodate the necessary changes in re-planning.
5. In planning of activities, it is balance in terms of amount and timing.
6. It uses the available resources to the utmost before creating new authorities and new
resources.

Principles of Planning

• Planning must focus on purposes. It should always be based on a clearly defined

objectives.
• Planning is a continuous which includes series of steps, so continuity and flexibility
should be maintained in planning cycle.
• Planning should be simple and there should be provision for proper analysis and
classification of actions.
• There should be good harmony with organization and environment - political as well as
economical.
• Planning is hierarchical in nature and must have an organizational identification
• Planning should be pervasive activity covering the entire organization with all its
departments, sectors and different levels of administration and it should be balanced.
• Planning must be precise in its objective scope and nature. It should be realistic in its
scope.
• The provision should be made to use all available resources.
• Planning should always be documented (or familiar) so that all the concerned are fully
committed to the implementation of the program.

Importance of Planning

Planning benefits everybody in the organization. It provides guidance for decision taking
clarifies roles and responsibilities of employees and is also means of measuring performance.
Without planning the organization would remain ill focused and in utter confusion. A
organization without plan is a navigator who sets sailing without a fixed course. In short,
planning is indispensible. The importance of planning are as follows:

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1) Prepares for uncertainty: Planning reduces uncertainty. It predermines future targets and
actions. Forecasting and environmental scanning help anticipate future uncertainties. It forces
managers to think ahead, anticipate change, consider the impact of change, and develop
appropriate responses. It provides a roadmap for future.

2) Goal focus: Planning helps managers to focus on goals. It defines goals and determines
courses of action to achieve them. Goals guide future activities and also facilitates decision
making. It establishes priorities. It helps to avoid problems in future.

3) Gives direction: Planning gives direction to the total activities of an organization. A focus on
the future that focus an organization to think ahead to identify potential options, problems, and
solutions. Planning involves others in working toward the goal. It is also a stimulus to think
about the resources, time and their effectiveness.

4) Avoids problem: Organizations that do not engage in planning often rely on intuition as a
basis for decisions. This method is too risky. If we rely too much on intuition can get the
managers into trouble. Managers who do not know their organization’s objectives and priorities
can make decisions that detract from goals. Resources may also be wasted resulting in increased
cost and reduced profits. There is also no basis for measuring success and achievements.

5) Basis for control: the control function of management is directly linked to planning. It
measures progress towards goals and provides information about causes of success or failure so
that plans may be adjusted for the future. Control systems provide the feedback that tells what
can be wrong and what kind of solutions to seek. A budget, for example, is a guide to keep
expenses within prescribed limits.

6) Basis for change: In today’s organizational environment, change is the rule rather than the
exception. Anticipating planning and implementing change is part of the challenge of a
manager’s job. Change can be managed more effectively if manager’s do not wait for it to
overtake them. Anticipating and planning ahead make it possible to take actions early.

7) Ensures better coordination of effort: Planning coordination from all the units of the
organization to attain goals. Lop sided efforts do not bring expected results. As planning brings
all the functions within its fold, coordination and integration of activities are established.

8) Ensures better utilization of resources: Planning primarily ensures the availability of

resources as and when needed. Hence, it prevents or at least minimizes crisis situations. Planning
facilitates efficient use of resources. It is rational approach for goal achievement. It reduces cost
by eliminating waste and avoiding duplication in efforts.

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Benefits Of Planning

• It gives people within an organization a sense of purpose and direction:

• It minimizes the risk and uncertainty:
• It provides basis for control
• It encourages motivation and creativity
• It leads to balanced utilization of resources
• It assists manager gain status

Limitation in Planning
• Planning is influenced by the accuracy of current information used as the premise:
• Planning is time consuming and costly:
• Planning is rigid to discourage initiative:
• Planning delays action:
• There is natural resistance to plan:

Types of Plan

• On the basis of Hierarchy

– Corporate plan
– Tactical plan
– Operational plan
• On the basis of Use
– Single uses plan
– Standing use plan
• On the basis of Flexibility
– Specific plan
– Flexible plan

1. Corporate Plan
Corporate plan is a long term plan prepared by the top-level management. It gives reason of
existence for the organization. It clearly defines the objectives of the organization and strategy
to achieve defined objectives.

2. Tactical Plan
The middle level management prepares the tactical plan. It is consistent with the corporate plan.It
is the sub-division of corporate plan to be implemented in the practical field.

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The divisional managers identify the priority of the activities and prepare plans on the basis of
priority of works. It is prepared to perform divisional activities like production, finances,
marketing, personnel and others.

3. Operational Plan
Lower level management prepares this plan. It is consistent with tactical plan.It is specific action
plan of each and every activity of the unit. It involves a schedule of each unit of work to
implement a tactical plan. It concentrates on the best use of available resources.

4. Single Use Plan

It is a plan prepared for a specific purpose in non-programmed situation. It is prepared for non-
repetitive activities.After completion of the defined objectives, such a plan becomes
worthless.Example: a plan of project program and budget plan

5. Standing Use Plan

It is a plan prepared for programmed decision making situation in an organization. This plan
gives broad guidelines for repetitive activities.Such plan once developed will be implemented in
the organization to achieve organizational objectives in different situations.E.g. objectives, rules,
policies, procedures, and strategy

6. Specific Plan
It is developed for a particular department or unit about the activities to be performed. Members
of an organization are clear about the task to be performed and resources to be used. All clearly
stated plans are specific plans.

7. Flexible Plan

Flexible plan is changeable on the basis of time and situations. It is not specific in terms of
procedures and allocation of resources. Such plan only provides guidelines to the members. The
members can modify such a plan on the basis of their facility and requirement.

Other terms used as types of planning are;

Basic plans: Objectives and strategies are basic plans which are necessary for all types of
planning and operations. They also play an important role in organizing, directing, and
controlling.

Master plans: Programs are master plans. They indicate a complete course of action and take
into consideration the timing and the strategy factor.

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Financial plans: Is a plan of income and expenditure for a specified organization.

Short or long term plans: These plans only relates to time; short term plans from 1 year-three
years and long term plans from 5 to 15 years.

Elements /Components/ Hierarchy of Planning

The elements or components of planning are: Purpose and objective; strategies; Policies;
Procedure; Rules & regulations; Program and/or Project; and, Budget, which are arranged in a
hierarchy within the organization.

et
y
ves
dures
ns
/Objecti
Regulatio
Budg
Polic
Proce
Ru les and
Purpose

1) Objective:Objectives are the statement of end-result, which the management wishes the
organization to achieve.Objectives provide the direction for all management activities.
Objective could be broad and general like purpose and mission, or specific by implying
the means and ways to achieve them.
Setting goals and objectives provide the foundation upon which the situation of plans can
be build. Objectives direct the actions and provide the fundamental strategy of
organization.

2) Strategy:It is a comprehensive master plan stating how an organization will achieve its
mission and goals. Strategies are broad descriptions of course of the action to be taken in
order to fulfil its goals.

Top-level managers usually do strategic planning, in which they decode as how to

achieve the organizational goals with available resources.The determination of the basic

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 long term objectives of an enterprise and the adoption of courses of action and allocation
of resources necessary to achieve these goals. It gives a frame work for guiding, thinking
and action.

In strategic planning, action plan is adopted along with allocation of resources by doing
careful SWOT analysis.

3) Policy: Policies are general statements or understanding which guide or channel thinking
and action in decision-making. They limit an area within which a decision to be made and
assure that the decision will be consistent with and contribute to objectives. – Kroontz
and O’ Donnell

A policy is a verbal, written or implied overall guide setting up the boundaries that supply
the general limits and direction in which managerial action will take place. – Terry

These definitions indicate that policies are standing plans that provide solutions to
recurring problems by setting boundaries or limits around the decisions, telling people
within organization what can be done and what cannot be done.

The formation of a policy should be within the boundaries determined by the objectives.

4) Procedures: A series of tasks that make up the established way of performing a work,
giving due consideration to objectives, policy and facilities available including the time,
money and manpower. – Lele and Mahajan

Procedures indicate the specific manner in which a certain activity is to be performed. It

directs a fixed path through the defined area of policy. In contrast to policies which
provide guides to thinking and action, procedures are more definite and specific guides to
action to fulfill the objectives. Procedures are not as flexible as policies are.

Example: purchasing procedure, tender procedure, leave sanction procedure etc.

Method:
• Method is a one step of procedure,
• It is a prescribed manner for performing a given task with adequate consideration to the
objective, facilities and total expenditure of time, money and material and effort.

5) Rules and regulation: They are guides to carry out specific activities. Rules and
regulations are detailed and recorded instructions that a specific task must or must not be
performed in a given situation. These are designed to regulate day to day activities.
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 ‘Detailed and recorded instructions that a specific actions must or must not be performed
in a given situation.’ – Tripathi and Reddy
The rules help in;
• Avoidance of repeated reference to higher level for the authorization of routine
matters that occur frequently and
• Bringing uniformity in actions.

6) Program: ‘Programmes are complex of goals, policies, procedures, rules, tasks

assignments, steps to be taken, resource to be employed and other elements necessary to
carry out the given course of action; they are ordinarily supported by necessary capital
and operating budget.’ – Koontz and O’Donnell

Programs unite together different plans for implementation into a complete and orderly
course of action. All individual plans in the form of policies and procedures are
assembled in such a way that they could be organized into a workable form for achieving
predetermined objectives. Piecemeal plans are transformed into a master plan at this stage
of program planning.

Every programme has to be completed in a given time period within allocated budget.

7) Budget: this is a statement of expected expenditures for the planned program. Budget is
the plan of allocation of the resources and a control for making sure that results comply
with the plan. The budget document reflects a numerical expression of expected income
and planned expenditure for an enterprise for a specific period of time.

• Budget is defined as ‘allocation of scarce resources on the basis of forecasted needs, for
proposed activities, over a specific period of time.’ - Gillies

Approaches (Methods) of Planning

All organizations prepare plans. The methods of planning can be:

1) Top-down method
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 2) Bottom-up method
3) Participative method
4) Team method

1) Top-down method: This method is top management driven. Top managers determine
goals and formulate plans. The plans are communicated to middle and lower level
managers for implementation and control.This method of planning assumes that top
management possesses knowledge, skills and authority for planning. It is generally used
in highly centralized organizations. Only top level managers have role in planning. Those
who responsible for implementation are not involved in the planning process. It restrict
initiative, and also not sensitive to local conditions.

2) Bottom-up method: This method is driven by middle level managers. The plans are
formulated at the operational level. After formulation it goes up to middle management
level and from there to top management level. The top management reviews and
approves the plans. It is decentralized approach. Those responsible for implementation
are involved in planning.

3) Participative method: This method is a combination of top-down methods of planning.

Top management provides broad premises, parameters, and guidelines for planning to
middle and lower level management. The middle and lower level management formulates
the plans and forwards them to top management. Top management reviews and finalizes
the plans. Management By Objects is an example of participative planning. Both
superior and subordinates jointly set time bound goals under MBO. This method provides
flexibility in planning. All levels of managers are involved in the planning process. The
implementation of plans is effective.

4) Team method: In team approach to planning, a cross sectional team of managers having
requisite experience in various functional areas of constituted by the management. The
job of planning is assigned to this team. The team prepares the draft plan, taking internal
as well as external factors into account. The tentative plan is forwarded to the top
management for approval. The expertise, experience, and capabilities of functional heads
are put into action in such a participative climate.

Planning Cycle

Planning is continuously reshaping and refining in nature. Once, it is prepared, it is not forever.
During executing of planning, there may be some drawbacks which are used as feedback for

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refining the next planning. In this way, it goes on cyclic manner, so it is known as planning
cycle.

WHO has mentioned PIE Cycle for Planning cycle.

Planning Process: Steps of Planning

1. Analyzing and understanding the system: The manager needs to understand the system
where he is working which is done by SWOT (Strength, weakness, opportunity and
threat) analysis, population characteristics, nature of problem and surroundings.
 Strength and weakness are internal to organization. They come from technology,
structure, and people.
 Opportunities and threats come from the external environment. They come from
political, economic, technological, social, cultural forces.
 Needs and problems of clients, staffs and organization must be identified and
prioritized or kept in order as per its importance so can be planned for the solution
as per the urgency.

• Needs and problems of clients, staffs and organization must be identified and prioritized
or kept in order as per its importance so can be planned for the solution as per the
urgency. A needs assessment is a systematic process for determining and addressing
needs, or "gaps" between current conditions and desired conditions or "wants".
• A needs assessment is a part of planning processes, often used for improvement in
individuals, and organizations. It can be an effective tool to clarify problems and identify
appropriate interventions or solutions.
• By clearly identifying the problem, finite resources can be directed towards developing
and implementing a feasible and applicable solution. Needs assessments can help
improve the quality of policy or program decisions—thus leading to improvements in
performance and the accomplishment of desired results.
• The techniques of need assessments are; direct observation, questionnaires, review of
relevant literature, interviews, focus groups discussion, surveys, records & report studies
and work samples

2. Determination of goals and objectivities: All elements of the plan evolve around the
objectives, therefore, planners must have clear understanding of the overall objectives of
the organization. The major objectives then broken down into many specific sectional or
departmental objectives, which indicate the means of achieving them.

Goal provides direction to the plan. They are set for entire organization and for divisions
and units. Goals should be SMART;

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  Specific
 Measurable
 Acceptable
 Realistic
 Time bound

According to Terry, the answers of the following questions will help in determining of the
purpose;
– What is the aim of the plan to be formulated?
– What will the goal achievement mean to the enterprise?
– Which problem needs priority attention?
– Does this aim require a new plan, or modification of existing plan, or the
elimination of any existing plan?

3. Identify the activities needed for achieving the objectives: In order to identify
activities that are most likely to help in the achievement of the objective; managers need
to have the knowledge of the effects of one activity on other activities on other activities
both within and outside the organization.
The past experience, past solutions to such problems, practice of such problem in other
enterprise, and observations, records and research findings are sources that will help in
finding complete information.

4. Establish planning premise and identify constraint: premise are key assumptions
about the future environment in which the plan is to be carried out. Clarifying what is
expectation of the plan and the possible constraints foreseen will help to validate plan.

5. Determine the resources needed: Plan for the resources needed by finding type of
resources, required supplies, form where it can be acquired and who will be responsible
for getting it.

6. Determine alternative plans of action: usually several alternative plans that consider
possible to achieve the objectives are prepared through the use of creativity. These plans
are evaluated in terms of goals achievement, cost, quality and feasibility.

7. Choose the plan to be implemented: This step is to decide which plan to choose among
the several alternatives at hand. Besides the adaptability and cost effectiveness, plan
acceptability to implementers, flexibility to adjust to varying conditions, ways of
managing resources need to be considered for proper selection of plan.

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 8. Formulate action plan and plan for distribution of activities: Action plan for each
activity is prepared which comprises of;
 Activities: activities to be performed are specified and listed in sequence.
 Responsibility: who is to carry out each activity?
 Timeframe: should specify when the action is to be initiated, the time span and
when it should be terminated.

9. Plan for progress check-up of the proposed course of action and the remedial
actions (Plan for evaluate): Evaluation is measuring what has been done against what
has been planned to do. Success of the plan is measured by the results. Provision should
be made to check regularly the progress that will determine to what extent the activities
planned are in compliance with meeting the objectives.

Reasons for failure of the plan

 Lack of clarity of objectives and unrealistic goal lack of meaningfulness of the objectives.
 Lack of commitment by the people concerned.
 Insufficient resources
 Lack of delegation
 Natural resistance to change
 Frequent change of plan
 Inflexibility resulting from unwillingness of manages to cancel or modify plan.
 Poor information and in adequate input during formulation.

SWOT Analysis
SWOT analysis is one of the important steps in formulating a strategy. SWOT is an acronym for;
• internal strength (S),
• Weakness (W) of organization,
• external Opportunities (O) and
• Threats (T) facing that organization.

Strength:
• They come from internal environment.
• It can be unique resource, skill, image and alliances that gives competitive advantage.

Weakness:
• A weakness is a limitation or deficiency in resource, skills and capabilities etc. or
• Attributes of person or company that are harmful to achieving the objectives

Opportunity:

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 • They come from external environment.
• It is a favorable condition in the environment.
• It can be change in technology, market or competition.
• It helps to achieve objectives.

Threats:
• A threat is a major unfavorable situation in the organization’s environment.
• The entry of new competitor, increased bargaining power of the suppliers and consumers,
major changes in technology and government regulations, slow market growth etc. are
some examples of organizational threats.

Tools/Techniques for Planning

Planning focuses on the future course of action. The future is uncertain and may be affected by
many external variables. Therefore, many quantitative tools are used to enhance the efficiency
and effectiveness of planning.

1. Forecasting
• It is the process of predicting future events that may significantly affect the business of
organization. It is process of developing assumptions or premises about the future that
managers use in planning.
• It helps to recognize future problems and opportunities. Different techniques may be used
in forecasting like time series analysis etc.
• E.g. sale and revenue forecasting, resource forecasting etc.

2. Flow chart
• It is simply arranging events in order of desired occurrence.
• It discourages unnecessary activities and events in the organization, eliminate waste of
steps and activities.
• Managers can identify and properly sequence important events and decisions with the
help of flow chart.

3. Gantt chart
• This chart focuses on the activities and time required to complete them.
• it is a graphic scheduling technique used in production activities.
• The graph consist of two dimension, one is vertical and another is horizontal.

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