Principles of Management & Communication – KCA 103

Unit 2 – Planning & Organizing

Exercise 1

1. Define Planning and elaborate it’s need.

2. Explain nature and scope of planning.
3. Explicate importance of planning.
4. Explain various steps of planning.
5. Expound various types of plans.
6. Elaborate the limitations of planning.

Q.1. Define Planning and elaborate it’s need.

Planning – Definition

Planning means deciding in advance:

‐ What to do?
‐ Why to do?
‐ How to do?
‐ When to do?
‐ Who will do? and
‐ What will be time and cost implication?

Plans are ideas that answer the above questions.

It involves anticipating the future and consciously choosing the future course of action.

According to Haimann, “Planning is the function that determines in advance what

should be done.”

Developing strategy takes time and resources. It requires the time and commitment of
some of the most highly paid and highly experienced people in your organization. So, if
your team isn’t willing to invest what is needed, I recommend that you don’t do it.
Poor planning is often worse than no planning at all.

Need of Planning:

So, why do you need a strategy? Why take time for planning? There are many reasons.
But the Drivers Model focuses on five reasons in particular for need of planning which
are as following:
1) To set direction and priorities
2) To get everyone on the same page
3) To simplify decision-making
4) To drive alignment
5) To communicate the message

1) To set direction and priorities:

First and foremost, you need a strategy because it sets the direction and establishes
priorities for your organization. It defines your organization’s view of success and
prioritizes the activities that will make this view your reality. The strategy will help your
people know what they should be working on, and what they should be working on
first.
Without a clearly defined and articulated strategy, you may very well find that your
priority initiatives—the ones that will drive the highest successare being given
secondary treatment.

2) To get everyone on the same page:

If you find that you have departments working to achieve different aims, or going in
different directions, you need a strategy.
Once you define your strategic direction, you can get operations, sales, marketing,
administration, manufacturing, and all other departments moving together to achieve
the organization’s goals.

3) To simplify decision-making:
If your leadership team has trouble saying no to new ideas or potential initiatives, you
need a strategy. Why? Your strategy will have already prioritized the activities
necessary for success. Priorities make it easier to say no to distracting initiatives.

4) To drive alignment:
Many organizations have hard-working people putting their best efforts into areas that
have little or no effect on strategic success. They’re essentially majoring in the
minors—because their activities aren’t aligned with the priorities. Your strategy serves
as the vehicle for answering the question, “How can we better align all our resources
to maximize our strategic success?”

5) To communicate the message:

Many leaders walk around with a virtual strategy locked in their heads—they know
where their organization needs to be and the key activities that will get it there.
Unfortunately, the strategy isn’t down on paper and hasn’t been communicated
thoroughly. As a result, few people are acting on it.
 When your staff, suppliers, and even customers know where you’re going, you allow
even greater opportunities for people to help you maximize your success in getting
there.
Once you recognize the need to plan, you now have the role of becoming the catalyst
for facilitating the buy-in and commitment of your leadership team and the rest of
your organization.

Q.2. Explain nature and scope of planning.

Nature and Scope of Planning:

The planning function of the management has certain special features. These features
throw light on its nature and scope:

(i) Planning focuses on achieving objectives

(ii) Planning is a primary function of management
(iii) Planning is pervasive
(iv) Planning is continuous
(v) Planning is futuristic
(vi) Planning involves decision making

(i) Planning focuses on achieving objectives:

Organizations are set up with a general purpose in view. Specific goals are set out in
the plans along with the activities to be undertaken to achieve the goals. Thus,
planning is purposeful. Planning has no meaning unless it contributes to the
achievement of predetermined organisational goals.

(ii) Planning is a primary function of management:

Planning lays down the base for other functions of management. All other managerial
functions are performed within the framework of the plans drawn. Thus, planning
precedes other functions. This is also referred to as the primacy of planning. The
various functions of management are interrelated and equally important. However,
planning provides the basis of all other functions.

(iii) Planning is pervasive:

Planning is required at all levels of management as well as in all departments of the
organisation. It is not an exclusive function of top management nor of any particular
department. But the scope of planning differs at different levels and among different
departments. For example, the top management undertakes planning for the
organisation as a whole. Middle management does the departmental planning. At the
lowest level, day-to-day operational planning is done by supervisors.
 (iv) Planning is continuous:
Plans are prepared for a specific period of time, may be for a month, a quarter, or a
year. At the end of that period there is need for a new plan to be drawn on the basis of
new requirements and future conditions. Hence, planning is a continuous process.
Continuity of planning is related with the planning cycle. It means that a plan is
framed, it is implemented, and is followed by another plan, and so on.

(v) Planning is futuristic:

Planning essentially involves looking ahead and preparing for the future. The purpose
of planning is to meet future events effectively to the best advantage of an
organisation. It implies peeping into the future, analysing it and predicting it. Planning
is, therefore, regarded as a forward looking function based on forecasting. Through
forecasting, future events and conditions are anticipated and plans are drawn
accordingly. Thus, for example, sales forecasting is the basis on which a business firm
prepares its annual plan for production and sales.

(vi) Planning involves decision making:

Planning essentially involves choice from among various alternatives and activities. If
there is only one possible goal or a possible course of action, there is no need for
planning because there is no choice. The need for planning arises only when
alternatives are available. In actual practice, planning presupposes the existence of
alternatives. Planning, thus, involves thorough examination and evaluation of each
alternative and choosing the most appropriate one.

(vii) Planning is a mental exercise:

Planning requires application of the mind involving foresight, intelligent imagination
and sound judgement. It is basically an intellectual activity of thinking rather than
doing, because planning determines the action to be taken. However, planning
requires logical and systematic thinking rather than guess work or wishful thinking. In
other words, thinking for planning must be orderly and based on the analysis of facts
and forecasts.

Q.3. Explicate importance of planning.

Importance of Planning:

You must have seen in films and advertisements how executives draw up plans and
make powerful presentations in boardrooms. Do those plans actually work? Does it
improve efficiency? After all why should we plan? These are numerous questions to
which we would like to find solutions. Planning is certainly important as it tells us
where to go, it provides direction and reduces the risk of uncertainty by preparing
forecasts. The major benefits of planning are given below:
(i) Planning provides directions
(ii) Planning reduces the risks of uncertainty
(iii) Planning reduces overlapping and wasteful activities
(iv) Planning promotes innovative ideas
(v) Planning facilitates decision making
(vi) Planning establishes standards for controlling

(i) Planning provides directions:

By stating in advance how work is to be done planning provides direction for action.
Planning ensures that the goals or objectives are clearly stated so that they act as a
guide for deciding what action should be taken and in which direction. If goals are well
defined, employees are aware of what the organisation has to do and what they must
do to achieve those goals. Departments and individuals in the organisation are able to
work in coordination. If there was no planning, employees would be working in
different directions and the organisation would not be able to achieve its desired
goals.

(ii) Planning reduces the risks of uncertainty:

Planning is an activity which enables a manager to look ahead and anticipate changes.
By deciding in advance the tasks to be performed, planning shows the way to deal with
changes and uncertain events. Changes or events cannot be eliminated but they can
be anticipated and managerial responses to them can be developed.

(iii) Planning reduces overlapping and wasteful activities:

Planning serves as the basis of coordinating the activities and efforts of different
divisions, departments and individuals. It helps in avoiding confusion and
misunderstanding. Since planning ensures clarity in thought and action, work is carried
on smoothly without interruptions. Useless and redundant activities are minimised or
eliminated. It is easier to detect inefficiencies and take corrective measures to deal
with them.

(iv) Planning promotes innovative ideas:

Since planning is the first function of management, new ideas can take the shape of
concrete plans. It is the most challenging activity for the management as it guides all
future actions leading to growth and prosperity of the business.
 v) Planning facilitates decision making:

Planning helps the manager to look into the future and make a choice from amongst
various alternative courses of action. The manager has to evaluate each alternative
and select the most viable proposition. Planning involves setting targets and predicting
future conditions, thus helping in taking rational decisions.

(vi) Planning establishes standards for controlling:

Planning involves setting of goals. The entire managerial process is concerned with
accomplishing predetermined goals through planning, organizing, staffing, directing
and controlling. Planning provides the goals or standards against which actual
performance is measured. By comparing actual performance with some standard,
managers can know whether they have actually been able to attain the goals. If there
is any deviation it can be corrected. Therefore, we can say that planning is a
prerequisite for controlling. If there were no goals and standards, then finding
deviations which are a part of controlling would not be possible. The nature of
corrective action required depends upon the extent of deviations from the standard.
Therefore, planning provides the basis of control.

Q.4. Explain various steps of planning.

Steps of Planning or Planning Process:

Planning, as we all know is deciding in advance what to do and how to do. It is a

process of decision making. How do we go about making a plan? Since planning is an
activity there are certain logical steps for every manager to follow.

(i) Setting Objectives

(ii) Developing Premises
(iii) Identifying alternative courses of action
(iv) Evaluating alternative courses
(v) Selecting an alternative
(vi) Implementing the plan
(vii) Follow-up action

(i) Setting Objectives:

The first and foremost step is setting objectives. Every organisation must have certain
objectives. Objectives may be set for the entire organisation and each department or
unit within the organisation. Objectives or goals specify what the organisation wants to
achieve. It could mean an increase in sales by 20% which could be objective of the
entire organisation. How all departments would contribute to the organisational goals
is the plan that is to be drawn up. Objectives should be stated clearly for all
departments, units and employees. They give direction to all departments.
Departments/ units then need to set their own objectives within the broad framework
of the organisation’s philosophy. Objectives have to drip down to each unit and
employees at all levels. At the same time, managers must contribute ideas and
participate in the objective setting process. They must also understand how their
actions contribute to achieving objectives. If the end result is clear it becomes easier to
work towards the goal.

(ii) Developing Premises:

Planning is concerned with the future which is uncertain and every planner is using
supposition about what might happen in future. Therefore, the manager is required to
make certain assumptions about the future. These assumptions are called premises.
Assumptions are the base material upon which plans are to be drawn. The base
material may be in the form of forecasts, existing plans or any past information about
policies. The premises or assumptions must be the same for all and there should be
total agreement on them. All managers involved in planning should be familiar with
and use the same assumptions. For example, forecasting is important in developing
premises as it is a technique of gathering information. Forecasts can be made about
the demand for a particular product, policy change, interest rates, prices of capital
goods, tax rates etc. Accurate forecasts, therefore become essential for successful
plans.

(iii) Identifying alternative courses of action:

Once objectives are set, assumptions are made. Then the next step would be to act
upon them. There may be many ways to act and achieve objectives. All the alternative
courses of action should be identified. The course of action which may be taken could
be either routine or innovative. An innovative course may be adopted by involving
more people and sharing their ideas. If the project is important, then more alternatives
should be generated and thoroughly discussed amongst the members of the
organisation.

(iv) Evaluating alternative courses:

The next step is to weigh the pros and cons of each alternative. Each course will have
many variables which have to be weighed against each other. The positive and
negative aspects of each proposal need to be evaluated in the light of the objective to
be achieved. In financial plans, for example, the risk-return trade-off is very common.
The more risky the investment, the higher the returns it is likely to give. To evaluate
such proposals detailed calculations of earnings, earnings per share, interest, taxes,
 dividends are made and decisions taken. Accurate forecasts in conditions of
certainty/uncertainty then become vital assumptions for these proposals. Alternatives
are evaluated in the light of their feasibility and consequences.

(v) Selecting an alternative:

This is the real point of decision making. The best plan has to be adopted and
implemented. The ideal plan, of course, would be the most feasible, profitable and
with least negative consequences. Most plans may not always be subjected to a
mathematical analysis. In such cases, subjectivity and the manager’s experience,
judgement and at times, intuition play an important part in selecting the most viable
alternative. Sometimes, a combination of plans may be selected instead of one best
course. The manager will have to apply permutations and combinations and select the
best possible course of action.

(vi) Implementing the plan:

This is the step where other managerial functions also come into the picture. The step
is concerned with putting the plan into action, i.e., doing what is required. For
example, if there is a plan to increase production then more labour, more machinery
will be required. This step would also involve organising for labour and purchase of
machinery.

(vii) Follow-up action:

To see whether plans are being implemented and activities are performed according to
schedule is also part of the planning process. Monitoring the plans is equally important
to ensure that objectives are achieved.

Q.5. Expound various types of plans.

Types of Plans

1. Single-use
2. Standing plans
3. Objectives
4. Strategy
5. Policy
6. Procedure
7. Method
8. Rule
9. Programme
10.Budget
Single-use and standing plans

An organization has to prepare a plan before making any decision related to business
operation, or undertaking any project. Plans can be classified into several types
depending on the use and the length of the planning period. Certain plans have a
short-term horizon and help to achieve operational goals. These plans can be classified
into single-use plans and standing plans.

1. Single-use Plan:

A single-use plan is developed for a one-time event or project. Such a course of action
is not likely to be repeated in future, i.e., they are for non-recurring situations. The
duration of this plan may depend upon the type of the project. It may span a week or a
month. A project may sometimes be of only one day, such as, organising an event or a
seminar or conference. These plans include budgets, programmes and projects. They
consist of details, including the names of employees who are responsible for doing the
work and contributing to the single-use plan. For example, a programme may consist
of identifying steps, procedures required for opening a new department to deal with
other minor work. Projects are similar to programmes but differ in scope and
complexity. A budget is a statement of expenses, revenue and income for a specified
period.

2. Standing Plan:

A standing plan is used for activities that occur regularly over a period of time. It is
designed to ensure that internal operations of an organisation run smoothly. Such a
plan greatly enhances efficiency in routine decision-making. It is usually developed
once but is modified from time to time to meet business needs as required. Standing
plans include policies, procedures, methods and rules. Policies are general forms of
standing plans that specifies the organisations response to a certain situation like the
admission policy of an educational institution. Procedures describe steps to be
followed in particular circumstances like the procedure for reporting progress in
production. Methods provide the manner in which a task has to be performed. Rules
are very clearly stated as to exactly what has to be done like reporting for work at a
particular time. Single-use and standing plans are part of the operational planning
process. There are other types of plans which usually are not classified as single use or
standing plans. A strategy, for example, is part of strategic planning or management. It
is a general plan prepared by top management outlining resource allocation, priorities
and takes into consideration the business environment and competition. Objectives
are usually set by the top management and serve as a guide for overall planning. Each
unit then formulates their own objectives keeping in view the overall organisational
goals. Based on what the plans seek to achieve, plans can be classified as Objectives,
Strategy, Policy, Procedure, Method, Rule, Programme, Budget.
3. Objectives

The first step in planning is setting objectives. Objectives, therefore, can be said to be
the desired future position that the management would like to reach. Objectives are
very basic to the organisation and they are defined as ends which the management
seeks to achieve by its operations. Therefore, an objective simply stated is what you
would like to achieve, i.e., the end result of activities. For example, an organisation
may have an objective of increasing sales by 10% or earning a reasonable rate of
return on investment, earn a 20% profit from business. They represent the end point
of planning. All other managerial activities are also directed towards achieving these
objectives. They are usually set by top management of the organisation and focus on
broad, general issues. They define the future state of affairs which the organisation
strives to realise. They serve as a guide for overall business planning. Different
departments or units in the organisation may have their own objectives. Objectives
need to be expressed in specific terms i.e., they should be measurable in quantitative
terms, in the form of a written statement of desired results to be achieved within a
given time period.

4. Strategy (Plan of action)

A strategy provides the broad outlines of an organisation’s business. It will also refer to
future decisions defining the organisations direction and scope in the long run. Thus,
we can say a strategy is a comprehensive plan for accomplishing an organisation’s
objectives.
This comprehensive plan will include three dimensions:
(i) determining long term objectives
(ii) adopting a particular course of action and
(iii) allocating resources necessary to achieve the objective.

Whenever a strategy is formulated, the business environment needs to be taken into

consideration. The changes in the economic, political, social, legal and technological
environment will affect an organisation’s strategy. Strategies usually take the course of
forming the organisation’s identity in the business environment. Major strategic
decisions will include decisions like whether the organisation will continue to be in the
same line of business, or combine new lines of activity with the existing business or
seek to acquire a dominant position in the same market. For example, a company’s
marketing strategy has to address certain questions i.e., who are the customers? what
is the demand for the product? which channel of distribution to use? what is the
pricing policy? and how do we advertise the product. These and many more issues
need to be resolved while formulating a marketing strategy for any organisation.
5. Policy

Policies are general statements that guide thinking or channelize energies towards a
particular direction. Policies provide a basis for interpreting strategy which is usually
stated in general terms. They are guides to managerial action and decisions in the
implementation of strategy. For example, the company may have a recruitment policy,
pricing policy within which objectives are set and decisions are made. If there is an
established policy, it becomes easier to resolve problems or issues. As such, a policy is
the general response to a particular problem or situation. There are policies for all
levels and departments in the organisation ranging from major company policies to
minor policies. Major company policies are for all to know i.e., customers, clients,
competitors etc., whereas minor polices are applicable to insiders and contain minute
details of information vital to the employees of an organisation. But there has to be
some basis for divulging information to others. Policies define the broad parameters
within which a manager may function. The manager may use his/her discretion to
interpret and apply a policy. For example, the decisions taken under a Purchase Policy
would be in the nature of manufacturing or buying decisions. Should a company make
or buy its requirements of packages, transport services, printing of stationery, water
and power supply and other items? How should vendors be selected for procuring
supplies? How many suppliers should a company make purchases from? What is the
criteria for choosing suppliers. All these queries would be addressed by the Purchase
Policy.

6. Procedure (way of doing something)

Procedures are routine steps on how to carry out activities. They detail the exact
manner in which any work is to be performed. They are specified in a chronological
order. For example, there may be a procedure for requisitioning supplies before
production. Procedures are specified steps to be followed in particular circumstances.
They are generally meant for insiders to follow. The sequence of steps or actions to be
taken are generally to enforce a policy and to attain pre-determined objectives.
Policies and procedures are interlinked with each other. Procedures are steps to be
carried out within a broad policy framework.

7. Method (Steps of procedure)

Methods provide the prescribed ways or manner in which a task has to be performed
considering the objective. It deals with a task comprising one step of a procedure and
specifies how this step is to be performed. The method may vary from task to task.
Selection of proper method saves time, money and effort and increases efficiency. For
imparting training to employees at various level from top management to supervisory,
different methods can be adopted. For example for higher level management
orientation programmes, lectures and seminars can be organised whereas at the
supervisory level, on the job training methods and work-oriented methods are
appropriate.

8. Rule

Rules are specific statements that inform what is to be done. They do not allow for any
flexibility or discretion. It reflects a managerial decision that a certain action must or
must not be taken. They are usually the simplest type of plans because there is no
compromise or change unless a policy decision is taken.

9. Programme

Programmes are detailed statements about a project which outlines the objectives,
policies, procedures, rules, tasks, human and physical resources required and the
budget to implement any course of action. Programmes will include the entire range of
activities as well as the organisation’s policy and how it will contribute to the overall
business plan. The minutest details are worked out i.e., procedures, rules, budgets,
within the broad policy framework.

10. Budget

A budget is a statement of expected results expressed in numerical terms. It is a plan

which quantifies future facts and figures. For example, a sales budget may forecast the
sales of different products in each area for a particular month. A budget may also be
prepared to show the number of workers required in the factory at peak production
times. Since budget represents all items in numbers, it becomes easier to compare
actual figures with expected figures and take corrective action subsequently. Thus, a
budget is also a control device from which deviations can be taken care of. But making
a budget involves forecasting, therefore, it clearly comes under planning. It is a
fundamental planning instrument in many organisations. Let us take an example of
Cash Budget. The cash budget is a basic tool in the management of cash. It is a device
to help the management to plan and control the use of cash. It is a statement showing
the estimated cash inflows and cash outflows over a given period. Cash inflows would
generally come from cash sales and the cash outflows would generally be the costs and
expenses associated with the operations of the business. The net cash position is
determined by the cash budget i.e., inflows minus (–) outflows = surplus or deficiency.
The management has to hold adequate cash balances for various purposes. But at the
same time, it should avoid excess balance of cash since it gives little or no return. The
business has to assess and plan its need for cash with a degree of caution.
Q.6. Elaborate the limitations of planning.

Limitations of Planning:

We have seen how planning is essential for business organisations. It is difficult to

manage operations without formal planning. It is important for an organisation to
move towards achieving goals. But we have often seen in our daily lives also, that
things do not always go according to plan. Unforeseen events and changes, rise in
costs and prices, environmental changes, government interventions, legal regulations,
all affect our business plans. Plans then need to be modified. If we cannot adhere to
our plans, then why do we plan at all? This is what we need to analyse. The major
limitations of planning are given below:

(i) Planning leads to rigidity

(ii) Planning may not work in a dynamic environment
(iii) Planning reduces creativity
(iv) Planning involves huge costs
(v) Planning is a time-consuming process
(vi) Planning does not guarantee success

(i) Planning leads to rigidity:

In an organisation, a well-defined plan is drawn up with specific goals to be achieved

within a specific time frame. These plans then decide the future course of action and
managers may not be in a position to change it. This kind of rigidity in plans may create
difficulty. Managers need to be given some flexibility to be able to cope with the
changed circumstances.

Following a pre-decided plan, when circumstances have changed, may not turn out to
be in the organisations interest.

(ii) Planning may not work in a dynamic environment:

The business environment is dynamic, nothing is constant. The environment consists of

a number of dimensions, economic, political, physical, legal and social dimensions. The
organisation has to constantly adapt itself to changes. It becomes difficult to
accurately assess future trends in the environment if economic policies are modified or
political conditions in the country are not stable or there is a natural calamity.
Competition in the market can also upset financial plans, sales targets may have to be
revised and, accordingly, cash budgets also need to be modified since they are based
on sales figures. Planning cannot foresee everything and thus, there may be obstacles
to effective planning.
(iii) Planning reduces creativity:

Planning is an activity which is done by the top management. Usually the rest of the
members just implements these plans. As a consequence, middle management and
other decision makers are neither allowed to deviate from plans nor are they
permitted to act on their own. Thus, much of the initiative or creativity inherent in
them also gets lost or reduced. Most of the time, employees do not even attempt to
formulate plans. They only carry out orders. Thus, planning in a way reduces creativity
since people tend to think along the same lines as others. There is nothing new or
innovative.

(iv) Planning involves huge costs:

When plans are drawn up huge costs are involved in their formulation. These may be
in terms of time and money for example, checking accuracy of facts may involve lot of
time. Detailed plans require scientific calculations to ascertain facts and figures. The
costs incurred sometimes may not justify the benefits derived from the plans. There
are a number of incidental costs as well, like expenses on boardroom meetings,
discussions with professional experts and preliminary investigations to find out the
viability of the plan.

(v) Planning is a time-consuming process:

Sometimes plans to be drawn up take so much of time that there is not much time left
for their implementation.

(vi) Planning does not guarantee success:

The success of an enterprise is possible only when plans are properly drawn up and
implemented. Any plan needs to be translated into action or it becomes meaningless.
Managers have a tendency to rely on previously tried and tested successful plans. It is
not always true that just because a plan has worked before it will work again. Besides,
there are so many other unknown factors to be considered. This kind of complacency
and false sense of security may actually lead to failure instead of success. However,
despite its limitations, planning is not a useless exercise. It is a tool to be used with
caution. It provides a base for analysing future courses of action. But, it is not a
solution to all problems.