UNIT 2

Planning

2.1 Definition and Importance of planning

Definition-

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.

Importance of 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.

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.

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.

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.

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.

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.

Key Takeaways

1. Managers are a very important part of the function of business planning. Planning requires innovation, creativity and multi-tasking from the managers.
2. 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.

2.2 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.

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.

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.

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.

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.

Key Takeaways

1. 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.
2. Planning is a cost-consuming process. Since it is an intellectual and creative process, specialized professionals must be hired for the job.

2.3 Process of planning

As planning is an activity, there are certain reasonable measures for every manager to follow:

1. Setting Objectives

• This is the primary step in the process of planning which specifies the objective of an organisation, i.e. what an organisation wants to achieve.
• The planning process begins with the setting of objectives.
• Objectives are end results which the management wants to achieve by its operations.
• Objectives are specific and are measurable in terms of units.
• Objectives are set for the organisation as a whole for all departments, and then departments set their own objectives within the framework of organisational objectives.

• Planning is essentially focused on the future, and there are certain events which are expected to affect the policy formation.
• Such events are external in nature and affect the planning adversely if ignored.
• Their understanding and fair assessment are necessary for effective planning.
• Such events are the assumptions on the basis of which plans are drawn and are known as planning premises.

• Once objectives are set, assumptions are made.
• Then the next step is to act upon them.
• There may be many ways to act and achieve objectives.
• All the alternative courses of action should be identified.

• In this step, the positive and negative aspects of each alternative need to be evaluated in the light of objectives to be achieved.
• Every alternative is evaluated in terms of lower cost, lower risks, and higher returns, within the planning premises and within the availability of capital.

• The best plan, which is the most profitable plan and with minimum negative effects, is adopted and implemented.
• In such cases, the manager’s experience and judgement play an important role in selecting the best alternative.

• This is the step where other managerial functions come into the picture.
• This step is concerned with “DOING WHAT IS REQUIRED”
• In this step, managers communicate the plan to the employees clearly to convert the plans into action.
• This step involves allocating the resources, organising for labour and purchase of machinery.

1. Monitoring the plan constantly and taking feedback at regular intervals is called follow-up.
2. Monitoring of plans is very important to ensure that the plans are being implemented according to the schedule.
3. Regular checks and comparisons of the results with set standards are done to ensure that objectives are achieved.

Key Takeaways

1. Monitoring the plan constantly and taking feedback at regular intervals is called follow-up.
2. The planning process begins with the setting of objectives.

2.4 Features of sound planning

Key Takeaways

1. A good plan should integrate the short-term requirements of the firm with its long-term requirements. Plans must be oriented towards the achievement of overall organisational goals.
2. Planners must conduct a thorough market research before framing plans. What potential customers say they are going to do and what they end up doing may be two different things.

2.5 Definition and Features of decision making

Definition- A decision is the selection of a course of action (or decision) out of many available alternatives. The marketing manager may be arrived to a particular decision by analyzing, evaluating and carefully planning.

The decision making is the basic and fundamental key of all managerial activities. It is the study of identifying and choosing best possible choice (or option) based on the values and preferences of the business organization.

Features of decision making-

1. Rational Thinking- It is invariably based on rational thinking. Since the human brain with its ability to learn, remember and relate many complex factors, makes the rationality possible.
2. Process- It is the process followed by deliberations and reasoning.
3. Selective- It is selective, i.e. it is the choice of the best course among alternatives. In other words, decision involves selection of the best course from among the available alternative courses that are identified by the decision-maker.
4. Purposive- It is usually purposive i.e. it relates to the end. The solution to a problem provides an effective means to the desired goal or end.

Key Takeaways

1. Rational Thinking- It is invariably based on rational thinking. Since the human brain with its ability to learn, remember and relate many complex factors, makes the rationality possible.

References-

1. Principles & Practices of Management: L. M. Prasad
2. Principles of Management: P. C. Tripathy & P.N. Readdy