Concept of planning
Planning means deciding in advance what is to be done, how it will be done, when, and by whom. It fills the gap between where we are and where we want to go.
Features of planning
- It focuses on achieving objectives.
- It is the primary (first) function of management. Organising, staffing, directing and controlling all come after it.
- It is pervasive: needed at every level and in every department.
- It is continuous: when one plan ends, a new one is made.
- It is futuristic: it looks ahead.
- It involves decision making: choosing between options.
- It is a mental exercise: it needs thinking and good judgement.
Importance of planning
- Gives direction: everyone knows what to do.
- Reduces the risk of uncertainty: we guess future changes and get ready.
- Reduces overlapping and waste: work is not done twice.
- Promotes new ideas: managers must think of fresh ways.
- Helps decision making: we compare options and choose.
- Sets standards for controlling: the plan is the yardstick to check real results.
Limitations of planning
- Rigidity: once a plan is fixed, managers may not change it even when they should.
- May not work in a fast-changing world: the future is hard to guess.
- Reduces creativity: lower staff just follow orders.
- Huge cost: experts, research and meetings cost money.
- Time-consuming: little time may be left to act.
- No guarantee of success: a plan that worked before may fail now.
Planning process
- Setting objectives: decide the goal, e.g. sell 10% more.
- Developing premises: premises are guesses about the future (demand, prices, government rules) on which the plan rests.
- Identifying alternative courses of action: list the different ways to reach the goal.
- Evaluating alternatives: check the good and bad points of each.
- Selecting an alternative: pick the best one (or a mix).
- Implementing the plan: put it into action.
- Follow-up action: check that the plan is working and correct it if needed.
Single-use and standing plans
Single-use plans are made for a one-time event. After the event, the plan is over. Examples: budget, programme, a project plan.
Standing plans are made once and used again and again for work that repeats. Examples: policies, procedures, methods and rules.
| Basis | Single-use | Standing |
|---|---|---|
| Use | Once | Many times |
| Life | Short | Long |
| Examples | Budget, programme | Policy, procedure, method, rule |
Types of plans
- Objectives: the end results the firm wants, stated in numbers if possible. Example: earn 12% return this year.
- Strategy: a full plan to reach objectives while facing the environment and rivals. Example: enter small towns with low-price packs.
- Policy: a general statement that guides thinking and decisions. Example: "we recruit only through campus".
- Procedure: the exact order of steps for a routine task. Example: steps to approve a purchase.
- Method: the best way to do one task or step. Example: training by a video instead of a lecture.
- Rule: a strict statement of what must or must not be done, with no choice. Example: "no smoking in the factory".
- Budget: a plan in numbers for a future period. Example: sales budget of Rs 50 lakh.
- Programme: a detailed plan for one project, with objectives, policies, steps, budget and time. Example: plan to launch a new product.
Policy vs procedure
A policy is a guide to thinking and leaves room for judgement. A procedure is a guide to action and gives exact steps in order.
Try it
Plan your own birthday party. Write 1 objective, 2 premises (for example, "10 friends will come"), 3 alternatives (home, park, cafe), pick one, make a small budget, and write one rule. You have just done the 7 steps and used 3 types of plans.
Key formulas and definitions
- Planning = deciding in advance what, how, when and who.
- Process: Objectives β Premises β Alternatives β Evaluate β Select β Implement β Follow-up.
- Single-use plans: budget, programme. Standing plans: policy, procedure, method, rule.
- Policy guides thinking; procedure guides action; rule allows no choice.
Worked examples
1. A shoe company decides: "Our sales will grow 15% next year." Which type of plan is this?
Objective. It is the end result the company wants, stated in numbers.
2. A firm expects petrol prices to rise and demand for cycles to go up. At which step of planning is it working?
Step 2, developing premises. Premises are guesses about the future on which plans are built.
3. A bank says: "No cash will be paid after 4 pm." Is this a policy or a rule? Why?
A rule. It says exactly what must not be done and allows no choice. A policy would leave some room for judgement.
4. A school plans a science fair: aim, dates, list of tasks, who does what and cost. Name the plan and say if it is single-use or standing.
It is a programme (it includes a budget too). It is a single-use plan because the fair happens once.
5. A company fixed a 5-year plan and refused to change it when a new rival cut prices. Which limitation of planning is shown?
Rigidity, and also that planning may not work in a dynamic (fast-changing) environment.
Common mistakes
- Thinking premises are goals. Premises are guesses about the future; objectives are the goals.
- Calling a budget a standing plan. A budget is for one period, so it is single-use.
- Mixing policy and rule. A policy leaves room for judgement; a rule allows no choice.
- Stopping the process at implementation. Follow-up action is the last step.