6/11/24 Chapter 4

Planning
Meaning:
• Deciding in advance what to do& how to do it. It is one of the basic
managerial functions.

• It involves 2 aspects:
Setting of aims and objectives of the organization + Selecting and
developing an appropriate course of action to achieve these objectives.

• Koontz and O‘Donnell – ―Planning is deciding in advance what to do,

how to do, when to do, and who to do it. Planning bridges the gap from
where we are to where we want to go. It makes it possible for things to
occur which would not otherwise happen.

• Involves setting of objectives & developing an appropriate course of

action to achieve these objectives

Importance of Planning
1. Planning provides directions: By stating in advance how the work is
to be done planning provides direction for action. If there was no planning,
employees would be working in different directions and the organization
would not be able to achieve its goals efficiently.
2. Planning reduces the risk of uncertainity: Planning is an activity
which enables a manager to look ahead, anticipate change, consider the
impact of change and develop appropriate responses.
3. Planning reduces wasteful activities: Planning serves as the basis
of coordinating the activities and efforts of different departments and
individuals whereby useless and redundant activities are mentioned.
4. Planning promotes innovative ideas: Planning is the first function
of management. Managers get the opportunity to develop new ideas and
new ideas can take the shape of concrete plans.
5. Planning facilities decision making: Under planning targets are laid
down. The manager has to evaluate each alternative and select the most
viable option.
6. Planning establishes standards for controlling: Planning provides
the standards against which the actual performance can be measured and
evaluated. Control is blind without planning. Thus planning provides the
basis for control.
Limitations of Planning
(A) Internal Limitations
1. Planning leads to rigidity: Planning discourages individual’s
initiative &creativity. The managers do not make changes according to
changing business environment. They stop taking or giving suggestions
and new ideas. Thus detailed planning may create a rigid framework in
the organization.
2. Planning may not work in dynamic environment: Planning is
based on anticipation of future happenings and since future is uncertain
and dynamic therefore, the future anticipations are not always true.
3. Planning involves huge costs: When plans are drawn up, huge cost
is involved in their formulation.
4. Planning is time consuming: Sometimes plans to be drawn up take
so much of time that there is not much time left for their implementation.
5. Planning does not guarantee success: The success of an
enterprise is possible only when plans are properly drawn and implement.
Sometimes managers depend on previously tried successful plans, but it
is not always true that a plan which has worked before will work
effectively again.
6. Planning reduces creativity: In planning, work is to be done as per
pre-determined plans. It is decided in advance what is to be done, how it
is to be done and who is going to do it. Moreover, planning is done by top
management which leads to reduction of creativity of other levels of
management.
(B) External Limitations
They are those limitations of planning which arises due to external factors
over which an organization has no control.

1. Changes in Government policies way leads to failure of planning.

2. Natural calamities such as flood, earthquake etc. also adversely affect
the success of planning.
3. Changes in the strategies of competitors also leads to failure of
planning many times.
4. Regular technological changes may affect planning.
5. Changes in the Economic and Social Conditions also reduces the
effectiveness of planning.
Planning Process
1. Setting Objectives:
– Objectives specify what the organization wants to achieve.
– Objectives can be set for the entire org. & stated to each dept. within
the org. very clearly, to determine how all depts. would contribute
towards overall objectives.
-Then these have to percolate down to all employees at all levels so that
they understand how their actions contribute to achieving objectives.
– E.g. Objective could be to achieve sales, expansion of business etc.
2. Developing Premises:
– Plans are made on the basis of some assumptions.
– These assumptions, which provide the basis for planning, are called
premises.
– All managers involved in planning should be familiar w/ them, cuz plans
are expected to operate & reach their destination subject to these. They
can be:
• Internal premises: Cost of products, capital, machinery, profitability etc.
• External premises: Changes in technology, population growth,
competition, govt. policies etc
3. Identifying Alternative Courses Of Action:
– After setting the objectives, managers make a list of alternatives
through which the org. can achieve its objectives as there can be many
ways to achieve the objectives & managers must know all of them.
– E.g. Sales could be increased through any of the following ways:
• By enhancing advertising expenditure
• Appointing salesmen for door-to-door sales
• By offering discounts
• By adding more product lines.
4. Evaluating Alternative Courses Of Action
– Positive & negative aspects of each &every proposal need to be
evaluated to determine their feasibility and consequences in the light of
each objective to be achieved.
– E.g. In financial plans, risk-return trade-off are imp. Riskier the
investment, higher the returns it is likely to give. To evaluate such
proposals, detailed calc. of earnings, taxes, earnings per share etc. should
be done.
5. Selecting The Best Alternative
– Real point of decision-making→ Best plan has to be adopted and
implemented.
– The ideal plan = most feasible, profitable and with least negative
consequences.
– Most plans may not be subjected to mathematical analysis. In such
cases, subjectivity & manager‘s experience, judgment and intuition are
important to select the most viable alternative.
– Sometimes a combination of plans may be selected instead of one best
course.
6. Implementing The Plan
– Concerned with putting the plan into action.
– For implementing the plans, managers start organizing & assembling
resources for it.
– E.g. If there is a plan to ↑ production, then more labour, more machinery
will be reqd. This step would also involve organizing for more labour and
purchase of machinery.
7. Follow Up Action
– This involves monitoring the plans and ensuring that activities are
performed according to the schedule.
– Whenever there are deviations from plans, immediate action has to be
taken to bring implementation according to the plan or make changes in
the plan.
TYPES OF PLAN
Plan
A Plan is a specific action proposed to help the organization achieve its
objectives. It is a document that outlines how goals are going to be met.
The importance of developing plans is evident from the fact that there
may be more than one means of reaching a particular goal. So with the
help of logical plans, objectives of an organization could be achieved
easily.
SINGLE USE PLAN
A Single use plan in a business refers to plan developed for a one-time
project or event that has one specific objective. It applies to activities that
do not reoccur or repeat. It is specifically designed to achieve a particular
goal. Such plan is developed to meet the needs of a unique situation. The
length of a single use plan differs greatly depending on the project in
question, as a single event plan may only last one day while a single
project may last one week or months. For example, an outline for an
advertising campaign. After the campaign runs its course, the short term
plan will lose its relevance except as a guide for creating future plans.

Types of Single Use Plan

1. Programme: A programme is a single use plan containing detailed
statements about project outlining the objectives, policies, procedures,
rules, tasks, physical and human resources required to implement any
course of action.
2. Budget: A budget is a statement of expected result expressed in
numerical terms for a definite period of time in the future.
STANDING PLANS
Standing plans are used over and over again because they focus on
organizational situations that occur repeatedly. They are usually made
once and retain their value over a period of years while undergoing
revisions and updates. That is why they are also called repeated use
plans. For example, Businessman plans to establish a new business
Entrepreneur drafts business plan before opening the doors to their
business, and they can use their plan to guide their efforts for years into
the future.

Types of Standing Plans

1. Objectives: Objectives are defined as ends for the achievement of
which an organization goes on working. They may be designed as the
desired future position that the management would like to reach. The first
and foremost step of the planning process is setting organizational
objectives. Examples increasing sales by 10%, Getting 20% return on
Investment etc. Objectives should be clear and achievable.
2. Strategy: Strategies refer to those plans which an organization
prepares to face various situations, threats and opportunities. When the
managers of an organization prepare a new strategy for the business it is
called internal strategy and when some strategies are prepared to
respond to the strategies of the competitors, then such strategies are
called external strategies. Examples, selection of the medium of
advertisement, selection of the channel of distribution etc.
3. Policy: Policies refers to the general guidelines which brings uniformity
in decision-making for achievement of organizational objectives. They
provide directions to the managers of an organization. They are flexible as
they may be changed as per requirement. Example, selling goods on cash
basis only, reserving some post for women in the organization.
4. Procedure: Procedures are those plans which determine the
sequential steps to carry out some work/activity. They indicate which work
is to be done in which sequence/way. They help in the performance of
work. Procedures are guides to action. Example: Process adopted in the
Selection of Employees.
5. Rule: Rules are specific statement that tell what is to be done and
whatnot to be done in a specified situation. They help in indicating which
points are to be kept in mind while performing task/work. Rules are rigid
which ensure discipline in the organization. Example : ‘No smoking in the
office premises’. Violation of rules may invite penalty.
6. Method: Methods are standardized ways or manners in which a
particular task has to be performed. There may be many ways/method of
completing a task but that method/way must be selected by which work
can be done early at the minimum possible cost. Methods are flexible.
Example, various methods of training are adopted by an organization to
train its employees like apprenticeship training, vestibule training etc.
Basis of
Single use Standing
Differenc
plans Plans
e

A standing
plans in a
A single use business
plans in a refers to
business plans
refers to developed
plans for using
1. developed over and
Meaning for a one over again
time project because
or event they focus
that has on
same organization
objective. al situations
that occur
repeatedly.

2. Single use Standing

Objectiv plans is plans
e developed however is
to carry out developed
a course of for activities
action that that occur
is not likely regularly
to be over a
 repeated in period of
future time. time.

Standing
Single use plans
plans generally
generally encompass
encompass a wider
a narrow scope
3. Scope
scope involving
targeting a more than
specific one
project or department
event. or business
function.

Standing
plans are
Single use
relatively
plans are
stable and
discarded
used over
4. when the
and over
Stability situation,
again with
project or
necessary
event is
modification
occur.
s or
updations.

Recruitment
Budget for and
Annual selection
5. General procedure
Example Meeting of for a
Shareholder particular
s. post in a
company.