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Concept of Planning

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Concept of Planning

• Planning is the most basic managerial function and is all-


encompassing in nature. All other functions of management are
largely dependent on the effectiveness of planning. The other
functions become meaningless without planning.
• Being the primary and basic managerial function, planning also
guides and motivates people to achieve results.
• Planning involves deciding the future course of action in advance.
A manager has to plan what is to be done, where, how, and by
whom to achieve some decided goals.
• Planning helps the manager to understand in advance the future
activities that need to be performed to achieve the desired results
for the organization as a whole and also for each department.
• Effective planning requires not only assessing the future but also
making adequate provision to face the future. From this
perspective, planning is a rational approach to the future.
• Managers are, therefore, required to plan and initiate necessary
actions for successful implementation of their plans.
• At the organizational level, planning is done by choosing from
different alternatives. Proper study of alternatives facilitates
correct courses of actions that are less prone to risks, based on
which organizations take decisions.
• Through planning, managers can minimize the risk of decisional
errors.
• Planning requires consideration of objectives, facts and forecasts. It
is also useful to every hierarchical level of an organization.
• The planning process involves choosing the best course of action
from different alternatives, and it has to be implemented by all
people, irrespective of their hierarchical level.

Importance/ Significance of Planning


• Since planning is one of the primary functions of management, it
provides the framework within which organizing, staffing,
directing and controlling are undertaken.
• The enormous importance of planning is understood in the context
of its dynamic equation with other management functions and also
with the organization’s objectives.
a) Planning clarifies the objectives of the organization: In planning,
the first stage is the deliberate statement of organizational and
departmental objectives.
• The statement of objectives helps employees to visualize the
organization in its entirety and see how their actions contribute to
its ultimate goals.
• Since objectives represent end points of planning, management
should be prepared to face the future and revise its plans in the
light of possible changes so that goals can be accomplished more
effectively.
b) Planning economizes operations: Planning is done considering the
factors of economy and efficiency in operations.
• It improves the effectiveness of all other functions of management
and also helps to secure coordinated efforts throughout the
organization.
• It facilitates choice of the best method and also helps to identify
alternatives expected to produce the desired results with minimum
cost and risk.
c) Planning precedes control: Control ensures that everything
conforms to one’s plans.
• Planning is, therefore, an important prerequisite for control.
• The management function of control seeks to check
performance against a predetermined standard of projected
courses of action established through planning process, and in
this process control ensures conformance to plans.
c) Planning provides for the future: Planning, by definition,
means providing for the future and deciding the course of action.
• During the planning process itself, organizations need to look
to the future and discover suitable alternative course of action.
• Depending on the quality of prediction, managers can have a
relatively realistic idea of the future and chalk out suitable
programmes of action.
• As a rational approach, it provides for unexpected events and
can, accordingly, enable the management to prepare against
any eventual and undesirable change.
d) Planning increases the efficiency of all managerial
functions: Planning, organizing, staffing, directing and
controlling together contribute to the accomplishment of
organizational, departmental and group goals.
• Since planning is the primary function and precedes all other
functions, effective plans can increase the efficiency of all other
managerial functions.

Limitations of Planning
• Even though planning is all-pervasive and a primary function of
management, it is subject to certain limitations. Awareness of these
may improve the efficiency of planning. The limitations are:
a) Planning premises may be wrong: The premises of planning are
the basis and framework for any decision. Understanding the planning
premises with absolute accuracy is impossible. There always exists
some margin of error that may vitiate the plans.
b) Rapidity of change: Every organization operates in the context of a
certain internal and external environment. The environment cannot be
always stable. Thus, the extent of change in the internal and external
environment creates various situations of instability, making the
planning job extremely difficult.
c) Time and Cost Constraints: Every organization has to plan within
given time and cost constraints. Such constraints stand against the
efficiency of planning.
• Non-availability of time and resources may compel the
organization to settle for the most convenient business plan.
d) Planning may limit new ideas: New ideas or innovations in
planning may not be encouraged because of the traditional mind-sets
of people. If the vision and philosophy of the organization are not
progressive, it may limit the planning initiative of the management.
e) Capital Investment Constraint: Capital investment in a business,
in the form of both equipment and employees (investment in
training), often limits the planning initiative.
f) Lack of control over external factors: Some external factors may
seriously impede the process of planning e.g. a sudden change in the
government policies, union pressure for a wage hike, war,
international policies etc.

Components/Elements of Planning (Types of Plans)


• Planning components/elements are usually classified as policies,
procedures, rules, programmes, missions or purposes, objectives or
goals, budgets and strategies.
1) Vision: A vision consists of the organization’s intentions that are
all-inclusive and forward-thinking.
• It is the driving force of the organization. A vision has certain
characteristics:
i) It describes aspirations for the future.
ii) It does not specify the means that are used to achieve the
desired ends.
iii) It must be inspirational.
iv) It is often unwritten.
v) It must be communicated.
• Communication of a vision can be done in two ways: a) in the
form of a mission statement and b) through personal selling.

2) Mission or Purpose: A vision in tangible form is a mission


statement. Therefore, a mission statement verbalizes the vision.
• A mission statement attempts to answer the issues like basic
purpose of an organization; distinctiveness of the
organization; principal customers and key market segments;
principal goods and services; basic beliefs, values aspirations,
and philosophical priorities of the firm.
• The mission or purpose identifies the basic purpose or
function or tasks of an enterprise or any part of it. Every
organization has or at least should have a meaningful mission.

3) Goals or Objectives: A mission statement tries to make a


vision more specific, while goals are attempts to make a mission
statement more concrete.
• Objectives are the operational definitions of goals. They
describe what organizations hope to accomplish in specific
measurable terms within a given time frame.
• Objectives or goals are the ends toward which activity is
aimed. They represent not only the end point of planning but
also the end toward which organizing, staffing, leading, and
controlling are aimed.
• The top management of an organization decides the overall
objectives, which then cascades to divisional, departmental,
and individual employee-level objectives.
4) Strategies: A strategy is a proposed course of action to exert a far-
reaching impact on the ability of the enterprise to attain its goals.
• Strategy is defined as the determination of the basic long-term
objectives of an enterprise and adoption of courses of action and
allocation of resources necessary to achieve these goals.
• Strategy is the long-term direction and scope of an organization,
matching its resources to its changing environment and in
particular its markets, customers or clients to meet stakeholders’
expectations.
5) Policies: A policy is a predetermined and established guideline
aimed towards the attainment of accepted goals and objectives. Such
guidelines help to accomplish the strategic intent through properly
designed efforts.
• Policies also are plans in that they are general statements or
understandings that guide or channel thinking in decision making.
• Policies define an area within which a decision is to be made and
ensure that the decision will be consistent with and contribute to an
objective.
• Policies should not be interpreted as strategies or tactics.
6) Procedures: Procedures are plans that establish a required
method of handling future activities.
• They are guides to action, rather than to thinking, and they
detail the exact manner in which certain activities must be
accomplished.
7) Rules: Rules spell out specific required actions or non-
actions, allowing no discretion. They usually the simplest type of
plan.
8) Programmes: A programme consists of the entire broad
course of action governing employees at all levels (including
management) in an organization.
• Programmes are also a complex of goals, policies, procedures,
rules, task assignments, steps to be taken, resources to be
employed, and other elements necessary to carry out a given
course of action; they are ordinarily supported by budgets.
9) Budgets: A budget is a statement of expected results
expressed in numerical terms. A budget may be expressed in
financial terms; in terms of labour-hours, units of product, or
machine-hours; or in any other numerically measurable terms.
• Budgeting is the formulation of plans for a given future period in
numerical terms. It is a statement of anticipated results in financial
terms (as in revenue and expense, and capital budgets) or in non-
financial terms (as in budgets of direct labour hours, materials,
physical sales volume, or units of production).

Steps in Planning
• The steps of planning are detailed as follow:
1) Being aware of opportunities: Although it precedes actual
planning and not strictly a part of the planning process, an awareness
of opportunities in the external as well as within the organization is
the real starting point for planning.
• All managers should take a preliminary look at possible future
opportunities and see them clearly and completely.
• Setting realistic objectives depends on this awareness as planning
requires a realistic diagnosis of the opportunity situation.
2) Establishing objectives: The second step in planning is to establish
objectives for the entire enterprise and then for each subordinate work
unit. This is to be done for long-term as well as for short-term range.
• Objectives specify the expected results and indicates the end points
of what is to be done, where the primary emphasis is to be placed
and what is to be accomplished by the network of strategies,
policies, procedures, rules, budgets and programs
• Enterprise objectives give direction to the major plans, which, by
reflecting these objectives, define the objectives of every major
department. Major departmental objectives, in turn, control the
objectives of subordinate departments, and so on down the line.
• Managers should also have the opportunity to contribute ideas for
setting their own goals and those of the enterprise.
3) Developing premises: The next logical step in planning is to
establish, circulate, and obtain agreement to utilize critical planning
premises such as forecasts, applicable basic policies, and existing
company plans.
• Premises are assumptions about the environment in which the plan
is to be carried out. It is important for all managers involved in
planning to agree on the premises.
4) Determining alternative courses: The fourth step in planning is to
search for and examine alternative courses of action, especially those
not immediately apparent.
• The more common problem is not finding alternatives but reducing
the number of alternatives so that the most promising may be
analysed.
• The planner must usually make a preliminary examination to
discover the most fruitful possibilities.
5) Evaluating the alternative courses: After seeking out alternate
courses and examining their strong and weak points, the next step is
to evaluate the alternatives by weighing them in light of premises and
goals.
• One course may appear to be the most profitable but may require a
large cash outlay and have a slow payback; another may look less
profitable but may involve less risk; still another may better suit
the company’s long-range objectives.
• There are so many alternative courses in most situations and so
many variables and limitations to be considered that evaluation can
be exceedingly difficult. Due to these complexities, the newer
methodologies, applications and analysis should be considered.
6) Selecting a course: This is the point at which the plan is adopted-
the real point of decision-making.
• Occasionally, an analysis and evaluation of alternative courses
will disclose that two or more are advisable, and the manager
may decide to follow several courses rather than the one best
course.
7) Formulating Derivative/Supporting Plans: When a decision is
made, planning is seldom complete, and a seventh step is indicated.
Derivative plans are almost invariably required to support the basic
plan.
8) Quantifying Plans by Budgeting: After decisions are made and
plans are set, the final step in giving them meaning is to quantify
them by converting them into budgets.
• The overall budget of an enterprise represents the sum total of
income and expenses, with resultant profit or surplus, and the
budgets of major balance sheet items such as cash and capital
expenditures.
• Each department or program of a business or some other
enterprise can have its own budgets, usually of expenses and
capital expenditures, which tie into the overall budget.
• If done well, budgets become a means of adding the various plans
and set important standards against which planning progress can be
measured.
*** Key Result Areas (KRAs): Key Result Areas are the areas in
which performance is essential for the success of the enterprise. Such
individual employee-level objectives so called KRAs become the
basis for performance evaluation.
*** Management By Objectives (MBO): MBO is a comprehensive
managerial system that integrates may key managerial activities in a
systematic manner and is consciously directed toward the effective
and efficient achievement of organizational and individual objectives.
Delegation of Authority
• Delegation of Authority means division of authority and powers
downwards to the subordinates. Delegation is about entrusting
someone else to do part of a superior’s job.
• It can be defined as subdivision and sub-allocation of powers to the
subordinates in order to achieve effective results.
• No organization is possible without delegation because it would
then imply the non-existence of subordinates in the organization
and one man doing everything.
• While establishing the organization structure, the managers must
group activities, assign them to different individuals in the
organization, and delegate authority necessary for their effective
and efficient functioning to achieve the mission of the enterprise.
Authority is delegated when a superior gives a subordinate
discretion to make decisions.

Essential Elements of Effective/Good Planning


1) Effective and strategic planning process: Effective planning
requires a strategic planning process, and that process must be
structured and disciplined in order to be efficient one. Without a
process the planning techniques will be awkward, inefficient and
often insufficient.
2) Dynamic and adaptable planning: In terms of effective planning,
dynamic means that plans are adaptable in two ways. First, the act of
effective planning considers the current and the predicted
environment and adapts the plan accordingly. Second, in the strategic
planning process, plans must be devised in such a way so that they are
not overly detailed. Effective planning ensures that plans can adapt to
changes that occur while the plans are being executed.
3) Effective planning requires learning from experiences: A
complex and rapidly changing environment demands the ability to
rapidly learn from the changes in that environment. Good
organizational planning requires sophisticated and effective planning
techniques that the organization learns continually, through
interaction with its environment and the execution of its plans.
4) Means to Achieve/Course of Action: The central element of all
effective planning techniques is the course of action.
• These are the actual tasks that must be completed, whether in
parallel, in series, or a combination of both to achieve the goal.
5) Individual accountability: The scope and detail of effective
planning is concluded when each task within a course of action is
assigned to a single individual, not a team, to complete. Without
individual accountability to each task and each plan, there is a
significant risk of miscommunication, misunderstanding and
ultimately failure.
6) Consideration of Resources: Resources are considered at every
level of effective planning. Furthermore, the assessment of objectives,
threats and resources are critical steps in every strategic planning
process.
7) The most effective plans are simple: The more complex a plan, the
more likely it will fail. The effective planning process remains simple
in nature. Simplicity is not just about minimizing the number of tasks,
it’s about making sure that each task is clearly defined through
answering simple questions ‘who will do what and when”
Centralisation and Decentralisation
• Centralization refers to the hierarchical level within an
organization that has authority to make decisions. When decision
making is kept at the top level, the organization is centralized.
• Centralization is the process by which the activities of an
organization, particularly those regarding planning and decision
making, become concentrated within a particular geographical
location group.
• Decentralization is the process by which the activities of an
organization, particularly those regarding planning and decision
making, are distributed or delegated away from a central
authoritative location or group.
• It is the process of distributing or dispersing functions, powers,
people or things away from a central location or authority to
middle and lower level managers within the organization.
Span of Control: Span of control refers to the number of
subordinates a supervisor has i.e. the number of subordinates
controlled directly by a superior.
Power: It is the ability of individuals or groups to induce or
influence the beliefs or actions of other persons or groups.
Authority: Authority in organization is the right in a position (
and through it, the right of the person occupying the position) to
exercise discretion in making decisions affecting others.

Formal and Informal organization


• Formal organization means the intentional structure of roles in
a formally organized enterprise. It is an organization with a
fixed set of rules of intra-organization procedures and
structures.
• Informal organization is a network of interpersonal
relationships that arise when people associate with each other.
It is the interlocking social structure that governs how people
work together in practice.
Line and Staff relationship
• Line functions are those that have a direct influence on
accomplishing the objectives of an organization.
• Staff functions help the line to work effectively to accomplish
organizational objectives.
• Different authority relationships basically revolve around line and
staff relationships.
• Based on the nature of organization, such categorization of line and
staff functions varies. In a manufacturing organization, production
and sales are considered as line functions, and finance, purchase,
personnel, maintenance, quality control etc. are classified as staff
functions.
• Line and staff functions are defined on the basis of two viewpoints:
functional viewpoint and authority relationships viewpoint.
• Allen defined line functions as ‘those which have direct
responsibility for accomplishing the objectives of the enterprise’
and staff functions as ‘those elements of the organization that help
the line to work more effectively in accomplishing the primary
objectives of the enterprise’.
• Since organizational objectives determine the line and staff
functions, any change in objectives may result in changes in the
line and staff functions.
• Line and staff managers are expected to work harmoniously to
achieve organizational goals.

Problems/Conflicts encountered in Line and Staff relationship


a) Lack of accountability: Line managers generally perceive that
staff managers are not accountable for their actions. Such lack of
accountability on the part of staff can cause neglect of the overall
organizational objectives. Staff managers are quick to take credit for
achieving results that have come through because of the efforts of the
line managers. These are the basic causes of conflicts between the line
and staff.
b) Encroachment on line authority: Line managers often allege that
staff managers encroach upon their authority by giving
recommendations on matters that are outside their purview. Such
encroachment influences the working of their department and often
leads to hostility, resentment, and reluctance to accept staff
recommendations.
c) Lack of proper authority: The staff often alleges that despite
having the best solutions to the problems in their areas of
specialization, they fail to contribute to organizational goals due to
lack of authority.
d) Dilution of authority: Staff managers often dilute the authority
of line managers and also belittle the latter’s responsibility.
e) Lack of proper use of the staff: The staff alleges that line
managers often take decisions without any input from the staff. The
line just informs the staff after taking decisions and the staff is
made responsible if anything goes wrong.
f) Resistance to new ideas: Line mangers often resist new ideas
from the staff. Such rigidity of line managers dissuades the staff
from implementing new ideas in the organization and this adds to
their frustration.
g) Different backgrounds: Line people are senior to staff in terms
of organizational hierarchy and levels. Staff people are relatively
young and better educated. Some of them may even look down on
the line which creates mistrust between the line and staff.
h) Lack of demarcation between the line and staff authority: In
practice, it is difficult to make a distinction between the line and
staff authority. Overlapping and duplication of work create a gap
between authority and responsibility of line and staff. Each tries
to shift the blame to the other.
i) Lack of proper understanding of authority: Failure to
understand authority causes misunderstandings between the line
and the staff. This leads to encroachment and creates conflict.

Features of a Good Organization Structure


a) Simplicity: An organization structure should be basically
simple. It implies that the structure should have the simplest
possible framework which will fulfil the purposes intended with
due emphasis on economical and effective means of
accomplishing the objective of the enterprise.
b) Flexibility and continuity: The organizer should build the
structure not for today or tomorrow, but for the distant future. As
such continuity must be maintained in the organization structure
over the period of time with flexible changes in the structure.
c) Clear line of authority: Whatever the form of structure is
adopted, there should be clear lines of authority running from top
to bottom or in horizontal directions. It implies that one should be
very clear about what he is expected to achieve or contribute and
what relationships should be maintained by him at his official level.
d) Application of ultimate authority: Although a superior manager
assigns some of the work to his subordinates, he is ultimately
responsible for the accomplishment of the total work as well as for
the work performed by his subordinates.
e) Proper Delegation of authority: The concept of ultimate
authority will be effective only when there is proper delegation of
authority at various levels of the organization.
f) Unity of command and direction: The principles of unity of
command and direction should be followed. Unity of command
suggests that one person should receive orders and instructions
from one superior only while unity of direction means one plan one
man.
g) Minimum possible Managerial levels: As far as possible, there
should be minimum managerial levels. Greater the number of levels,
longer is the line of communication in the chain of command creating
problems of delay and distortion.
h) Proper emphasis on staff: Line functions should be separated from
staff functions and adequate emphasis should be placed on important
staff activities.
Qualities of a Manager
1) A manager should be creative and innovative in taking up tasks.
2) A manager should know how to work within an organizational
structure.
3) A manager should be a knowledgeable one.
4) A manager should be committed to the success of a project.
5) Flexibility and versatility are valuable qualities in a manager.
6) A manager should be able to lead and guide the subordinates.

***Scalar Chain: The scalar chain is the chain of supervisors ranging


from the ultimate authority to the lowest rank. An employee should
feel free to contact his supervisor through the scalar chain.
• Every order, message, request, instruction or explanation has to
pass through the scalar chain.
• This path shows a company’s line of authority and the links
through which communications are transmitted from the top to the
bottom of a company and back.

Staffing
• The managerial function of staffing is defined as filling, and
keeping filled, positions in the organization structure.
• This is done by identifying workforce requirements, inventorying
the people available, and recruiting, selecting, placing, promoting,
appraising, planning the careers of, compensating, and training or
otherwise developing both candidates and current job holders so
that they can accomplish their tasks effectively and efficiently.
• It is clear that staffing must be closely linked to organizing, that is,
setting up of intentional structures of roles and positions.
• Staffing affects leading and controlling i.e. proper staffing
facilitates leading and selecting quality managers affects
controlling by preventing many undesirable deviations from
becoming major problems.
• Staffing requires an open system approach. It is carried out within
the enterprise which in turn is linked to the external environment.
• Recruitment, Selection, Induction and Placement altogether form
the staffing function.
*** Recruitment: Recruitment is the process of discovering sources of
the workforce to meet the requirements or the staffing schedule of an
organization and employing effective measures for attracting that
workforce in adequate numbers to facilitate the selection of an
efficient workforce.
• Thus, recruiting involves attracting candidates to fill the positions in
the organization structure.
*** Selection: Selecting a manager is choosing from among the
candidates the one who best meets the position requirements. Since the
selection may be for a specific job opening or for future managerial
requirements, there are two approaches to filling organizational
positions- selection approach and placement approach.
*** Induction: Induction or orientation programme of an organization
is a process to guide and counsel the employees to familiarize them
with the job and the organization. It involves the introduction of new
employees to the enterprise- its functions, tasks, and people.
Decision making process
• Decision making is the process of making choices by
identifying a decision, gathering information, and assessing
alternative resolutions.
• Using a step-by-step decision making process can help a
manager make more deliberate, thoughtful decisions by
organizing relevant information and defining alternatives. The
steps of decision making process are:
1) Identifying the decision/goal: A manager realizes that he
needs to make a decision. He needs to clearly define the nature
of the decision he would make. This first step is very important.
2) Gathering relevant information: The manager needs to
collect some pertinent information before he makes his decision-
what information is needed, and how to get it. This step involves
both the external and external sources of information.
3) Identification of alternatives: As the manager collects
information, he would probably identify several possible paths
of action or alternatives. In this step, he would list all possible
and desirable alternatives.
4) Weighing and Evaluation of alternatives: A manager
would weigh the alternatives during the evaluation of the
alternatives to meet or resolve the need or goal identified
in the step-I through the use of each alternative.
5) Choosing among alternatives: Once the manager hs
weigh all the alternatives, he is ready to select the
alternative that seems to be best one for him. He may even
choose a combination of alternatives.
6) Taking decision for implementation: The manager is
ready to take some positive action by beginning to
implement the alternative he chose.
7) Reviewing the decision and its consequences: In this
final step, the manager needs to consider the results of his
decision whether or not it has met or resolved the need or
goal identified in the first step. If the decision has not met
the identified need, he needs to repeat certain steps of the
process to make a new decision.

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