Nature and Characteristics of Planning
1. Intellectual Process:
Planning is an intellectual and rational process. Planning is a mental exercise involving imagination, foresight and sound judgement. It requires a mental disposition of thinking before’ acting in the light of facts rather than guess. The quality of planning depends upon the abilities of the managers who are required to collect all relevant facts, analyse and interpret them in a correct way.
How far into the future a manager can see and with how much clarity he will depend on his intellectual calibre, are chalked out through planning process. In thinking of objectives, alternative courses of action and, above all, in making decision for choosing certain alternatives, the planner goes through an intellectual process.
2. Goal-orientation:
All planning is linked up with certain goals and objectives. It follows, therefore, that every plan must contribute in some positive way to the accomplishment of group objectives. Planning has no meaning without being related to goals and objectives. It must bridge the gap between where we are and where we want to go at the minimum cost.
3. Primary Function:
Planning is said to be the most basic and primary function of management. It occupies first place and precedes all other functions of management which are designed to attain the goals set under planning. This is so because the manager decides upon the policies, procedures, programmes, projects, etc. before proceeding with the work. The other functions of management—organising, direction, co-ordination and control—can be performed only after the manager has formulated the necessary planning.
4. Pervasiveness:
Planning pervades all managerial activities. It is the job of all managers in all types of organisation. It is undertaken at all segments and levels of the organisation—from the general manager to the foreman. Whatever be the nature of activity, management starts with planning. The character and breadth of planning will, of course, vary from one job to another—depending on the level of management.
5. Uniformity:
There may be separate plans prepared in different levels in the organisation, but all the sub-plans must be united with the general plan so as to make up a comprehensive plan for operation at a time. So, uniformity must be there in all levels of planning to match the general plan.
6. Continuity:
To keep the enterprise as a going concern without any break, it is essential that planning must be a continuous process. So, the first plan must follow the second plan and the second plan the third and so on in never-ending series in quick succession.
7. Flexibility:
Plans should not be made rigid. It should be as flexible as possible to accommodate all possible changes in the enterprise with a view to coping with the changing conditions in the market. In fact, planning is a dynamic activity.
8. Simplicity:
The language of the work schedule or programme in the planning should be simple so that each and every part of it may easily be understood by the employees at different levels, specially at the lower level.
9. Precision:
Precision is the soul of planning. This gives the planning exact, definite, and accurate meaning in its scope and content. Any mistake or error in planning is sure to upset other functions of management and, thus, precision is of utmost importance in every kind of planning.
10. Feasibility:
Planning is neither poetry nor philosophy. It is based on facts and experience, and thereby realistic in nature. It represents a programme which is possible to execute with more or less existing resources.
11. Choice among Alternative Courses:
Planning involves selection of suitable course of action from several alternatives. If there is only one way of doing something there is no need of planning. Planning has to find out several alternatives, estimate the feasibility and profitability of the different alternatives, and to choose the best one out of them.
12. Efficiency:
Planning is directed towards efficiency. A plan is a course of action that shows promise of optimizing return at the minimum expense of inputs. In planning, the manager evaluates the alternatives on the basis of efficiency. A good plan should not only attain optimum relationship between output and input but should also bring the greatest satisfaction to those who are responsible for its implementation.
13. Inter-dependence:
The different departments may formulate different plans and programmes for their integration in the overall planning. But sectional plans cannot but be inter-dependent. For example, production planning depends upon sales planning—and vice versa.
Again, planning for purchase of raw materials, employment of labour, etc. cannot be an isolated act apart from sales planning and production planning. Planning is a structured process and different plans constitute a hierarchy. Different plans are inter-dependent and inter-related. Every lower-level plan serves as a means towards the end of higher plans.
14. Forecasting:
Above all, no planning can proceed without forecasting—which means assessing the future and making provision for it. Planning is the synthesis of various forecasts—short-term or long-term, special or otherwise. They all merge into a single programme and act as a guide for the whole concern.
The Types of Plans
Operational Planning
“Operational plans are about how things need to happen,” motivational leadership speaker Mack Story said at LinkedIn. “Guidelines of how to accomplish the mission are set.”
This type of planning typically describes the day-to-day running of the company. Operational plans are often described as single use plans or ongoing plans. Single use plans are created for events and activities with a single occurrence (such as a single marketing campaign). Ongoing plans include policies for approaching problems, rules for specific regulations and procedures for a step-by-step process for accomplishing particular objectives.
Strategic Planning
“Strategic plans are all about why things need to happen,” Story said. “It’s big picture, long-term thinking. It starts at the highest level with defining a mission and casting a vision.”
Strategic planning includes a high-level overview of the entire business. It’s the foundational basis of the organization and will dictate long-term decisions. The scope of strategic planning can be anywhere from the next two years to the next 10 years. Important components of a strategic plan are vision, mission and values.
Tactical Planning
“Tactical plans are about what is going to happen,” Story said. “Basically at the tactical level, there are many focused, specific, and short-term plans, where the actual work is being done, that support the high-level strategic plans.”
Tactical planning supports strategic planning. It includes tactics that the organization plans to use to achieve what’s outlined in the strategic plan. Often, the scope is less than one year and breaks down the strategic plan into actionable chunks. Tactical planning is different from operational planning in that tactical plans ask specific questions about what needs to happen to accomplish a strategic goal; operational plans ask how the organization will generally do something to accomplish the company’s mission.
8 Main Steps Involved in Planning Process (VVVI)
Step # 1. Perception of Opportunities:
Perception of opportunities is not strictly a part of the planning process. But this awareness of opportunities in the external environment as well as within the organisation is the real starting point for planning. It is important to take a preliminary look at possible future opportunities and see them clearly and completely.
All managers should know where they stand in the light of their strengths and weaknesses, understand the problems they wish to solve and know what they gain. Setting objectives depends on the awareness. Planning requires realistic diagnosis of the opportunity situation.
Step # 2. Establishing Objectives:
Organisational objectives give direction to the major plans, which by reflecting these objectives define the objective of every major department. Major objectives, in turn, control the objectives of subordinate departments and so on down the line. In other words, objectives from a hierarchy.
The objectives of lesser departments will be more accurate if subdivision managers understand the overall enterprise objectives and the derivative goals. Managers should also have the opportunity to contribute their ideal to setting their own goals and those of the organisation.
Step # 3. Planning Premises:
After determination of organisational objectives, the next step is establishing planning premises that is the conditions under which planning activities will be undertaken. Planning premises are planning assumptions the expected environmental and internal conditions.
The nature of planning premises differs at different levels of planning. At the top level, it is mostly externally focused. As one moves down the organisational hierarchy the composition of planning premises changes from external to internal. The major plans both old and new will materially affect the future against which the managers at lower units must plan.
Step # 4. Identification of Alternatives:
The fourth step in planning is to identify the alternatives. Various alternatives can be identified based on the organisational objectives and planning premises. The concept of various alternatives suggests that a particular objective can be achieved through various actions.
For example, if an organisation has set its objectives to grow further, it can be achieved in several ways like expanding in the same Field of business or product line diversifying in other areas, joining hands with other organisations, or taking over another organisation and so on. Within each category, there may be several alternatives.
The most common problem is not finding alternatives but reducing the number of alternatives so that the most promising may be analysed. Even with mathematical techniques and the computer, there is a limit to the number of alternatives that can be thoroughly examined. The planner must usually make a preliminary examination to discover the most fruitful possibilities.
Step # 5. Evaluation of Alternatives:
The various alternative course of action should be analysed in the light of premises and goals. There are various techniques available to evaluate alternatives. The evaluation is to be done in the light of various factors. Example, cash inflow and outflow, risks, limited resources, expected pay back etc., the alternatives should give us the best chance of meeting our goals at the lowest cost and highest profit.
Step # 6. Choice of Alternative Plans:
This is the real point of decision-making. An analysis and evaluation of alternative courses will disclose that two or more .ire advisable and beneficial. The fit one is selected.
Step # 7. Formulation of Supporting Plan:
After formulating the basic plan, various plan are derived so as to support the main plan. In an organisation there can be various derivative plans like planning for buying equipment, buying raw materials, recruiting and training personal, developing new product etc. These derivative plans are formulated out of the basic or main plan and almost invariably required to support the basic plan.
Step # 8. Establishing Sequence of Activities:
After formulating basic and derivative plans, the sequence of activities is determined so those plans are put into action. After decisions are made and plans are set, budgets for various periods and divisions can be prepared to give plans more concrete meaning for implementation.
The overall budgets of an enterprise represent the sum total of income and expenses, with resultant profit or surplus, and budgets of major balance sheet items such as cash and capital expenditures. Each department or programme of a business or 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 together the various plans and also set important standards against which planning progress can be measured.
Importance of Planning
- Increases efficiency: Planning makes optimum utilization of all available resources. It helps to reduce wastage of valuable resources and avoids their duplication. It aims to give the highest returns at the lowest possible cost. It thus increases the overall efficiency.
- Reduces business-related risks: There are many risks involved in any modern business. Planning helps to forecast these business-related risks. It also helps to take the necessary precautions to avoid these risks and prepare for future uncertainties in advance. Thus, it reduces business risks.
- Facilitates proper coordination: Often, the plans of all departments of an organization are well coordinated with each other. Similarly, the short-term, medium-term and long-term plans of an organization are also coordinated with each other. Such proper coordination is possible only because of efficient planning.
- Aids in Organizing: Organizing means to bring together all available resources, i.e. 6 Ms. Organizing is not possible without planning. It is so, since, planning tells us the amount of resources required and when are they needed. It means that planning aids in organizing in an efficient way.
- Gives right direction: Direction means to give proper information, accurate instructions and useful guidance to the subordinates. It is impossible without planning. It is because planning tells us what to do, how to do it and when to do it. Therefore, planning helps to give a right direction.
- Keeps good control: With control, the actual performance of an employee is compared with the plans, and deviations (if any) are found out and corrected. It is impossible to achieve such a control without right planning. Therefore, planning becomes necessary to keep a good control.
- Helps to achieve objectives: Every organization has certain objectives or targets. It keeps working hard to fulfill these goals. Planning helps an organization to achieve these aims, but with some ease and promptness. Planning also helps an organization to avoid doing some random (done by chance) activities.
- Motivates personnel: A good plan provides various financial and non-financial incentives to both managers and employees. These incentives motivate them to work hard and achieve the objectives of the organization. Thus, planning through various incentives helps to motivate the personnel of an organization.
- Encourages creativity and innovation: Planning helps managers to express their creativity and innovation. It brings satisfaction to the managers and eventually success to the organization.
- Helps in decision-making: A manager makes many different plans. Then the manager selects or chooses the best of all available strategies. Making a selection or choosing something means to take a decision. So, decision-making is facilitated by planning.
Therefore, planning is necessary for effective and efficient functioning of every organization irrespective of its size, type and objectives.