What is Planning?
All of us have often heard from our elders when we spent money too much (in their view of course) that spending without keeping some left for the future could become a grave mistake. In simple single words, they imply that one must always plan and prepare for the future. Preparing oneself for what may happen in the future is an essential part of life. This is because life is unpredictable and there might just be something around that corner that can change your life immensely.
Planning to meet those non-predictable outcomes thus becomes pertinent. As in life, planning also plays an important role in any business. Planning can be understood as nothing short of the spine of business without which keeping steady and on the feet becomes next to impossible. Planning is one of the import sub-functions that a business invariably carries out through the process of management. The importance of planning as this management activity can never be understated and has to be truly understood. This article entails an effort to shed light on the process of Planning and bring out the advantages and disadvantages it poses.
Planning can be considered as the most important function of a manager and the entire top-level management in general. It is a broad process that involves deciding in advance what is to be done, where it is to be done, when it is to be done, how it is to be done and by whom it is to be done. It is an all-pervasive and fundamental function of management that involves looking ahead and preparing for the uncertain future.
It is that mental function of projecting a course of action for the future which seeks to achieve desired results for the business entity as a whole and each functional department making up the entity. All the other functions of management starting from organizing and staffing to controlling, coordinating and directing are done on the basis of the plans made through the planning function and it becomes absolutely pertinent that those functions reflect the planning function. It is a mental function that requires reflective-logical and critical thinking combined with innovation and imagination and innate quality of farsightedness
Planning is to be effectively distinguished from forecasting. Planning is a broader function that involves the process of forecasting. That is to say, planning includes forecasting whereas forecasting is not planning.
According to George. R. Terry- “Planning is the selecting and relating of facts and the making and using of assumptions regarding the future in the visualization and formulation of proposed activities believed necessary to achieve desired results“.
Thus planning is, quite simply put, a process that involves the collection and analysis of facts to make assumptions and premises for the future, based on which an action plan intended to achieve desired results is duly formulated.
Features of Planning
- The primacy of Planning: Planning is the first and foremost function of any management. It is the most basic and is the primary function, that has to be efficiently carried out no matter what. The efficiency of a management’s plan determines the efficiency of the management’s activity for the planned time period. All other functions revolve around the plan formulated through this process. Controlling especially is dependent on planning because it is invariably treated as an extension of the planning process and cannot exist without it. Planning develops the goals which guide the entire organization and this makes it the most important of all management functions.
- Planning is an Intellectual Process: Planning unlike the other functions of management is more of an intellectual process. All other processes draw its intellectual backing or logical backing from the plans formulated. That is to say, when staffing is done, the logic employed is whether the new recruit will fit into the plan. Hence as evident from the illustration, the other functions function on the logic of planning and requires only the application of the logic behind the plan. Planning which lays down this logic is thus the intellectual mental process. It involves many functions like weighing risks, analyzing trade-offs, predicting business environment changes etc. This thus requires a great degree of mental prowess and ability.
- Continuous: Planning is a continuous function that never ceases. Even after a plan is formulated for a time period, the function of planning still persists to make new plans for another period but primarily also for creating contingency plans if something goes wrong. This is required because businesses subsist in a dynamic ever-changing environment and hence flexibility with such changes is required which can only be facilitated by sub-plans, contingency plans, etc.
- Pervasiveness: Planning even though predominantly understood to be a function of top-level management is a pervasive function. The top-level management develops plans for the organization as a whole, whereas the department manager makes plans for his department and a supervisor makes plans for the set of employees under him. In this manner planning is done at all levels, making it pervasive.
Importance of Planning
1. Formulation of Concrete Goals: Formulating concrete goals is the primary objective of planning. Planning by collecting and analyzing facts determines goals that have to be met to earn profits and to develop and expand the business. These goals so formulated is concrete and remains unchanged as long as the predicated environment complies with the actual environment that materializes. This formulation becomes important when it is brought to the notice of the employees, who will then work to achieve the said goal, making every task and operation goal-oriented.
2. Basis of Controlling and other functions: Planning acts as the basis of Controlling. Controlling as a management function can be simply understood as ensuring that activities are in compliance with the plan. Hence if there is no plan, there is no control. Without planning and subsequent controlling there is no goal-oriented work and without such goal-oriented uniform work, business profits becomes minimal.
Even though other functions are not as dependent as controlling, all of them to derive their basis for functioning from the plan for the set period. For instance, organizing resources has to be done keeping in mind the requisite resources for carrying out the work.
3. The economy in Operations: Planning plays a key role in ensuring that the management is not wasteful nor minimal in using resources. By clearly laying down what is to be done, planning ensures that an optimal amount can be allocated and determined as per the plan. This is important because the cost of wasteful resources or loss of profits due to minimal employment of resources can be easily avoided.
4. Helps in providing for risks: Risks refer to uncertain future losses. Planning as a major management function entails the provision of providing for these risks by anticipating and expecting them. Such prediction can assist in preparing for it by way of methods such as Insurance, Surety, etc.
Limitations of Planning
1. The futility of Predictions: It is an admitted fact that the future is not predictable. Only assumptions can be made about the future and these assumptions more often than not do prove to be sufficiently accurate. But in some cases, these predictions can prove completely futile because of a sudden change in a factor or because of a wrong analysis of a fact etc. This makes planning a process limited to the efficiency of assumptions and predictions.
2. Time and Cost: Planning can be a process that can be severely limited by time and cost. Planning as a process cannot take forever to be discharged, it has to be discharged within a set time period. When the process to be planned is complex and multi-faceted than the shortage of time or a particular contingency facilitating the need to change directions of the plan within a short time, can severely hamper the efficiency of the process.
Besides, planning being an extensive process adds to the cost immensely. It is an extensive process that starts with the collection of relevant data to employing specialized efficient managers to utilize this data. This costs associated with efficient planning acts as a dissuading factor to firms with limited resources.
3. Resistance to Change: Planning is a process that has to necessarily adapt to changing times. Plans are formulated by taking to factors of change and may require the business to drastically change its course. However businesses because of its various rigid and embedded policies and procedures, along with its employees, because of their beliefs, philosophies and mentality, are more often than not resistant to these proposed changes.
Being resistant severely limits the scope of the proposed plan and its functioning. Reforming these policies and making behavioral changes thus has to become a factor in planning itself and requires considerable commitment drawing away attention from the external actions that have to be planned.
4. Limited Capital: The capital of a firm determines the scope of planning. If the capital available is limited, then the planning process also becomes restricted because there is no point in making elaborate plans.
5. External Constraints: Planning as is implicit from the account given here depends on both external and internal environments. The external environment which is equally important to the planning process may put forth multiple constraints such as a sudden change in labor law or tax rates or a strike by a labor union etc. Thus planning for this and also all the above-cited reasons is not a perfect process.