Planning- Process, Techniques & Limitations
Process and Techniques of Planning
The most sequential steps in the planning process are as below.
Analysis of organizational environment:
Before the actual planning starts with, the management must carefully analyse the external and internal environment prevailing in the region/country and the resources of the organization. The external environment covers various elements like socio-economic conditions political set-up government rules and regulations, competition in the industry etc., which have no direct control by the business. However, it is actually an exercise leading to planning. Awareness of such factors is very important for planning process. An analysis for internal factors will give an exact idea about the strengths and weakness of the enterprise. Plans policies strategies, budgets, etc., are to be adjusted according to internal resources of the organization relating to men, machines, materials, technology, finance, etc.
Determination of objectives:
The next step in the planning process is the determination of planning objectives. The organizational objectives must be spelled out in key areas of operations and should be divided according to various departments. The objectives must be clearly specified and measurable as far as possible. A well defined objective can make the difference between success and failure of an enterprise.
Developing of forecasts and future conditions:
Planning premises are actually assumptions that predictions about the future. In preparing plans for the future, the management has to make some predictions about the future things. It has to make forecasting about the general business sales and capital. The process of forecasting generally involves these steps: (1) developing the basis through systematic investigations of the economy products and industry; (2) estimation of future business operations; (3) changes in consumer preferences attitude technology and competitive strategies and changes in the government policies, etc.,
Developing alternative plans:
Koontz and O’Donnell observe, “There is seldom a plan made for which reasonable alternatives do not exist. The management should, therefore, try to find out these alternatives and analyse them carefully in the light planning premises.
Evaluation of alternative plan:
Having found out the available alternative and having made an examination of their strong and weak points, the planner must evaluate alternatives. The evaluation made should be the most profitable and involving less risk. Sometimes the evaluation discloses that more than one alternative equally good. In such situations, the manager should select more than one alternative and combine them in action.
Selection of best alternative:
This is the point at which the plan is adopted the point of decision making. Often selection from alternatives will disclose two or more courses of action. In such a situation these should be better co-ordination between these alternatives so that it would not arise any problem in implementing the plan.
Formulation of derivative plans:
Derivative plans are sub-plans for each segment of the enterprise to support the formal plan. Derivative or sectional plans are developed in each area of the business, but within the framework of the primary plan, in order to co-ordinate and integrate programmes and policies of all departments of the enterprise. A derivative plan may be necessary to develop new policies and procedures for effecting the plan.
Implementation of plan:
A better selection of plans is not sufficient to achieve results. Good results can be achieved only when the co-operation of each employee is obtained. For this purpose, it is necessary to associate the subordinates in the planning process and to invite their suggestions at every stage of planning process so as to motivate them for better performance and co-operation.
Feedback or follow up of the plan:
Feedback mechanism is an attempt to secure which was originally planned. To do this we have to compare the actual performance with the performance predicted from the plan and have to initiate necessary corrective, measures to ensure that performance may possible according to plans. The plan should be periodically re-evaluated to measure its effectiveness so that a deviation can be corrected and adjusted well in time.
Types of plans
(A) Standing or Repeated use Plans –
Standing or repeated use plans, as the name suggests, are those plans which are used again and again during the year. Standing plans are of the following types.
Purpose of Mission –
Every organization economic, religious or social must have a purpose or mission- the basic function or task which is assigned to it by society. Thus the purpose or mission of a business enterprise is the production and distribution of economic goods and services, and that of an educational institution teaching and research. the basic objective of a business enterprise is to earn profit, but this objective is accomplished by undertaking activities going in clear directions, achieving goals and accomplishing mission.
Objectives, or goals are the ends towards which the activities of an enterprise are aimed. They represent not only the end point of planning but the end towards which all other managerial functions are aimed. So, enterprise objectives constitute the basic plan of the firm and departmental objectives consisting of sub-plans are tied to it. These two sets of objectives may be entirely different, yet consistent in that they both lead to the accomplishment of the same enterprise mission. Objectives are thus established to guide the efforts of an organization and its various departments and sub-units. The chief features of objectives are as follows:
- Objectives constitute the basic plans of an enterprise.
- Objectives are plural as every organization seeks to attain several rather then one objective.
- Objectives form a hierarchy i.e., they can be arranged in such a way that the goals of each sub-unit contribute to the goals of the larger unit of which it is a part.
- Objectives form a network, i.e., goals are interconnected and mutually supportive.
- Objectives differ in time span, i.e., some objectives are long-range while others short-rang in nature, through both are interrelated.
- Objectives may be broad and general, or may be specifically mentioned.
Learned defined business strategy as the pattern of objectives, purpose or goals and major policies and plans for achieving these goals, stated in such a way as to define what business the company is in or is to be in and the kind of company it is or is to be”.
According to Anthony, “Strategy is the determination of the basic long-term goals and objectives of an enterprise, and the adoption of courses of action and the allocation of resources to carry out these goals. Strategies are thus required to determine and communicate, through a system of major objectives and policies, a picture of what kind of enterprise is envisioned.
Strategies may exist at the following three levels.
- Corporate strategy – concerned with what sorts of business the company as a whole, should be in.
- Competitive or business strategy- it is concerned with how to compete in a particular market.
- Operational strategy – it is concerned with how the different functions of the enterprise contribute to the other levels of strategy.
Policies are general statements or understandings which guide or channel thinking are action in decision making. They define an area within which a decision is to be made and ensure that decision will be consistent with and contribute to an objective. They usually do not require action but are intended to guide managers in their decision commitments when they do make decisions. Also policies are usually meant for decision making in repetitive situations. Policies ordinarily exist at all levels of the organization ranging from major company policies through major departmental policies to minor or derivative policies applicable to the smallest segment of the organization. Similarly, policies may exist for all operational areas of the enterprise, or for projects only. Finally policies, being guides to decision making must allow for some discretion. Otherwise, they would be rules.
Procedure refers to the specific manner in which a particular activity is to be performed. It prescribes the chronological sequence of the required action. It is defined as “a series of related tasks that make up the chronological sequence and the established way of performing the work to be accomplished”. Normally a procedure includes how each of its tasks will take place, when it will take place and by whom it is to be performed. The best way of completing a task from the dew point of time, effort and money expenditures is usually represented by the procedure. Procedures are generally laid down for repetitive work so that same steps are taken each time the activity is performed.
“Rules are specific guides for action, established authoritatively, and utilized in order to inform employees of conditions under which, designated activities are to be performed. Rules spell out specific required action or non-action allowing no discretion. Rules are different from procedures in that, unlike procedures, they guide action without specifying a time sequence. Rules do not allow for any deviation from a stated course of action. In essence, rules represent managerial decisions that some certain action must or must not be taken.
(B) Single use plans-
Single use plans are used once during a year time. There are: methods, programmers, projects, budgets and schedules. These are of following types-
A method tells how a particular step of an activity is to be taken. It is more detailed than procedure. Whereas a procedure specifies a series of steps to be taken a method is only concerned with the single operation, with one particular step, and it tells exactly how this particular step is to be performed. The term method is most frequently used in the context of production though methods are determined in other areas of business operations as well.
Programmers are complexes 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.” Simply stated, programmes represent the proposed projects and schemes designed to attain a given objective in accordance are generally supported by budgets, that is they specify capital outlay involved. Normally within any enterprise there are several programmes both major and minor, in existence at any given time, and these programmes are all related to a greater or lesser degree. Hence, all these programmes call for co-ordination and timing, It is of crucial importance to remember that a program me of any importance seldom stands by itself. It is usually one part of a complex system of programmes depending upon some and affecting others.
A project is considered merely a part of a general programme a part which can be planned and fulfilled as a distinct project. In other words, a project is a distinct cluster of functions and facilities for a definite purpose. It is designed and executed as a distinct plan. For instance, computerization of a computer enterprise is a programme, and training of selected employees in computer operations may be called a project. This project can be handled by itself and once the employees are properly trained the project stands terminated. Projects facilitate co-ordination and control of business operations by identifying an integrated work package within a heterogeneous mass of activities and resources.
A budget is a numerical estimate of expected results (or needs), arranged according to an orderly basis, covering some or all the activities of an enterprise for a definite period of time. It may be referred to as a ‘numerised programme’. Budgets may be compiled either in financial terms or in terms of labour-hours units of products, machine- hours, or any other numerically measurable term.
A variety of budgets are prepared in business enterprises. they are sales budget production budget, purchase budget, labour budget, cash budget and master budget. It brings together and co-ordinates all the other budgets into an over- all integrated budgets. It may truly be called as “budget of budgets.”
A schedule specifies time limits within which activities are to be completed. Thus, it lays down a timetable for the completion of activities fixing starting and finishing dates for each sub-activity. In the absence of schedules delays likely to occur and continuity of work may be disturbed.
Limitations of planning
Planning involves laying down plans of action in advance. It may lead to internal inflexibility and procedural rigidity by compelling the managers to conform to the plans. Inflexibility in planning may prove to be costly for the organization.
Planning involves expenses, which may be sometimes prohibitive. A good deal of time, energy and money is involved in gathering of an analysis of facts and testing of various alternatives. Because of its high cost many managers feel that planning especially long-range planning is a luxury, which they cannot afford. It is true that expenses on planning should not exceed the value of benefits derived from it. It should, however, be noted that it is not easy to measure the expenses on planning and benefits derived from the plans. A good deal of vision and foresight would be necessary to judge when planning does not pave its way.
Time factor sometimes also puts limitations to the practical utility of planning. Planning is time consuming and sometimes an advance planning might delay action and this may result in loss of opportunities, which may not knock the door again. When time is of essence, advance planning loses its validity. Cases are not uncommon in business when prompt action is so urgent and unavoidable that hardly any time can be devoted to advance planning.
Lack of planning skills:
The skills required for planning at operating level are different from those required at the strategic level. The managers who are promoted from lower to higher levels normally do not possess the requisite skills to make strategic plans. Their failure to admit their lack of planning skills, normally results in poor planning.
Some of the external factors (limitations) over which management does not have any control are as follows:
- Government policies, e.g., rise in excise or custom duty.
- Natural calamities like flood, earthquake, etc.
- Change in taste and fashion of customers e.g., preference for fast food and ready-made garments.
- Change in technology.
- Introduction of new products and aggressive advertisement by competitors.
Measures to Overcome Limitations of Planning
In order to overcome the limitations of planning the following measures should be taken.
- The managers should adopt a forward-looking attitude. They should be prepared to do innovative thinking to increase the effectiveness of planning.
- The managers should give sufficient time and attention to planning since it is the basis of every other managerial function.
- A suitable Management Information System’ should be organized so that the relevant information is made available to the planners before they make any plan.
- A system of forecasting coupled with a keen insight into the dynamics of relevant environment should be developed which will improve the reliability of the process of planning.
- The systems of control should be directly associated with planning so that every plan is implemented properly
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