UNIT- 2

PLANNING

CONTENTS:

1. Planning:
Meaning
Definitions
Characteristics Of Planning
Steps in planning
Benefits of planning
Limitations of planning
Types of planning

2. Objectives
Meaning
Definition
Management By Objective:
Definition
Benefits
Limitation

3. Strategy
Meaning
Types
Key Components
Importance
Policies

4. Environmental analysis and Diagnosis

Meaning
Importance
Process
 Meaning
Planning is the beginning of the process of management. A manager must plan before he
can possibly organise, staff, direct or control. Because planning sets all other functions into
action, it can be seen as the most basic function of management. Without planning other
functions become mere activity, producing nothing but chaos. This has been called the
principle of primacy of planning.

Planning is an intellectual process which requires a manager to think before acting. It is

thinking in advance. It is by planning that managers of organisations decide what is to be
done, when it is to be done, how it is to be done, and who is to do it. Decision-making is
thus an integral part of planning.

Definition
Alford and Beatty, “Planning is the thinking process, the organised foresight, the vision
based on fact and experience that is required for intelligent action”.

According to H Fayol, “Planning is deciding the best alternative among others to perform
different managerial operations in order to achieve the pre-determined goals.”

Koontz and O'Donnell, "Planning is deciding in advance what to do, how to do it, when to do
it, and who is to do it.

Terry, ‘’ Planning is the selection 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 “

Haynes and Massie,’’ Planning is that function of the manager in which he decides in advance, what
he will do, it is a decision-making process of a special kind. It is an intellectual process in which
creative thinking and imaginations are essential.’’
 Characteristics Of Planning
1. Goal-oriented: Planning is a goal-oriented activity. It includes setting objectives and goals,
deciding on strategies to achieve them, and formulating plans that will lead to their
accomplishment.

Being goal-oriented means that planning is done in the context of the overall objectives and
desired results of an organization.

2. Intellectual Process: Planning is an intellectual process that requires critical thinking,

creative problem-solving, and analysis. It involves making decisions based on a variety of
factors such as the organization’s objectives an strategies, current market conditions,
available resources, and potential risks.

With the help of an intellectual process, planning can result in the most effective and
efficient use of resources.

3. Continuous Process, or Continuous function of Management: Planning is an ongoing

process that needs to be adjusted and updated as the business environment changes. This
means that planning must be revisited regularly for organizations to remain competitive and
successful.

As a continuous process, planning helps businesses to remain agile and adaptive to stay ahead
of the competition.

4. Flexible: Planning should be flexible enough to accommodate changes in the external

environment. This means that plans must be adjusted as needed to remain relevant and
applicable to current conditions.

With the help of flexibility, organizations can ensure that their plans are up-to-date and best
suited to the current market conditions.

5. Involves Forecasting: Planning involves forecasting and predictions by using current data,
trends and past experiences, and performance. This helps organizations determine what
needs to be done to achieve their goals and objectives.

It also helps them develop strategies that will enable them to respond effectively when
changes occur or challenges arise.
6. Planning secures efficiency, economy and accuracy: A pre- requisite of planning is that it
should lead to the attainment of objectives at the least cost. It should also help in the
optimum utilisation of available human and physical resources by securing efficiency,
economy and accuracy in the business enterprises. Planning is also economical because it
brings down the cost to the minimum.

7. Primary Function of Management: Planning is often considered the primary function of

management because it precedes and guides all other managerial activities. Without
effective planning, organizing, staffing, directing, and controlling become challenging to
execute.

It lays the foundation for decision-making and resource allocation, ensuring that
organizational activities are purposeful and coordinated. Managers must engage in planning
to determine organizational objectives, strategies, and action plans.

Steps In Planning Process –

Setting up of objectives

Developing Premises

Listing variour alternatives

Evaluating of various alternatives

Implementation of plan

Follow - up

1.Setting Up Objectives: This is the primary step in the process of planning which specifies the
objective of an organisation, i.e. what an organisation wants to achieve. The planning process begins
with the setting of objectives. Objectives are end results which the management wants to achieve by
its operations.
Objectives are specific and are measurable in terms of units. Objectives are set for the organisation
as a whole for all departments, and then departments set their own objectives within the framework
of organisational objectives.

2. Developing Planning Premises: The manager is required to make certain assumptions

about the future. These assumptions are called premises in which plan are expected to be
operate. Planning is essentially focused on the future, and there are certain events which are
expected to affect the policy formation Such events are external in nature and affect the
planning adversely if ignored. Their understanding and fair assessment are necessary for
effective planning .Such events are the assumptions on the basis of which plans are drawn
and are known as planning premises.

(3) Identifying Alternative Courses of Action: Once objectives are set, assumptions are
made. Then the next step is to act upon them. There may be many ways to act and achieve
objectives. All the alternative courses of action should be identified.

(4) Evaluating Alternative Course of Action: In this step, the positive and negative aspects
of each alternative need to be evaluated in the light of objectives to be achieved. Every
alternative is evaluated in terms of lower cost, lower risks, and higher returns, within the
planning premises and within the availability of capital.

(5) Selecting One Best Alternative: The best plan, which is the most profitable plan and
with minimum negative effects, is adopted and implemented. In such cases, the manager’s
experience and judgement play an important role in selecting the best alternative.

(6) Implementing the Plan: This is the step where other managerial functions come into the
picture. This step is concerned with “DOING WHAT IS REQUIRED”. In this step, managers
communicate the plan to the employees clearly to help convert the plans into action. This step
involves allocating the resources, organising for labour and purchase of machinery.

(7) Follow Up Action: Monitoring the plan constantly and taking feedback at regular
intervals is called follow-up. Monitoring of plans is very important to ensure that the plans
are being implemented according to the schedule. Regular checks and comparisons of the
results with set standards are done to ensure that objectives are achieved.

Benefits Of Planning
Planning helps the organisation achieve its objectives early. In this way, planning helps the
organisation in many ways. Some of the advantages of planning are briefly explained below:
1.Better utilisation of resources- Planning decides what to produce and how to produce.
Then, there is the possibility of utilising the resources effectively.
2.Helps in achieving objectives-Planning sets goals or objectives of an organisation. This
gives effective direction to the control of employees of the organisation In this way,
planning helps the organisation accomplish the pre-determined goals o objectives.
3.Economy in operation -Unnecessary production, ineffective utilisation of resources and
unnecessary activities of an organisation are eliminated through planning This results in the
economy of operations.
4.Minimises future uncertainties: The uncertain future increases the importance of
planning. Planning foresees the changes and uncertainties taking shape in future and
devices methods to face them. Some future uncertainties are thus, minimised through
planning.
5.Improves competitive strength: Competitive strength is improved by adding new line of
products, changes in quality and size of the product, expansion of plant capacity and
changes in methods of work. These are achieved through planning.
6. Effective control: Control without planning is an impossible one. Control is used only
when there is a well-chalked out plan. So, planning provides a basis for controlling.
7. Motivation: A well-prepared plan encourages the employees of an organisation and gives
them a sense of effective participation. Planning motivates the employees as to what the
organisation wants to achieve and defines it to the employees.
8. Co-operation: Planning helps the management pull the individual to achieve common
objectives or goals. Planning provides well-defined objectives, unity of direction, well-
published policies, procedures and programmes. All these facilitate to get co-ordination,
which consequently avoids duplication of work and interdepartmental conflicts.
9. Promote growth and improvement: Planning sets a standard to control purpose So,
useless and aimless activities are avoided. It leads to the growth and improvement of an
individual and the organisation.
10. Develops rationality among management executives: Disciplined thinking of
management executives is geared up through formal planning. Management executives
takes action only after putting their thoughts in blueprints. This is why planning brings
rational thinking and approach among management executives.

Limitation Of Planning
Though planning function is a primary function of management and it facilitates other
functions of management, it suffers from certain limitations.

1. Inflexibility: The more detailed and widespread the plans are, the greater inflexibility they
are. This inflexibility arises an account of the philosophy of management.
If the management has the philosophy of production of high quality goods at high cost, it
may be difficult for them to plan for a cheaper quality product.
2. Limitation of forecasts: Planning is fully based on forecasts. If there is any defect in
forecasts, the planning will lose its value.
3. Unsuitability: In planning, objectives, policies, procedures etc. are set after careful
investigation of all the relevant factors. But in practice, business is facing new opportunities.
4. Mental ability: Planning is a mental exercise. The most careful planning is made only by
an able and skilful manager. If the executives or managers do not have such ability, there
will be no effective planning. According to George A.Steiner, "Planning is hard work It
requires a high level of imagination, analytical ability, creativity and fortitude to choose and
become committed. Management must exert pressure to demand the best efforts in
managers and the staff. Both the talents required are limited and the maintenance of high
quality planning is difficult to achieve.
5. False sense of security: Future is uncertainty. Planning is concerned with future.The
management people think that there is security, if planning is properly adhered to.But, this
is not true in practice. So, the course of action is limited and planning becomes precise. This
difficulty makes the management have a false sense of security.
6. Delay during emergency period: Planning does not give any benefits to an organisation
during the emergency period. Spot decision dominates the planning. H planning is followed
during the emergency period, there will be a possibility of delay in performing the work.
7. Capital investment: If sizeable amounts are invested in fixed assets, the ability to change
future course of action will be limited and planning will become precise. This difficulty
continues upto the liquidation of investments or it creates a necessity to write of the
investment.
8. Political climate: Government can change its attitudes according to the changes of the
political climate. Taxation policy, regulation of business and finances through financial
institutions are generating constraints on the organisational planning process.
9. Trade Unions: The freedom of planning is restricted through the organisation of trade
unions at national level. Trade unions can interfere in the management activities on work
rule, fixation of wages, productivity and associated benefits. Hence, managers are not free
to take decisions in this area to some extent.
10. Technological changes: When there is a change in technology, the management has to
face number of problems. The problems may be high cost of production, competition in the
market etc. The management is not in a position to change its policies according to
technology changes. It will affect the planning.
 Types Of Planning

Corporate
Planning

Reactive Functional
Planning Planning

TYPES OF
PLANNING

Proactive Strategic
Planning Planning

Operational
Planning

1. Corporate planning- Corporate planning is a strategic process that organizations use

to define their goals, establish priorities, allocate resources, and outline actions to
achieve long-term objectives. It involves analyzing the internal and external
environments, assessing strengths and weaknesses, and identifying opportunities and
threats. All planning activities at the top level which covers the entire organizational
activities.
1. Done to determine the long-term objective of the organization.
2. As it is based on long-term orientation, it is also called strategic planning.
3. Covers almost all management functions.

2. Functional Planning –
Functional planning refers to the process of developing specific strategies and actions within
individual departments or functions of an organization. Each function—such as marketing,
finance, operations, human resources, and research and development—creates its own plans
that align with the overall corporate strategy.

it is done with segmental approach and is done separately for major functions of
organization.
1. The 2nd level of functional planning is done for Sub-Functions within each major
functional department.
 2. It is derived from a corporate planning and therefore should contribute to the latter.

3.Strategic Planning
Strategic planning looks at the long-term issues of the organization, and helps develop a
plan for growth or change of business function. Goals developed at the strategic planning-
level are often increased by dividing them into tactical and operational levels.
This is long-term planning that focuses on defining the organization's vision, mission, and
overall goals. It involves setting broad objectives and determining the best strategies to
achieve them. Strategic planning typically looks 3-5 years into the future

4. Operational Planning
Operations planning focuses on day-to-day issues, such as staffing levels or inventory
quantities. Operational-level planning includes more detailed objectives with concrete
deadlines and task assignments
It involves creating detailed plans for specific tasks and activities to ensure that the
organization's routine operations align with strategic and tactical goals. This type of
planning is typically short-term, covering periods from months to a year.

5.Proactive planning

A proactive approach involves taking deliberate actions to shape the future according to
desired outcomes. Proactive planning is a forward-thinking approach that focuses on
anticipating future events, challenges, and opportunities rather than merely reacting to them
as they arise. It involves actively identifying potential scenarios, setting goals, and
developing strategies to achieve desired outcomes.

it involves the anticipation of likely changes in environment &

deciding a suitable course of action.

1. Org. that have proactive planning have broad planning approach, environmental

scanning, decentralized control and reserved resources to be utilized.

2. They do no wait for environment to change but take actions in advance.

6. Reactive Planning

Reactive thinking and planning is characterized by responding to events or situations after

they've occurred, usually without any prior preparation. Organizations responses comes after
the environmental changes have taken place.

1. Org. looses opportunity to those orgs who adopts proactive planning.

2. Due to proactive org., the reactors become ready with new plans and thus, reactive
planning made by organization fails, as things will be again changed soon.

3. This approach is used in fairly stable environment sustaining for long time

OBJECTIVES
MEANING
Objectives or the goals of the organization are the ends towards which every activity of the
organization is aimed at. Therefore, goals or objectives are the results that the organization tries to
achieve. Objectives are considered as a prerequisite for planning. Objectives are specific, measurable
goals that an organization aims to achieve within a defined timeframe. They provide a clear direction
and focus for planning and decision-making, helping to translate broader strategies and visions into
actionable steps.

DEFINITION
Mc. Farland has defined, "Objectives are the goals, aims or purposes that organisations wish
to achieve over varying periods of time."
Terry has defined that, A managerial objective is the intended goal which prescribes definite
scope and suggests direction to the efforts of a manager."
In the words of Knootz and O'Donnel, "Objective is a term commonly used to indicate the
endpoint of a management programme."
Simply, objectives may be defined as the expectation of end results for which an
organisation is established and which it tries to achieve.
 MBO – Management by Objective
“MBO is a comprehensive managerial system that integrates many managerial activities in a
systematic manner, consciously directed towards the effective and efficient achievement of
organizational activities.” “MBO is a result-centered, non-specialist, operational managerial process
for the effective utilization of material, physical and human resources of organization by integrating
the individual with the organization and organization with the environment.”

Definitions of Management by Objectives (MBO)

1. According to Koontz and Weihrich,“Management by Objectives is a comprehensive

managerial system that integrates many key managerial activities in a systematic manner
and it consciously directed toward the effective and efficient achievement of organizational
and individual objectives.”

2. According to George Odiorne “MBO is a process whereby the superior and subordinate
managers of an organization jointly identify its [the organization’s] common goals, de- fine
each individual’s major area of responsibility in terms of the results expected of an
individual, and use these measures as guides for operating the unit and assessing the
contribution of each of its members.”

Benefits of Management by Objectives

• Management by objectives helps employees appreciate their on-the-job roles and

responsibilities.
• The Key Result Areas (KRAs) planned are specific to each employee, depending on their
interest, educational qualification, and specialization.
• The MBO approach usually results in better teamwork and communication.
• It provides the employees with a clear understanding of what is expected of them. The
supervisors set goals for every member of the team, and every employee is provided with a
list of unique tasks.
• Every employee is assigned unique goals. Hence, each employee feels indispensable to the
organization and eventually develops a sense of loyalty to the organization.
• Managers help ensure that subordinates’ goals are related to the objectives of the
organization.

Limitations of Management by Objectives

• Management by objectives often ignores the organization’s existing ethos and working
conditions.
• More emphasis is given on goals and targets. The managers put constant pressure on the
employees to accomplish their goals and forget about the use of MBO for involvement,
willingness to contribute, and growth of management.
 • The managers sometimes over-emphasize the target setting, as compared to operational
issues, as a generator of success.
• The MBO approach does not emphasize the significance of the context wherein the goals are
set. The context encompasses everything from resource availability and efficiency to relative
buy-in from the leadership and stakeholders.
• Finally, there is a tendency for many managers to see management by objectives as a total
system that can handle all management issues once installed.
• The overdependence may impose problems on the MBO system that it is not prepared to
tackle, and that frustrates any potentially positive effects on the issues it is supposed to deal
with.

Strategies
Strategies in the principles of management refer to the comprehensive plans or approaches that
organizations use to achieve their long-term goals and objectives. They provide a framework for
decision-making and resource allocation, guiding the organization in navigating challenges and
opportunities. Strategies are defined as the overall plans that outline how an organization intends to
achieve its objectives, addressing the allocation of resources and the actions needed to compete
effectively in its market.

Types of Strategies

• Corporate Strategy: Focuses on the overall scope and direction of the organization,
including decisions about which markets to enter or exit.
• Business Strategy: Concentrates on how to compete successfully in particular
markets, including cost leadership, differentiation, and market focus.
• Operational Strategy: Details the processes and procedures that support the business
strategy, optimizing daily operations for efficiency and effectiveness.
• Functional Strategy: Pertains to specific functions within the organization, such as
marketing, finance, and human resources, and how they support the overall strategy.

3. Key Components of Strategies

• Vision and Mission: Clear articulation of the organization's purpose and aspirations,
guiding strategic direction.
• Objectives: Specific, measurable goals that the organization aims to achieve in the
short and long term.
• Analysis: Involves assessing internal strengths and weaknesses and external
opportunities and threats (SWOT analysis).
• Resource Allocation: Decisions about where to invest resources, including time,
money, and personnel, to maximize effectiveness.
• Implementation Plan: A roadmap detailing how the strategy will be executed,
including timelines and responsible parties.
4. Importance of Strategies

• Guidance: Strategies provide direction and help align the efforts of all members of
the organization toward common goals.
• Competitive Advantage: Well-crafted strategies can help an organization stand out
in the market, whether through cost leadership, unique offerings, or exceptional
service.
• Adaptability: Strategies allow organizations to anticipate and respond to changes in
the environment, such as market trends or competitive actions.
• Performance Measurement: Establishing clear objectives enables organizations to
assess their progress and adjust strategies as necessary.

Policies
A policy in Management is a general statement which is formulated by an organization for the
guidance of its personnel. The objectives are first formulated and then policies are planned to
achieve them. Policies are a mode of thought and the principles underlying the activities of an
organization or an institution

According to Koontz & O ‘Donnel, “Policies were identified as guides to thinking in decision-making.
They assume that when decisions are made, these will fall within certain boundaries.” Policies do not
require action, but are intended to guide managers in their decision commitments when they do not
make decisions. In the words of George Terry, “Policy is a verbal, written or implied overall guide
setting up boundaries that supply the general limits and direction in which managerial action will
take place.” Policies provide a framework within which a person has freedom to act.

The policies are formulated for the following purposes:

1. The main purpose of policies is to ensure that there is no deviation from the planned course
of action. The framework is set within which everybody is expected to work. Policies ensure
that the broad guides for action are adhered to.

2. Since policies chalk out a framework for each and every person, it ensures proper
delegation of authority also. A manager knows the extent of authority required by a
subordinate to undertake the work allotted to him. Policies serve the purpose of delegating
adequate authority downwards.

3. Policies allow the scope for interpretation. The main aspects are given in a policy but the
actual mode of implementation is decided by the concerned person.

4. Policies are helpful for future planning also. The impact and influence of policies help in
thinking about the future.

5. Policies also ensure consistency of action. The guidelines are similar for everybody and
actions must conform to the broad outlines.
 Environmental Analysis & Diagnosis
An environmental analysis is a strategic technique used to identify all internal and external
factors that could affect a company’s success. Internal components reveal the strengths and
shortcomings of a company, while external components represent the opportunities and risks.
This exists outside of the company.

Trends and high-level factors are considered in it; another name for this is environmental
scanning.

Importance of environmental analysis

Organizations need to do environmental analysis because it helps them:

• Find opportunities: By looking at the outside world, organizations can find new
trends and chances to enter new markets or make new products or services.
• Identify threats: It helps businesses find threats to their business, such as new
competitors, changes in regulations, or a slowing economy.
• Create effective strategies: Organizations can create effective strategies that are in
line with their goals and objectives when they understand how the outside world
affects their business.
• Anticipate change: Environmental scanning helps organizations plan ahead for
changes in the outside world and create strategies to deal with them.
• Make informed decisions: It helps organizations learn more about the outside
factors that affect their business so that they can make better decisions.

Process Of Environmental analysis

1. Determine the effects on the environment

To begin a business environmental analysis procedure, select environmental factors

evaluating. Your industry determines this.

For example, if you work in a medical facility, you might want to think about legal
implications. Regulations managing healthcare experience and safety, for example. Choose
factors that have the potential to influence how you make deals.

2. Obtain information

Collect information about your chosen environmental factors once you decide which ones to
evaluate. You can observe your factors and conduct research here. There are two types of
information to gather: verbal and written data. Hearing is how people obtain verbal
information.

As an example, consider listening to a radio broadcast. They obtain written information from
sources such as newspapers and magazines.

Using the preceding example, this would involve conducting research online and in medical
magazines.

It will assist you in determining whether or not there have been any changes to health and
safety regulations because this may have an impact on your healthcare facility.

3. Consider your competitors

You may want to gather information about your competitors. To see if they pose any threats.
You can accomplish this by employing a technique known as spying. This involves unusually
gathering information.

Using the same example, you could spy on a nearby health facility to learn about recent
activity.

4. Examine your strategies

Finally, evaluate your present and prospective strategies to determine how future
environmental changes will impact your organization. This assists you in resolving potential
issues. These factors could have been to blame.

For example, the health facility may wish to develop a new strategy. It will clearly show how
they aim to deal with the decrease in clients caused by their competitor’s new branch