Chapter 4: Planning

Business enterprise would try to calculate profit through future activities and will consider who will do, what work, how and when, to what extent to earn profit. Planning is the forecasting for the future in the present.

Meaning:
Everyone has to decide before hand, what he wants to achieve in future and how, for which various alternatives are to be considered. Planning is to prepare a plan for adopting the best alternatives. Thus, planning considers present and future together, as there are many uncertainties in business. These uncertainties obstruct the accomplishment of enterprise objectives and expected result is not achieved. It is present in every field and includes various assumptions.

Definition:
Following are some of the definitions: 1. Planning is a function of preference. 2. Planning is to select facts, establish inter-relation with them and make forecasts about the formulation and review of various activities to be undertaken to achieve the expected results. 3. Planning is to decide a method for following and using a policy, and its stages for forecasting. In short, planning is to collect information for the activities to be undertaken in business consider them in advance and plan how to do these activities. Planning is outline for future Characteristics: 1. Planning is all pervasive (present everywhere) 2. Planning is the primary function of management. Other functions like organising, directing and control can be considered only on the basis of planning. 3. Planning is conscious and mental process 4. Planning is continuous process 5. Planning contains various calculations and assumptions, for e.g. if sales increase, production will increase and if production increases then the purchase of raw material also will increases. Because of the possibility of such changes planning becomes flexible. Flexibility is the precondition of planning. 6. Planning is precise: matters to be considered should be studies exactly. Figures, information etc. must be perfect and precise 7. Forecasting is essential for planning: forecasting alone gives idea of future 8. Planning is the list of alternatives 9. Planning is concerned with future: To decrease future uncertainties and risk 10.Planning is an objective oriented activity 11.Planning requires decision process.

Importance

In India the central government has accepted the importance of planning and has constituted a planning commission which includes experts from various fields. Following points show importance of planning 1. In planning all activities are done in an orderly manner 2. Wastage avoided, economy made possible 3. Uncertainties are reduced 4. Use of planning for accomplishment of objectives 5. Exactness increases 6. Smoothness in other managerial functions 7. Effective control 8. Clear picture of business conditions 9. Planning increases employee co-operation 10.Planning co-ordinates various activities

Types or elements or components of Planning

1. Objectives: The purpose of every business is to determine and fulfil objectives. Well considered objectives are determined. Determining of objectives is a difficult task. All the factors of business are to be considered. What should be done to accomplish the objectives has to be clarified. The objectives should not be over ambitious. 2. Policies: Whatever decisions and strategies are decided for accomplishment of objectives, are called, policies. Policies create distinct image of the managers, executives and employees of the company. They give an idea of the efficiency of the company. Like the objectives, policies should be pragmatic. 3. Methods: Method is the arrangement for carrying out programmes. Objectives indicate the purpose, policy gives information as to how to fulfil the objectives, while method shows the actual procedure for fulfilling the objective, e.g. company gets an idea of the actual situation by preparing quarterly and half-yearly balance-sheet, so that objectives can be accomplished at the end of the year. Thus, method is a road, a path, following which, problems as to the success of enterprise do not arise. 4. Rules: Rules establish order for getting discipline, co-ordination, cooperation and how to do the work for fulfilling a programme. These rules regulate any deviation. Discipline is established and accomplishment of objectives becomes easy, when rules are followed. Rules make supervision easy. 5. Programmes: For accomplishment of objectives, business decides policies and plans, these plans are called programmes. The function of management is not merely to see that the work is carried out according to the programme, but also compare it is with the standards and to correct whenever there is a deviation. 6. Budgets:

Process of planning or stages of planning

1. Establish objectives 2. Clarify planning premises: Assumptions or forecasts 3. Collecting and analysing information

4. To prepare alternative plans 5. Evaluating of alternatives 6. Choice of alternatives 7. Formulation of supporting plan 8. Evaluating supporting plan 9. Evaluation of plan

Limitations of planning
1. The basis of planning is uncertain 2. Planning is a costly process 3. Planning is time consuming process 4. Planning is unnecessary 5. Planning tends towards inflexibility and rigidity. 6. Uncertainty of external factors 7. Incomplete information 8. Planning is an attack on the freedom of the employee 9. Use of faulty matters. Planning allows us to master the change.