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Planning is the process which involves “thinking before doing”.

The concept has

been defined by various management experts.
According to Koontz and O’Donnel, ”Planning is deciding in advance what to do,
how to do, when to do it and who is to do it.”
Henry Fayol has said, ”Planning is deciding the best alternative among others to
perform different managerial operations in order to achieve the pre-determined
In simple words planning is the determination of a course of action to achieve a
desired result. Planning is a projected course of action. IT includes forecasting,
formulation of objectives, policies, programmes, schedules, procedures and
Over the years, a number of fundamental principles have been developed to
guide the efforts of managers in preparing effective plans. These
principles relate to the nature, purpose, process and structure of planning.
A brief description of planning principles are given below:
2. Principle of contribution to objectives.
3. Principle of efficiency of plans.
4. Principle of primacy of planning.
5. Principle of planning premises.
6. Principle of policy framework.
7. Principle of timing.
8. Principle of alternatives.
9. Principle of limiting factors.
10. Principle of commitment.
11. Principle of flexibility.
12. Principle of competitive strategies.
1) Planning is goal-oriented.
2) Planning is a primary function.
3) Planning is all-pervasive.
4) Planning is an intellectual or rational process.
5) Planning is a continuous process.
6) Planning forward-looking.
7) Planning involves choice.
8) Planning is an integrated process.
9) Planning is directed towards efficiency.
Planning has got these objectives:
2. Planning the primary function of management.
3. Planning is required for an effective control.
4. Planning leads to attainment of objectives.
5. Planning reduces uncertainty and business failure.
6. Planning is the basis for decentralization.
7. Planning leads to minimize the cost of production.
Organizations differ in terms of their size and complexity. Therefore, there is no
single planning procedure applicable to all organizations. However the main steps
in planning process are as follows:
Identify Goals: Plans are formulated to achieve certain objectives. The objectives
fixed must clearly indicate what is to be achieved, where action should take place
and who is to perform it and when it is to be accomplished. They should be stated
clear and in measurable terms.
Develop Planning Premises: Planning is done for future which is uncertain.
Therefore, certain assumptions are made about the future environment. These
assumptions are known as planning premises. Planning premises lay down the
boundary or limitations within which plans are to be implemented.
Determine Alternative Courses of Action: Generally, there are alternative ways of
achieving the same goal. Therefore, alternative courses of action should be
Evaluate the alternatives: Alternative courses of action can be evaluated against
the criteria of costs, risks, benefit and organizational facilities. The strong and
weak points of every alternative should be analyzed carefully.
Select a course of action: The most appropriate alternative is selected as the plan.
This is the point of decision where a plan is adopted for accomplishing identified
Formulate derivative plans: The final step in planning process is to develop sub-
plans. In order to give effect to and support to the basis plan, several sub-plans are

Determine Develop Planning Identify Evaluate

Objectives Premises Alternatives Alternatives

Formulate Derivative Select a course

Plans of action
Plans can be classified as :
ii. Purposes or Missions
iii. Objectives or Goals
iv. Strategies
v. Policies
vi. Procedures
vii. Rules
viii. Programs
ix. Budgets
These plans guide the decisions and actions of employees in repetitive
situations. These are the effective means of achieving the objectives of the
organizations. These plans are classified into two categories which are, the
multi-use plans like objectives, strategies, policies, procedures and rules and
the other category is single-use plans like programmes, budgets, schedules,
projects and methods.
1.Purposes or Mission: This identifies the basic function or task of an enterprise
or agency or any part of it. Every kind of organized operations has, or at least
should have if it is to be meaningful, a purpose or a mission. For ex. The purpose
of a business generally is the production and distribution of goods & services. The
purpose of a state highway department is the design, building and operation of a
system of a state highways.
Mission serves as the reason for the existence of an organization.

2. Goals: A goal is a desired state of affairs which an organization wants to

realize. Goals are collective ends towards which organization direct their energies
and activities. Goals legitimize the role of an organization in society and provide a
motive for its activities. For ex. The goal of Maruti Udyog is to provide low cost,
economical and quality automobiles to the public. Goals may be short term & long
term in nature.
3. Objectives: Objectives may be defined as the ends, purposes or aims which an
organization wants to achieve over varying periods of time. According to Allen,
“objectives are goals established to guide the efforts of the company and each of
its components.” Organizational objectives are the goals or ends towards which
the activities of an organization are directed and the standards against which the
performance is evaluated.
i. An organization has multiple or several objectives eg. Profits, survival,
growth, service to society etc. This multiplicity of objectives creates the
problem of fixing priorities among different objectives & of harmonizing
ii. Objectives have a time span. Short term and medium term objectives are
means of achieving long term objectives.
iii. Objectives form a hierarchy. There is a graded series or continuum of
objectives. Objectives of each lower unit contribute to the objectives of the
next higher unit.
iv. Objectives may be tangible or intangible.
v. Objectives may be for long term and short term.
• Objectives must be clear and specific.
• They should be stated in measurable terms.
• Objectives must be result-oriented and time-bound.
• Objectives must be mutually supportive.
• Objectives should be challenging but attainable or realistic.
• Objectives must be acceptable to employees.
• Objectives should be interconnected and mutually supportive.
• Objectives should be laid down in all the key result areas (KRA’s) of business.
Peter Drucker has identified eight key areas in which objectives should be
established they are market standing, innovation, productivity, physical &
financial resources, manager performance and development, worker
performance & attitudes, profitability, public & social responsibility.
• Objectives should provide some flexibility.
• Sub-goals should be laid down for every objective.
4.Stratigies: According to Koontz strategy is defined as the determination of the
basic long-term objectives of an enterprise and the adoption of courses of action
and allocation of resources necessary to achieve these goals.
Strategy may be defined as a comprehensive and integrated plan designed to assure
that the mission and objectives of the organization are achieved.
These definitions reveal the following features of strategy:
iv. Strategy is a comprehensive and integrated plan for the allocation of scarce
organization resources.
v. Strategy is designed to improve the organization’s relations to its environment.
This is known as environmental adaptation.
vi. Strategy involves choices that determine the nature and direction of the
organization’s activities towards the attainment of goals.
vii. Strategy sets the direction while other plans decide how this direction is put into
action. Therefore, strategy must be formulated before plans are made.
viii. Strategy making is primarily the responsibility of top management. However,
people at all levels are involved in strategy implementation.
ix. Strategy is a standing and long term plan.
x. Every organization needs a strategy to achieve its objectives.
5.Policy: Policies also are plans in that they are general statements or
understandings that guide or channel thinking in decision making.
For example the policy of offering equal job opportunity to minorities and
women contributes to the objective of meeting social obligations.
Policies define an area within which a decision is to be made and ensure that
the decision will be consistent with, and contribute to, an objective.
The forgoing description reveals the following features of policy:
v. A policy is a standing plan. It is a standing answer to recurring problems of
a similar nature.
vi. Policies provide broad guidelines as to how objectives of a business are to
be achieved.
vii. Policies are models of thought and principles underlying the activities of an
organization. They guide the decisions and behavior of executives.
viii. Policies are broad guides & provide scope for executive judgment.
ix. Policies are generally formulated by top management for a long time.
6. Procedures: Procedures are plans that establish a required method of handling
future activities. They are guides to action, rather, than to thinking and they in the
exact manner in which certain activities must be accomplished.
A procedure is narrower in scope and less flexible than a policy. For most policies
there is an accompanying procedure. Procedures are used in all major functional
areas. Purchase procedure, Selection procedure, Grievance procedure, procedure
for processing orders are popular examples of procedures.
7. Rules: Rules spell out specific required actions or non-actions, allowing no
discretion. They are the simplest type of plan. “No Smoking” is a rule that allows no
deviation from a stated course of action. The essence of a rule is that it reflects a
managerial decision that some certain action must or must not be taken. The
purpose of policies is to guide decision making by marking off areas in which
managers can use their discretion. Rules allow no discretion in their application.
8. Programs: Programs are a complex 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.
In business programmes are used in various areas, example developing a new
product, training programme, advertising programme, expansion programme etc.
9. Budgets: A budget is a statement of expected results expressed in numerical
terms. It may be called a “numberized” program. A budget is a plan for allocation
of resources. A budget may reflect capital outlay, cash flows, production & sales
Budgets may be prepared for production, sales, materials, cash, capital
expenditure etc. A budget is an instrument of both planning & control. Budgets
serve as standards of performance. It is generally prepared for one year.