Chapter 4 : Planning Business
1. What are the main points in the definition of planning.
The main points in the definition of planning are:
• It means deciding in advance what to do and how to do.
• A basic managerial function.
• It requires taking decisions since it involves making a choice from alternative courses of action.
• It involves setting objectives and developing appropriate courses of action to achieve these objectives.
• It has to have a given time frame.
2. How does planning provide direction?
Planning provide direction by stating in advance how work is to be done. It ensures that the goals or objectives are clearly stated so that they act as a guide for deciding what action should be taken and in which direction. If goals are well defined, employees are aware of what the organisation has to do and what they must do to achieve those goals.
3. Do you think planning can work in a changing environment?
No, planning may not work in a changing environment because it becomes difficult to accurately assess future trends in the environment if economic policies are modified or political conditions in the country are not stable or there is a natural calamity. Competition in the market can also upset financial plans, sales targets may have to be revised and, accordingly, cash budgets also need to be modified since they are based on sales figures. Planning cannot foresee everything and thus, there may be obstacles to effective planning.
4. If planning involves working out details for the future, why does it not ensure success?
Planning does not guarantee success. The success of an enterprise is possible only when plans are properly drawn up and implemented. Any plan needs to be translated into action or it becomes meaningless. Managers have a tendency to rely on previously tried and tested successful plans. It is not always true that just because a plan has worked before it will work again. Besides, there are so many other unknown factors to be considered. This kind of complacency and false sense of security may actually lead to failure instead of success.
5. Why are rules considered to be plans?
Rules are specific statements that inform what is to be done. They do not allow for any flexibility or discretion. It reflects a managerial decision that a certain action must or must not be taken. They are usually the simplest type of plans because there is no compromise or change unless a policy decision is taken.
6. What kind of strategic decisions are taken by business organisations.
Major strategic decisions will include decisions like whether the organisation will continue to be in the same line of business, or combine new lines of activity with the existing business or seek to acquire a dominant position in the same market.
7. Why it is that organisation are not always able to accomplish all their objectives?
For accomplishment of objectives an organisation make plans. However, planning also has a set of limitations therefore organisations are not always able to accomplish all their objectives. The limitations are:
→ Rigidity: A well-defined plan is drawn up with specific goals to be achieved within a specific time frame. These plans then decide the future course of action and managers may not be in a position to change it. This kind of rigidity in plans may create difficulty.
→ Planning may not work in a dynamic environment: The business environment is dynamic, nothing is constant. Planning cannot foresee everything and thus, there may be obstacles to effective planning. The organisation has to constantly adapt itself to changes.
→ Planning reduces creativity: Planning is done by the top management. Usually the rest of the members just implement these plans. As a consequence, middle management and other decision makers are neither allowed to deviate from plans nor are they permitted to act on their own. Thus, planning in a way reduces creativity since people tend to think along the same lines as others.
→ Planning involves huge costs: Formulation of plans involves huge costs. Detailed plans require scientific calculations to ascertain facts and figures also number of incidental costs as well, like expenses on boardroom meetings, discussions with professional experts and preliminary investigations to find out the viability of the plan… The costs incurred sometimes may not justify the benefits derived from the plans.
→ Planning is a time-consuming process: Sometimes plans to be drawn up take so much of time that there is not much time left for their implementation.
→ Planning does not guarantee success: The success of an enterprise is possible only when plans are properly drawn up and implemented. Any plan needs to be translated into action or it becomes meaningless. Managers have a tendency to rely on previously tried and tested successful plans. It is not always true that just because a plan has worked before it will work again. Besides, there are so many other unknown factors to be considered. This kind of complacency and false sense of security may actually lead to failure instead of success.
8. What are the main features to be considered by the management while planning?
The features to be considered by the management while planning are:
→ Focus on Objectives: Specific goals are set out in the plans along with the activities to be undertaken to achieve the goals. Thus, planning is purposeful. Planning has no meaning unless it contributes to the achievement of predetermined organisational goals.
→ Planning is a primary function of management: Planning lays down the base for other functions of management. All other managerial functions are performed within the framework of the plans drawn. Thus, planning precedes other functions.
→ Planning is pervasive: Planning is required at all levels of management as well as in all departments of the organisation. It is not an exclusive function of top management nor of any particular department. But the scope of planning differs at different levels and among different departments.
→ Planning is continuous: Plans are prepared for a specific period of time, may be for a month, a quarter, or a year. At the end of that period there is need for a new plan to be drawn on the basis of
new requirements and future conditions. Hence, planning is a continuous process.
→ Planning is futuristic: Planning essentially involves looking ahead and preparing for the future. The purpose of planning is to meet future events effectively to the best advantage of an organisation. It implies peeping into the future, analysing it and predicting it. Planning is, therefore, regarded as a forward looking function based on forecasting.
→ Planning involves decision making: The need for planning arises only when alternatives are available. Planning, thus, involves thorough examination and evaluation of each alternative and choosing the most appropriate one.
→ Planning is a mental exercise: Planning requires application of the mind involving foresight, intelligent imagination and sound judgment. It is basically an intellectual activity of thinking rather than doing, because planning determines the action to be taken. However, planning requires logical and systematic thinking rather than guess work or wishful thinking.
9. What are the steps taken by management in the planning process?
The steps taken by management in the planning process are:
→ Setting Objectives: The first and foremost step is setting objectives. Objectives or goals specify what the organisation wants to achieve. Objectives should be stated clearly for all departments, units and employees. Managers must understand how their actions contribute to achieving objectives. Objectives give direction to all departments. If the end result is clear it becomes easier to work towards the goal.
→ Developing Premises: Planning is concerned with the future which is uncertain and every planner is using conjecture about what might happen in future. Therefore, the manager is required to make certain assumptions about the future which is called premises. Assumptions are the base material upon which plans are to be drawn. The base material may be in the form of forecasts, existing plans or any past information about policies.
→ Identifying alternative courses of action: There may be many ways to act and achieve objectives. All the alternative courses of action should be identified. The course of action which may be taken could be either routine or innovative.
→ Evaluating alternative courses: The next step is to weigh the pros and cons of each alternative. The positive and negative aspects of each proposal need to be evaluated in the light of the objective to be achieved through detailed calculations of earnings, earnings per share, interest, taxes, dividends are made and decisions taken. Alternatives are evaluated in the light of their feasibility and consequences.
→ Selecting an alternative: The best plan has to be adopted and implemented. The ideal plan, of course, would be the most feasible, profitable and with least negative consequences. Subjectivity and the manager’s experience, judgement and at times, intuition play an important part in selecting the most viable alternative. Sometimes, a combination of plans may be selected instead of one best course.
→ Implementing the plan: The step is concerned with putting the plan into action, i.e., doing what is required. For example, if there is a plan to increase production then more labour, more machinery will be required. This step would also involve organising for labour and purchase of machinery.
→ Follow-up action: To see whether plans are being implemented and activities are performed according to schedule is also part of the planning process. Monitoring the plans is equally important to ensure that objectives are achieved.
10. Is planning actually worth the huge costs involved? Explain.
Planning is an essential function of organisation despite huge costs involved. The below points detailed the benefits of planning:
→ Planning provides directions: By stating in advance how work is to be done planning provides direction for action. Planning ensures that the goals or objectives are clearly stated so that they act as a guide for deciding what action should be taken and in which direction. If goals are well defined, employees are aware of what the organisation has to do and what they must do to achieve those goals. Departments and individuals in the organisation are able to work in coordination.
→ Planning reduces the risks of uncertainty: Planning is an activity which enables a manager to look ahead and anticipate changes. By deciding in advance the tasks to be performed, planning shows the way to deal with changes and uncertain events.
→ Planning reduces overlapping and wasteful activities: Planning serves as the basis of coordinating the activities and efforts of different divisions, departments and individuals. It helps in avoiding confusion and misunderstanding. Since planning ensures clarity in thought and action, work is carried on smoothly without interruptions. Useless and redundant activities are minimised or eliminated.
→ Planning promotes innovative ideas: Since planning is the first function of management, new ideas can take the shape of concrete plans. It is the most challenging activity for the management as it guides all future actions leading to growth and prosperity of the business.
→ Planning facilitates decision making: Planning helps the manager to look into the future and make a choice from amongst various alternative courses of action. The manager has to evaluate each alternative and select the most viable proposition. Planning involves setting targets and predicting future conditions, thus helping in taking rational decisions.
→ Planning establishes standards for controlling: Planning involves setting of goals. The entire managerial process is concerned with accomplishing predetermined goals through planning, organising, staffing, directing and controlling. Planning provides the goals or standards against which actual performance is measured. By comparing actual performance with some standard, managers can know whether they have actually been able to attain the goals.