what are the importance and limitations of planning as a function of management  

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wannam eNotes educator| Certified Educator
Planning is a key function of any management or leadership. It is very difficult to achieve your goals without a plan. A company must decide what its goals are and management must decide how they will achieve these goals. Planning allows management to be prepared for most contingencies. Of course, the downside of planning is that there is less room for spontaneity and one cannot possibly plan for every possibility. Let's look at a car dealership as an example. A manager might plan for each employee to sell a specific number of cars. They may decide to appropriate funds to reward these employees for meeting their goals. This is a great way to meet sales goals, but this plan might have a downside. If another car dealership offers a sale, it might be difficult for the first dealership to compete because their plan is to reward their employees and not to discount their cars. Planning is necessary for many aspects of business other than just reaching major goals. A manager must plan how best to use his/her employees. Each employee must have a scheduled time to work and a specific job to do. These minor portions of business can have major consequences if they are not planned correctly. A restaurant that doesn't plan to have extra employees on a holiday can find themselves in trouble quickly. Planning is vital for many aspects of business.
sid-sarfraz | Student

Management - Definition

Management in business and organizations is the function that coordinates the efforts of people to accomplish goals and objectives using available resources efficiently and effectively.

According to Henry L.SSK;

Management is the coordination of all resources through the process of planning, organizing, staffing, leading and controlling in order to attain stated objectives.

According to Janes L.Lundy;

Management is principally the task of planning, coordinating, motivating and controlling the efforts of others towards a specific objective.

Following are the basic functions of management:-

  1. Planning
  2. Organizing
  3. Staffing
  4. Leading
  5. Controlling

Planning Definition

"Planning bridges the gap from where we are to where we want to go. It makes it possible for things to occur which would not otherwise happen"

- Koontz and O'Donnel.

Planning in Management

Planning is deciding in advance what to do and how to do.It is one of the basic managerial functions. Before doing something, the manager must formulate an idea of how to work on a particular task. Thus, planning in management is closely connected with creativity and innovation. It involves setting objectives and developing appropriate courses of action to achieve these objectives.

Characteristics of Planning:-

  • Planning is a basic managerial function
  • Planning helps in defining the course of action to be followed for achieving various organizational objectives
  • It is a decision in advance, what to do, when to do, how to do and who will do a particular task.
  • Planning is the key to all other functions of management
  • It is a continuous process
  • It penetrates right from the top to the bottom level of management, but it is the responsibility of the managers or executives at the top level to make the right moves at the right time.
  • It is flexible and goal oriented.

Steps in Planning:-

  1. Create plan
  2. Implement Plan
  3. Review and revise plan
  4. Determine situation
  5. Evaluate goals
  6. Assess risk

Principles of Planning:-

  1. Principle of Contribution: The accomplishment of the objectives always depends on the soundness of plans and the adequate amount of contribution of company towards the same.
  2. Principle of Sound and Consistent Premising: Premises are the assumptions regarding the environmental forces like economic and market conditions, political, legal and cultural aspects, competitors actions, etc. These are prevalent during the period of the implementation of plans. Hence, Plans are made on the basis of premises accordingly, and the future of the company depends on the soundness of plans they make so as to face the state of premises.
  3. Principle of Limiting factors : The limiting factors are the lack of motivated employees, shortage of trained personnel, shortage of capital funds, government policy of price regulation, etc. The company requires to monitor all these factors and need to tackle the same in an efficient way so as to make a smooth way for the achievement of its objectives.
  4. Principle of Commitment: The planning shall has to be in such a way that the product diversification should encompass the particular period during which entire investment on that product is recovered.
  5. Principle of Coordinated Planning: Implementation of the long-range plan is regarded as contributing to the implementation of the short-range plan. functional plans of the company too should contribute to all others plans i.e. implementation of one plan should contribute to all the other plans.
  6. Principle of Timing: The plans should be arranged in a time hierarchy, initiation and completion of those plans should be clearly determined.
  7. Principle of Efficiency: Cost of planning constitute human, physical and financial resources for their formulation and implementation as well. Minimizing the cost and achieving the efficient utilization of resources shall has to be the aim of the plans. Employee satisfaction and development, and social standing of the organization are supposed to be considered while calculating the cost and benefits of plan.
  8. Principle of Flexibility: Plans are supposed to be flexible to favor the organization to cope-up with the unexpected environments. It is always required to keep in mind that future will be different in actuality. Hence companies, therefore, require to prepare contingency plans which may be put into operation in response to the situations.
  9. Principle of Navigational Change: Since the environment is always not the same as predicted, plans should be reviewed periodically.
  10. Principle of Acceptance: Plans should be understood and accepted by the employees, since the successful implementation of plans requires the willingness and cooperative efforts from them. Communication also plays a crucial role in gaining the employee understanding and acceptance of the plans by removing their doubts and misunderstanding about the plans also their apprehensions and anxieties about consequences of plans for achievement of their personal goal.

Types of Planning:-

  • Strategic plan
  • Portfolio plan
  • Business plan

Kinds of plans according to various organizations and their objectives:-

  1. Purpose or Missions: Basic task of an organization. For example, teaching and research can be attributed as the basic function of an educational institution; the purpose of business is to produce, distribute goods and make a surplus.
  2. Objectives: These are the goals that have to be accomplished by the organization. Corporate companies chart out their production plan well in advance to meet the requirements on time. For this they break the objectives into short term goals i.e., for a quarter based on the sales forecast. This kind of planning gives clarity and direction for the production team to achieve the goals.
  3. Strategies: These are the set of action plans designed in order to achieve the future objectives backed up by long term perspective in the wake of environmental analysis and give direction in which the resources have to be channelized.
  4. Policies: These are basically the guideline books that direct the course of the organization’s function as what to do and what not to-do. They see to that the decisions made fall well within certain boundaries in order to ensure fair and equitable treatment to all the employees. HR policies govern all the functions related to pay, promotion and other disciplinary mechanisms related to the work force.
  5. Procedures: They are programmes designed to carry out the activities of the organization in a specified manner. The procedures for placing a purchase order, payment collection etc.,
  6. Programmes: A programme is the sum total of goals, policies, procedures, rules, task etc., For example, new product development may be cited as a major programme while promotional campaign may be cited as  a supporting programme.
  7. Budget: No plan is feasible without a budget allocated to it. A budget is a numberised programme and more of a control device. Revenue budgets, expense budgets, production budgets to name a few.
  8. Zero base budget: This kind of budget does not take into account the previous year’s performance record or budget but treats every progarmme afresh and starts working from ground up.

Importance of Planning:-

  • Planning increases the organization's ability to adapt to future eventualities: The future is generally uncertain and things are likely to change with the passage of time. The uncertainty is augmented with an increase in the time dimension. With such a rise in uncertainty there is generally a corresponding increase in the alternative courses of action from which a selection must be made. It provides a systematic approach to the consideration of such future uncertainties and eventualities and the planning of activities in terms of what is likely to happen.
  • Planning helps crystallize objectives: The first step in planning is to fix objectives which will give direction to the activities to be performed. This step focuses attention on the iesults desired. A proper definition and integration of overall and departmental objectives would result in more co-ordinated inter-departmental activities and a greater chance of attaining the overall objectives.
  • Planning ensures a relatedness among decisions: A crystallization of objectives as mentioned above would lead to a relatedness among the decisions which would otherwise have been random. Decisions of the managers are related to each other and ultimately towards the goals or objectives of the enterprise. Creativity and innovation of individuals is thus harnessed towards a more effective management of the company.
  • Planning helps the company to remain more competitive in its industry: Planning may suggest the addition of a new line of products, changes in the methods of operation, a better identification of customer needs and segmentation and timely expansion of plant capacity all of which render the company better fitted to meet the inroads of competition.
  • Adequate planning reduces unnecessary pressures of immediacy: If activities are not properly planned in anticipation of what is likely to happen, pressures will be exerted to achieve certain results immediately or a in a hurry. Thus adequate planning supplies orderliness and avoids unnecessary pressures.
  • Planning reduces mistakes and oversights: Although mistakes cannot be entirely obviated, they can certainly be reduced through proper planning.
  • Planning ensures a more productive use of the organization's resources: By avoiding wasted effort in terms of men, money and machinery, adequate planning results in greater productivity through a better utilization of the resources available to the organization.
  • Planning makes control easier: The crystallization of objectives and goals simplify and highlight the controls required.
  • Planning enables the identification of future problems and makes it possible to provide for such contingencies.
  • Planning can help the organization secure a better position or standing: Adequate planning would stimulate improvements in terms of the opportunities available.
  • Planning enables the organization to progress in the manner considered most suitable by its management: Management, for example, may be interested in stability and moderate profits rather than huge profits and risk of instability. In terms of its objectives, the plan would ensure the actions are taken to achieve such objectives.
  • Planning increases the effectiveness of a manager: As his goals are made clearer, adequate planning would help the manager in deciding upon the most appropriate act.

Limitations of Planning:-

  1. Time consuming
  2. Costly
  3. Changes in situation makes planning ineffective
  4. Internal inflexibility: psychological, policy, capital
  5. External in flexibilities: Political climate, trade unions, technological changes.