Planning ensures the events to conform to plans. Thus, if you do not plan (no clear objectives), you do not know what to control. Control assumes significance in a dynamic environment as of today, where several forces push you away from reaching the goal. Appropriate control devices help you to check the course from time to time, so that you will be able to take the appropriate corrective measures.
Principles of Planning
Systematic planning is essential for the success and survival of any organization. Organizations fail not because they don’t plan, but because they don’t plan in an effective way. An understanding of the following principles helps one to achieve effectiveness in planning, so that you can guard yourself against the possible mistakes that are often committed by managers.
i.Take Time to Plan
As the plan is a decision regarding a future course of action, it specifies the sequence of events to be performed. It involves the commitment of organizational resources in a particular way. Therefore, if a plan is not conceived well, the resources would be put to wrong use. It becomes a wasteful exercise resulting in agony and frustration. To avoid such unpleasant outcomes, several probing questions have to be asked. Planning in haste with incorrect information, unsound assumptions and inadequate analysis of the environment has to be avoided by all means. Otherwise, you may save some time in quickly developing a plan, but in the event of things going wrong, you are hard pressed for time and resources to correct yourself. It not only lands you in trouble, but the organization as well.
ii. Planning can be top down and bottom up
Normally in any organization major enterprise plans are developed by the top management. These plans are wider in scope and provide the direction to the whole organization. They spell out what the organization wants to achieve over the years. The overall plan thus formulated by the top management is split into departmental plans. Accordingly, plans for production, marketing, finance, personnel and so on, stem from the basic
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plan of the organization. The other operational plans at various levels down the organization flow from the departmental plans. This approach is called top-down approach to planning.
In contrast, bottom-up approach involves information emanating from the lower levels – that is, top management collects information from lower levels. On the basis of such information, plans are formulated. The underlying assumption is that people at the operational level are closer to the action and they possess valuable information. In this approach, the initiative for planning comes from the lower levels in the organization. This approach makes use of the rich experience of the subordinates. It also helps to motivate the people and elicit commitment from them. However, the choice of the method depends on the size of the organization, the organizational culture, the preferred leadership style of the executive and the urgency of the plan.
iii. Involve and communicate with all those concerned
Modern business organizations are so complex that various operations are highly interrelated. Such an interrelation of activities requires the involvement of all the people concerned with the achievement of goals. For instance, a plan to improve the quality of the products (Quality control plan) may require the cooperation of the people in the production. Such participation helps in instilling a sense of commitment among the people. They also in turn gain a sense of pride for having been a party in deciding the plan. Such an involvement makes possible the process of sharing information. If concerned people are not involved, there may be unnecessary gaps in the execution because of lack of understanding of the plans.
iv. Plans must be flexible and dynamic
Your managerial career indeed would be a “bed of roses” if there are no unexpected changes in the environment. Day in and day out, you are confronted with too many changes forcing you into so many dilemmas or problems. Most of such problems are caused by unexpected events in the environment. If the plan is rigid with less scope for modifications as required by the changes in the environment, the organization would ultimately sink. In a static environment, of course, there may not be a
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problem with a rigid plan. But in a dynamic environment, to meet the unexpected changes, adequate flexibility has to be built into the plan. Otherwise, the plan itself becomes a limiting factor.
v. Evaluate and revise
While building into the plans the required flexibility, you should not lose sight of the additional costs involved to buy such flexibility. You must also remember that flexibility in plans may not be possible always. For example, a plan for a petroleum refinery may not offer any flexibility because the machinery can hardly be used for any other purpose. Evaluation of the plan at regular intervals is necessary to make sure that it is contributing to the objectives. Like a pilot, who in the high skies checks the course to make sure that he is flying in the right direction and at the right altitude, the manager has to evaluate and review the plan. Such an exercise enables to initiate the corrective measures at the right time before it is too late. This depends on the accuracy of the information systems in the organization.
STEPS IN PLANNING
Though there may be a few variations in the exact procedure adopted by different organizations in planning, the following are the broad steps:
a. Setting of goals
Planning begins with decisions about what the organization wants to achieve during a specified period. The goals of an organization and various subunits have to be decided and spelt out in clear terms. It is always desirable to express the goals in quantitative terms for all the key areas of the business like production, profit, productivity, market share, employee relations, social responsibilities, etc. For instance, instead of saying that the objective of business is to achieve a fair rate of return on the investment, it may be given a quantitive expression, say, 10 or 15 percent return on the investment. The time frame in which the objectives have to be achieved must also be specified. Besides, adequate attention has to be paid to the resources required to achieve the objectives. Thus what to achieve, when, how and with what resources are a few important questions that should be answered at this stage.
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Since goal setting is the essential first step in planning, managers who fail to set meaningful goals cannot make effective plans. If Telco is able to retain its dominance in the Heavy Commercial Vehicle (HCV) segment, it is because all the employees of the organization know clearly that the primary objective is retaining the leadership in the industry. For instance, SAIL’s corporate mission “Infrastructuring India” explains basic purpose and board objectives of the company to a larger extent. The mission of the organization, the corporate values, experience, polices provide adequate guidance to the managers in goal setting.
b. Outlining Planning premises
Planning premises, in simple, are the assumptions about the various elements of the environment. Planning assumptions or premises provide the basic framework in which plans operate. Appropriate assumptions have to be made on various aspects of the environment – both internal and external to the organization. Otherwise, it will be like fighting a battle without a clear assessment of the enemy’s strengths and weaknesses.
i.Internal premises: Important internal premises include sales forecasts and policies of the organization. Each one of these elements is a critical success factor. For instance, the accuracy of the sales forecast influences the procurement of resources, production scheduling and the marketing strategies to be pursued to achieve the objectives. Similarly, however effective the objectives are, it is the people who have to perform and achieve. If their attitude is not positive, nothing moves.
ii.External premises: Important external premises relate to all those factors in the environment outside the organization. They include issues related to technology, general economic conditions, government policies and attitude towards business, demographic trends, socio-cultural changes in the society, political stability, degree of competition in the market, availability of various resources and so on.
It is evident that some of these factors are tangible while others are intangible. For example, material and human resources availability, etc. are tangible factors which can be stated in quantitative terms. On the other hand factors like political stability, attitudes of the people, certain other sociological factors are intangible, in that they cannot be
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measured quantitatively. Effective premising – the making of appropriate assumptions, helps the organization to identify the favourable and unfavourable elements in the environment. Though accurate premising is difficult, anticipating future situations, problems and opportunities would undoubtedly help the managers in reducing the risk, though not completely eliminating it.
c. Decide the planning period
How far in the future should a plan be made is another pertinent question in the process of planning. Businesses vary in their planning periods. In some cases plans are made for a short period, varying from a few months to a year, while in some other cases, they are made to cover a longer period, to cover a period of more than a year. The period may extend up to 5-10 years and even beyond. Companies normally plan for a period that can be reasonably anticipated. The lead time involved in the development and commercialization of a product and time required to recover the capital investment (pay-back period) influence the choice of the length of the plan. Again, in the same organization, different plan periods may exist for different purposes. This gives raise to the two important concepts – operational planning and strategic planning. While operational plans focus on the short-term, strategic plans focus on the long-term.
d. Develop alternatives and select the course of action
The next logical step in planning involves the development of various alternative courses of action, evaluating these alternatives and choosing the most suitable alternative. Objectives may be achieved by different courses of action (alternatives). For example, technical know-how may be developed by in-house research, collaboration with a foreign company or by tying up with a research laboratory. Similarly, an organization can grow by expanding its scale of operations or through acquisitions and mergers. Technical feasibility, economic viability and the impact on the society are the general thumb rules to select the course of action. The alternative courses are evaluated in the light of the premises and the overall goals of the organization.
e. Derivative plans
The plan finalized after a thorough analysis of various alternatives
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