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 goal.”

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 budgets.

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:

1. Principle of contribution to objectives.

2. Principle of efficiency of plans.

3. Principle of primacy of planning.

4. Principle of planning premises.

5. Principle of policy framework.

6. Principle of timing.

7. Principle of alternatives.

8. Principle of limiting factors.

9. Principle of commitment.

10.Principle of flexibility.

11.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:

1. Planning the primary function of management.

2. Planning is required for an effective control.

3. Planning leads to attainment of objectives.

4. Planning reduces uncertainty and business failure.

5. Planning is the basis for decentralization.

6. 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 determined.

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 goals.

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 required.

Determine Objectives

Develop PlanningPremises

IdentifyAlternatives

EvaluateAlternatives

Formulate DerivativePlans

Select a courseof action

Plans can be classified as :

i. Purposes or Missions

ii. Objectives or Goals

iii. Strategies

iv. Policies

v. Procedures

vi. Rules

vii. Programs

viii. 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 them.

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.

1. Objectives must be clear and specific.

2. They should be stated in measurable terms.

3. Objectives must be result-oriented and time-bound.

4. Objectives must be mutually supportive.

5. Objectives should be challenging but attainable or realistic.

6. Objectives must be acceptable to employees.

7. Objectives should be interconnected and mutually supportive.

8. 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.

9. Objectives should provide some flexibility.

10.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:

i. Strategy is a comprehensive and integrated plan for the allocation of scarce organization resources.

ii. Strategy is designed to improve the organization’s relations to its environment. This is known as environmental adaptation.

iii. Strategy involves choices that determine the nature and direction of the organization’s activities towards the attainment of goals.

iv. Strategy sets the direction while other plans decide how this direction is put into action. Therefore, strategy must be formulated before plans are made.

v. Strategy making is primarily the responsibility of top management. However, people at all levels are involved in strategy implementation.

vi. Strategy is a standing and long term plan.

vii. 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:

i. A policy is a standing plan. It is a standing answer to recurring problems of a similar nature.

ii. Policies provide broad guidelines as to how objectives of a business are to be achieved.

iii. Policies are models of thought and principles underlying the activities of an organization. They guide the decisions and behavior of executives.

iv. Policies are broad guides & provide scope for executive judgment.

v. 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 targets.

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.