Process of Planning

Planning is the essence of management. There is no fixed formula or method for planning. It is carried out as per the need of the organisation. For ready execution and better results step by step approach to a planning process is considered to be a good technique.

Some of the steps involved in the process of planning are as follows:

1. Identification of the Problem or Opportunity 2. Collection and Analysis of Relevant Information 3. Establishment of Objectives 4. Determination of Planning Premises or Ideas

5. Examining Alternative Courses of Action 6. Weighing Alternative Courses of Action 7. Selecting Ideal Action-Plan 8. Determining Secondary Plans 9. Providing for Future Evaluation.

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Process of Planning (With Steps)

Process of Planning – Analysing Factors Affecting the Future, Forecasting the Future Environment and a Few Other Steps

Planning is the essence of management. Conceived as a process, planning embraces a series of steps:

(1) Analysing factors affecting the future;

(2) Forecasting the future environment;

(3) The determination of the objectives to be sought, and overall goals;

(4) Policy-making and establishing programmes and procedures;

(5) Decision-making and choosing between alternatives;

(6) Preparing and installing plans.

These and other elements are considered in the following paragraphs:

1. Analysing Factors Affecting the Future:

A plan provides a spring board from the present. The planner should start looking into the conditions which affect the company’s future opportunity. These condi­tions are – (i) the environment, (ii) internal conditions, and (iii) obligations of the enterprise.

The Environment:

The business organisation exists in three kinds of environment – first, in the total economy; second, in a particular industry; and third, in a specific geographic area.

If the enterprise is in a position to make its own independent appraisal of the total economy, it will want to consider a broad range of business indicators. The more important barometers are industrial production, wholesale prices, retail prices, employment and unemploy­ment, personal incomes, sales and inventories, merchandise exports and imports, availability of credit, raw material prices, new incorporations, business failures, gross national product, corporate profits, and central budget.

In addition, further developments in the total economy, such as- transport and communication developments.

Competition is also major part of the enterprise’s environment. It is important to know as much about competition as possible. The business must also consider its direct and (in the case of capital goods industries) its indirect customers. The frailties of consumer acceptance impose constant challenge.

The consumer is not concerned with the manu­facturer’s financial condition; he wants a product or service which fulfills his needs. The company must be willing and able to change the course of its business to meet customer demands and to find improved ways of service through better products, increased quality, and greater value.

2. Forecasting:

Business forecasting is the calculation of probable events, to provide against the future. Thus, it is an estimate of a future condition. No one can really know what the future will bring. The only certain thing about the future is its uncertainty. It is possible, however, to visualise the future of events, on the basis of the study that has been made with respect to environment.

The forecast could include a variety of elements, such as:

i. Estimates of general conditions in the total economy;

ii. Estimates of specific conditions in the total economy, which affect the company’s business;

iii. Estimates of total demand for the products sold by the company;

iv. Estimates of markets for the company’s current and/or prospective product line;

v. estimates of sales possibilities;

vi. Estimates of activities at peak, normal and below-normal conditions and for short and long-range periods.

Methods of Forecasting – Direct and Indirect:

In direct method one can arrive at the requirements of the firm by summing up the estimates submitted by its different components or subordinate units. In the case of indirect method, first of all, requirements of the entire trade or industry are estimated and then the share of the particular unit is ascertained.

Empirical or Scientific Forecasting:

Empirical forecasting attempts to view the future in terms of the past. Previous experience properly organised and interpreted in terms of causal relationship is the basis of scientific forecasting.

Establishing Conditions and Assumptions:

After the estimates based on forecasting have been made, logical development of assump­tions from these known facts is the next step. The manager has to put together lists of information and fill in the gaps. Through necessary assumptions, he will picture the future.

3. Establishing Objectives:

A plan is sometimes described as a statement of objectives to be attained in the future and an outline of the steps necessary to reach them. If plans have to ensure that objectives have to be achieved, they must be set. Objectives have to be established to give a sense of direction in which efforts are to be made. A goal is the end result towards which all management activities are directed. They constitute the purpose of the enterprise.

But no one can accomplish an ambiguous goal. People must know what their goals are, what actions contribute to the attainment of those goals. Someone has said – “If you don’t know where you are going, no road will get you there”. Hence, setting of objectives is necessary for each manager.

As the whole organisation must set goals and objectives, so must each department section or division. As a matter of fact, one of the recognised methods of managing business these days is managing by objectives or by results.

i. Hierarchy of Objectives:

There is a hierarchy of objectives in an organisation. The structure of planning starts at the highest level. At the top, the entire organisation aims in a given direction. Each department, in turn, directs its efforts towards its own sets of goals. Each subdivision of each department has its own objectives.

Each of the sub-goals should be consistent with and contribute towards, the goals of the next higher level in the hierarchy. Thus, the hierarchy can be built up by coordinating plans of different departments and with the overall company-wise programme. Any conflict between different departments should be reconciled.

ii. Multiplicity of Objectives:

In a business organisation the overall objective is to make the highest profit possible. But planning for profit will require planning for subsidiary goals as well. Such goals may include such things as company growth, diversification into entirely new types of business, development of new products, penetration in a new market, getting a larger share of the market that already exists for the products, or vertical integration for self-sufficiency.

Companies may also have social objects – to pay good wages, to make their plants and offices good places to work in, to provide useful products at reasonable prices. Thus, even broad major objectives are normally multiple. A business might include among its overall objectives a certain rate of profit and return on investment, consumer satisfaction and rendering service to the commun­ity.

iii. Management by Objectives:

We have seen above that at each level of company’s objectives, one level complements the next. The goals or ends of one level are the means of achieving other goals at the next higher level. It is important, therefore, to focus the attention of individual members of the organisation on the objectives that are meaningful to them. A useful approach, as suggested by Peter Drucker, is “management by objectives, in which objectives are supplied to every area where performance and results directly and vitally affect the survival and prosperity of business.”

Management by objectives involves mutual goal-setting by manag­ers at different levels right to the level of the worker. In this way, each person has a definite and measurable goal and each person then contributes towards companywide objectives. This requires each man­ager to develop and set the objectives of his unit himself. Higher management, of course, reserves the power to approve or disapprove these objectives.

The overall objectives of a company generally are established by top management; yet, it is desirable for each subordinate manager to participate in the development of these objectives. This will not only give him a sense of participation, but he will clearly understand the relationship between his own objectives and the broader objectives of the company.

He will accept such objectives as correct and strive in a joint effort for the attainment of the company’s objectives. This generates the great advantage of management by objectives in that the manager can control his own performance. “Self-control means stronger motivation – a desire to do the best rather than just enough to get by”.

Plans for Goal Achievement:

Once goals are set, other plans are made to carry them out.

These plans can be divided into two groups:

1. Standing plans, and

2. Single-use plans.

1. Standing Plans:

Standing Plans are used more than once. They help solve repetitive problems.

The most common forms of standing plans are:

i. Policies,

ii. Procedures,

iii. Rules, and

iv. Programmes

i. Policies:

Policy-making is important in the process of planning. Policies are general statements that serve as guides for the actions of managers. They are indeed guidelines for actions which help subordin­ates to carry on their work in harmony with the overall goals of the business. Policies communicate top managements thinking to company employees and to suppliers, customers and the public. Policies set limits on activities, but do not tell someone exactly what to do. This gives the individual some “manoeuvering room” in making a decision.

The responsibility of determining policy rests with those who direct a business. The overall policies are made by top management and departmental managers may make policies for their respective depart­ment. Whether overall or departmental policies must come from above, they cannot well up from beneath. Policy making cannot be delegated to subordinates.

ii. Procedures:

Unlike policies, procedures state exactly what to do. They reduce the judgment a person may use in problem solving; he must follow the procedure as laid down. Procedures are useful where high degree of regularity is desired in frequently recurring event. When, for example, a department manager requisitions office supplies, he will have to follow a required procedure. An important advantage of establishing procedures is that a good procedure makes sure that the work will be done and can be done by a person who is not as skilled as the individuals laying down the procedure.

iii. Rules:

Rules are specific instructions in regard to what may or may not be done. “No smoking in the plant”, “safety shoes must be worn in the plant” are examples of rules. Penalty may be provided for failure to observe the rule.

iv. Programmes:

A programme is a definite plan of work made in proper sequence and in conformity with the objectives, on the basis of policies and procedures laid down. Within the scope of policies, programmes aim at completion of the activities within a specific period. For example, a programme of modernisation of facilities might cover a year. Another example of a programme may be an automatic replace­ment of type-writers after they reach a certain age. Similarly, training programme, and management development programme are other exam­ples.

2. Single-Use Plans:

Some plans are used only once. They are needed for non-repetitive situations. Thus, single-use or single purpose plans are designed to accomplish specific objectives, usually within a relatively short period of time. Budgets, programmes and projects are examples of single-use plans. The overall budget might include sales budget, advertising budget, production budget, Raw Materials budget, personnel budget, equipment purchasing and maintenance budget, cost budget, cash flow budget and profit budget. All these budgets must be coordinated.

Plan Standards and Methods of Measuring Accomplishment:

The executive deals with money, men, materials, machines, methods and time all at once. He must measure the hierarchy of objectives and possible action to be taken to reach them. Budgets help in numerical terms the requirements of the above resources. The quantification can be made as so many units of money to be spent on a programme or so many units of materials, so many man-hours or machine-hours to be utilised for the purpose.

Review and Adjust Plan in Light of Changing Condition:

Conditions are changing all the time. In some instances the rate of change is extremely rapid. Either there may not be time to plan, or the plan may become obsolete. It is a good idea to review policies and procedures periodically.

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Process of Planning – 9 Step Process: Identification of the Problem or Opportunity, Collection and Analysis of Relevant Information and a Few Other Steps

Step # 1. Identification of the Problem or Opportunity:

External environment imposes limitations and constraints on formulation of organizational objectives and their implementation, but at the same time it also offers opportunities and challenges which an organization could exploit to its advantage.

The constraints and opportunities provided by the external environment are in various forms- legal regulations, social and cultural norms, scarcity of financial resources, ever-changing technology, and unpredictable consumer demand and preferences.

The basic purpose of identifying and interpret­ing a problem or opportunity is to ensure that existing resources of the organization are adjusted and adapted to the needs of a given situation, in other words, to convert a challenge into an opportunity. Of course, this will require considerable knowledge and experience on the part of management—but then, is it unfair and illogical to expect these qualities from owners and top management?

Thus, imposition of a new tax on its products may be seen as an opportunity to start a new line of production. Increase in oil prices may become an opportunity to explore and develop new sources of energy and more efficient methods of fuel-consumption. Or, increasing number of women taking up outdoor jobs may be a signal for closure of sewing machine production.

Step # 2. Collection and Analysis of Relevant Information:

Effective planning depends on the quality, relevance and validity of the data and information on which it is based. But this is not easy to determine. It will depend on the sources of information and methods of its collection.

The sources of information may be external and internal. External sources will include customers, professional people, newspapers and magazines, TV news channels reporting business affairs. Inter­nal sources will be meetings with salespersons and reports sent by own staff from different places.

The methods of collection of information will be informal monitoring under which no visible effort is made to collect the information, the same being obtained by mere observation of reactions of dealers and customers as regards quality, price and demand of goods and services produced by the organi­zation.

The second method will be to obtain information by formal scanning of external sources, e.g., newspapers, trade magazines and journals, reports emanating from business associations. The third method of information collection is to set up a department or an official to collect all available informa­tion as regards a specific purpose.

Analysis of the information for the purpose of planning will require considerable skill. It includes scrutiny of the information and developing cause-effect relationship between various factors—price and demand, quality and costs, wage increase and level of productivity. Over the years, several sophisticated quantitative techniques have been developed for the purpose, such as, trend projections through econometric models, regression analysis, substitution effect, etc.

Step # 3. Establishment of Objectives:

Objectives need to be established in every area where performance and results will directly impact the survival and growth of business. They should clearly define the desired outcome that the organization seeks to achieve within the limitations of its internal and external environment. The objectives may include stability, growth and development, increasing return to stakeholders, market leadership, job creation, and promotion of quality research to justify the existence of the organization in society.

Determination of objectives reflects learning-adapting response of an organization to the prevailing environment. Management does have a key role in shaping the objectives but it must address the con­cerns of several interest-groups—investors, suppliers of material, dealers, consumers and employees— which for their own reasons, contribute to organizational activities.

However, mere setting of objective will not be enough. There have also to be specific policies, proce­dures, and strategies to facilitate the accomplishment of objectives. Improvement in quality of custom-made goods will, for example, need suitable adjustment in policy and procedures for selection, training and com­pensation of workers.

Organizational objective also need to be split into specific, short-term and measurable objectives for the departments concerned. A general long-term objective of profitability will, for example, need splitting into measurable production and sales targets for production and sales departments. Likewise, objective of market leadership will need splitting into measurable performance in terms of quality control, cost reduction, and customer satisfaction.

Step # 4. Determination of Planning Premises or Ideas:

Planning has to take into account numerous uncertainties of its internal environment. Important com­ponents of the internal environment are – (a) Technology; (b) Structural relationships and organization design; (c) Employee attitudes and morale; and (d) Managerial decision-making mechanism. Internal environment falls within the control of management which can appropriately adjust and adapt it to the requirements of the external environment.

As it is difficult to accurately predict future environmental conditions, it will be necessary to base planning on certain assumptions, such as-

(a) Behavior of various market forces, such as, nature of customers (children, youth, old), their class composition (rich, upper middle, middle or other classes), their disposable income levels, existing and estimated demand and supply of goods and services, etc.;

(b) Kinds and cost of the goods and services to be produced and the price at which they will be marketed;

(c) Expected volume of sales;

(d) Competitors’ plans, strategies and activities;

(e) Change in production technology;

(f) Policies of the government in the fields of money management, taxation, imports and exports, competition and monopoly control, etc.;

(g) Change in economic conditions affecting availability of material, equipment, capital and manpower.

It is not necessary to make assumptions about all environmental factors. Only factors that will crit­ically affect the plans should be identified and evaluated. Moreover, since even the best assumptions may not work due to unforeseen changes, it is better to work on a series of assumptions ranging from the realistic, to the most optimistic and pessimistic, and prepare sketchy details of the plans based on each assumption. True, this will involve great deal of administrative work but it will help to broaden and deepen the outlook of managers.

Step # 5. Examining Alternative Courses of Action:

Often there will be more than one action-plan to achieve a desired objective. In fact, in many situa­tions there may be an unlimited number of alternative plans of action. For example, if the objective is to maximize profits, one alternative would be to intensify sales effort in existing markets, another to test waters in unexplored markets, yet another to increase the price of goods and services, and still another to diversify production and start manufacturing products and services similar to those of the competitors.

In making a decision on how much to spend on advertising the alternatives may consist of a fantastic range of possible expenditure—from zero to millions of rupees. In some cases, however, the alternatives may not be many. For example, while making the decision on purchase of a plant, there will be fewer alternatives. In fact, sometimes just two alternatives will be present —to purchase or not to purchase.

The number of alternative action-plans prepared by a manager would depend on his sense of imagination, skill and experience.

Step # 6. Weighing Alternative Courses of Action:

There may be many alternative courses of action to achieve the desired objective. But all of them may not be equally suitable or practicable; each alternative plan will have its strong and weak points. A proper evaluation of the alternative action-plans is necessary to determine which of them would be the best in a given situation.

Evaluation of each alternative action-plan should be based on- (a)’It’s effectiveness in achieving the desired result; (b) Its ability to face environmental changes; and (c) Its integration with other on-going action plans.

The objective of profit maximization can, for example, be achieved variously, such as, (a) Produc­tion of useful products and services at affordable price; (b) Diversification of product-line, (c) Aggres­sive advertising on domestic media channels. However, each of these will require necessary human, physical, technological, and financial resources and the management should examine whether it can do with the existing resources or require additional resources for the purpose.

Step # 7. Selecting Ideal Action-Plan:

Whether evaluation of various alternatives is based on individual preferences and prejudices, or math­ematical and statistical analysis techniques, a decision has to be taken in favor of one or the other course of action. Needless to say, the ideal action-plan should satisfy the test of being realistic and feasible.

Step # 8. Determining Secondary Plans:

Secondary plans flow from the basic plan. These are meant to support and expedite the achievement of the basic plan. For example, once the ideal production plan is decided, there will need to be decision on where, how and at what price to procure the necessary material, consumable stores, necessary tech­nology, and hire and train workers.

Step # 9. Providing for Future Evaluation:

Planning is with a view to achieving pre-determined objectives. To ascertain if the ideal action-plan selected for the purpose is proceeding as planned, it will be necessary to devise a system for continu­ous evaluation and appraisal of the plan and removal of factors that impede its accomplishment.

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Process of Planning – 6 Steps Followed by a Manager: Recognition of the Need for Action, Establishment of Clear-Cut Objectives and a Few Other Steps

Planning in a business enterprise generally calls for the following steps on the part of a manager:

(i) Recognition of the Need for Action:

This means that the manager must first identify the problem or opportunity that calls for planning and action.

(ii) Establishment of Clear-Cut Objectives:

As the second step, the manager has to lay down in the clearest possible terms his objectives keeping in view his strengths and limitation.

(iii) Building the Premises for Planning:

This involves the collection and dissemination of the facts and figures necessary for planning the future course of an enterprise or a part of it. Forecasting is, thus, an important step in planning. A forecast is a picture of the future based on inference from the known facts. A business enterprise will need to forecast its markets, sales, prices, product costs and wage rates taking into account projections of taxes, population, literacy, economic development, etc., before it can venture to formulate plans for the future.

(iv) Identifying Alternative Courses of Action:

The next step in the planning process is to search for and examine alternative courses of action. The strength and weaknesses of the alternative courses of action also need to be examined by the manager at this stage.

(v) Evaluation of Alternative Courses:

The manager has to compare the strong points and the limitations of the alternatives identified at the last stage in the light of premises and goals. Since there are so many complex variables connected with each goal and each possible plan, the process of comparative evaluation is extremely difficult. Ultimately, the choice will depend upon what is determined as most critical factor from the point of view of the objectives of the enterprise.

(vi) Choice of Course of Action:

This is the point of final decision-making after which the manager adopts a particular course of action as his plan. Sometimes, a manager may decide upon more than one plan at the same time.

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Process of Planning – 7 Step Process

There is no fixed formula or method for planning. It is carried out as per the need of the organisation.

However, one would broadly follow the steps in planning mentioned below:

1. The first step to determine the goals or objectives for the entire organisation. If one fails to set correct or meaningful goals, it becomes impossible to make effective plans. Although goal setting is the first step in planning, the real starting point is the identification of the opportunity or the problem itself. This is very important because the manager should know where they are, what opportunities or problems they wish to handle and why or what they expect to gain.

2. The second step is to determine the planning premises. Planning premises, in simpler words, is the assumptions that are made about the various elements of the environment. It is important for all the managers involved in planning to agree on the premises. Internal premises include sales forecasts and policies of the organisation. External premises are those factors that are outside the organisation such as technological changes, general economic conditions etc.

3. The third step would be to decide the planning period. While operational planning focus on the short term, the strategic plans focus on the long term.

4. The fourth step in planning is to search for and examine alternative courses of actions. There is rarely a need to plan for where there exist no alternatives and generally an alternative that is not obvious proves to be the best.

5. The fifth step is evaluating the alternatives. After identifying the number of alternatives and examining their strong and weak points, it is logical to evaluate them against the planning premises and objectives.

6. The sixth step is the real point of decision-making. Here, a particular alternative is chosen from the given options. Based on this, the strategic plan is adopted.

7. The seventh step is to make derivative plans. The plan chosen after a through analysis is seldom complete without derivative plans. The plan, to make it operational, is split into departmental plans. Plans for the various operational units, within the departments, have to be formulated. The plans, thus, developed for the various levels down the organisation are called derivative plans.

After the decisions are made and plans are set and are rolling, in order to reach the desired goal the plan has to be reviewed periodically. Such a review helps in taking corrective action, if necessary, when the plan is in force.

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Process of Planning – 8 Main Steps: Identify the Opportunity, Define Goals, Consider the Planning Premises and a Few Other Steps

1. Identify the Opportunity:

Real planning starts with knowing the availability of different opportunities. For each opportunity, assess carefully the size of markets, type of customers, degree of competition, needs of customers, finances required and the strengths and weaknesses of the firm. Then, identify the right opportunity.

2. Define Goals:

Once the opportunity is identified, define the goals you want to achieve for the entire organisation. Goals, in turn, will throw light on what objectives, strategies, policies, procedures, rules, budgets and programmes you should follow.

3. Consider the Planning Premises:

Planning premises refers to the assumptions about the environment in which plans have to be carried out. Correct assumptions about markets, competition, product technology, prices, volume of sales, costs, tax rates etc., are essential for business planning. Government policies, annual budgets, economic indicators, survey of specific industries etc., provide valuable insights on the basis of which ‘premises’ can be worked out.

Premises may be internal or external to the firm. Internal premises refer to the assumptions about the firm’s finances, employees, technology-in-use etc. External premises are assumptions about competitors, lenders, changes in technology, government policies and procedures.

Premises may be controllable or non-controllable. Managers can exercise control over internal premises but not over the external ones. For instance, a firm can decide about the wages and salaries of its employees but not on the taxes payable. The government determines taxes and the firm has just to follow the prevailing tax rates.

Premises may be tangible or non-tangible. Tangible premises refer to what can be quantified as sales, number of employees etc. Intangible premises refer to what cannot be quantified such as – employee morale or the goodwill of the business.

4. Identify Alternatives:

There may be more than one alternative to reach a goal or objective. Search for and identify all the available alternatives. Work out the requirement of resources under each alternative. In most cases, finding alternatives may be easier. Shortlisting the promising ones is a relatively complex task.

5. Evaluate the Alternatives:

Examine each alternative in relation to the other and identify the merits and demerits of each. One alternative may look very profitable but it may involve a large capital, investment and also take longtime to return the original investment. It may also involve a high degree of risk. There may be some good alternatives which cannot be considered even though they fit into the long term interests of the organisation.

Evaluation of given alternatives is a complicated process as the business environment is full of uncertainties. Government policy may change, technology may change, adequate funds may not be available etc. The alternatives have to be evaluated in the light of many variables and constraints. There are some modern techniques such as – operations research and computing which can be gainfully employed in evaluating the given alternatives.

6. Choose the Best Alternative:

The best alternative is decided on a given situation. Normally it involves optimum utilisation of resources. At times, the number of best alternatives could be more than one. To eliminate errors in judgement, the manager may even decide to follow more alternatives than confining himself to one.

7. Formulate and Communicate Supporting Plans:

Supporting plans are also called derivative plans. These are derived from the best alternative chosen. When a company decides to launch a new product, it also has to formulate several supporting plans for recruiting and training more staff, mobilise more infrastructure and working capital for advertising and insurance. Managers have to communicate these supporting plans to the employees concerned so that they can be involved in their implementation.

8. Make Budgets:

Budget is “numerical expression” of a plan. Budgets can be formulated for the entire organisation and also for each department or programme. When cash, sales, production and other budgets are integrated, it results in an overall budget for the entire organisation, popularly known as Mater Budget or Integrated budget. Budgets set standards for measuring and controlling the actual performance of the employees in an organisation.

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Process of Planning – 7 Steps: Determination of Objectives of the Enterprise, Establishment of Planning Premises and a Few Other Steps

Any logical and scientific planning must go through the following steps:

Step # i. Determination of Objectives of the Enterprise:

The first step in planning work is to determine the objec­tives of the enterprise. Objectives indicate the end-points of what is to be done, where the emphasis is to be placed and what is to be accomplished. Objectives specify the results expected and are the basis of planning. Objectives must be backed by suitable policies, procedures, rules, programmes, and strategies. Objectives must be clear, specific, and informative. The objectives of planning should be well-defined to avoid confusion and ambiguity.

Step # ii. Establishment of Planning Premises:

Planning premises form the foundation of organizational plans. Planning premises refer to certain assumptions about future behaviour of variables. Planning is based on forecasting. Forecasting means the assumption and anticipation of certain future events. Therefore, planning must consider the likely behaviour of certain variable factors.

The planning premises may be of different types as follows:

a. Internal premises (cost of products, profitability, etc.);

b. External premises (liberalized economic and industrial policies of Government);

c. Tangible premises (sales volume, production volume, etc.);

d. Intangible premises (goodwill, competence of managerial personnel, etc.);

e. Controllable premises (expenditure on advertisements);

f. Uncontrollable premises (abnormal events, Government policies, etc.).

Step # iii. Development of Alternative Courses of Action:

There may be numerous courses of action to achieve an objective. The management should find alternative ways and examine their effectiveness in the light of plan­ning premises. All possible alternatives should be properly listed for their analysis and comparative evaluation. Managers are required to apply their creative and innovative skills to develop alternative courses of action.

Step # iv. Selection of Best Course of Action:

The next step is the evaluation of alternative courses of action and selecting the best course of action. All possible alternatives should be compared and evaluated in the light of the objectives of the organization. The best feasible course of action is to be decided after careful considera­tion of merits and demerits of various alternatives. The best course of action is determined according to the circumstances prevailing. Each course of action has to be evaluated in terms of the cost involved, benefits to be received, risks involved availability of resources, and long-term objectives of the organization.

Step # v. Preparation of Derivative (or Secondary) Plans:

It is necessary to formulate a derivative plan for each activity in support of the basic plan. The basic plan prepared for the whole enterprise cannot be effectively operated in the absence of derivative (or secondary) plans. The main plan is implemented with the help of various derivative plans. Derivative plans are developed for each activity within the framework of a basic plan. These plans must indicate the time schedule within which a particular assignment should be completed. A derivative plan is necessary to expedite the accomplishment of the basic plan.

Step # vi. Securing Participation of Employees:

The execution of a successful plan depends to a large extent upon the loyalty and sincerity of the employees. The management should involve employees in the planning process through consultation and their effective participation. Management should take necessary steps to secure the cooperation, participation, and commitment of the members of the organization. Involvement of the subordinates is essential in order to ensure effective implementation of planning. Plans must be properly communicated, explained, and the employees consulted to secure their effective participation.

Step # vii. Follow-Up and Evaluation:

The management should watch carefully as to whether the plans and pro­grammes are being implemented properly. The shortcomings of planning can be identified through follow-up action. Necessary adjustment in plans becomes imperative in the context of current problems and situations. Actual performance is compared with planned performance and corrective action is taken to rectify devia­tions (especially unfavourable deviation). A suitable strategy should be planned and followed for the successful implementation of the planned course.

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Process of Planning – Top 8 Steps: Crystallizing the Opportunity or the Problem, Securing and Analyzing the Necessary Information and a Few Other Steps

1. Crystallizing the opportunity or the problem,

2. Securing and analyzing the necessary information,

3. Establishing the planning premises and constraints,

4. Ascertaining the alternative courses of action or plans,

5. Selecting the optimum plan,

6. Determining the derivative plans,

7. Fixing the time of introduction and

8. Arranging future evaluation of effectiveness of the plan.

Step # 1. Crystallizing the Opportunity or Problem:

It is obvious that first step in planning is to find out problem to which one has to plan or the opportunity that is to be grabbed. It is necessary to ascertain clearly what requires improvement for which planning is visualized.

To do this the following questions will help the manager:

(i) Why is the plan to be formed?

(ii) Is it necessary to prepare a new plan to meet the organizational requirements or the management will satisfy with modification of the existing plan?

(iii) What benefits organization will reap, if the new plan/modified plan if effectuated?

Just think you want to decide which branch of engineering you want to select while join­ing an engineering college.

(i) What branch I have to select?

(ii) Is it necessary to join that particular branch only or select another branch equally important and learn certain certificate courses to enhance my ability?

(iii) What benefits I get by joining the particular course /joining other branch and obtain certificate courses?

Whether it is personal/organizational/national problem, this sort of crystallization or awareness is necessary to be able to formulate practical and realistic objectives.

Step # 2. Securing and Analyzing the Necessary Information:

Quite a good amount of information is required to decide the course of action possible in the interests of the organization. The manager, concerned has to find out the sources of information, gather information on the type of activity planned. Once the necessary information is gathered it is to be processed/analyzed to establish relationship and tabulate the information/processed data for further interpretation.

Step # 3. Establishing the Planning Premises and Constraints:

When the collected data is analyzed it results in formulating certain assumptions / lead to some guesswork on the basis of which the plan will be ultimately formulated. When the plan is to be formulated, assumption depending on the changes in the environmental conditions, market conditions, changes in the consumer tastes and political influence will play an important role.

Some of these factors /premises are controllable and some of them are uncontrollable by the organization. In additions to these there are some constraints (may be external such as government controls or may internal such as technical capability of manpower) will play vital role on the plans formulated. Planning will be in the backdrop of such premises and constraints, which must be watched to detect changes and their effect on plans.

Step # 4. Ascertaining the Alternative Courses of Action or Plans:

After the analysis, a manager who is dealing with the problem may have on his hand number of courses of action/plans. He has to examine each and everyone in the light of organizational goals to be achieved. He must have lot of patience, ingenuity, imagination, technical capability, knowledge and experience to judge and select the best course of action / best plan in the interest of the organization.

Step # 5. Selecting the Optimum Plan:

All the alternate courses of action/plan are to be evaluated thoroughly in the interest of the organizational goals/objectives to select the best one. For this purpose, he can use his judgement or decision maker may take the help of colleagues, or there are many mathematical models today he can use them. After evaluation, the manager can opt for optimal plan in the interests of the organization.

Step # 6. Determining the Derivative Plans:

After selecting the basic plan as said above, the manager has to develop other plans to support the basic plan and these plans are known as derivative plans. These derivative plans will help the decision maker to make these support plans to help the basic plans to achieve the organizational goals by providing necessary inputs.

Step # 7. Fixing the Timing of Introduction:

Introduction of the basic plan with necessary information/instructions to subordinates is as much important as drafting a plan. Optimal time of introduction helps the organization to face problems as everybody in the organization knows what to do, when to do and so on and will go as per instructions given in the introductory note.

Step # 8. Arranging Future Evaluation of Effectiveness of the Plan:

Once the plan is introduced, follow up evaluation is necessary to judge the effectiveness of the plan. The plans are set to achieve certain organizational goals/objectives hence it is necessary to have continuous follow up to see whether the organization is moving in the right direction or not. If not necessary changes are made in the existing plan and accordingly instructions are given to the departmental managers. In case the situation demands certain managerial action, adequate control is exercised to see the planned objectives are reached.

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Process of Planning – Step by Step Approach

For ready execution and better results step by step approach to a planning process is considered to be a good technique.

These steps are as follows:

1. Determination of Objectives – This is the First step in planning process. The objective so determined decides the future course of action and shape the organisational structure. The objectives should be specified in clear and measurable terms. One cannot make plans unless one knows what is to be accomplished. Objectives define the mission of an organisation. Major objectives, divided into departmental sectional or individual objectives and planners must be fully aware of the opportunities and problems that the enterprise is likely to face for setting realistic objectives.

2. Establishment of Planning Premises – These are the assumptions for future which provide a framework for planning process. Planning premises attempt a prediction about the glorious uncertainties of business environment. These are expected to supply relevant facts information and data on the basis of which forecasts are made.

3. Preparing Operating Plans – There are number of alternatives for achieving the result. These alternatives are evaluated studied by careful consideration of cost, risk, gain etc. On this basis the best possible choice is made on which decisions are to be taken. The operating plan of the whole enterprise follows the suggested course of action.

4. Reviewing Limitations – Several constraints or limitations affect the ability of an organisation to achieve its goals. These limitations restrict the smooth operation of plans, so they are anticipated and provided for. The key areas of limitations are finance, human resource materials, power and machinery. The strong and weak points of the enterprise should be correctly assessed.

5. Deciding the Planning Period – Timing is an essential consideration in any planning formation. Time factor enables the plan to take concrete form and practical shape. Sequence of operation is also arranged carefully. The planning period should be long enough to permit the fulfillment of the commitments involved in a decision. This is known as principle of commitment. All this helps in keeping the programme schedule of the enterprise.

6. Securing Participation – Effective execution of plan and its related programme necessitates willing participation of all those who are responsible for making the plan successful, Communication and explanation of the plan to subordinates help in better understanding. Co­operation comes out to be an added advantage when by invited subordinates advances and comments on plans we can tend our plans to their best results.

7. Implementation of Strategies and Policies – “Strategy implies an approach to the execution of plan whereby all resistance and reactions of employees are encountered,” says Satya Charan Chaterjee. Some adjustment in the plan according to the attitude of the subordinate may also be required. Strategies must be thought out before the plan is put to action. This would help in greater efficiency and better flexibility on the part of planners as well as the executors.

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Process of Planning – 7 Step Process: Setting Objectives, Establishing Planning Premises, Identifying Alternatives,Evaluating Alternatives and a Few Other Steps

Planning process consists of various steps in a sequence through which plans are formulated.

Perception of opportunities is not strictly a planning process. However, this perception is very important for planning process because it leads to formulation of plans by providing clue whether opportunities exist for taking up particular plans. Perception of opportunities includes a preliminary look at possible opportunities provided by the environment and ability of the organization to capitalize those opportunities in the light of its strengths and weaknesses.

This is a preliminary stage in planning exercise, hence the analysis of environment is not taken in elaborated form but analysis remains confined to the determination of opportunities at first instance. Once the opportunities are perceived to be available, steps of planning are undertaken.

1. Setting Objectives:

At this stage, major organizational objectives are set. Objectives are the end results to be achieved by implementation of plans formulated through planning process. At this stage, organizational objectives are specified in all key result areas. Key result areas are those areas in which satisfactory performance leads to achieve organizational objectives.

These areas are identified on the basis of organizational objectives. For example, for a manufacturing organization, key result areas may be profitability, sales, research and development, manufacturing, and so on. Once organizational objectives are identified, objectives of organizational units and sub-units can be identified on the basis of organizational objectives.

2. Establishing Planning Premises:

After setting organizational objectives, the next step is establishing planning premises, that is, the conditions under which planning activities will be undertaken. Planning premises are assumptions about the expected environmental and internal conditions in future. These assumptions are base materials on which plans are formulated. There are two types of planning premises: external and internal. External premises include factors of environment — both general and specific — which are expected to affect organizational working.

Internal premises include organization’s policies, resources of various types, and the ability of the organization to withstand the environmental pressure. Emphasis on types of planning premises differs at different levels of planning. At the top level, it is mostly externally focused. As one moves down the organizational hierarchy, emphasis on planning premises changes from external to internal.

3. Identifying Alternatives:

Based on the organizational objectives and planning premises, various alternatives (alternative courses of action) are identified. The concept of various alternatives suggests that a particular objective can be achieved through alternative actions. For example, if an organization has set its objective to grow further, it can be achieved in several ways like expanding the present business, diversifying in new businesses, taking over another organization, and so on.

Within each category of alternatives, there may be several alternatives. For example, diversification itself may point out the possibility of entering in one of the several businesses. The most common issue involved in identification of alternatives is not just to identify alternatives only but to reduce the number of alternatives so that only promising ones may be taken for detailed analysis because it requires lot of time and efforts. In order to prune number of alternatives, some preliminary criteria should be set like investment requirement, type of technology to be used, etc.

4. Evaluating Alternatives:

Various alternatives which are considered feasible in terms of preliminary criteria may be taken for detailed evaluation. At this stage, an attempt is made to evaluate how each alternative contributes to achieve objectives of the organization in the light of its resources and constraints.

This presents a problem because each alternative may have certain positive points on one aspect but negative on others. For example, one alternative may be more profitable but requires heavy investment with long gestation period; another may be less profitable but also involves less risk. Therefore, for evaluation of alternatives, rational criteria should used like organizational vision, cost, return, risk, etc.

5. Choosing Alternative:

After the evaluation of various alternatives, the most suitable one is selected. Sometimes, evaluation of alternatives may show that more than one alternative is equally good or the first alternative is just marginally better than the second or alternatives that follow it. In such a case, a planner may choose more than one alternative keeping in view the various planning premises.

This is beneficial because chosen course of action is to be undertaken in future which is not constant but changes. Therefore, the planner must be ready with alternative plan, known as contingency plan, which can be implemented in changed situations.

6. Plan Implementation:

When a plan is selected, it is implemented, that is, putting the plan into action. For implementing the plan, various action plans, also known as supporting plans or derived plans, are formulated. In an organization there can be various action plans like plan for buying equipments, buying raw materials, recruiting and training personnel, etc. These action plans are formulated on the basis of the main plan and lead to implementation of the plan.

7. Follow-up Action:

Plan implementation takes lot of time. Therefore, when the plan is put into action, follow-up action is required to see whether plan is implemented according to schedule. If no, suitable actions should be taken to ensure that the plan is implemented according to prescription and within the specified time and stated objectives of the organization are achieved.

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