A Business Encyclopedia


Definition: Planing is the fundamental management function, which involves deciding beforehand, what is to be done, when is it to be done, how it is to be done and who is going to do it. It is an intellectual process which lays down organisation’s objectives and develops various courses of action, by which the organisation can achieve those objectives. It chalks out exactly, how to attain a specific goal.

Planning is nothing but thinking before the action takes place. It helps us to take a peep into the future and decide in advance the way to deal with the situations, which we are going to encounter in future. It involves logical thinking and rational decision making.

Characteristics of Planning

  1. First and foremost managerial function: Planning provides the base for other functions of the management, i.e. organising, staffing, directing and controlling, as they are performed within the periphery of the plans made.
  2. Goal oriented: It focuses on defining the goals of the organisation, identifying alternative courses of action and deciding the appropriate action plan, which is to be undertaken for reaching the goals.
  3. Pervasive: It is pervasive in the sense that it is present in all the segments and is required at all the levels of the organisation. Although the scope of planning varies at different levels and departments.
  4. Continuous Process: Plans are made for a specific term, say for a month, quarter, year and so on. Once that period is over, new plans are drawn, considering organisation’s present and future requirements and conditions. Therefore, it is an ongoing process, as the plans are framed, executed and followed by another plan.
  5. Intellectual Process: It is a mental exercise at it involves the application of mind, to think, forecast, imagine intelligently and innovate etc.
  6. Futuristic: In the process of planning we take a sneak peek of future. It encompasses looking into future, to analyse and predict it, so that the organisation can face the future challenges effectively.
  7. Decision making: Decisions are made regarding the choice of alternative courses of action that can be undertaken to reach the goal. The alternative chosen should be best among all, with least number of negative and highest number of positive outcomes.

Planning is concerned with setting objectives, targets, and formulating plan to accomplish them. The activity helps managers analyse the present condition to identify the ways of attaining the desired position in future. It is both, the need of the organisation and the responsibility of managers.

Importance of Planning

  • It helps managers to improve future performance, by establishing objectives and selecting a course of action, for the benefit of the organisation.
  • It minimises risk and uncertainty, by looking ahead into future.
  • It facilitates coordination of activities. Thus, reduces overlapping among activities and eliminates unproductive work.
  • It states in advance, what should be done in future, so it provides direction for action.
  • It uncovers and identifies future opportunities and threats.
  • It sets out standards for controlling. It compares actual performance with the standard performance and efforts are made to correct the same.

Planning is present in all types of organisations, households, sectors, economies, etc. We need to plan because future is highly uncertain and no one can predict future with 100% accuracy, as the conditions can change anytime. Hence, planning is the basic requirement of any organization for the survival, growth and success.

Steps involved in Planning

  • Step 1: Analysing opportunities
  • Step 2: Setting objectives
  • Step 3: Developing premises
  • Step 4: Identifying alternatives
  • Step 5: Evaluating alternatives
  • Step 6: Selecting an alternative
  • Step 7: Implementing action plan
  • Step 8: Reviewing

By planning process, an organisation not only gets the insights of future, but it also helps the organisation to shape its future. Effective planning involves simplicity of the plan, i.e. the plan should be clearly stated and easy to understand, because if the plan is too much complicated it will create chaos among the members of the organisation. Further, the plan should fulfil all the requirements of the organisation.

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