PLANNING

Planning enables management to command the future rather than

being swept away by future. In a fast changing environment the need
for planning is all the more important because risk and uncertainty
increase. In such an environment contingent plans can be prepared.
A plan may be defined as detailed course of action designed today to
do something tomorrow. Thus, planning is an intellectual attempt by a
manager to anticipate the future for better organisational performance.
Planning is a primary management function which every organisation
has to undertake irrespective of its size, nature and origin.
Tlieo Haimann – “Planning is deciding in advance what is to be done.
When a manager plans, he projects a course of action, for the future,
attempting to achieve a consistent, coordinated structure of operations
aimed at the desired results.”
Learn about:-
1. Introduction to Planning 2. Definitions of Planning 3. Nature 4.
Importance 5. Types 6. Features 7. Levels 8. Approaches 9. Process
10. Principles 11. Advantages 12. Limitations 13. Measures.

What is Planning? – Definitions, Nature, Importance, Types,

Features, Process, Approaches, Levels and Other Details

What is Planning – Introduction

It is often remarked that ‘Planning is a mere ritual in a fast changing
environment’. This statement implies that in a highly turbulent and
competitive environment planning becomes an empty academic
exercise. Rapid changes in the economic and non-economic
environment of business reduce the effectiveness of plans.
It becomes difficult for the planners to accurately forecast future
conditions. Planning premises or assumptions may have a low degree
of accuracy. The reliability of plans is open to doubt when the
environmental forces are not stable.

Uncertainty and unpredictability of environment reduce the

usefulness of planning in a turbulent environment planning becomes
a more time-consuming and expensive exercise. Even the best laid
planning may become redundant when the assumptions and
forecasts on which the plans are based turn out to be different. Plans
have to be revised again and again in a highly volatile environment.
The plans might fail to guide the destiny of the organization.

It is true that a last changing environment reduces the accuracy and

reliability of planning. But planning in advance is better than
reacting to the environmental crisis as and when they arise. When
events are left to chance the organization has no guide and cannot
survive environmental threats. Through planning, it can search for
and prepare itself to meet the contingencies and challenges.

Planning enables management to command the future rather than

being swept away by future. In a fast changing environment the need
for planning is all the more important because risk and uncertainty
increase. In such an environment contingent plans can be prepared.
Koontz and O’Donnell have suggested the following measures for
making planning more effective in a fast changing environment:

(a) Planning must not be left to chance. Rather a climate conducive

to planning should he created.

(b) Planning must start at the top, initiative and support of top
management is essential for effective planning.

(c) Planning must be organized for wider participation in the

formulation and execution of plan.

(d) Goals, premises and policies must be properly communicated.

(e) Long-range planning must be integrated with short range

planning.
(f) Planning must include awareness and acceptance of change.

(g) An open system approach involving continuous monitoring of

environment should be adopted.

What is Planning – Definitions

Planning is the first as well as most crucial function of management
and is considered as a foundation to all other functions of
management. It is symbolic to ‘looking ahead’ as is a process of
chalking out future plan of action to be followed. In simple sense, it
is an act or process of making plans such as – objectives, policies,
procedures and strategies.
A plan may be defined as detailed course of action designed today to
do something tomorrow. Thus, planning is an intellectual attempt by
a manager to anticipate the future for better organisational
performance. Planning is a primary management function which
every organisation has to undertake irrespective of its size, nature
and origin.

To have organisational effectiveness, the first prerequisite is that

people should know what and when things are expected from them.
For this purpose, planning comes as a solution whereby managers
define broad objectives of organisation which are broken into
departmental plans and then finally operational plans and budgets.
In a way, planning provides a blueprint of functioning of an
organisation aiming at attainment of organisation objectives.
Effective planning is a prelude for effective functioning of every other
function of management.

Few Definitions of Planning:

Being the starting point in managerial functions, broadly speaking,
planning is concerned with determining various courses of action in
the light of organisational objectives and premises and then selecting
the best possible alternative.
As a function of management, planning has been defined by various
authors. Few of them are presented below:

Koontz and O’Donnell – “Planning is deciding in advance what to do,

when to do, how to do and who is to do it. It is bridging the gap from
where we are to where we want to go.”

Alford and Beatt – “Planning is the thinking process, the organised

foresight, the vision based on fact and experience that is required for
intelligent action.”

Louis A. Allen – “Management planning involves the development of

forecasts, objectives, policies, programmes, procedures, schedules
and budgets.”
Tlieo Haimann – “Planning is deciding in advance what is to be done.
When a manager plans, he projects a course of action, for the future,
attempting to achieve a consistent, coordinated structure of
operations aimed at the desired results.”

Urwick – “Planning is a mental predisposition to do things in orderly

way, to think before acting and to act in the light of facts rather than
guesses.”

Weihrich and Koontz – “Planning is an intellectually demanding

process; it requires that we consciously determine courses of action
and base our decisions on purpose, knowledge and considered
estimates.”
What is Planning – Nature
There are number of ways available to complete a certain job.
Planning chooses any one of the best alternatives out of the available
ones. Economy and certainty are considered while selecting the best
alternative.

Thus, the nature of planning is briefly discussed below:

1. Primary of Planning:
The functions of management include planning, organising,
staffing, directing and controlling. Eminent writers may add
other new ones to these functions or those which have not been
included in these functions. Anyway, writers unanimously
accept that planning is the primary function of all the other
functions. The reason is that the manager wants to achieve the
pre-determined objectives in a better way.

2. Planning Contributes to Objectives:

There is a close connection between objectives and planning.

Planning is based on the objectives. If there is no link between
planning and objectives, the former will only be a mental
exercise and of no use. Planning contributes to the attainment
of objectives.

3. Planning an Intellectual Activity:

Planning includes the selection of the best alternative available

and thinking before selection of the best alternative. It involves
the ability to foresee mishaps in future which might affect the
smooth functioning of an organisation. So, planning is an
intellectual activity.

4. Planning Results in Higher Efficiency:

Planning efficiency is measured in terms of input and output
ratios. Planning leads to maximum output with minimum
expenditure. This input and output relationship is not only
determined by money, labour hours and production units but
also by the degree of satisfaction available to the individual as
well as the group. The high degree of human satisfaction
motivates the workers to produce more within the specified
time.

5. Planning is a Continuous Process:

Planning does not come to an end with the establishment of a

business concern. Planning in other functions is also required.
After the establishment of a business concern, certain decisions
are taken. Planning is necessary to implement the decisions. A
number of decisions are taken during the life time of the
business concern. So, planning is necessary throughout the
running of the business concern as a continuous process.

6. Planning is Flexible:

While planning, any one of the available alternatives is selected.

Planning selects the best alternative based on certain
assumptions. If the assumptions are proved wrong, the selected
alternative tends to be an incorrect one. There is a possibility of
a dead log in the functions of the management. Planning has
one more alternative to suit future situations.

7. Unity and Consistency:

Every department manager resorts to planning at different
times. The planning is related to the achievement of objectives.
In other words, managerial actions of different managers are
unified in order to achieve the objectives. Policies and
procedures of the organisation provide a basis for the
consistency of executive behaviour and action in matters of
planning.

8. Planning is Common to All:

Planning work is done by every person who is working in a

business unit. He may be a managing director or a foreman.
Being of a higher place, the planning for a managing director is
to frame the policies and procedures to be adopted. Being at a
lower place, planning for a foreman is to allocate the work to his
subordinates. So, planning is common to all.

9. Basis for All Managerial Functions:

Planning is found at all levels of management. Top management

looks after strategic planning. Middle management looks after
administrative planning and the lower level management looks
after operational planning.
10. Getting Co-Ordination:

Planning co-ordinates various business activities. Without

planning, nothing can be co-ordinated.

11. Considering Limiting Factors:

Every plan is formulated after considering the limiting factors.

The limiting factors may be money, skilled labour, quality
materials, plant and machinery.

What is Planning – Importance

Planning is the first and foremost essential activity in all
organisation. It helps in determining and achieving the
objectives of the organisation. The sound planning is important
condition for effective management.

It helps the organization in the following ways:

1. Making Objectives Clear:

It makes objectives clean, clear, and specific, it also serves as

guide for deciding what action should be taken in present and
future conditions.

2. Planning Provides Direction:

Planning helps the organisation to keep on the right path. It
provides definite direction to manager to decide what to do and
when to do it.

3. It Reduces Risk and Uncertainty:

It helps organisation to predict future events and prepare to

take necessary actions against unexpected events. It is helpful
in assessing and meeting future challenges. As per view of Peter
F. Drucker, “Planning enables a manager to affect rather than
accept the future”.

4. Planning is Economical:

As per views of Koontz and O’ Donnell,” Planning substitutes

jointly directed effort against uncoordinated, piecemeal activity,
an even flow of work for an uneven flow, and deliberate
decisions for snap judgments”. The effective plans coordinate
organisational work and economical.

5. Planning Provides the Basis for Control:

Planning provides the standard against which the actual

performance can be measured and evaluated. There is nothing
to control without planning and without proper control. Plans
serve as yardsticks for measuring performance.

6. Planning Facilitates Decision Making:

Planned targets serve as the criteria for the evaluation of

different alternatives so that the best one may be chosen with
the help of planning hasty decisions and random actions can be
avoided.

7. Planning Improve Efficiency of Operations:

It is rational activity that leads to efficient and economical

operations, planned action is always better than unplanned.
Planning makes the task of managing more efficient and
effective manner. It helps to minimize the cost of operations and
improves the competitive strength of an organisation.

8. Planning Improves Morale:

If the role of employee is cleared and well defines goals, then the
employee feels highly motivated and contribute his full potential
towards accomplishment of objectives. Planning improves the
behavioural climate in the organisation and reduces the friction
between departments.

9. Effective Co-Ordination:

According to Koontz and O’ Donnell “Plans are selected courses

along with the management desires to coordinate group action.”
The effective coordination integrates the physical and human
resources between departments.

10. Planning Encourages Innovation and Creativity:

Planning compels the managers to be creative and innovative

all the time. It forces managers to find out new and improved
ways of doing things in order to remain competitive and avoid
the threats in the environment.

What is Planning – Classification of Plans: Based on

Importance, Time, Level, Formality and Approach
Plans can be classified based on importance, period of planning,
level, for-mality, and approach.

1. Based on Importance:
Plans can be strategic, tactical, or operational. Strategic plans
are important, future-oriented plans that form the hub of
fulfilling the vision. Usually, they concern the entire
organisation. Tactical plans are required to implement strategic
plans. Examples, are redesigning the shop floor layout or
closing a few non-performing out-lets of a retail chain.
Operational plans are related to day-to-day func-tioning such
as production, delivery, or purchase operation. Take for
instance, the plan of Precision Connectors to deliver connectors
to the two-wheeler manufacturer, which is an illustration of
operational plans.

2. Based on Time:
Plans can be short, medium, or long term. Short term usually
refers to plans of one year or less; medium term, to two to five
years; and long term, to five to 10 or even 20 years. It depends
on the nature of the project. Some projects such as building the
Metro in Mumbai or Bengaluru may have a short-term plan that
covers 50 km of Metro in five years; a medium- term plan that
covers 200 km in 10-12 years, and a long-term plan that covers
300 or 400 km of rail that in 20 to 30 years.

3. Based on Level:
A plan can be called corporate level, business level, or
functional level plan. The Tatas entering the airlines business
is an example of corporate-level plan and Precision Connectors
becoming an OEM is an example of a business-level plan.
Functional-level plans are made by departments, for example,
a plan on how the marketing department will achieve its goals.

4. Based on Formality:
A plan can be formal or informal. It is formal when planning is
done as per the defined steps and documented, and informal
when the documentation is not very rigorous.

5. Based on Approach:
A plan can be called proactive when it is meant to meet an
anticipated situation. For instance, a compensation plan based
on a three-year salary negotiation is a proactive plan to ensure
industrial peace. If the same compensation plan came up as a
result of a flash strike, it would be a reactive plan. The former
leads to growth and the latter helps to regain balance and to
ensure survival.

What is Planning – 11 Main Features

Feature # 1. Main Focus on Objectives:
While goals are the broad, long-term accomplishments an
organisation wishes to attain, objectives are specific, short-term
statements detailing how to achieve the organisation’s goals.
Planning specifies the objectives to be attained by an
organisation in the future. It also lays down the steps to be
followed to achieve the objectives. By determining the objectives
planning provides clear directions and guidelines to an
organisation’s activities — both current and future.

Feature # 2. Basic (Key) Function:

Planning is typically the starting point in the management
process. To be successful, organisations need a great deal of
planning. People in organisations need goals and the plans to
achieve them. Planning lays the foundation for the whole
management process. It makes an organisation efficient.

It helps in manpower planning and human resource

development. It serves as the yardstick which can be used by
the managers to exercise control over resources and activities.

Feature # 3. Universal (Pervasive) Function:

Planning is the basic function of managers at various levels of
an organisation. The exercise is carried out by all three levels of
managers — the upper, middle and lower. However, the nature,
type and scope of planning is not the same at each managerial
level. In most organisations upper- level and some middle level
managers spend more time developing strategic,
broad/directional, long-range and single-use plans for the
organisation.

Other middle-level and all low-level managers, in contrast,

spend more time specifying how the strategic plans will be
accomplished by developing operational, narrow/ specific,
short-range plans and implementing standing plans (i.e.,
policies, procedures and rules).

Feature # 4. Continuous (On-Going) Process:

Planning is a continuous process. A plan which worked
yesterday may not be successful in today’s market. Most
planning also follows a pattern. Old plans are to be revised and
modified and new ones to be introduced as demanded by the
needs of the situation for achieving organisational objectives. In
today’s rapidly changing environment planning is becoming
more and more difficult because changes are occurring so fast
that plans — even those for just few months into the future —
may soon be obsolete.

Feature # 5. Forward-Looking Nature:

Any planning exercise at the business level is a forward-
looking-one. It is carried out to achieve certain objectives in the
future. It involves forecasts of future demand, market
competition and government policies. And business managers
try to cope with future uncertainty effectively through proper
planning.

Feature # 6. Decision-Making Aspect:

Decision-making is essentially a choice of an appropriate course
of action from among alternatives. The process of planning
involves searching for alternatives and choice of the best
alternative from those which are available for achieving certain
specified and pre-determined organisational objectives.

Thus decision-making is an inherent part of the planning

exercise. For example, financial planning involves choice
between bond (debenture) financing and equity financing of
investment projects. Proper decision-making techniques are
crucial for selecting the organisational goals, plans and
strategic options.

Feature # 7. Mental Exercise:

Planning involves some sort of intellectual (brain storming)
exercise. It requires a lot of thinking in advance, foresight and
proper judgment on the part of management.

Feature # 8. Flexibility:
In today’s era of rapid changes in technology, market conditions
and government policies, the planning process has to be flexible
enough in order to enable managers to face and meet newer and
newer challenges. Due to rapidly changing environment, some
companies are making shorter-term plans which allow for quick
responses to customer needs and requests. The goal is to be
flexible and responsive to the market.

Feature # 9. Shared Responsibility:

Planning means that a manager must involve his subordinates
actively in order to determine resource requirement, fix goals
and identify and exploit opportunities. During the process, the
manager may need to go outside the work unit for information
about products, competitors, markets, and the like.

Feature # 10. Choice:

Planning involves choice. Planning is essentially an act of
choosing from alternative courses of action. And choice involves
decision-making. In truth, in order to make a rational choice, it
is necessary to evaluate and compare the possible alternatives.

Feature # 11. Efficiency:

Planning seeks to promote efficiency. By helping to economise
the use of scarce resources, sound planning leads to
accomplishment of desired objectives in the best possible may,
i.e., at the minimum possible cost. And this implies efficient
operation which is the primary objective of a business.

What is Planning – Top 3 Levels: Strategic, Tactical and

Operational Planning
Planning is ubiquitous – that is, it exists in the entire
organisation. All levels in the organisation carry out the
planning function, but in varying degrees. In other words, the
scope and timescale of planning varies. Planning commences at
the strategic or top level of the management.

Strategic planning commences with defining the purpose or

mission of the organisation, establishing strategic priorities and
formulating major policies. Strategic planning becomes the
basis for successive levels of planning namely, tactical planning
(at the middle level) and operational planning (at the lower
level).

These are discussed in detail here:

1. Strategic Planning:
Strategic planning includes plans made by the top management
to pursue long term goals with the resources likely to be
available.

It involves:

i. Formulating a mission for the entire organisation.

ii. Identifying the business that helps to meet a mission.

iii. Determination of financial requirements.

iv. Working out authority relationships in terms of organisation

structure.

v. Allocating resources effectively.

It has a time horizon of five years or more. The chief executive

or chairman, members of the board, managing directors, and
divisional heads (these constitute the top level management)
take part in strategic planning.

2. Tactical Planning:
Tactical planning specifies how the mission of an organisation
can be accomplished.

It involves the decisions in respect of:

i. Products or services to be added or deleted

ii. Size of capital investments required

iii. Pricing the products and services to be provided

iv. Facilities, methods and systems necessary

v. Withdrawing investments from, or closing down operations of

unprofitable departments or products or services.

Tactical planning has a time horizon of six months to two years.

It is done by the middle-level management, which comprises
functional managers, product line managers and department
heads. Tactical planning is also called intermediate planning.

3. Operational Planning:
Operational planning works out the basic details of how the
specific tasks can be accomplished with the available resources.

It involves decisions in respect of:

i. Best suitable production methods.

ii. Effective marketing plans.

iii. Organisation structure in terms of customer, product or

region etc.

iv. Facilities required in the office, factory, sales outlets etc.

The time horizon for operational planning is between one week

to one month. Operational planning is carried out by lower-level
management comprising unit managers, foremen, line
supervisors etc.

What is Planning – 4 Important Approaches: Top- Down

Approach, Bottom-Up Approach, Composite Approach and
Team Approach
Following are the approaches to planning:

Approach # 1. Top-Down:
Under this approach, only echelons of management frame
objectives, policies, strategies procedures and so on. Those at
the other levels have little to say in the planning exercise, even
though they are consulted in plan formulation. The plans made
by the top brass are implemented by managers at middle and
lower levels.

The approach assumes that only those at the top level have
requisite skill, knowledge and authority to plan. Thus plans
made reflect the values and visions of the top management. This
approach is practised in family-run organizations and
centralized organizational structure.

Approach # 2. Bottom-Up:
This is virtual reversal of top-down approach. Under this
approach, plan proposals originate from supervisory
management level and travels upwards. The top management
limits itself only to issuing guidelines for planning. The lower
level management evolves planning taking into account the
ground reality.

The implicit belief under this approach is that those who are
concerned with implementation of plans are more informed,
more practical and the plans formulated by them reflect
realism. Top management unifies all sub-corporate plans. This
approach is called participative approach.

Approach # 3. Composite:
This is the blend of top-down and bottom- up approach. This
approach gives broad guidelines and parameters to the line
executives at middle and lower level management. It gives
support, resources and freedom to evolve plans to middle and
lower level managements. But the plans evolved are thoroughly
reviewed and adjusted in consultation with other levels of
management. This is semi- participative approach. This
approach is suited to many organizations.

Approach # 4. Team:
This approach envisages granting autonomy to teams in the
matter of planning and execution thereof. It fixes accountability
on those empowered with resources and authority in respect of
the results expected of them. The team comprising functional
specialists is led by a team leader. He, in turn, empowers the
members to evolve plans suitable to their area and fixes
accountability for the results.

The team leader coordinates the sub-plan, and directs them

towards accomplishment of team objectives. The team leader
frequently conducts review meetings to ensure that plans are
put through smoothly. Contemporary organizations have
restructured their vertical organizations into flat organizations.

What is Planning – Process

It is difficult to specify the steps in the planning process for all
organisations because of their differences in size and
complexity. Nevertheless, it is possible to suggest some
important steps for effective planning.

The process which are applicable to the most types of plans are
discussed below:

Process # 1. Establishing Objectives:

Planning is an intellectual process which an executive carries
out before he does any job with the help of other people. But
while planning, the question which must arise in the mind of
the executive is “what is the objective of doing the job?” So, the
first step in planning is the determination of objectives.
Objectives provide direction to various activities in the
enterprise. Planning has no utility if it is not related to
objectives.

The establishment of objectives can, at times, be more

important than the objectives themselves since their
establishment emphasizes how various people and units fit into
the overall organisation framework. The formalisation of this
process can also be used to motivate individuals to achieve
objectives which they have helped to establish. Objectives
clarify the tasks to be accomplished. Overall objectives define
what is to be accomplished in general terms. The derivative
objectives focus on more details, that is, what is to be
accomplished, where action is to take place, who is to perform
it, how it is to be undertaken, and when it is to be accomplished.

Process # 2. Collection of Information and Forecasting:

Sufficient information must be collected in order to make the
plans and sub plans. Necessary information includes the
critical assessment of the current status of the organisation
together with a forward look at the environment that is
anticipated. The assessment of external environment may
consider the strong and weak points of the organisation.
Collection of information and making forecasts serve as an
important basis of planning.

Process # 3. Development of Planning Premises:

This step involves making assumptions concerning the
behaviour of internal and external factors mentioned in the
second step. It is essential to identify the assumptions on which
the plans will be based. Assumptions denote the expected
environment in the future and are known as planning premises.

Again, forecasting is important in premising. It helps in making

realistic assumptions about sales, costs, prices, products,
technological developments, etc. in the future. The assumptions
along with the future forecasts provide a basis for the plans.

Since future environment is so complex and uncertain, it would

not be realistic to make assumptions in greater details about
every environmental factor. It is advisable to limit premising to
those factors which are critical or strategic to the planning
process.

Process # 4. Search of Alternatives:

Usually, there are several alternatives for any plan. The planner
must try to find out all the possible alternatives. Without
resorting to such a search, he is likely to be guided by his
limited imagination. At the time of finding or developing
alternatives, the planner should try to screen out the most
unviable alternatives so that there are only a limited number of
alternative for detailed analysis. It may be noted that
determination of alternative plans can be a time consuming
task because objectives which have been established initially
may be found to be inflexible. It is also possible that the
assumptions need revision in the light of the changed
circumstances.

Process # . Evaluation of Alternatives:

Once alternative action plans have been determined, they must
be evaluated with reference to considerations like cost, long-
range objectives, limited resources, expected payback, risk, and
many intangible factors to select the satisfactory course of
action. Many quantitative techniques are available to evaluate
alternatives.

The manager may take the help of these techniques to reach the
most objective result. The best possible alternative may be
chosen by the manager after detailed analysis. Sometimes,
evaluation of available alternatives may disclose that two or
more courses are advisable and so the concerned manager may
decide to choose two or more alternatives and combine them to
suit the requirements of the situation.

Process # 6. Selection of Plan and Development of Derivative

Plans:
The final step in the planning process is to select the most
feasible plan and develop derivative plans. The plans must also
include the feedback mechanism. The hierarchy of plans must
be both integrated and flexible to meet the changing internal
and external environment.

The derivative plans are required to support the basic or overall

plans because the latter cannot be executed effectively unless
they are supported by the derivative or sub-plans. The
derivative plans are developed within the framework of the basic
overall plan. For instance, if an airline decides to acquire a fleet
of new planes, it will be followed by the development of a host
of derivative plans dealing with the employment and training of
various types of personnel, the acquisition of spare parts, the
installation of maintenance facilities, scheduling, advertising,
financing and insurance.

What is Planning – 9 Main Principles

The principles of planning are as follows:

1. Goal Orientation:

A plan should be absolutely goal focused and adhere to the

scope and time frame set by the goal.

2. Specificity:

Plans must be specific and should avoid generalities and non-

verifiable statements/propositions such as ‘complete as early as
possible’, ‘resources will be mustered in due course’, ‘using least
resources’, and so on. Rather one should use terms such as
‘complete the task by 30th April 2016′, ‘complete the task with
an expense not more than Rupees 20 lakhs’ and so on.

3. Accuracy:

Plans are like maps, and we all know that an inaccurate map
can lead us to the wrong place. For example, if Rajendra makes
a plan to produce 1,000 connectors a day, it must be based on
the number of connectors a person/team can make per day and
the number of peo-ple/teams available.

4. Comprehensiveness:

If plans leave some blanks, either there will be confusion due to

different interpretation, or there will be delay for clarifications.

5. Flexibility:

As the execution of the plan progresses, there will be changes

to the external environment, internal environment, and
resources. Plans must envisage these possible changes and
cater for them from the beginning. For example, if you are
building a mall and the contracting economy decreases
demand, then you should have away to build part of it and open
the business leaving the completion for better days to come.

6. Objectivity:

While selecting from various options available, you should be

objective. When quantitative parameters are used, the data
should be fair and impartial, and when qualitative parameters
are used, individual bias should not creep in.

7. Simplicity:

Plans are implemented by several people and more impor-tantly

by people who may not be as smart as the planners. Therefore,
each part of a plan must be simple, the parts of a plan must be
easily connectible, and the overall plan should be simple for
everyone to un-derstand and implement.

For example, if you have to set up a chain of coffee shops, the

design of each shop should be simple, resources that would be
shared such as purchase, promotion, and so on, should also be
simple for everyone to understand and manage.

8. Communicability:

A plan needs approval from internal and external agencies. For

example, Rajendra’s plan to make connectors as an OEM
supplier for two wheelers would need acceptance by internal
teams, funding approval from the bank, and approval related to
production, quality assurance, and purchase from the two-
wheeler company. Hence, it should not be vague, but should be
in an easily communicable format.

9. Implementable:
This implies that there should not be any external
envi-ronmental restrictions to implement the plan. Coca Cola
had a bottling plant in Plachimada in Kerala, India. Most
bottling plants need copious water, and ground water is a
practical source. Plachimada had plenty of water and there is
no national law against using it.

Coca Cola planned to establish a bottling plant at Plachimada.

The problem they faced was that the use of ground water affects
the neighbourhood and the socially aware neighbourhood
brought the operations to a halt. Would the fact that there is no
law to prevent the company from using ground water, and that
it returned more water to the nature than it used, through
various means make the plan implementable? The moot point
is that what is permissible may not be implementable.

What is Planning – 18 Main Advantages

Planning helps the organisation achieve its objectives early. In
this way, planning helps the organisation in many ways.

Some of the advantages of planning are briefly explained below:

1. Better utilisation of resources – Planning decides what to

produce and how to produce. Then, there is the possibility of
utilising the resources effectively.

2. Helps in achieving objectives – Planning sets goals or

objectives of an organisation. This gives effective direction to the
control of employees of the organisation. In this way, planning
helps the organisation accomplish the pre-determined goals or
objectives.

3. Economy in operation – Unnecessary production, ineffective

utilisation of resources and unnecessary activities of an
organisation are eliminated through planning. This results in
the economy of operations.

4. Minimises future uncertainties – The uncertain future

increases the importance of planning. Planning foresees the
changes and uncertainties taking shape in future and devices
methods to face them. Some future uncertainties are thus,
minimised through planning.

5. Improves competitive strength – Competitive strength is

improved by adding new line of products, changes in quality
and size of the product, expansion of plant capacity and
changes in methods of work. These are achieved through
planning.

6. Effective control – Control without planning is an impossible

one. Control is used only when there is a well-chalked out plan.
So, planning provides a basis for controlling.

7. Motivation – A well-prepared plan encourages the employees

of an organisation and gives them a sense of effective
participation. Planning motivates the employees as to what the
organisation wants to achieve and defines it to the employees.

8. Co-operation – Planning helps the management pulls the

individual to achieve common objectives or goals. Planning
provides well-defined objectives, unity of direction, well-
published policies, procedures and programmes. All these
facilitate to get co-ordination, which consequently avoids
duplication of work and interdepartmental conflicts.

9. Promote growth and improvement – Planning sets a standard

to control purpose. So, useless and aimless activities are
avoided. It leads to the growth and improvement of an individual
and the organisation.

10. Develops rationality among management executives –

Disciplined thinking of management executives is geared up
through formal planning. Management executives take action
only after putting their thoughts in blueprint. In this way,
planning brings rational thinking and approach among
management executives.
11. Prevents hasty judgment – We can analyse a problem
through a plan and consider the alternatives before taking a
sound decision. It is possible to plan in advance as to what will
be done and how it will be done. This process avoids hasty
judgment.

12. Reduces red-tapism – junior most executive can act

according to pre-planned decisions. There is no need for him to
get any fresh permission for his action. It saves time, energy and
cost and reduces red-tapism.

13. Encourages innovative thought – A good plan should

provide a basis for new thinking in any individual. It seeks a
way to encourage people to co-ordinate and to achieve common
objectives. According to D.E. Hussey “A good planning process
will provide avenues for individual participation, will throw up
more ideas about the company and its environment, will
encourage an atmosphere of frankness and corporate self-
criticism and will stimulate managers to achieve more.”

14. Improves ability to cope with change – Planning helps

managers improve their ability to cope with changes but it
cannot prevent changes from happening. This creates an
awareness among the managers regarding the incidence of
change.

15. Creates forward looking attitude in management – Managers

may lose their prosperity facing day to day problems. Planning
helps a manager to become more prosperous and creates a
forward looking attitude in him, thus such a planning ensures
stability to management.

16. Development of efficient methods – Planning helps the

management develop efficient methods and procedures of
action.

17. Delegation of authority facilitated – A well-prepared plan will

always facilitate the delegation of authority.
18. Anticipation of crisis – Careful planning will avoid the crisis
which is likely to occur. In this way, management can reduce
the internal organisational disturbances.

What is Planning – 9 Major Limitations

Planning has various limitations. This is why it becomes less
effective in most cases, if not completely ineffective.

The following points are observed in this context:

1. Lack of Flexibility:
Plans lay down a specified course of action regarding the future,
which cannot be changed even if situations so demand. This
often proves to be costly for the organisation, particularly when
there is need for a change in the actual course of action. And
this is why some progressive firms now rely on contingency
planning. The object is to overcome crisis situations as and
when they arise.

2. Lack of Creativity and Initiative:

Due to inherent rigidity of the plans managers lack the initiative
to do new things or to venture out in new directions to cope with
changes in the environment. So even advance thinking by
managers does not lead to the generation of new ideas. And
creative thinking or creativity is out of question.

3. Environmental Uncertainty:
At times planning loses its practical relevance due to various
uncertainties surrounding the environment. So managers
cannot fully rely on existing plans. They have to revise or modify
existing plans or change their strategies to get the desired
results even in adverse situations. For instance, a company
might be required to revise its advertisement budget to maintain
competitive parity, i.e., to match the efforts of its major and
nearest rivals.

4. Time Lag:
Planning which involves several steps such as – defining
objectives, collecting and analysing data and choosing from
alternatives is a time-consuming and lengthy exercise. It loses
effectiveness due to delay in taking necessary action. In other
words, planning loses its relevance in situations which demand
quick decision(s) and immediate action(s).

5. Costly Process:
Planning is also a costly exercise. Since management is a
valuable resource, the cost of planning varies directly and
proportionately with the time managers devote to planning. If
managers do not devote sufficient time to planning, their
decisions may prove to be impractical or wrong.

6. No Guarantee for Action:

A plan is just a programme of action regarding the future, not a
guarantee for action. The success of planning depends on its
effective implementation. The effectiveness of planning depends
on the outlook and the actual behaviour of the planners.
Planning makes managers feel secured. So they just want to
maintain the status quo. They just try to fulfill the requirements
of existing plans rather than improving their performance or
venturing out in new directions.

7. Inaccurate Forecast:
Planning is based on the timely availability of reliable and
complete information and accuracy of forecasts of demand,
price and technology. If forecasts are based on incomplete
information or if the forecasting method is not reliable, then
plans are bound to be ineffective or likely to fail.

8. Time Constraint:
Planning requires a manager to set aside necessary time to do
it. Managers who have very busy schedules may react adversely
when superiors order them to prepare a 5-year plan for their
work unit. The reason is that they are expected to do this and
still find time to meet the current year’s target. However, the
time for planning has to be found. Otherwise, managers will just
react to events.

9. Internal and External Constraints:

In spite of Internet connections and speedy access to computer
databases, every manager cannot use available information to
make an intelligent decision. The caliber of employees he needs
may not be immediately available at the salary he is willing to
pay. A competitor may quickly enter his market with a more
attractive product. A change in buying habits of consumer may
occur.

An important supplier may let him down. Rapid technological

progress may make his machines and equipment obsolete
overnight. And in any of these the manager will not have the
time to plan a decision based on these internal and external
constraints (over which he has not much control). Nevertheless
a plan need not be perfect to be executable. Often a manager
has to make a decision based on an incomplete plan.

What is Planning – 10 Measures to Overcome Limitations

The following measures help to overcome the limitations of
planning:

1. Scientific Selection of Goals:

Unwillingness to give up alternative goals can be overcome
through scientific selection of goals. Managers should carry out
cost-benefit analysis for each alternative and accept goals
whose returns are greater than the costs.

2. Use of Mathematical Methods:

Fear of failure to achieve the goals can be removed by applying
mathematical models to the goal selection process. These
models help in accurate predictions and practical
implementation of plans. Besides, managers should make
flexible plans which be changed according to changing
situations.

3. Sound Communication System:

Lack of knowledge can be overcome through a well-connected
communication system where managers at all levels remain
informed of the organisational activities. A well-developed
management information system can solve this problem.
4. Forecasting:
Managers remain informed of the external environment through
an effective system of communication. Regular contact with
outside parties, through seminars and conferences provides
information about the environment. In fact, the need for
planning arises because of uncertainties in the environment. If
everything could be forecast, there would be no need for
planning. The need is to predict the environmental changes
through forecasting techniques like time series, forecasts,
causal models and other statistical methods. They help to know
the environmental factors and their effect on organisational
goals.

5. Develop Managerial Confidence:

The above measures develop confidence to build rational and
realistic goals which are challenging but attainable. Important,
overall organisational goals are set at the top level and goals
lower in priority are framed by lower-level managers in
consultation with the superiors.

6. Help Organisational Members to Accept Change:

Organisational members should realise that change is the
essence of life and reduce resistance to change through the
following measures-

(a) Managers should explain the causes and effects of change to

organisational members. Members should know the benefits
that accrue to them and the organisation because of changes in
the current system of working.

(b) The existing benefits should be compared with future

benefits that will accrue as a result of change and unwillingness
of members to give up existing benefits should be removed.

(c) If members feel that plans have deficiencies and weaknesses,

management should involve organisational members in framing
the plans. Thus, members become aware of the effects of
changes and minimise the impact of their weaknesses, if any.
 7. Top Management Support:
Planning process should initiate at the top-level. Managers
should keep in mind the barriers to planning and set realistic
and attainable goals.

8. Setting Responsibility:
If responsibility is fixed for framing and implementing the plans,
plans will be more realistic. Strategic plans should be the
responsibility of top management, tactical plans should be the
responsibility of middle-level managers and operating plans
should be the responsibility of lower-level managers.

9. Encourage Group Participation:

Rather than framing and communicating plans to
organisational members for implementation, top managers
should encourage group participation where people frame and
implement plans collectively in the planning process.

10. Prepare Contingency Plans:

Organisations operating in the dynamic and complex
environment should prepare contingency plans which can be
adopted if unpredicted situations occur.
Definition of Leadership
1
Leadership can simply be defined as the ability to influence others. In the course of his survey of
leadership theories and research, Stogdil came across innumerable definitions of leadership. For
our purpose we may define leadership as the process of directing and influencing people so that
they will strive willingly and enthusiastically towards the achievement of group objectives. Ideally,
people should be encouraged to develop not only willingness to work but also willingness to work
with confidence and zeal. Confidence reflects experience and technical expertise; zeal is
earnestness, and intensity in the execution of work. A leader acts to help a group achieve
objectives through the exploitation of its maximum capabilities. A leader does not stand behind a
group to push and prod; she/he places herself/himself before the group, facilitates progress and
inspires the group to accomplish organisational goals.
Nature of Leadership
Leadership derives from power and is similar to, yet distinct
from, management. In fact "leadership" and "managership" are
different. There can be leaders of completely unorganised
groups, but there can be managers only of organised groups.
Thus it can be said that a manager is necessarily a leader but a
leader may not be a manager.
Leadership integrates the available resources of an organisation
and guides a team of people to utilise those resources to best
achieve the organisational goals.
Leadership is essential for managing. The ability to lead
effectively is one of the keys to being an effective manager
because she/ he has to combine resources and lead a group to
achieve objectives.
Leadership and motivation are closely interconnected. By
understanding motivation, one can appreciate better what
people want and why they act as they do. A leader can
encourage or dampen workers' motivation by creating a
favourable or unfavourable working environment in the
organisation.
The essence of leadership is followership. In other words, it is
the willingness of people to follow a person that makes that
person a leader. Moreover, people tend to follow those whom
they see as providing a means of achieving their own desires,
needs and wants.
Qualities/Ingredients of Leadership
Undoubtedly, leadership is one of the most talked about,
written about, and researched topics in the field of
management. It is inherent in management. Every group of
people that performs satisfactorily has somebody among them
who is more skilled than any of them in the art of leadership.
This skill is a compound of at least four major ingredients: (a)
the ability to use power effectively and in a responsible manner,
(b) the ability to comprehend that human beings have different
motivation forces at different times and in different situations,
(c) the ability to inspire, and (d) the ability to act in a manner
that will develop a climate conducive to responding and
arousing motivations.2 These are elaborated below:
An effective leader makes just use of power, understands
human drives, inspires the followers and sustains a working
climate.
a) Power: This is the first ingredient of leadership. Power is
the potential ability to affect the behaviour of others. The
word potential suggests that one can have power without
 actually using it. In organisational settings, there are
usually five kinds of power - legitimate, reward, coercive,
referent, and expert power. A manager may have one or
more of these kinds of power.
The leader’s power is his/ her capability of influencing others.
(i) Legitimate power: This power is granted through the
organisational hierarchy. It is the same as authority. All
managers have legitimate power over their sub-ordinates.
Categories of power:
• Legitimate power uses authority.
• Reward power is the power to give or withhold rewards.
• Coercive power uses force.
• Referent power emerges from the employee’s fellow feeling for
the leader or the leader’s charisma.
• Expert power is derive from the leader’s expertise.
(ii) Reward power: Reward power is the power to give or withhold
rewards. In general, the greater the number of rewards
controlled by a manager and the more important the rewards
are to the subordinates, the greater the manager's reward
power.
(iii) Coercive power: This type of power is the power to force
compliance via psychological, emotional, or physical threat. In
some isolated settings, coercion can take the form of physical
punishment. It is likely that the more a manager uses coercive
power, the more likely he or she is to provoke resentment and
hostility.
(iv) Referent Power: Referent power is more abstract than the
other types of power. It is usually based on identification or
imitation. That is, followers may react favourably to a leader
because somehow they identify with the leader, who may be like
them in background, attitude, affiliation or personality.
Referent power may also take the form of charisma, an
intangible attribute in the leader's personality that inspires
loyalty and enthusiasm.
Unit-9 Page-188
Bangladesh Open University
(v) Expert power: Expert power is derived from expertise. A
scientist who is capable of achieving an important technical
breakthrough or a manager who knows how to deal with an
important but eccentric customer, are examples of expert
power.
b) Fundamental understanding of people: It is not enough
to know the theoretical aspects of motivation. The more
important is the ability of the manager to apply them to
real people and situations. But a manager who
understands the elements of motivation and motivation
theories, is more aware of the nature and strength of
human needs and is better able to define and design ways
of satisfying them and to administer so as to get the
desired responses.An understanding manager can
motivate his employees by satisfying their various needs.
c) The ability to inspire followers to apply their full
capabilities: Inspiration to do something usually comes
from leaders, who may have qualities of charm and appeal
that give rise to loyalty, devotion, and a strong desire on
the part of followers to promote what leaders want. This is
not a matter of need satisfaction; rather, it is a matter of
unselfish support from followers to their leader. The best
examples of inspirational leadership come from hopeless
and frightening situations. The workers of a dying concern
may come forward and follow the leader to overcome
crisis.The sheer personality of the manager can inspire the
employees to give a big hand to overcome a crisis.
d) The ability to develop a climate conducive to arousing
motivation: This ingredient of leadership has to do with
the style of the leader and the climate she or he develops.
As we know, strength of motivation greatly depends on
factors that are part of an environment, as well as an
organisational climate. There is no denying the fact that
the primary tasks of managers are the design and
maintenance of an environment for performance. The
fundamental principle of leadership is this - since people
tend to follow those who, in their view, offer them a means
of satisfying their own personal goals, the more managers
understand what motivates their subordinates and how
these motivations operate, and the more they reflect this
understanding in carrying out their managerial actions,
the more effective they are likely to be their leaders.
Lesson 2 : Styles/Types of Leadership
Lesson Objectives
Upon completion of this lesson you will be able to:
• describe the leadership styles based on the use of authority
1. Leadership Style Based on the Use of Authority
The traditional way of classifying leadership is based on the use
of authority by the leader. Those classifications are:
a) Autocratic leadership: This type of leadership is based on
the use of coercive power. An autocratic leader gives orders
and expects compliance. He is dogmatic and leads by the
ability to withhold or give punishment or rewards.
However, some autocratic leaders may happen to be
"benevolent autocrats". Usually, they are willing to hear
and consider subordinates' ideas and suggestions but
when a decision is to be made, they turn to be more
autocratic than benevolent.Autocratic leadership relies on
coercion, and its style is paternalism, arbitrariness,
command and compliance.
b) Democratic leadership: The type or style of leadership that
uses legitimate power can be called democratic leadership.
A democratic leader usually consults with subordinates on
proposed actions and decisions and encourages
participation from them. This type of leader ranges from
the person who does not take action without subordinates’
concurrence to the one who makes decisions but consults
with sub-ordinates before doing so.Democratic leadership
solicits employees’ participation and respects their
opinions.
c) Free-rein leadership: The leadership style which allows
maximum freedom to followers may be called free-rein
leadership. A free-rein manager gives workers a high
degree of independence in their operations. He or she
depends largely on subordinates to set their own goals and
the means of achieving them, and they see their role as
one of aiding the operations of followers by furnishing
them with information and acting primarily as a contact
with the groups' external environment. Figure 9.1
illustrates the flow of power on the three leadership styles
discussed.