PLANNING

1.0 INTRODUCTION

Planning has been defined previously as one of the five major functions of management. However, since planning is a bridge between the present and the future, it has been called the primary management function. Planning is particularly important because of scarce resources and uncertain environment with a fierce competition for these resources.

Planning is a decision-making activity requiring the process of ascertaining objectives and deciding on activities to attain these objectives. It is also a process of preparing for change and coping with uncertainty by formulating future courses of action. The basic purpose of planning is to reduce the risk of uncertainties, and to initiate a coordinated effort within the organisation for the purpose of organisational success. In this unit, you will be taken through the rudiments of planning so as to be able to understand what the topic is all about.

table of content A

1. personal selling and sales promotion 
2. branding 
3. evolution of management theory
4. organising 
5. planning
6. recruitment and selection
7. advertising and publicity
8. channels of distribution
9. communication
10. control
11. decision-making in business
12. delegation and decentralisation of authority
13. employee training and development
14. introduction to marketing

2.0 OBJECTIVES

At the end of this unit, you should be able to:

1.  discuss planning, procedures and rules, and organisational objectives 
2. illustrate the six P’s of planning, reasons for planning and the limitations of planning 
3.  describe the principles of effective planning, levels of planning, strategic planning and strategic planning process 
4.  state types of strategies, policies, procedures and rules 
5. highlight the characteristics of sound policy, sound goals and advantages of objectives. 

3.0 MAIN CONTENT

3.1 Planning Defined

The planning process has three characteristics (Boone, 1981). These are as listed below.

1.  Planning is anticipatory in nature. A decision must be made now as to what to do and how, before it is actually done. 
2. Planning is a system of decisions. It involves a process of making decisions which will define what is to be achieved in the future and the formulation of action plans for achievement of goals. 
3. It is focused on desired future results. Planning is a means of ensuring that the important organisational objectives are accomplished as and when desired. 

The most comprehensive definition of planning is given by Cyril L. Hudson (1970), who states that:
To plan is to produce a scheme for future action; to bring about … a deliberate attempt to influence, exploit, bring about and control the nature, direction, extent, speed, and effects of change. It may even attempt deliberately to

create change, remembering always that change (like decision) in any one sector will, some way, affect other sectors.

Since Peter Drucker is, supposedly, a pioneer scholar of modern management, it will be interesting to note how he defines it. His definition - as cited by George A. Steiner (1969), is that:

Planning is the continuous process of making present entrepreneurial decisions systematically and with best possible knowledge of their futurity, organising systematically the efforts needed to carry out these decisions and measuring the results of these decisions against the expectation through organised, systematic feedback.

Peter Drucker, thus, encompasses the element of feedback that would ascertain the quality of decisions and the accuracy of planning.

SELF-ASSESSMENT EXERCISE

Do you agree that “planning is a bridge between the present and the future”? If so, why?

3.2 The Six P’s of Planning

They are as follows:

1. Purpose

An effective planning system requires a clear understanding of the organisation’s purpose. What are the reasons for the organisation’s existence? Is it to increase profit or increase market share or generate more employment or introduce more products, and so on? This purpose must be clear and elaborate.

2. Philosophy

Philosophy incorporates the fundamental beliefs as to how the organisation’s purpose is to be achieved. For long-term survival and growth, a philosophy of ethical conduct must be adopted. For example, General Motor’s philosophy is based upon profitability through quality, service and ethical behaviour. IBM’s philosophy was to elevate the level of the salesman to an executive, etc.

3. Premise

This involves the strengths and weaknesses of the organisation and its knowledge and assumptions about its environment. By forecasting and other methods, the management can make some conclusions about the trends of the environment and by knowing its own strengths and weaknesses it can deal with the changing environment in a more intelligent way.

4. Policies

Policies are general guidelines or constraints that aid managerial thinking and action. In a typical organisation, there are production policies, financial policies, accounting policies, marketing policies, personnel policies; and these form the basis for planning and necessary operational actions.
5. Plans
Plans represent specific objectives and action statements. Objectives are the goals to be met and the action statements are the means to achieve these ends. These plans guide us step by step as to how to reach the objectives and also at what stage the progress is at a given time.

6. Priorities

A particular organisational goal must be given a particular priority. Limited resources of time, finances, materials, etc., must be proportionally allotted to goals of priority. The priorities will determine an appropriate allocation of resources. Prioritising goals will determine what is relatively more important. A goal that is given higher priority will receive more attention and more resources. For example, a research-oriented organisation will get different priorities and resources than a profit-oriented organisation. Setting priorities for goals will be established on the basis of philosophy and premises of the organisation as well as social, political, and economic measures and value conflicts. In any case, such priorities will affect the planning process.

SELF-ASSESSMENT EXERCISE

Explain some of the reasons for planning. Are there “good plans” and “bad plans”? Describe some of the characteristics of good planning

3.3 Reasons for Planning

The reasons for planning are itemised below.

1. Planning is essential in modern business. The growing complexity of the modern business with rapid technological changes, rapid changes in consumer tastes and growing tough competition necessitates orderly operations not only in the current environment but also in the future environment. Since planning takes a future outlook, it takes into account the possible future developments. 
2.  Planning is related to performance. It can be expected and there is evidence to support the hypothesis that companies that engage in formal planning consistently perform better than those with no formal planning. They can even improve their performance over a period of time. Performance can be measured by such factors as return on investment, sales volume, growth in earnings per share, etc.,

3.6 Steps in Formal Planning

Planning can be considered as a series of sequential steps. These steps are as follows:
Steps

1.  Establish and define clearly the central and overall objectives of the organisation. A well-defined objective can make the difference between success and failure of an enterprise. It clearly defines the product or service as well as the purpose of the company. Along with the overall mission of the company, it is also necessary to establish specific objectives and goals. For example, the overall objective of a hospital is to provide quality healthcare.
2. Determine your current position relative to your objectives. Make an assessment of your strengths and weaknesses. This will show the distance the company has to cover before reaching its goals. The analysis of current strengths and weaknesses will determine if goals are realistic and achievable or whether they have to be re- evaluated and modified. 
3. Develop forecasts and future conditions. In order to effectively plan, it is important and necessary to forecast (as accurately as possible) future trends that will affect the company’s position and operations. The factors of forecast will include general economic conditions, changes in consumer attributes, new technological and product developments, possible competitive strategies and any adverse legal developments. 
4.  Preparation of derivative plans. Once an overall plan has been adopted, it is necessary to develop other derivative plans for each segment of the company, to support the formal plan. Derivative or sectional plans are developed in each area of the business, but within the framework ofthe primary plan in order to coordinate and integrate programs and policies of all sections of the enterprise. 
5.  Implement plan and evaluate results. The success of a plan will depend upon how effectively the plan is implemented. This implementation is going to require a combination of all skills and coordination of all factors. Also in this ever-changing dynamic environment, it is necessary to keep the plan open to evaluation and modification. The plans should be periodically re- evaluated to measure its progress and effectiveness so that any deviations can be corrected and any adjustments can be made. 

3.7 Problems and Limitations of Planning

There are situations in which sometimes even well-designed plans fail to bring the desired results. There are some established reasons why plans fail. Some of these reasons, according to K.A. Ringbakk (1970), are listed below.

1. Corporate planning is not integrated into the total management system. The top management fails to identify and associate properly the formal planning with the central concept of the organisation’s mission. 
2. There is a lack of understanding of the different steps of the planning process. The management may not be knowledgeable or skilled in understanding all steps of the planning requirements. 
3.  Management at different levels in the organisation has not properly contributed to planning activities. Since all strategic planning is generally formulated and conducted at top management level, the middle management and lower management cadres which are closer to the operations may not understand all aspects of planning and thus may not be able to contribute some necessary key factors as inputs. 
4. Poor information and inadequate inputs may have formed the basis for planning. Since reliable data and information is the backbone of formal planning, such information may not be available. Poor information may also be due to faulty forecasting or poor judgements. 

3.8 Resistance to Change

Even though planning and plans are so important to organisational success, a study in the 1970’s revealed that about 50 percent of line managers were very reluctant to actively participate in the planning process (Martin, 1979). Sometimes, even top managers are lukewarm in supporting the process, thus serving as poor role models for the junior staff.


Since most of the resistance is emotionally oriented, it is necessary to take steps that will build confidence in management’s ability to work as a team under a participative management system. Renato Targiuri (1979) has suggested some steps which would inspire that confidence in management. These steps are listed below.

1.  All managers must be made aware of the benefits derived both at individual as well as the organisational level. 
2. Communication lines among all level managers and any staff specialists should be kept open and accessible. 
3. Set up a system of recognition and rewards to encourage all to participate in the planning process and contribute uniquely to its success. 
4.  Perhaps, a seminar and a lecture by a trained industrial psychologist in an informal, small group session will enhance positive thinking. 

3.9 Provision for Contingency Plans

Contingency plans are alternative methods to either take over earlier plans if they seem to fail due to unexpected circumstances or modify them as the situation demands. Contingency plans help management to respond quickly to unpredicted changes, thus avoiding panic in crisis situations (Linneman, 1981).

The contingency plans should also be consistent with the general mission and policies of the organisation and should be as simple as possible. However, it is very important to keep a close watch on the development and progress of the original plans, so that if there are any early signals of the possibility of failure of the original plans, then the contingency plans can be put into execution without delay. For example, when the aviation controllers in America went on strike affecting the operations of airlines, such contingency measures were effectively taken. A new force of controllers was already on ground to take their place immediately, and many went through a quick and concentrated form of training.

In addition to the reasons that contribute to the failure of some planning processes, there are some other limitations that inhibit the successful formulation of formal plans. These are listed below:

1.  Planning is expensive. A good deal of time, energy, and money is involved in setting up the planning machinery for the purpose of gathering and analysis of data and testing of various alternatives about long-range planning. Accordingly, the cost of planning and the benefit derived from it must be adequately balanced. 
2. Planning is time-consuming. Planning is time-bound and sometimes advanced planning may delay immediate action that may be necessary; and thereby resulting in loss of valuable opportunity. Certain situations do pop up where prompt action is so urgent and unavoidable that no time could be devoted to advance planning. This is especially true in sudden and unexpected emergencies. 
3.  Planning is a hindrance to innovation. In a planned set-up, everything is pre-conceived and every operation pre-planned. This means simply proceeding according to plans and following the rules mechanically. This does not leave any ground for a manager’s initiative and innovation. This is a big handicap for imaginative and creative managers. This problem can be overcome, however, by making the plans less rigid and more flexible in order to accommodate any new and relevant suggestions. 

3.10 Principles of Effective Planning

These principles are primarily based upon the submissions of Gary Dressler (1985). They are as follows:

1.  Keep aims crystallised (Hudson, 1967). These aims must be clear, unambiguous, solid, reasonable and attainable. Badly defined objectives do not support accurate planning. 
2.  Develop accurate forecasts. Accurate events and trends are the most important inputs in planning. Accordingly, the managers making the forecasts must be highly skilled and must use forecasting methods that are suitable.
3. Involve subordinates in the planning process. This will ensure the acceptance of the plans by those who are going to implement it. Studies have indicated that the people, who put the plan into operation, do it much better when they participate in the formulation of the plan, than when the plans are assigned to them (Bass, 1970). 

3.11 Levels of Planning

There are basically three levels of planning associated with the different managerial levels. These levels are as follows:

1. Strategic Planning

Strategic planning is conducted by top management which includes Chief Executive Officer, President, Vice-Presidents, and General Managers, etc.; and it is the process of determining overall objectives of the organisation and the policies and strategies adopted to achieve those objectives. It is a long-range planning and may cover a period of up to 10 years. It basically deals with the total assessment of the organisation’s capabilities, its strengths and its weaknesses and an objective evaluation of the environment. The planning also determines the direction the company will be taking in achieving these goals.

2. Intermediate Planning

This planning covers a time frame of about 6 months to 2 years and is contemplated by middle-level management made up of functional managers, departmental heads and product-line managers. They also have the task of polishing the top management’s strategic plans. The middle-level management will have a critical look at the resources available and they will determine the most effective and efficient mix of human, financial, and material factors. They refine the broad strategic plans into more workable and realistic plans.

3. Operational Planning

These plans are the responsibility of lower management cadre and are conducted by unit supervisors, foremen, etc. These are short-range plans covering a time span from one week to one year. These are more specific and they determine how a specific job is to be completed in the best possible way. Most operational plans are divided into functional areas such as production, finance, marketing, personnel, etc. For example, production plans will require an analysis and decisions covering inventory levels of raw materials as well as finished product; flexibility of current production facilities, how to cope with changing technology, etc. These plans are relatively stable and are linked with the planning objectives of the middle management levels and the top management levels.
Even though planning - at all levels, is important, since all levels are integrated into one, strategic planning requires closer observation since it establishes the direction of the organisation.

3.12 Strategic Planning

Strategic planning, as defined earlier, is the process of planning how to achieve organisational goals with available resources; and it is undertaken by the central management of the organisation. Strategic planning is necessary and important for the following reasons (Herkhuis, 1979).

1.  First, there are a large number of external variables –with constant values – that affect the operations of the organisation. These variables include - changing international environment, political and governmental policies and forces, economic trends, competition tactics, technological changes and social dynamism. Strategic plans must have provisions to cope with these situations. 
2.  Secondly, all natural resources are becoming scarce. Management must decide on how to compete for these resources and how to allocate them properly. Human resources are constantly changing in nature. There is more and more of an educated workforce and most routine work is being taken over by computers and robots. Hence a proper redistribution of human resources must be properly put into focus.
3. Thirdly, there has been an information explosion which has necessitated increase in knowledge and ability to plan effectively Since, effective strategic planning ensures success; all competitive forces are contributing a lot of their energies in perfecting these plans; thus generating an absolute necessity to introduce strategic planning in most companies. 

3.13 Strategic Planning Process

Similar to the formal planning process, the process of strategic planning can be considered to constitute the following steps.

1.  Define and express clearly the mission of the organisation. The mission must be clearly understood. It could be high quality product at low cost. It could be high quality product at high cost to have and keep a quality-oriented image like Rolls Royce or Mercedes Benz automobiles. 
2. Determine long-range goals and objectives. These should be more specific in nature, but in accordance with the general mission of the organisation. These can include the types of products the company wants to produce and promote and the long-term profit potential. 
3. Make predictions about the economic environment in the future. This will involve the use of some forecasting techniques to predict the growth of the company’s market share. 

3.14 Types of Strategies

A strategy is an action plan which sets the direction that a company will be taking. Formulating a strategy entails decision-making; and will involve consideration of external environment of the company, as well as the internal environment-in terms of strengths and weaknesses of the company. According to William F. Guelick (1972), there are four strategies: stability, growth, retrenchment or a combination approach.

1. Stability Strategy

Stability strategy implies “leaving the well enough alone”. If the environment is stable and the organisation is doing well, then it is better to make no changes. This strategy is exercised, most often, and is less risky as a course of action. An example of stability strategy would be an organisation that is satisfied with the same product, serving the same consumer groups and maintaining the same market share. The organisation may not be motivated and adventurous to try new strategies to change the status quo.

2. Growth Strategy 

Growth means expansion of the operations of the company and addition of new areas of operations. Growth strategy can be risky and involves forecasting and analysis of many factors that affect expansion, like resource availability and market availability. However, growth is necessary due to volatility of businesses and industries. Growth must be properly planned and controlled, otherwise the organisation can fail. This is evident from failures of Laker Airways and W.T. Grant Company. However, growth is not only necessary but desirable, since growth is an indication of effective management and it attracts quality employees as a result. Growth can come due to expansion or diversification or merger with similar firms. A classic example of growth of existing services is that of McDonald’s Hamburger chain. Starting from scratch in the 1950’s, it developed into a franchise chain of 6,000 outlets in 1979 with a sale of over 5 billion dollars per year (Rowan, 1979).

Diversification of services or products is another example of growth and strategy. Banks are going into stocks brokerage. Potamkin Cadillac car dealer in New York City is also dealing in Japanese imported cars. Avon products - primarily a cosmetics company, has gone into the jewellery business. Similarly, General Motors acquired Electronic Data Systems (EDS), a computer company and Philips Morris, a company producing tobacco products acquired Miller Brewing Company producing beer and also acquired a soft drink company - Seven-Up.

3. Retrenchment Strategy

Retrenchment primarily means reduction in product, services, and personnel. This strategy is many times useful in the face of tough competition, scarcity of resources and reorganisation of the company to reduce waste. Most airlines have streamlined their operations. Most automobile manufacturers had closed down many plants and retrenched personnel during the economically difficult period of 1979 – 1980. The City University of New York (CUNY) had a major cutback on faculty during the financial crisis of the late 1960’s. Retrenchment strategy, though reflecting failure of the company to some degree, becomes highly necessary for the very survival of the company.

4. Combination Strategy

Combination strategy means using a combination of other strategies; and it is primarily used by large complex organisations who may want to cut back in some areas and expand in others. Also, in time of financial difficulties, a company may employ retrenchment strategy; and later resort to growth strategy, if the economic situation improves. In order to make strategic planning effective, it is necessary to have the right people involved who will objectively and intelligently look at all factors involved in the success of these plans and strategies. It is important to draw correct conclusions about the following:

1. the mission and the goal of the organisation 
2. the environment, both external and internal 
3.  the strengths and weaknesses of the organisation 
4.  management ethics and values. 

3.15 Policies, Procedures and Rules

Let us start by looking at policy first. It is necessary to frame some policies for successful planning. A policy is a statement and a predetermined guideline that provides direction for decision-making and action. Policies are usually general enough to give the manager sufficient freedom to make judgements; while at the same time, they are specific enough to establish constraining boundaries. For example, regarding employment, a company policy may be to employ personnel without regard to race, religion, sex, or age; and within the bounds of this policy, a manager can make decisions. Policies must be based upon a thorough analysis of objectives and should be consistent with the company’s mission and philosophy.

Policies, being formal statements, serve as ready guides for answering numerous questions, and making many routine day-to-day decisions, especially about recurring problems, thus freeing management’s time for more important and unique decisions. This helps improve the efficiency of operations. If the policies are clearly understood and adhered to by all, there will be fewer problems and fewer complaints to start with. There may be separate policies for separate functions, but they must be all coordinated around a common theme, serving a consistency of purpose.

Appropriate policy guidance enables managers to anticipate and predict action for a given set of situation variables. There are organisational policies formulated for all types of situations and functions. There may be sales policies, production policies, personnel policies, accounting policies, etc. These policies cover all aspects of these functions. For
example, personnel policies will specify decisions regarding selection, training, remuneration, labour relations, firing and promotion of personnel, etc. According to Newman Sumener, and Warren (1970), a policy may:

1. be specific or broad in nature 
2. deal with one or many aspects of a problem or situation 
3.  set wider or narrow limits within which action is to be taken (iv) specify the steps to be taken when a decision is to be made. 

3.15.1 Characteristics of Sound Policy

The characteristics of sound policy are as listed below.

1. It should be subject to one interpretation; and the intent and the content of the policy must be clearly expressed, preferably, in writing. 
2. It should be stable, but sufficiently flexible. Stability implies that no changes in the policy are to be made except in response to fundamental and basic identifiable changes in the conditions. Flexibility provides enough room for the manager to use his own discretion within the broad boundaries of the policy. 
3.  It should be comprehensive in scope. It should be capable of being applied to different situations in a given area, so that most cases can be handled at lower levels of the management, and only some exceptional cases, which are unique and are not covered by the policy, are referred to senior management team. For example, personnel policies should cover guidance for answering all questions that may arise in that area. These may be in reference to hiring, firing, promotions, transfers, training, remuneration,etc. 

4.0 CONCLUSION 

In this unit, you have learnt that planning is the first of the management functions - as it precedes all other functions. You have also been taken through the subject matter from the concept through to the reasons, levels, steps, and types of planning and the different levels of strategies, etc. Planning is particularly important because of scarce resources and uncertainties of the business environment with a fierce competition for these resources.

5.0 SUMMARY

In this unit, you have learnt about planning-the six P’s of planning and reasons for planning. The characteristics, contributions and benefits of planning, steps in formal planning, the principles of effective planning, levels of planning, strategic planning and strategic planning process have all been made known to you.

Also considered in this unit are the problems and limitations of planning, resistance to change and provision of contingency plans. The unit also examined objectives, types of strategies, policies, procedures and rules, and the characteristics of sound policy and sound goals.

6.0 TUTOR-MARKED ASSIGNMENT

Explain in detail, the concept of policies, procedures and rules.